FILED PURSUANT TO RULE 424(b)(2) | ||
REGISTRATION FILE NO.: 333-207132-03 | ||
PROSPECTUS
$593,122,000 (Approximate)
CITIGROUP COMMERCIAL MORTGAGE TRUST 2016-GC37
(Central Index Key number 0001670601)
Issuing Entity
Citigroup Commercial Mortgage Securities Inc.
(Central IndexKey number 0001258361)
Depositor
Citigroup Global Markets Realty Corp.
(Central Index Key number 0001541001)
Rialto Mortgage Finance, LLC
(Central Index Key number 0001592182)
The Bank of New York Mellon
(Central Index Key number 0001497973)
KGS-Alpha Real Estate Capital Markets, LLC
(Central Index Key number 0001499542)
Goldman Sachs Mortgage Company
(Central Index Key number 0001541502)
RAIT Funding, LLC
(Central Index Key number 0001587045)
Sponsors and Mortgage Loan Sellers
Commercial Mortgage Pass-Through Certificates, Series 2016-GC37
The Commercial Mortgage Pass-Through Certificates, Series 2016-GC37 will consist of multiple classes of certificates, including those identified on the table below which are being offered by this prospectus. The offered certificates (together with the classes of non-offered certificates of the same series) will represent the beneficial ownership interests in the issuing entity identified above. The issuing entity’s primary assets will be a pool of fixed rate commercial mortgage loans secured by first liens on various types of commercial, multifamily and manufactured housing community properties. Such mortgage loans will generally be the sole source of payment on the certificates. Credit enhancement will be provided solely by certain classes of subordinate certificates that will be subordinate to certain classes of senior certificates as described under “Description of the Certificates—Subordination; Allocation of Realized Losses”. Each class of offered certificates will entitle holders to receive monthly distributions of interest and/or principal on the 4th business day following the 6th day of each month (or if the 6th is not a business day, the next business day), commencing in May 2016. The rated final distribution date for the certificates is April 2049.
Classes of Offered Certificates | Initial Certificate Balance or Notional Amount(1) | Initial Pass-Through Rate(2) | Pass-Through Rate Description | |||||
Class A-1 | $ | 21,993,000 | 1.635% | Fixed | ||||
Class A-2 | $ | 19,474,000 | 2.022% | Fixed | ||||
Class A-3 | $ | 175,000,000 | 3.050% | Fixed | ||||
Class A-4 | $ | 227,379,000 | 3.314% | Fixed | ||||
Class A-AB | $ | 42,462,000 | 3.098% | Fixed | ||||
Class X-A | $ | 526,255,000 | (5) | 1.812% | Variable IO(6) | |||
Class X-B | $ | 33,868,000 | (5) | 0.690% | Variable IO(6) | |||
Class A-S(7) | $ | 39,947,000 | (8) | 3.576% | Fixed(9) | |||
Class B(7) | $ | 33,868,000 | (8) | 4.233% | Fixed(9) | |||
Class EC(7) | $ | 106,814,000 | (8) | (9) | (9) | |||
Class C(7) | $ | 32,999,000 | (8) | 4.923% | WAC(9)(11) |
(Footnotes to table begin on page 3)
You should carefully consider the risk factors beginning onpage 59 of this prospectus.
Neither the Series 2016-GC37 certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency or instrumentality or any other person or entity.
The Series 2016-GC37 certificates will represent interests in and obligations of the issuing entity only and will not represent the obligations of or interests in the depositor, the sponsors or any of their respective affiliates.
|
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DEPOSITOR WILL NOT LIST THE OFFERED CERTIFICATES ON ANY SECURITIES EXCHANGE OR ANY AUTOMATED QUOTATION SYSTEM OF ANY NATIONAL SECURITIES ASSOCIATION.
The offered certificates will be offered by Citigroup Global Markets Inc., Goldman, Sachs & Co. and Academy Securities, Inc., the underwriters, when, as and if issued by the issuing entity, delivered to and accepted by the underwriters and subject to each underwriter’s right to reject orders in whole or in part. The underwriters will purchase the offered certificates from Citigroup Commercial Mortgage Securities Inc. and will offer the offered certificates to prospective investors from time to time in negotiated transactions or otherwise at varying prices, plus, in certain cases, accrued interest, determined at the time of sale. Citigroup Global Markets Inc. and Goldman, Sachs & Co. are acting as co-lead managers and joint bookrunners in the following manner: Citigroup Global Markets Inc. is acting as sole bookrunning manager with respect to approximately 76.46% of each class of offered certificates and Goldman, Sachs & Co. is acting as sole bookrunning manager with respect to approximately 23.54% of each class of offered certificates. Academy Securities, Inc. is acting as co-manager.
The underwriters expect to deliver the offered certificates to purchasers in book-entry form only through the facilities of The Depository Trust Company in the United States and Clearstream Banking, société anonyme and Euroclear Bank SA/NV, as operator of the Euroclear System, in Europe against payment in New York, New York on or about April 26, 2016. Citigroup Commercial Mortgage Securities Inc. expects to receive from this offering approximately 113.76% of the aggregate principal balance of the offered certificates, plus accrued interest from April 1, 2016, before deducting expenses payable by the depositor. |
The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”), contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act (both as defined in“Risk Factors—Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity and Other Aspects of the Offered Certificates”). See also“Legal Investment”.
Citigroup | Goldman, Sachs & Co. |
Co-Lead Managers and Joint Bookrunners | |
Academy Securities Co-Manager |
April 13, 2016
Certificate Summary
Set forth below are the indicated characteristics of the respective classes of the Series 2016-GC37 certificates.
Classes of Certificates | Initial Certificate | Approximate Initial Credit Support | Initial Pass-Through Rate(2) | Pass-Through | Expected Weighted | Expected | ||
Offered Certificates | ||||||||
Class A-1 | $ | 21,993,000 | 30.000%(4) | 1.635% | Fixed | 2.73 | 5/16 - 12/20 | |
Class A-2 | $ | 19,474,000 | 30.000%(4) | 2.022% | Fixed | 4.76 | 12/20 - 4/21 | |
Class A-3 | $ | 175,000,000 | 30.000%(4) | 3.050% | Fixed | 9.61 | 9/25 - 1/26 | |
Class A-4 | $ | 227,379,000 | 30.000%(4) | 3.314% | Fixed | 9.71 | 1/26 - 1/26 | |
Class A-AB | $ | 42,462,000 | 30.000%(4) | 3.098% | Fixed | 7.24 | 4/21 - 9/25 | |
Class X-A | $ | 526,255,000 | (5) | N/A | 1.812% | Variable IO(6) | N/A | N/A |
Class X-B | $ | 33,868,000 | (5) | N/A | 0.690% | Variable IO(6) | N/A | N/A |
Class A-S(7) | $ | 39,947,000 | (8) | 24.250% | 3.576% | Fixed(9) | 9.71 | 1/26 - 2/26 |
Class B(7) | $ | 33,868,000 | (8) | 19.375% | 4.233% | Fixed(9) | 9.79 | 2/26 - 2/26 |
Class EC(7) | $ | 106,814,000 | (8) | 14.625%(10) | (9) | (9) | 9.76 | 1/26 - 2/26 |
Class C(7) | $ | 32,999,000 | (8) | 14.625%(10) | 4.923% | WAC(9)(11) | 9.79 | 2/26 - 2/26 |
Non-Offered Certificates | ||||||||
Class D | $ | 38,210,000 | 9.125% | 2.788% | Fixed | 9.79 | 2/26 - 2/26 | |
Class X-D | $ | 38,210,000 | (5) | N/A | 2.135% | Variable IO(6) | N/A | N/A |
Class E | $ | 19,105,000 | 6.375% | 4.923% | WAC(11) | 9.80 | 2/26 - 3/26 | |
Class F | $ | 7,816,000 | 5.250% | 4.923% | WAC(11) | 9.87 | 3/26 - 3/26 | |
Class G | $ | 7,816,000 | 4.125% | 4.923% | WAC(11) | 9.87 | 3/26 - 3/26 | |
Class H | $ | 28,657,724 | 0.000% | 4.923% | WAC(11) | 9.88 | 3/26 - 4/26 | |
Class R(12) | N/A | N/A | N/A | N/A | N/A | N/A |
(1) | Approximate, subject to a variance ofplus orminus 5%. |
(2) | Approximate per annum rate as of the closing date. |
(3) | Determined assuming no prepayments prior to the maturity date or any anticipated repayment date, as applicable, for each mortgage loan and based on the modeling assumptions described under “Yield, Prepayment and Maturity Considerations.” |
(4) | The approximate initial credit support percentages set forth for the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates are represented in the aggregate. |
(5) | The Class X-A, Class X-B and Class X-D certificates will not have certificate balances and will not be entitled to receive distributions of principal. Interest will accrue on the Class X-A, Class X-B and Class X-D certificates at their respective pass-through rates based upon their respective notional amounts. The notional amount of the Class X-A certificates will be equal to the aggregate of the certificate balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S trust component from time to time. The notional amount of the Class X-B certificates will be equal to the certificate balance of the Class B trust component from time to time. The notional amount of the Class X-D certificates will be equal to the certificate balance of the Class D certificates from time to time. |
(6) | The pass-through rate on the Class X-A certificates will generally be a per annum rate equal to the excess, if any, of (i) the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time, over (ii) the weighted average of the pass-through rates of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S trust component, as described in this prospectus. The pass-through rate on the Class X-B certificates will generally be a per annum rate equal to the excess, if any, of (i) the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time, over (ii) the pass-through rate of the Class B trust component, as described in this prospectus. The pass-through rate on the Class X-D certificates will generally be a per annum rate equal to the excess, if any, of (i) the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time, over (ii) the pass-through rate of the Class D certificates, as described in this prospectus. |
(7) | The Class A-S, Class B and Class C certificates, in the applicable proportions, may be exchanged for Class EC certificates, and Class EC certificates may be exchanged for the applicable proportions of Class A-S, Class B and Class C certificates. The Class A-S, Class B and Class C certificates are collectively referred to in this prospectus as “exchangeable certificates.” |
(8) | On the closing date, the issuing entity will issue the Class A-S, Class B and Class C trust components, which will have initial outstanding certificate balances, subject to a variance ofplusorminus 5%, of $39,947,000, $33,868,000 and $32,999,000, respectively. The exchangeable certificates and the Class EC certificates will, at all times, represent undivided beneficial ownership interests in a grantor trust that will hold such trust components. Each class of the exchangeable certificates will, at all times, represent a beneficial interest in a percentage of the outstanding certificate balance of the Class A-S, Class B or Class C trust component. The Class EC certificates will represent a beneficial interest in the remaining percentage of the outstanding certificate balances of the Class A-S, Class B and Class C trust components. Following any exchange of Class A-S, Class B and Class C certificates for Class EC certificates or any exchange of Class EC certificates for Class A-S, Class B and Class C certificates, the percentage interest of the outstanding certificate balances of the Class A-S, Class B and Class C trust components that is represented by the Class A-S, Class B, Class EC and Class C certificates will be increased or decreased accordingly. The initial certificate balance of each class of the Class A-S, Class B and Class C certificates shown in the table on the cover page of this prospectus, in the table above and on the back cover of this prospectus represents the maximum certificate balance of such class without giving effect to any issuance of Class EC certificates. The initial certificate balance of the Class EC certificates shown in the table on the cover page of this prospectus, in the table above and on the back cover of this prospectus is equal to the aggregate of the maximum initial certificate balances of the Class A-S, Class B and Class C certificates, representing the maximum certificate balance of the Class EC certificates that could be issued in an exchange. The actual certificate balance of the Class EC certificates or any class of exchangeable certificates issued on the closing date may be less than the maximum certificate balance of that class and may be zero. The certificate balances of the Class A-S, Class B and Class C certificates to be issued on the closing date will be reduced, in required |
3 |
proportions, by an amount equal to the certificate balance of the Class EC certificates issued on the closing date. The aggregate certificate balance of the offered certificates shown on the cover page and back page of this prospectus includes the maximum certificate balance of exchangeable certificates and Class EC certificates that could be outstanding on the closing date, equal to $106,814,000 (subject to a variance ofplus orminus5%). |
(9) | The Class EC certificates will not have a pass-through rate, but will be entitled to receive the sum of the interest distributable on the percentage interests of the Class A-S, Class B and Class C trust components represented by the Class EC certificates. The pass-through rates on the Class A-S, Class B and Class C trust components will at all times be the same as the pass-through rates on the Class A-S, Class B and Class C certificates, respectively. |
(10) | The approximate initial credit support percentages for the Class C and Class EC certificates are equal to the subordination level of the underlying Class C trust component. |
(11) | For any distribution date, the pass-through rate on each class of the Class C, Class E, Class F, Class G and Class H certificates will be a per annum rate equal to the weighted average of the net interest rates on the mortgage loans (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time. |
(12) | The Class R certificates will not have a certificate balance, notional amount, pass-through rate, rating or rated final distribution date. The Class R certificates will represent the residual interests in each of two separate REMICs, as further described in this prospectus. The Class R certificates will not be entitled to distributions of principal or interest. |
The Class D, Class X-D,Class E, Class F, Class G, Class H and Class R certificates are not offered by this prospectus. Any information in this prospectus concerning certificates other than the offered certificates is presented solely to enhance your understanding of the offered certificates.
4 |
Table of Contents
Certificate Summary | 3 |
Summary of Terms | 17 |
Risk Factors | 59 |
The Offered Certificates May Not Be a Suitable Investment for You | 59 |
Combination or “Layering” of Multiple Risks May Significantly Increase Risk of Loss | 59 |
The Offered Certificates Are Limited Obligations; If Assets Are Not Sufficient, You May Not Be Paid | 59 |
Any Credit Support for Your Offered Certificates May Be Insufficient to Protect You Against All Potential Losses | 60 |
Your Yield May Be Affected by Defaults, Prepayments and Other Factors | 60 |
Release, Casualty and Condemnation of Collateral May Reduce the Yield on Your Certificates | 64 |
Certain Classes of the Offered Certificates Are Subordinate to, and Are Therefore Riskier Than, Other Classes | 65 |
A Rapid Rate of Principal Prepayments, Liquidations and/or Principal Losses on the Mortgage Loans Could Result in the Failure to Recoup the Initial Investment in the Class X-A and Class X-B Certificates | 65 |
The Exchangeable Certificates and Class EC Certificates Are Subject to Additional Risks | 66 |
Book-Entry Registration Will Mean You Will Not Be Recognized as a Holder of Record | 66 |
The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Have Adversely Affected and May Continue to Adversely Affect the Value of CMBS | 67 |
Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity and Other Aspects of the Offered Certificates | 68 |
Other External Factors May Adversely Affect the Value and Liquidity of Your Investment; Global, National and Local Economic Factors | 70 |
The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline | 71 |
Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views |
of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded | 72 |
Commercial, Multifamily and Manufactured Housing Community Lending Is Dependent on Net Operating Income; Information May Be Limited or Uncertain | 74 |
Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed | 75 |
Underwritten Net Cash Flow Could Be Based on Incorrect or Failed Assumptions | 75 |
The Mortgage Loans Have Not Been Reviewed or Reunderwritten by Us | 76 |
Historical Information Regarding the Mortgage Loans May Be Limited | 76 |
Ongoing Information Regarding the Mortgage Loans and the Offered Certificates May Be Limited | 76 |
Static Pool Data Would Not Be Indicative of the Performance of This Pool | 77 |
Performance of the Certificates Will Be Highly Dependent on the Performance of Tenants and Tenant Leases | 77 |
A Tenant Concentration May Result in Increased Losses | 77 |
Mortgaged Properties Leased to Multiple Tenants Also Have Risks | 78 |
Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks | 78 |
Tenant Bankruptcy Could Result in a Rejection of the Related Lease | 78 |
Leases That Are Not Subordinated to the Lien of the Mortgage or Do Not Contain Attornment Provisions May Have an Adverse Impact at Foreclosure | 78 |
Early Lease Termination Options May Reduce Cash Flow | 79 |
Mortgaged Properties Leased to Not-for-Profit Tenants Also Have Risks | 79 |
Certain Aspects of Co-Lender, Intercreditor and Similar Agreements Executed in Connection with Mortgage Loans Underlying Your Offered Certificates May Be Unenforceable | 79 |
Mezzanine Debt May Reduce the Cash Flow Available to Reinvest in a Mortgaged Property and may Increase the Likelihood that a Borrower Will |
5 |
Default on a Mortgage Loan Underlying Your Offered Certificates | 80 |
Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses | 80 |
Repayment of a Commercial or Multifamily Mortgage Loan Depends Upon the Performance and Value of the Underlying Real Property, Which May Decline Over Time, and the Related Borrower’s Ability to Refinance the Property, of Which There Is No Assurance | 81 |
The Types of Properties That Secure the Mortgage Loans Present Special Risks | 87 |
Any Analysis of the Value or Income Producing Ability of a Commercial or Multifamily Property Is Highly Subjective and Subject to Error | 103 |
Changes in Pool Composition Will Change the Nature of Your Investment | 105 |
Tenancies-in-Common May Hinder Recovery | 105 |
Risks Relating to Enforceability of Cross-Collateralization Arrangements | 106 |
Inadequacy of Title Insurers May Adversely Affect Payments on Your Certificates | 106 |
The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property | 106 |
A Borrower May Be Unable to Repay Its Remaining Principal Balance on the Maturity Date or Anticipated Repayment Date; Longer Amortization Schedules and Interest-Only Provisions Increase Risk | 107 |
Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable | 108 |
Jurisdictions with One Action or Security First Rules and/or Anti-Deficiency Legislation May Limit the Ability of the Special Servicer to Foreclose on a Real Property or to Realize on Obligations Secured by a Real Property | 110 |
Appraisals May Not Reflect Current or Future Market Value of Each Property | 110 |
Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties | 111 |
Risks Relating to Costs of Compliance with Applicable Laws and Regulations | 112 |
Increases in Real Estate Taxes May Reduce Available Funds | 112 |
Risks Relating to Tax Credits | 112 |
Condemnation of a Mortgaged Property May Adversely Affect Distributions on Certificates | 113 |
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses | 113 |
Lending on Condominium Units Creates Risks for Lenders That Are Not Present When Lending on Non-Condominiums | 113 |
Lending on Ground Leases Creates Risks for Lenders That Are Not Present When Lending on an Actual Ownership Interest in a Real Property | 114 |
Leased Fee Properties Have Special Risks | 115 |
Risks Related to Zoning Non-Compliance and Use Restrictions | 116 |
Risks Relating to Inspections of Properties | 116 |
State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed-in-Lieu of Foreclosure and Reduce Net Proceeds | 117 |
Earthquake, Flood and Other Insurance May Not Be Available or Adequate | 117 |
Lack of Insurance Coverage Exposes the Trust to Risk for Particular Special Hazard Losses | 118 |
Terrorism Insurance May Not Be Available for All Mortgaged Properties | 119 |
Risks Associated with Blanket Insurance Policies or Self-Insurance | 120 |
The Mortgage Loan Sellers, the Sponsors and the Depositor Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans | 120 |
The Borrower’s Form of Entity May Cause Special Risks | 121 |
Other Debt of the Borrower or Ability to Incur Other Financings Entails Risk | 123 |
Litigation and Other Legal Proceedings May Adversely Affect a Borrower’s Ability to Repay Its Mortgage Loan | 124 |
Reserves to Fund Certain Necessary Expenditures Under the Mortgage Loans May Be Insufficient for the Purpose for Which They Were Established | 125 |
A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans | 125 |
Bankruptcy of a Servicer May Adversely Affect Collections on the Mortgage Loans and the Ability to Replace the Servicer | 126 |
6 |
Interests and Incentives of the Underwriter Entities May Not Be Aligned with Your Interests | 127 |
Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned with Your Interests | 128 |
Potential Conflicts of Interest of the Master Servicer, the Special Servicer, the Trustee, any Outside Servicer and any Outside Special Servicer | 129 |
Additional Compensation to the Master Servicer and the Special Servicer and Interest on Advances Will Affect Your Right to Receive Distributions on Your Offered Certificates | 131 |
Inability to Replace the Master Servicer Could Affect Collections and Recoveries on the Mortgage Loans | 131 |
Potential Conflicts of Interest of the Operating Advisor | 131 |
Potential Conflicts of Interest of the Asset Representations Reviewer | 132 |
Potential Conflicts of Interest of a Directing Holder, any Outside Controlling Class Representative and any Companion Loan Holder | 133 |
Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans | 134 |
Conflicts of Interest May Occur as a Result of the Rights of the Controlling Class Representative, an Outside Controlling Class Representative or a Controlling Note Holder to Terminate the Special Servicer of the Related Loan Combination | 134 |
Other Potential Conflicts of Interest May Affect Your Investment | 135 |
Your Lack of Control Over the Issuing Entity and Servicing of the Mortgage Loans Can Create Risks | 135 |
The Controlling Pari Passu Companion Loan for the 600 Broadway Loan Combination Is Expected to Be Contributed to an Outside Securitization That Has Not Yet Closed, and the Provisions of the Related Outside Servicing Agreement Expected to Govern Such Loan Combination Have Yet to Be Finalized | 137 |
Rights of the Directing Holder and the Operating Advisor Could Adversely Affect Your Investment | 138 |
Realization on a Mortgage Loan That Is Part of a Serviced Loan Combination May Be Adversely Affected by the Rights of the Related Serviced Companion Loan Holder | 138 |
Rights of any Outside Controlling Class Representative Under any Outside Servicing Agreement Could Adversely Affect Your Investment | 139 |
You Will Not Have Any Control Over the Servicing of Any Outside Serviced Mortgage Loan | 140 |
Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans | 140 |
Any Loss of Value Payment Made by a Sponsor May Not Be Sufficient to Cover All Losses on a Defective Mortgage Loan | 141 |
Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses | 141 |
Environmental Liabilities Will Adversely Affect the Value and Operation of the Contaminated Property and May Deter a Lender from Foreclosing | 142 |
Certain Types of Operations Involved in the Use and Storage of Hazardous Materials May Lead to an Increased Risk of Issuing Entity Liability | 143 |
Tax Matters and Changes in Tax Law May Adversely Impact the Mortgage Loans or Your Investment | 143 |
State, Local and Other Tax Considerations | 144 |
Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates | 145 |
Description of the Mortgage Pool | 146 |
General | 146 |
Certain Calculations and Definitions | 148 |
Statistical Characteristics of the Mortgage Loans | 156 |
Delinquency Information | 166 |
Environmental Considerations | 167 |
Litigation Considerations | 169 |
Redevelopment, Expansion and Renovation | 170 |
Default History, Bankruptcy Issues and Other Proceedings | 171 |
Tenant Issues | 173 |
Insurance Considerations | 181 |
Zoning and Use Restrictions | 182 |
Appraised Value | 182 |
Non-Recourse Carveout Limitations | 183 |
Real Estate and Other Tax Considerations | 183 |
Certain Terms of the Mortgage Loans | 184 |
Additional Indebtedness | 193 |
The Loan Combinations | 196 |
Significant Obligor | 224 |
Additional Mortgage Loan Information | 225 |
Transaction Parties | 226 |
The Sponsors and the Mortgage Loan Sellers | 226 |
Compensation of the Sponsors | 244 |
7 |
The Originators | 244 |
The Depositor | 269 |
The Issuing Entity | 270 |
The Trustee | 271 |
The Certificate Administrator | 272 |
Servicers | 274 |
The Operating Advisor and the Asset Representations Reviewer | 295 |
Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties | 296 |
Description of the Certificates | 300 |
General | 300 |
Exchangeable Certificates | 303 |
Distributions | 304 |
Allocation of Yield Maintenance Charges and Prepayment Premiums | 316 |
Assumed Final Distribution Date; Rated Final Distribution Date | 317 |
Prepayment Interest Shortfalls | 318 |
Subordination; Allocation of Realized Losses | 319 |
Reports to Certificateholders; Certain Available Information | 321 |
Voting Rights | 330 |
Delivery, Form, Transfer and Denomination | 330 |
Certificateholder Communication | 333 |
The Mortgage Loan Purchase Agreements | 334 |
Sale of Mortgage Loans; Mortgage File Delivery | 334 |
Representations and Warranties | 338 |
Cures, Repurchases and Substitutions | 339 |
Dispute Resolution Provisions | 342 |
Asset Review Obligations | 343 |
The Pooling and Servicing Agreement | 344 |
General | 344 |
Certain Considerations Regarding the Outside Serviced Loan Combinations | 346 |
Assignment of the Mortgage Loans | 346 |
Servicing of the Mortgage Loans | 348 |
Subservicing | 353 |
Advances | 354 |
Accounts | 358 |
Withdrawals from the Collection Account | 359 |
Application of Loss of Value Payments | 361 |
Servicing and Other Compensation and Payment of Expenses | 361 |
Application of Penalty Charges and Modification Fees | 374 |
Enforcement of Due-On-Sale and Due-On-Encumbrance Clauses | 375 |
Appraisal Reduction Amounts | 376 |
Inspections | 381 |
Evidence as to Compliance | 381 |
Limitation on Liability; Indemnification | 382 |
Servicer Termination Events | 386 |
Rights Upon Servicer Termination Event | 387 |
Waivers of Servicer Termination Events | 389 |
Termination of the Special Servicer Without Cause | 389 |
Resignation of the Master Servicer, the Special Servicer and the Operating Advisor | 391 |
Qualification, Resignation and Removal of the Trustee and the Certificate Administrator | 392 |
Amendment | 394 |
Realization Upon Mortgage Loans | 395 |
Directing Holder | 402 |
Operating Advisor | 409 |
Asset Status Reports | 415 |
The Asset Representations Reviewer | 416 |
Repurchase Requests; Enforcement of Mortgage Loan Seller’s Obligations Under the Mortgage Loan Purchase Agreement | 423 |
Dispute Resolution Provisions | 424 |
Rating Agency Confirmations | 427 |
Termination; Retirement of Certificates | 429 |
Optional Termination; Optional Mortgage Loan Purchase | 429 |
Servicing of the Outside Serviced Mortgage Loans | 430 |
Use of Proceeds | 438 |
Yield, Prepayment and Maturity Considerations | 439 |
Yield | 439 |
Yield on the Class X-A and Class X-B Certificates | 442 |
Weighted Average Life of the Offered Certificates | 442 |
Price/Yield Tables | 447 |
Material Federal Income Tax Consequences | 451 |
General | 451 |
Qualification as a REMIC | 451 |
Status of Offered Certificates | 453 |
Taxation of the Regular Interests | 453 |
Taxation of Class EC and Exchangeable Certificates | 459 |
Taxes That May Be Imposed on a REMIC | 460 |
Bipartisan Budget Act of 2015 | 460 |
Taxation of Certain Foreign Investors | 461 |
FATCA | 462 |
Backup Withholding | 462 |
Information Reporting | 462 |
3.8% Medicare Tax on “Net Investment Income” | 462 |
Reporting Requirements | 463 |
Tax Return Disclosure and Investor List Requirements | 463 |
Certain State, Local and Other Tax Considerations | 464 |
ERISA Considerations | 464 |
General | 464 |
8 |
Plan Asset Regulations | 465 |
Prohibited Transaction Exemptions | 466 |
Underwriter Exemption | 467 |
Exempt Plans | 470 |
Insurance Company General Accounts | 470 |
Ineligible Purchasers | 470 |
Further Warnings | 471 |
Consultation with Counsel | 471 |
Tax Exempt Investors | 472 |
Legal Investment | 472 |
Certain Legal Aspects of the Mortgage Loans | 473 |
General | 474 |
Types of Mortgage Instruments | 474 |
Installment Contracts | 475 |
Leases and Rents | 476 |
Personalty | 476 |
Foreclosure | 476 |
Bankruptcy Issues | 481 |
Environmental Considerations | 488 |
Due-On-Sale and Due-On-Encumbrance Provisions | 491 |
Junior Liens; Rights of Holders of Senior Liens | 491 |
Subordinate Financing | 491 |
Default Interest and Limitations on Prepayments | 492 |
Applicability of Usury Laws | 492 |
Americans with Disabilities Act | 493 |
Servicemembers Civil Relief Act | 493 |
Anti-Money Laundering, Economic Sanctions and Bribery | 493 |
Potential Forfeiture of Assets | 494 |
Ratings | 494 |
Plan of Distribution (Underwriter Conflicts of Interest) | 497 |
Incorporation of Certain Information by Reference | 498 |
Where You Can Find More Information | 499 |
Financial Information | 499 |
Legal Matters | 499 |
Index of Certain Defined Terms | 500 |
ANNEX A –Certain CHARACTERISTICS OF THE MORTGAGE LOANS | A-1 |
ANNEX B – significant loan summaries | B-1 |
ANNEX C – MORTGAGE POOL INFORMATION | C-1 |
ANNEX D – FORM OF DISTRIBUTION DATE STATEMENT | D-1 |
ANNEX E-1 – SPONSOR REPRESENTATIONS AND WARRANTIES | E-1-1 |
ANNEX E-2 – EXCEPTIONS TO SPONSOR REPRESENTATIONS AND WARRANTIES | E-2-1 |
ANNEX F – CLASS A-AB SCHEDULED PRINCIPAL BALANCE SCHEDULE | F-1 |
9 |
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus.
§ | This prospectus begins with two introductory sections describing the certificates and the issuing entity in abbreviated form: |
· | the “Certificate Summary” commencing on page 3 of this prospectus, which sets forth important statistical information relating to the certificates; and |
· | the “Summary of Terms” commencing on page 17 of this prospectus, which gives a brief introduction to the key features of the certificates and a description of the underlying mortgage loans. |
Additionally, “Risk Factors” commencing on page 59 of this prospectus describes the material risks that apply to the certificates.
This prospectus includes cross-references to other sections in this prospectus where you can find further related discussions. The Table of Contents in this prospectus identifies the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus to assist you in understanding the terms of the offered certificates and this offering. The capitalized terms used in this prospectus are defined on the pages indicated under the caption “Index of Certain Defined Terms” commencing on page 500 of this prospectus.
§ | In this prospectus: |
· | the terms “depositor,” “we,” “us” and “our” refer to Citigroup Commercial Mortgage Securities Inc. |
· | references to “lender” or “mortgage lender” with respect to the mortgage loans generally should be construed to mean, from and after the date of initial issuance of the offered certificates, the trustee on behalf of the issuing entity as the holder of record title to the mortgage loans or the master servicer or the special servicer, as applicable, with respect to the obligations and rights of the lender as described under “The Pooling and Servicing Agreement”. |
The Annexes attached to this prospectus are incorporated into and made a part of this prospectus.
THERE IS CURRENTLY NO SECONDARY MARKET FOR THE OFFERED CERTIFICATES. WE CANNOT ASSURE YOU THAT A SECONDARY MARKET WILL DEVELOP OR, IF A SECONDARY MARKET DOES DEVELOP, THAT IT WILL PROVIDE HOLDERS OF THE OFFERED CERTIFICATES WITH LIQUIDITY OF INVESTMENT OR THAT IT WILL CONTINUE FOR THE TERM OF THE OFFERED CERTIFICATES. THE UNDERWRITERS CURRENTLY INTEND TO MAKE A MARKET IN THE OFFERED CERTIFICATES, BUT ARE UNDER NO OBLIGATION TO DO SO. ACCORDINGLY, PURCHASERS MUST BE PREPARED TO BEAR THE RISKS OF THEIR INVESTMENTS FOR AN INDEFINITE PERIOD. SEE “RISK FACTORS—THE CERTIFICATES MAY HAVE LIMITED LIQUIDITY AND THE MARKET VALUE OF THE CERTIFICATES MAY DECLINE”.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE OR OTHER JURISDICTION WHERE SUCH OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE SPONSORS, THE ORIGINATORS, THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE CERTIFICATE ADMINISTRATOR, THE OPERATING ADVISOR, THE ASSET REPRESENTATIONS REVIEWER, THE CONTROLLING CLASS REPRESENTATIVE, THE COMPANION LOAN HOLDERS (OR THEIR REPRESENTATIVES), THE UNDERWRITERS OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR PRIVATE INSURER.
10 |
UNITED KINGDOM
EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT:
(A) IN THE UNITED KINGDOM, IT HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (THE “FSMA”)) RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE OFFERED CERTIFICATES IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE DEPOSITOR OR THE ISSUING ENTITY; AND
(B) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE OFFERED CERTIFICATES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.
NOTICE TO UNITED KINGDOM INVESTORS
THE ISSUING ENTITY MAY CONSTITUTE A “COLLECTIVE INVESTMENT SCHEME” AS DEFINED BY SECTION 235 OF THE FSMA THAT IS NOT A “RECOGNIZED COLLECTIVE INVESTMENT SCHEME” FOR THE PURPOSES OF THE FSMA AND THAT HAS NOT BEEN AUTHORIZED, REGULATED OR OTHERWISE RECOGNIZED OR APPROVED. AS AN UNREGULATED SCHEME, THE OFFERED CERTIFICATES CANNOT BE MARKETED IN THE UNITED KINGDOM TO THE GENERAL PUBLIC, EXCEPT IN ACCORDANCE WITH THE FSMA.
THE DISTRIBUTION OF THIS PROSPECTUS (A) IF MADE BY A PERSON WHO IS NOT AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (I) ARE OUTSIDE THE UNITED KINGDOM, OR (II) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND QUALIFY AS INVESTMENT PROFESSIONALS IN ACCORDANCE WITH ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE “FINANCIAL PROMOTION ORDER”), OR (III) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) THROUGH (D) (“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.”) OF THE FINANCIAL PROMOTION ORDER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “FPO PERSONS”); AND (B) IF MADE BY A PERSON WHO IS AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (I) ARE OUTSIDE THE UNITED KINGDOM, OR (II) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND QUALIFY AS INVESTMENT PROFESSIONALS IN ACCORDANCE WITH ARTICLE 14(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (PROMOTION OF COLLECTIVE INVESTMENT SCHEMES) (EXEMPTIONS) ORDER 2001 (THE “PROMOTION OF COLLECTIVE INVESTMENT SCHEMES EXEMPTIONS ORDER”), OR (III) ARE PERSONS FALLING WITHIN ARTICLE 22(2)(A) THROUGH (D) (“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.”) OF THE PROMOTION OF COLLECTIVE INVESTMENT SCHEMES EXEMPTIONS ORDER, OR (IV) PERSONS TO WHOM THE ISSUING ENTITY MAY LAWFULLY BE PROMOTED IN ACCORDANCE WITH RULE 4.12 OF THE UK FINANCIAL CONDUCT AUTHORITY’S CONDUCT OF BUSINESS SOURCEBOOK (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “PCIS PERSONS” AND, TOGETHER WITH THE FPO PERSONS, THE “RELEVANT PERSONS”).
THIS PROSPECTUS MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS PROSPECTUS RELATES, INCLUDING THE OFFERED CERTIFICATES, IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. ANY PERSONS OTHER THAN RELEVANT PERSONS SHOULD NOT ACT OR RELY ON THIS PROSPECTUS.
POTENTIAL INVESTORS IN THE UNITED KINGDOM ARE ADVISED THAT ALL, OR MOST, OF THE PROTECTIONS AFFORDED BY THE UNITED KINGDOM REGULATORY SYSTEM WILL NOT APPLY TO AN INVESTMENT IN THE OFFERED CERTIFICATES AND THAT COMPENSATION WILL NOT BE AVAILABLE UNDER THE UNITED KINGDOM FINANCIAL SERVICES COMPENSATION SCHEME.
11 |
EUROPEAN ECONOMIC AREA
THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF OFFERED CERTIFICATES IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A “RELEVANT MEMBER STATE”) WILL BE MADE PURSUANT TO AN EXEMPTION UNDER THE PROSPECTUS DIRECTIVE (AS DEFINED BELOW) FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OFcertificates. ACCORDINGLY ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT MEMBER STATE OF CERTIFICATES WHICH ARE THE SUBJECT OF AN OFFERING CONTEMPLATED IN THIS PROSPECTUS AS COMPLETED BY FINAL TERMS IN RELATION TO THE OFFER OF THOSE OFFERED CERTIFICATES MAY ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES FOR THE ISSUING ENTITY, THE DEPOSITOR OR AN UNDERWRITER TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE IN RELATION TO SUCH OFFER.
NONE OF THE ISSUING ENTITY, THE DEPOSITOR OR ANY OF THE UNDERWRITERS HAS AUTHORIZED, NOR DOES ANY OF THEM AUTHORIZE, THE MAKING OF ANY OFFER OF OFFERED CERTIFICATES IN CIRCUMSTANCES IN WHICH AN OBLIGATION ARISES FOR THE ISSUING ENTITY, THE DEPOSITOR OR AN UNDERWRITER TO PUBLISH OR SUPPLEMENT A PROSPECTUS FOR SUCH OFFER.
FOR THE PURPOSES OF THIS PROVISION AND THE PROVISION IMMEDIATELY BELOW, THE EXPRESSION “PROSPECTUS DIRECTIVE” MEANS DIRECTIVE 2003/71/EC (AND AMENDMENTS THERETO, INCLUDING THE 2010 PD AMENDING DIRECTIVE, TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE), AND INCLUDES ANY RELEVANT IMPLEMENTING MEASURE IN THE RELEVANT MEMBER STATE, AND THE EXPRESSION “2010 PD AMENDING DIRECTIVE” MEANS DIRECTIVE 2010/73/EU.
EUROPEAN ECONOMIC AREA SELLING RESTRICTIONS
IN RELATION TO EACH RELEVANT MEMBER STATE, EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT,with effect from and including the date on which the prospectus directive is implemented in that relevant member state, IT HAS NOT MADE AND WILL NOT MAKE AN OFFER OF THE CERTIFICATES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO THE PUBLIC IN THAT RELEVANT MEMBER STATE OTHER THAN:
(A) TO ANY LEGAL ENTITY WHICH IS A “QUALIFIED INVESTOR” AS DEFINED IN THE PROSPECTUS DIRECTIVE;
(B) TO FEWER THAN 150 NATURAL OR LEGAL PERSONS (OTHER THAN “QUALIFIED INVESTORS” AS DEFINED IN THE PROSPECTUS DIRECTIVE) SUBJECT TO OBTAINING THE PRIOR CONSENT OF THE RELEVANT UNDERWRITER OR UNDERWRITERS NOMINATED BY THE ISSUING ENTITY FOR ANY SUCH OFFER; OR
(C) IN ANY OTHER CIRCUMSTANCES FALLING WITHIN ARTICLE 3(2) OF THE PROSPECTUS DIRECTIVE;
PROVIDED THAT NO SUCH OFFER OF THE OFFERED CERTIFICATES REFERRED TO IN CLAUSES (A), (B) AND (C) ABOVE SHALL REQUIRE THE DEPOSITOR, THE ISSUING ENTITY OR ANY UNDERWRITER TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE.
FOR THE PURPOSES OF THE PRIOR PARAGRAPH, THE EXPRESSION “AN OFFER OF THE CERTIFICATES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO THE PUBLIC” IN RELATION TO ANY CERTIFICATE THAT IS OFFERED IN ANY RELEVANT MEMBER STATE MEANS THE COMMUNICATION IN ANY FORMand by any means of SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE CERTIFICATES TO BE OFFERED SO AS TO ENABLE AN INVESTOR TOdecide TO PURCHASE OR SUBSCRIBE TO THE OFFERED CERTIFICATES, AS THE SAME MAY BE VARIED IN THAT RELEVANT MEMBER STATE BY ANY MEASURE IMPLEMENTING THE PROSPECTUS DIRECTIVE IN THAT RELEVANT MEMBER STATE.
12 |
PEOPLE’S REPUBLIC OF CHINA
THE OFFERED CERTIFICATES WILL NOT BE OFFERED OR SOLD IN THE PEOPLE’S REPUBLIC OF CHINA (EXCLUDING HONG KONG, MACAU AND TAIWAN, THE “PRC”) AS PART OF THE INITIAL DISTRIBUTION OF THE OFFERED CERTIFICATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE PRC TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN THE PRC.
THE DEPOSITOR DOES NOT REPRESENT THAT THIS PROSPECTUS MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY OFFERED CERTIFICATES MAY BE LAWFULLY OFFERED, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN THE PRC, OR PURSUANT TO AN EXEMPTION AVAILABLE THEREUNDER, OR ASSUME ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION OR OFFERING. IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE DEPOSITOR WHICH WOULD PERMIT AN OFFERING OF ANY OFFERED CERTIFICATES OR THE DISTRIBUTION OF THIS PROSPECTUS IN THE PRC. ACCORDINGLY, THE OFFERED CERTIFICATES ARE NOT BEING OFFERED OR SOLD WITHIN THE PRC BY MEANS OF THIS PROSPECTUS OR ANY OTHER DOCUMENT. NEITHER THIS PROSPECTUS NOR ANY ADVERTISEMENT OR OTHER OFFERING MATERIAL MAY BE DISTRIBUTED OR PUBLISHED IN THE PRC, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS.
HONG KONG
NO PERSON HAS ISSUED OR HAD IN ITS POSSESSION FOR THE PURPOSES OF ISSUE, OR WILL ISSUE OR HAVE IN ITS POSSESSION FOR THE PURPOSES OF ISSUE, WHETHER IN HONG KONG OR ELSEWHERE, ANY ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE OFFERED CERTIFICATES, WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC OF HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO OFFERED CERTIFICATES WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO “PROFESSIONAL INVESTORS” WITHIN THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP. 571 OF THE LAWS OF HONG KONG) AND ANY RULES OR REGULATIONS MADE UNDER THAT ORDINANCE.
THE OFFERED CERTIFICATES (IF THEY ARE NOT A “STRUCTURED PRODUCT” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CAP. 571 OF THE LAWS OF HONG KONG) HAVE NOT BEEN OFFERED OR SOLD AND WILL NOT BE OFFERED OR SOLD, BY MEANS OF ANY DOCUMENT, OTHER THAN (A) TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CAP. 571 OF THE LAWS OF HONG KONG) AND ANY RULES OR REGULATIONS MADE UNDER THAT ORDINANCE, OR (B) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT CONSTITUTING A “PROSPECTUS” AS DEFINED IN THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CAP. 32 OF THE LAWS OF HONG KONG) OR WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE COMPANIES ORDINANCE (CAP. 622 OF THE LAWS OF HONG KONG). FURTHER, THE CONTENTS OF THIS PROSPECTUS HAVE NOT BEEN REVIEWED OR APPROVED BY THE SECURITIES AND FUTURES COMMISSION OF HONG KONG OR ANY OTHER REGULATORY AUTHORITY IN HONG KONG. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE OFFERING CONTEMPLATED IN THIS PROSPECTUS. IF YOU ARE IN ANY DOUBT ABOUT ANY OF THE CONTENTS OF THIS PROSPECTUS, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
SINGAPORE
NEITHER THIS PROSPECTUS NOR ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH ANY OFFER OF THE OFFERED CERTIFICATES HAS BEEN REGISTERED AS A PROSPECTUS WITH THE MONETARY AUTHORITY OF SINGAPORE (“MAS”) UNDER THE SECURITIES AND FUTURES ACT (CAP. 289) OF SINGAPORE (THE “SFA”). ACCORDINGLY, MAS ASSUMES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT A PROSPECTUS AS DEFINED IN THE SFA AND STATUTORY LIABILITY UNDER THE SFA IN RELATION TO THE CONTENTS OF PROSPECTUSES
13 |
WOULD NOT APPLY. THE PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY WHETHER THE INVESTMENT IS SUITABLE FOR IT.
THIS PROSPECTUS AND ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH THE OFFER OR SALE, OR INVITATION FOR SUBSCRIPTION OR PURCHASE, OF THE OFFERED CERTIFICATES MAY NOT BE CIRCULATED OR DISTRIBUTED, NOR MAY THE OFFERED CERTIFICATES BE OFFERED OR SOLD, OR BE MADE THE SUBJECT OF AN INVITATION FOR SUBSCRIPTION OR PURCHASE, WHETHER DIRECTLY OR INDIRECTLY, TO PERSONS IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR (AS DEFINED IN SECTION 4A OF THE SFA (“INSTITUTIONAL INVESTOR”)) UNDER SECTION 274 OF THE SFA, (II) TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA (“RELEVANT PERSON”)) PURSUANT TO SECTION 275(2) OF THE SFA, AND IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA; (III) TO ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SFA, IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA; OR (IV) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SFA.
UNLESS ANY OFFER OF SUCH OFFERED CERTIFICATES WAS PREVIOUSLY MADE IN OR ACCOMPANIED BY A PROSPECTUS AND WHICH ARE OF THE SAME CLASS AS OTHER OFFERED CERTIFICATES OF A CORPORATION LISTED ON FOR QUOTATION ON A SECURITIES EXCHANGE, ANY SUBSEQUENT OFFERS IN SINGAPORE OF OFFERED CERTIFICATES ACQUIRED PURSUANT TO AN INITIAL OFFER MADE IN RELIANCE ON AN EXEMPTION UNDER SECTION 274 OF THE SFA OR SECTION 275 OF THE SFA MAY ONLY BE MADE, PURSUANT TO THE REQUIREMENTS OF SECTION 276 OF THE SFA, FOR THE INITIAL SIX MONTH PERIOD AFTER SUCH ACQUISITION, TO PERSONS WHO ARE INSTITUTIONAL INVESTORS OR TO ACCREDITED INVESTORS (AS DEFINED IN SECTION 4A OF THE SFA (“ACCREDITED INVESTOR”)) OR RELEVANT PERSONS OR TO SUCH PERSONS PURSUANT TO AN OFFER REFERRED TO UNDER SECTION 275(1A) OF THE SFA. ANY TRANSFER AFTER SUCH INITIAL SIX MONTH PERIOD IN SINGAPORE SHALL BE MADE, PURSUANT TO THE REQUIREMENTS OF SECTION 257 OF THE SFA, IN RELIANCE ON ANY APPLICABLE EXEMPTION UNDER SUBDIVISION (4) OF DIVISION 1 OF PART XIII OF THE SFA (OTHER THAN SECTION 280 OF THE SFA).
IN ADDITION TO THE ABOVE, WHERE THE OFFERED CERTIFICATES ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY A RELEVANT PERSON WHICH IS:
(A) | A CORPORATION (WHICH IS NOT AN ACCREDITED INVESTOR) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS AND THE ENTIRE SHARE CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN ACCREDITED INVESTOR; OR |
(B) | A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED INVESTOR) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND EACH BENEFICIARY IS AN ACCREDITED INVESTOR, |
SECURITIES (AS DEFINED IN SECTION 239(1) OF THE SFA) OF THAT CORPORATION OR THE BENEFICIARIES’ RIGHTS AND INTEREST (HOWSOEVER DESCRIBED) IN THAT TRUST SHALL NOT BE TRANSFERABLE FOR SIX MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS ACQUIRED THE OFFERED CERTIFICATES UNDER SECTION 275 OF THE SFA EXCEPT:
(1) | TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON, OR TO ANY PERSON ARISING FROM AN OFFER REFERRED TO IN SECTION 275(1A) OR SECTION 276(4)(i)(B) OF THE SFA; |
(2) | WHERE NO CONSIDERATION IS GIVEN FOR THE TRANSFER; OR |
(3) | WHERE THE TRANSFER IS BY OPERATION OF LAW. |
NOTICE TO RESIDENTS OF THE REPUBLIC OF KOREA
THIS PROSPECTUS IS NOT, AND UNDER NO CIRCUMSTANCES IS THIS PROSPECTUS TO BE CONSTRUED AS, A PUBLIC OFFERING OF SECURITIES IN KOREA. NEITHER THE ISSUER NOR ANY OF ITS AGENTS MAKE ANY REPRESENTATION WITH RESPECT TO THE ELIGIBILITY OF ANY RECIPIENTS OF THIS PROSPECTUS TO ACQUIRE THE OFFERED CERTIFICATES UNDER THE LAWS OF KOREA, INCLUDING, BUT WITHOUT LIMITATION, THE FOREIGN EXCHANGE TRANSACTION LAW AND
14 |
REGULATIONS THEREUNDER (THE “FETL”). THE OFFERED CERTIFICATES HAVE NOT BEEN REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA FOR PUBLIC OFFERING IN KOREA, AND NONE OF THE OFFERED CERTIFICATES MAY BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED OR SOLD TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT PURSUANT TO THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT AND THE DECREES AND REGULATIONS THEREUNDER (THE “FSCMA”), THE FETL AND ANY OTHER APPLICABLE LAWS, REGULATIONS AND MINISTERIAL GUIDELINES IN KOREA. WITHOUT PREJUDICE TO THE FOREGOING, THE NUMBER OF OFFERED CERTIFICATES OFFERED IN KOREA OR TO A RESIDENT OF KOREA SHALL BE LESS THAN FIFTY AND FOR A PERIOD OF ONE YEAR FROM THE ISSUE DATE OF THE OFFERED CERTIFICATES, NONE OF THE OFFERED CERTIFICATES MAY BE DIVIDED RESULTING IN AN INCREASED NUMBER OF OFFERED CERTIFICATES. FURTHERMORE, THE OFFERED CERTIFICATES MAY NOT BE RESOLD TO KOREAN RESIDENTS UNLESS THE PURCHASER OF THE OFFERED CERTIFICATES COMPLIES WITH ALL APPLICABLE REGULATORY REQUIREMENTS (INCLUDING, BUT NOT LIMITED TO, GOVERNMENT REPORTING APPROVAL REQUIREMENTS UNDER THE FETL AND ITS SUBORDINATE DECREES AND REGULATIONS) IN CONNECTION WITH THE PURCHASE OF THE OFFERED CERTIFICATES.
JAPAN
THE OFFERED CERTIFICATES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE FINANCIAL INSTRUMENTS AND EXCHANGE LAW OF JAPAN, AS AMENDED (THE “FIEL”), AND DISCLOSURE UNDER THE FIEL HAS NOT BEEN AND WILL NOT BE MADE WITH RESPECT TO THE OFFERED CERTIFICATES. ACCORDINGLY, EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT IT HAS NOT, DIRECTLY OR INDIRECTLY, OFFERED OR SOLD AND WILL NOT, DIRECTLY OR INDIRECTLY, OFFER OR SELL ANY CERTIFICATES IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN (WHICH TERM AS USED IN THIS PROSPECTUS MEANS ANY PERSON RESIDENT IN JAPAN, INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF JAPAN) OR TO OTHERS FOR RE-OFFERING OR RE-SALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE FIEL AND OTHER RELEVANT LAWS, REGULATIONS AND MINISTERIAL GUIDELINES OF JAPAN.
15 |
FORWARD-LOOKING STATEMENTS
In this prospectus, we use certain forward-looking statements. These forward-looking statements are found in the material, including each of the tables, set forth under “Risk Factors” and “Yield, Prepayment and Maturity Considerations”. Forward-looking statements are also found elsewhere in this prospectus and include words like “expects,” “intends,” “anticipates,” “estimates” and other similar words. These statements are intended to convey our projections or expectations as of the date of this prospectus. These statements are inherently subject to a variety of risks and uncertainties. Actual results could differ materially from those we anticipate due to changes in, among other things:
· | economic conditions and industry competition, |
· | political and/or social conditions, and |
· | the law and government regulatory initiatives. |
We will not update or revise any forward-looking statement to reflect changes in our expectations or changes in the conditions or circumstances on which these statements were originally based.
16 |
Summary of Terms
The following is only a summary of selected information in this prospectus. It does not contain all of the information you need to consider in making your investment decision. More detailed information appears elsewhere in this prospectus. To understand all of the terms of the offered certificates, carefully read this entire document. See“Index of Certain Defined Terms”for definitions of capitalized terms.
General | |||
Title of Certificates | Citigroup Commercial Mortgage Trust 2016-GC37, Commercial Mortgage Pass-Through Certificates, Series 2016-GC37. | ||
Relevant Parties | |||
Depositor | Citigroup Commercial Mortgage Securities Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of Citigroup Global Markets Holdings Inc. As depositor, Citigroup Commercial Mortgage Securities Inc. will acquire the mortgage loans from the sponsors and transfer them to the issuing entity. The depositor’s address is 390 Greenwich Street, New York, New York 10013 and its telephone number is (212) 816-5343. See “Transaction Parties—The Depositor.” | ||
Issuing Entity | Citigroup Commercial Mortgage Trust 2016-GC37, a New York common law trust to be established on the closing date of this securitization transaction under the pooling and servicing agreement, to be dated as of April 1, 2016, between the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the operating advisor and the asset representations reviewer. See “Transaction Parties—The Issuing Entity”. | ||
Sponsors | The sponsors will be transferring the mortgage loans to the depositor for inclusion in the issuing entity. The sponsors of this transaction are: | ||
· | Citigroup Global Markets Realty Corp., a New York corporation (15 mortgage loans representing approximately 49.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date); | ||
· | Rialto Mortgage Finance, LLC, a Delaware limited liability company (9 mortgage loans representing approximately 15.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date); | ||
· | The Bank of New York Mellon, a New York banking corporation (6 mortgage loans representing approximately 13.4% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date); | ||
· | KGS-Alpha Real Estate Capital Markets, LLC, a Delaware limited liability company (18 mortgage loans representing approximately 10.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date); | ||
· | Goldman Sachs Mortgage Company, a New York limited partnership (3 mortgage loans representing approximately 8.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date); and |
17 |
· | RAIT Funding, LLC, a Delaware limited liability company (3 mortgage loans representing approximately 3.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date). | ||
The sponsors are sometimes also referred to in this prospectus as the “mortgage loan sellers”. | |||
Originators | The sponsors originated the mortgage loans or acquired the mortgage loans, directly or indirectly, from the originators as set forth in the following chart: |
Originator | Sponsor | Number of Mortgage Loans | Aggregate Principal Balance of Mortgage Loans | Approx. % of Initial Pool Balance | ||||||||
Citigroup Global Markets Realty Corp.(1) | Citigroup Global Markets Realty Corp. | 14 | $290,553,424 | 41.8 | % | |||||||
Rialto Mortgage Finance, LLC | Rialto Mortgage Finance, LLC | 9 | 107,425,000 | 15.5 | ||||||||
The Bank of New York Mellon(2) | The Bank of New York Mellon. | 6 | 92,759,029 | 13.4 | ||||||||
KGS-Alpha Real Estate Capital Markets, LLC | KGS-Alpha Real Estate Capital Markets, LLC. | 18 | 74,730,408 | 10.8 | ||||||||
Goldman Sachs Mortgage Company | Goldman Sachs Mortgage Company | 3 | 56,136,918 | 8.1 | ||||||||
Pillar Multifamily, LLC | Citigroup Global Markets Realty Corp. | 1 | 51,744,943 | 7.4 | ||||||||
RAIT Funding, LLC | RAIT Funding, LLC | 3 | 21,377,004 | 3.1 | ||||||||
Total | 54 | $694,726,725 | 100.0 | % |
(1) | The mortgage loan secured by the mortgaged property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is part of a loan combination that was co-originated by Citigroup Global Markets Realty Corp. and Barclays Bank PLC, and will be sold to the depositor by Citigroup Global Markets Realty Corp. | |||
(2) | The mortgage loan secured by the mortgaged property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is part of a loan combination that was co-originated by The Bank of New York Mellon and German American Capital Corporation, and will be sold to the depositor by The Bank of New York Mellon. | |||
See “Transaction Parties—The Sponsors and the Mortgage Loan Sellers” and “—The Originators.” | ||||
Master Servicer | Wells Fargo Bank, National Association, a national banking association, will be the master servicer. The master servicer will, in general, be responsible for the master servicing and administration of the serviced mortgage loans and the related companion loans pursuant to the pooling and servicing agreement for this transaction (excluding those mortgage loans and companion loans that are part of outside serviced loan combinations and serviced under an outside servicing agreement as indicated in the table titled “Outside Serviced Mortgage Loans Summary” under “—The Mortgage Pool—The Loan Combinations” below). The master servicer may also be responsible for taking certain actions to enforce certain obligations of a mortgage loan seller under its mortgage |
18 |
loan purchase agreement with respect to non-specially serviced mortgage loans. The principal west coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at MAC-A0227-020, 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at MAC-D1086-120, 550 South Tryon Street, Charlotte, North Carolina 28202. See “Transaction Parties—Servicers—The Master Servicer” and “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans”. | ||
See “—The Mortgage Pool—The Loan Combinations” below for a discussion of the mortgage loans included in the issuing entity that are part of a loan combination and have one or more related companion loans held outside the issuing entity. | ||
Any mortgage loans transferred to the issuing entity, any related companion loans and any related loan combinations that are serviced under the pooling and servicing agreement are referred to as “serviced mortgage loans,” “serviced companion loans” and “serviced loan combinations,” respectively. A serviced mortgage loan and a serviced companion loan may each also be referred to as a “serviced loan”. Any mortgage loans transferred to the issuing entity, related companion loans and related loan combinations that are not serviced under the pooling and servicing agreement, but are instead serviced under a separate pooling and servicing agreement, trust and servicing agreement and/or other servicing arrangement (in any such case, an “outside servicing agreement”) governing the securitization of one or more related companion loans, are referred to as “outside serviced mortgage loans,” “outside serviced companion loans,” and “outside serviced loan combinations,” respectively. An outside serviced mortgage loan and an outside serviced companion loan may each also be referred to as an “outside serviced loan”. | ||
The servicer(s) of the outside serviced mortgage loan(s) are set forth in the table titled “Outside Serviced Mortgage Loans Summary” under “—The Mortgage Pool—The Loan Combinations” below. See “Transaction Parties—Servicers—The Outside Servicers and the Outside Special Servicers” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. | ||
Special Servicer | Midland Loan Services, a Division of PNC Bank, National Association, a national banking association, will be the initial special servicer with respect to the serviced mortgage loans (other than any excluded special servicer mortgage loan) and any related serviced companion loans pursuant to the pooling and servicing agreement. The special servicer will be primarily responsible for (i) making decisions and performing certain servicing functions with respect to the serviced mortgage loans and any related companion loans as to which a special servicing transfer event (such as a default or an imminent default) has occurred, as well as any related REO properties acquired on behalf of the issuing entity and any related companion loan holders, and (ii) in certain circumstances, reviewing, evaluating, and providing or withholding consent as to certain major decisions and other transactions relating to such serviced mortgage loans and any related companion loans for which a special servicing transfer event has not occurred, in each case pursuant to the pooling and servicing agreement for this transaction. The special servicer may also be responsible for taking certain actions to enforce certain obligations of a mortgage loan seller under its mortgage loan purchase agreement with respect to specially serviced mortgage loans. The |
19 |
principal special servicing offices of the special servicer are located at 10851 Mastin Street, Building 82, Suite 300, Overland Park, Kansas 66210, and its telephone number is (913) 253-9000. See “Transaction Parties—Servicers—The Special Servicer”, and “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans” and “—Servicing and Other Compensation and Payment of Expenses”. | ||
If the special servicer, to its knowledge, becomes a borrower party (as defined under “—Directing Holder / Controlling Class Representative” below) with respect to any mortgage loan (such mortgage loan, an “excluded special servicer mortgage loan”), it will be required to resign with respect to the servicing of that mortgage loan. The controlling class representative (prior to the occurrence and continuance of a control termination event (as described under “—Directing Holder / Controlling Class Representative” below)) will be entitled to appoint a separate special servicer that is not a borrower party with respect to such excluded special servicer mortgage loan (such special servicer, an “excluded mortgage loan special servicer”) unless such excluded special servicer mortgage loan is also an excluded mortgage loan (as defined under “—Directing Holder / Controlling Class Representative” below), in which case the largest controlling class certificateholder (by certificate balance) that is not an excluded controlling class holder with respect to that mortgage loan will be entitled to appoint the excluded mortgage loan special servicer. A controlling class certificateholder that is a borrower party with respect to any mortgage loan will be an “excluded controlling class holder” with respect to that mortgage loan. See “—Directing Holder / Controlling Class Representative” below. Any excluded mortgage loan special servicer will be required to perform all of the obligations of the special servicer for the related excluded special servicer mortgage loan and will be entitled to all special servicing compensation with respect to such excluded special servicer mortgage loan earned during such time as the related mortgage loan is an excluded special servicer mortgage loan. If neither the controlling class representative nor any controlling class certificateholder is entitled to appoint an excluded mortgage loan special servicer for an excluded special servicer mortgage loan, an excluded mortgage loan special servicer will be appointed in the manner described in this prospectus and as provided under the pooling and servicing agreement. See “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause” in this prospectus. | ||
Midland Loan Services, a Division of PNC Bank, National Association was selected to be the initial special servicer by Eightfold Real Estate Capital Fund IV, L.P. (or its affiliate), which is expected to purchase the Class E, Class F, Class G and Class H certificates (and may purchase certain other classes of certificates) and, on the closing date, to be the initial controlling class certificateholder and the initial directing holder with respect to the serviced loans other than (x) any serviced loan combination as to which the controlling note is held outside the issuing entity, and (y) any excluded mortgage loan. See “—Directing Holder / Controlling Class Representative” below and “The Pooling and Servicing Agreement—Directing Holder”. | ||
The special servicer (but not the special servicer with respect to any outside serviced mortgage loan) may be removed in such capacity under the pooling and servicing agreement, with or without cause, as set forth under “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause”, “—Servicer Termination Events” and “—Rights Upon Servicer Termination Event.” |
20 |
A special servicer with respect to any outside serviced mortgage loan may only be removed in such capacity in accordance with the terms and provisions of the applicable outside servicing agreement and the co-lender agreement governing the related outside serviced loan combination. | ||
The special servicer(s) of the outside serviced mortgage loan(s) are set forth in the table below titled “Outside Serviced Mortgage Loans Summary” under “—The Mortgage Pool—The Loan Combinations”. See “Transaction Parties—Servicers—The Outside Servicers and the Outside Special Servicers” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. | ||
Significant Primary Servicer | Berkadia Commercial Mortgage LLC, a Delaware limited liability company, is acting as primary servicer with respect to three outside serviced mortgage loans representing approximately 19.4% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, and will act as primary servicer with respect to three serviced mortgage loans representing approximately 5.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. The principal servicing office of Berkadia Commercial Mortgage LLC is located at 323 Norristown Road, Suite 300, Ambler, Pennsylvania 19002. The master servicer or applicable outside servicer will pay the fees of the primary servicer to the extent such fees are received. See “Transaction Parties—Servicers—Significant Primary Servicer—Berkadia Commercial Mortgage LLC”. | |
Trustee and Custodian | Deutsche Bank Trust Company Americas, a New York banking corporation, will act as trustee and as custodian. The corporate trust office of the trustee is located at 1761 East St. Andrew Place, Santa Ana, California 92705-4934, Attention: Trust Administration-CGCMT Commercial Mortgage Trust 2016-GC37. Following the transfer of the mortgage loans, the trustee, on behalf of the issuing entity, will become the mortgagee of record for each serviced mortgage loan and any related companion loans. In addition, subject to the terms of the pooling and servicing agreement, the trustee will be primarily responsible for back-up advancing. See “Transaction Parties—The Trustee” and “The Pooling and Servicing Agreement”. | |
With respect to each outside serviced mortgage loan, the entity set forth in the table titled “Outside Serviced Mortgage Loans Summary” under “—The Mortgage Pool—The Loan Combinations” below, in its capacity as trustee under the pooling and servicing agreement, trust and servicing agreement and/or other servicing arrangement for the indicated transaction, is the mortgagee of record for that outside serviced mortgage loan and the related outside serviced companion loan(s). With respect to each outside serviced mortgage loan, the entity set forth in the table titled “Outside Serviced Mortgage Loans Summary” under “—The Mortgage Pool—The Loan Combinations” below, in its capacity as custodian under the pooling and servicing agreement, trust and servicing agreement and/or other servicing arrangement for the indicated transaction, is the primary custodian for that outside serviced mortgage loan and the related outside serviced companion loan(s). See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. | ||
Certificate Administrator | Citibank, N.A., a national banking association organized under the laws of the United States, will initially act as certificate administrator. The certificate administrator will also be required to act as certificate registrar, |
21 |
REMIC administrator, 17g-5 information provider, paying agent and authenticating agent. The corporate trust offices of the certificate administrator are located at 388 Greenwich Street, 14th Floor, New York, New York 10013, Attention: Global Transaction Services – CGCMT 2016-GC37, and for certificate transfer purposes are located at 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey 07310, Attention: Global Transaction Services – CGCMT Commercial Mortgage Trust 2016-GC37. See “Transaction Parties—The Certificate Administrator” and “The Pooling and Servicing Agreement”. | |||
Operating Advisor | Park Bridge Lender Services LLC, a New York limited liability company, will be the operating advisor. Following the occurrence and continuance of certain trigger events, the operating advisor will have the following rights and duties with respect to the serviced mortgage loans: (i) certain review and reporting responsibilities with respect to the performance of the special servicer; (ii) certain non-binding consultation rights with the special servicer regarding major decisions on specially serviced loans; and (iii) in certain circumstances, the right to recommend to the certificateholders that the special servicer be replaced. The operating advisor will generally have no obligations or consultation rights as operating advisor under the pooling and servicing agreement for this transaction with respect to any outside serviced mortgage loan or any related REO property. See “Transaction Parties—The Operating Advisor and the Asset Representations Reviewer” and “The Pooling and Servicing Agreement—Operating Advisor”. | ||
Asset Representations Reviewer | Park Bridge Lender Services LLC will also be serving as the asset representations reviewer. The asset representations reviewer will be required to review certain delinquent mortgage loans after a specified delinquency threshold has been exceeded and the required percentage of certificateholders have voted to direct a review of such delinquent mortgage loans. See “Transaction Parties—The Operating Advisor and the Asset Representations Reviewer” and “The Pooling and Servicing Agreement—The Asset Representations Reviewer”. | ||
Outside Servicers, Outside Special Servicers, Outside Trustees | |||
and Outside Custodians | The following loan combinations constitute the “outside serviced loan combinations” and will be serviced and administered pursuant to the pooling and servicing agreement, trust and servicing agreement and/or other servicing arrangement governing the securitization of a related companion loan by the parties thereto, as set forth below: | ||
(i) | each of the loan combinations secured by the mortgaged properties identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, Austin Block 21, 5 Penn Plaza and Park Place is being serviced and administered pursuant to the pooling and servicing agreement (the “CGCMT 2016-GC36 pooling and servicing agreement”) for the commercial mortgage securitization transaction involving the issuance of the Citigroup Commercial Mortgage Trust 2016-GC36, Commercial Mortgage Pass-Through Certificates, Series 2016-GC36, dated as of February 1, 2016, between Citigroup Commercial Mortgage Securities Inc., as depositor, KeyBank National Association, as master servicer, Wells Fargo Bank, National Association, as special servicer and as certificate administrator, Wilmington Trust, National Association, as trustee, and Pentalpha Surveillance LLC, as operating advisor and as asset representations reviewer; and |
22 |
(ii) | each of the loan combinations secured by the mortgaged properties identified on Annex A to this prospectus as 79 Madison Avenue and 600 Broadway is being serviced and administered pursuant to the pooling and servicing agreement (the “CGCMT 2016-P3 pooling and servicing agreement”) for the commercial mortgage securitization transaction involving the issuance of the Citigroup Commercial Mortgage Trust 2016-P3, Commercial Mortgage Pass-Through Certificates, Series 2016-P3, dated as of April 1, 2016, between Citigroup Commercial Mortgage Securities Inc., as depositor, Wells Fargo Bank, National Association, as master servicer, C-III Asset Management LLC, as special servicer, Park Bridge Lender Services LLC, as operating advisor and as asset representations reviewer, Citibank, N.A., as certificate administrator, and Wilmington Trust, National Association, as trustee. However, solely in the case of the 600 Broadway loan combination, following the securitization of the 600 Broadway controlling pari passu companion loan, it is expected that the 600 Broadway loan combination will be serviced under the pooling and servicing agreement (the “600 Broadway pooling and servicing agreement”) governing the securitization of the 600 Broadway controlling pari passu companion loan, which is expected to be the securitization transaction involving the issuance of the DBJPM 2016-C1 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2016-C1. The parties to the pooling and servicing agreement for the DBJPM 2016-C1 securitization are expected to be Deutsche Mortgage & Asset Receiving Corporation, as depositor, Wells Fargo Bank, National Association, as master servicer and certificate administrator, Midland Loan Services, a Division of PNC Bank, National Association, as special servicer, Park Bridge Lender Services LLC, as operating advisor and as asset representations reviewer, and Wilmington Trust, National Association, as trustee. | ||
Each of the pooling and servicing agreements, trust and servicing agreements and/or other servicing arrangements identified in clauses (i) and (ii) above is referred to herein as an “outside servicing agreement”; each master servicer identified in clauses (i) and (ii) above or its permitted successor is referred to herein as an “outside servicer”; each special servicer identified in clauses (i) and (ii) above or its permitted successor is referred to herein as an “outside special servicer”; each trustee identified in clauses (i) and (ii) above or its permitted successor is referred to herein as an “outside trustee”; each operating advisor identified in clauses (i) and (ii) above or its permitted successor is referred to herein as an “outside operating advisor”; and each custodian (or other party performing custodial duties) identified in clauses (i) and (ii) above or its permitted successor is referred to herein as an “outside custodian”. With respect to each outside serviced loan combination, the related outside servicer will have primary servicing responsibilities with respect to the entire loan combination, the related outside special servicer will serve as special servicer of the entire loan combination, the related outside trustee serves as mortgagee of record with respect to the entire loan combination, and the related outside custodian serves as custodian with respect to the mortgage loan file for the related loan combination (other than with respect to the related promissory note evidencing each related mortgage loan that will be contributed to this securitization transaction and any promissory note evidencing any related companion loan(s) not included in the subject controlling securitization transaction). |
23 |
None of the master servicer or the special servicer (in each such capacity) or any other party to this securitization transaction is responsible for the performance by any party to an outside servicing agreement of its duties thereunder, including with respect to the servicing of each of the subject mortgage loans held by the issuing entity that is included in the subject outside serviced loan combination. | |||
See “Transaction Parties—Servicers—The Outside Servicers and the Outside Special Servicers” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans.” | |||
Directing Holder / Controlling Class | |||
Representative | The “directing holder” with respect to any serviced mortgage loan or, if applicable, serviced loan combination under the pooling and servicing agreement will be: | ||
· | with respect to any such mortgage loan (other than an excluded mortgage loan) or loan combination (other than any serviced loan combination as to which the controlling note is held outside the issuing entity), the controlling class representative; and | ||
· | with respect to any serviced loan combination as to which the controlling note is held outside the issuing entity (sometimes referred to in this prospectus as a “serviced outside controlled loan combination”), the holder of the related controlling note (sometimes referred to as an “outside controlling noteholder”). | ||
The “controlling class representative” under the pooling and servicing agreement will be the controlling class certificateholder or other representative selected by more than 50% of the controlling class certificateholders (by certificate balance). No person may exercise any of the rights and powers of the controlling class representative with respect to an excluded mortgage loan. | |||
An “excluded mortgage loan” is a mortgage loan or loan combination with respect to which the controlling class representative or a holder of more than 50% of the controlling class of certificates (by certificate balance) is (i) a borrower, a mortgagor or a manager of a mortgaged property or an affiliate of any of the foregoing or (ii) a holder or beneficial owner of (or an affiliate of any holder or beneficial owner of) a mezzanine loan, secured by a pledge of the direct (or indirect) equity interests in the borrower under that mortgage loan or loan combination, if such mezzanine loan either (i) has been accelerated or (ii) is the subject of foreclosure proceedings against the equity collateral pledged to secure that mezzanine loan (any such person described in clauses (i) or (ii) above, a “borrower party”). Solely for the purposes of the definition of “borrower party”, the term “affiliate” means, with respect to any specified person, (i) any other person controlling or controlled by or under common control with such specified person or (ii) any other person that owns, directly or indirectly, 25% or more of the beneficial interests in such specified person. | |||
In general, the controlling class is the most subordinate class of the Class E, Class F, Class G and Class H certificates that has an outstanding certificate balance, as notionally reduced by any cumulative appraisal reduction amounts then allocable to such class, that is equal to or greater than 25% of the initial certificate balance of that class of certificates, or if no such class meets the preceding requirement, then the Class E certificates will be the controlling class. The controlling class |
24 |
as of the Closing Date will be the Class H certificates. See “Description of the Certificates—Voting Rights” and “The Pooling and Servicing Agreement—Directing Holder”. No other class of certificates will be eligible to act as the controlling class or appoint a controlling class representative. | |||
With respect to the serviced mortgage loans and serviced loan combinations (but, other than in the case of a serviced outside controlled loan combination, only prior to the occurrence of certain appraisal or other trigger events): | |||
· | the related directing holder will have certain consent and/or consultation rights under the pooling and servicing agreement with respect to certain major decisions and other matters with respect to such mortgage loan or, if applicable, loan combination, and | ||
· | the related directing holder will have the right to remove and replace the special servicer, with or without cause, with respect to such mortgage loan or, if applicable, loan combination. | ||
If and to the extent that the holder of a mortgage loan included in any serviced outside controlled loan combination has consultation rights, then prior to certain trigger events the controlling class representative may consult with respect to certain major decisions and other matters with respect to such loan combination. | |||
After the occurrence and during the continuance of a control termination event (as described below), the consent and special servicer replacement rights of the controlling class representative will terminate, however, the controlling class representative will retain consultation rights under the pooling and servicing agreement with respect to certain major decisions and other matters with respect to the applicable serviced loans. After the occurrence and during the continuance of a consultation termination event (as described below), all of these rights of the controlling class representative with respect to the applicable serviced loans will terminate. See “The Pooling and Servicing Agreement—Directing Holder”. | |||
If, with respect to any serviced outside controlled loan combination, the related controlling note is included in a separate securitization trust, the pooling and servicing agreement, trust and servicing agreement and/or comparable agreement for the relevant securitization may impose limitations on the exercise of rights associated with that related controlling note. For example, any “controlling class representative” (or equivalent entity) for such other securitization may lose consent and consultation rights and special servicer replacement rights in a manner similar to that described in the prior paragraph with respect to the controlling class representative for this securitization. However, if the related controlling note for any such serviced outside controlled loan combination is not included in a separate securitization trust, the related outside controlling note holder may not lose such rights under the related co-lender agreement. | |||
A “control termination event” will either (a) occur when none of the classes of Class E, Class F, Class G and Class H certificates has an outstanding certificate balance (as notionally reduced by any cumulative appraisal reduction amounts then allocable to such class) that is at least equal to 25% of the initial certificate balance of that class of certificates or (b) be deemed to occur as described under “The Pooling and |
25 |
Servicing Agreement—Directing Holder—General” in this prospectus; provided, however, that a control termination event will in no event exist at any time that the aggregate certificate balance of each class of certificates (other than the classes of Class E, Class F, Class G and Class H certificates) (without regard to the allocation of appraisal reduction amounts) has been reduced to zero. With respect to excluded mortgage loans, a control termination event will be deemed to exist. | |||
A “consultation termination event” will either (a) occur when none of the classes of Class E, Class F, Class G and Class H certificates has an outstanding certificate balance, without regard to the allocation of any cumulative appraisal reduction amounts, that is equal to or greater than 25% of the initial certificate balance of that class of certificates or (b) be deemed to occur as described under “The Pooling and Servicing Agreement—Directing Holder—General” in this prospectus; provided, however, that a consultation termination event will in no event exist at any time that the aggregate certificate balance of each class of certificates (other than the classes of Class E, Class F, Class G and Class H certificates) (without regard to the allocation of appraisal reduction amounts) has been reduced to zero. With respect to excluded mortgage loans, a consultation termination event will be deemed to exist. | |||
Notwithstanding anything to the contrary described in this prospectus, at any time when the Class E certificates are the controlling class certificates, the holder of more than 50% of the controlling class certificates (by outstanding certificate balance) may waive its right to act as or appoint a controlling class representative and to exercise any of the rights of the controlling class representative or cause the exercise of any of the rights of the controlling class representative set forth in the pooling and servicing agreement (in general, as to such certificateholder and not as to any successor certificateholder), by following the specific procedures set forth in the pooling and servicing agreement. See “The Pooling and Servicing Agreement—Directing Holder”. | |||
Eightfold Real Estate Capital Fund IV, L.P. (or its affiliate) is expected, on the closing date (i) to purchase the Class E, Class F, Class G and Class H certificates, and (ii) to be the initial controlling class representative (and initial directing holder with respect to all of the mortgage loans and loan combinations serviced under the pooling and servicing agreement for this securitization transaction other than (x) any serviced loan combination as to which the controlling note is held outside the issuing entity, and (y) any excluded mortgage loan). | |||
With respect to any subordinate companion loan that is part of a serviced loan combination, during such time as the holder of the applicable subordinate companion loan is no longer permitted to exercise control or consultation rights under the related co-lender agreement, the controlling class representative (as directing holder) will generally have the same consent and consultation rights with respect to the related serviced mortgage loan (and any related companion loan(s)) as it does for the other serviced mortgage loans in the pool that are not part of a loan combination. | |||
With respect to the outside serviced mortgage loans, the entity identified in the table titled “Outside Serviced Mortgage Loans Summary” under “—The Mortgage Pool—The Loan Combinations” below is the initial controlling class representative (or equivalent entity) (referred to as an “outside controlling class representative”) under the pooling and servicing agreement, trust and servicing agreement and/or other |
26 |
servicing arrangement for the indicated transaction or other directing holder for the related outside serviced loan combination, and such entity will have certain consent and consultation rights and special servicer replacement rights with respect to the related outside serviced loan combination, which are substantially similar, but not identical, to those of the controlling class representative under the pooling and servicing agreement for this securitization, subject to similar appraisal and other trigger events. See “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. | |||
The controlling class representative, any outside controlling class representative or any other related directing holder may direct the special servicer or the outside special servicer, as applicable, to take actions with respect to the servicing of the applicable mortgage loan(s) and/or loan combination(s) that could adversely affect the holders of some or all of the classes of certificates, and may remove and replace the special servicer or the outside special servicer, as applicable, with respect to the applicable mortgage loan(s) and/or loan combination(s) with or without cause. The controlling class representative, any outside controlling class representative or any other related directing holder may have interests in conflict with those of the holders of the offered certificates. See “Risk Factors—Potential Conflicts of Interest of a Directing Holder, any Outside Controlling Class Representative and any Companion Loan Holder”. | |||
Significant Affiliations | |||
and Relationships | Certain parties to this securitization transaction, as described under “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Transaction Party and Related Party Affiliations”, may: | ||
· | serve in multiple capacities with respect to this securitization transaction; | ||
· | be affiliated with other parties to this securitization transaction, a controlling class certificateholder, the controlling class representative, an outside controlling class representative and/or the holder of a companion loan or any securities backed in whole or in part by a companion loan; | ||
· | serve as an outside servicer, outside special servicer, outside trustee, outside custodian, outside operating advisor or asset representations reviewer with respect to any securitization involving a companion loan in an outside serviced loan combination; or | ||
· | be affiliated with an outside servicer, outside special servicer, outside trustee, outside custodian, outside operating advisor or asset representations reviewer with respect to any securitization involving a companion loan in an outside serviced loan combination. | ||
In addition, certain parties to this securitization transaction or a directing holder may otherwise have financial relationships with other parties to this securitization transaction. Such relationships may include, without limitation: | |||
· | serving as warehouse lender to one or more of the sponsors and/or originators of this securitization transaction through a repurchase facility or otherwise (including with respect to certain mortgage loans |
27 |
to be contributed to this securitization transaction), where the proceeds received by such sponsor(s) and/or originator(s) in connection with the contribution of mortgage loans to this securitization transaction will be applied to, among other things, reacquire the financed mortgage loans from the repurchase counterparty or other warehouse provider (see “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Warehouse Financing Arrangements”); | |||
· | serving as interim servicer for one or more of the sponsors and/or originators of this securitization transaction (including with respect to certain mortgage loans to be contributed by such sponsor(s) and/or originator(s) to this securitization transaction) (see “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Interim Servicing Arrangements”); | ||
· | serving as interim custodian for one or more of the sponsors and/or originators of this securitization transaction (including with respect to certain mortgage loans to be contributed by such sponsor(s) and/or originator(s) to this securitization transaction) (see “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Interim and Other Custodial Arrangements”); | ||
· | entering into one or more agreements with the sponsors to purchase the servicing rights to the related mortgage loans and/or the right to be appointed as the master servicer with respect to such mortgage loans; and/or | ||
· | performing due diligence services prior to the securitization closing date for one or more sponsors, a controlling class certificateholder or the controlling class representative with respect to certain of the mortgage loans to be contributed to this securitization transaction (see “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Other Arrangements”). | ||
In addition, certain of the sponsors and/or other parties to this securitization transaction or their respective affiliates may hold mezzanine debt, a companion loan, securities backed in whole or in part by a companion loan, or other additional debt related to one or more of the mortgage loans to be included in this securitization transaction, and as such may have certain rights relating to the related mortgage loan(s) and/or loan combination(s), as described under “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Loan Combination and Mezzanine Loan Arrangements”. In the event a sponsor or other party to this securitization transaction or any affiliate of any of the foregoing includes any companion loan in a separate securitization transaction, such sponsor, other party or affiliate may be obligated to repurchase such companion loan from the applicable separate securitization trust in connection with certain breaches of representations and warranties and certain document defects. | |||
Each of the foregoing relationships, to the extent applicable, is described under “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”. |
28 |
These roles and other potential relationships may give rise to conflicts of interest as further described under “Risk Factors—Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned with Your Interests” and “—Other Potential Conflicts of Interest May Affect Your Investment”. | ||
Significant Obligor | The mortgaged property identified on Annex A as Sheraton Denver Downtown Fee, securing a mortgage loan representing approximately 10.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is a “significant obligor” (as such term is used in Items 1101 and 1112 of Regulation AB under the Securities Act of 1933, as amended) with respect to this offering. See “Description of the Mortgage Pool—Significant Obligors” and “Significant Loan Summaries—Sheraton Denver Downtown Fee” in Annex B to this prospectus. | |
Relevant Dates and Periods | ||
Cut-off Date | With respect to each mortgage loan, the due date in April 2016 for that mortgage loan (or, in the case of any mortgage loan that has its first due date in May 2016, the date that would have been its due date in April 2016 under the terms of that mortgage loan if a monthly payment were scheduled to be due in that month). | |
Closing Date | On or about April 26, 2016. | |
Distribution Date | The 4th business day following the related determination date of each month, beginning in May 2016. | |
Determination Date | The 6th day of each calendar month or, if the 6th day is not a business day, then the business day following such 6th day, beginning in May 2016. | |
Record Date | With respect to any distribution date, the last business day of the month preceding the month in which that distribution date occurs (or, in the event the closing date occurs in the same month as the first distribution date, the first record date will be the closing date). | |
Interest Accrual Period | With respect to any distribution date, the calendar month preceding the month in which that distribution date occurs. Interest will be calculated on the offered certificates assuming each month has 30 days and each year has 360 days. | |
Collection Period | With respect to any distribution date, the period commencing on the day immediately following the determination date in the month preceding the month in which the applicable distribution date occurs (or, in the case of the distribution date occurring in May 2016, with respect to any particular mortgage loan, beginning on the day after the cut-off date) and ending on and including the determination date in the month in which the applicable distribution date occurs. |
Assumed Final Distribution Date | Class A-1 | December 2020 | ||
Class A-2 | April 2021 | |||
Class A-3 | January 2026 | |||
Class A-4 | January 2026 | |||
Class A-AB | September 2025 | |||
Class X-A | February 2026 | |||
Class X-B | February 2026 | |||
Class A-S | February 2026 |
29 |
Class B | February 2026 | |||
Class EC | February 2026 | |||
Class C | February 2026 |
The assumed final distribution date for each class of offered certificates is the date on which that class is expected to be paid in full (or, in the case of each class of the Class X-A and Class X-B certificates, the date on which the related notional amount is reduced to zero), assuming no delinquencies, losses, modifications, extensions or accelerations of maturity dates, repurchases or prepayments of the mortgage loans after the initial issuance of the offered certificates (other than the assumed repayment of a mortgage loan on any anticipated repayment date for such mortgage loan). | ||
The assumed final distribution date with respect to each class of the Class A-S, Class B, Class EC and Class C certificates assumes that the maximum certificate balance of that class of certificates was issued on the closing date and there were no subsequent exchanges of such certificates. | ||
Rated Final Distribution Date | As to each class of offered certificates, the distribution date in April 2049. | |
Transaction Overview | ||
General | On the closing date, each sponsor will sell its respective mortgage loans to the depositor, which will in turn deposit the mortgage loans into the issuing entity, a New York common law trust created on the closing date. The issuing entity will be formed pursuant to a pooling and servicing agreement, to be entered into between the depositor, the master servicer, the special servicer, the certificate administrator, the trustee, the operating advisor and the asset representations reviewer. | |
| The transfers of the mortgage loans from the sponsors to the depositor and from the depositor to the issuing entity in exchange for the certificates, as well as the sales of the offered certificates by the depositor to the underwriters and by the underwriters to investors that purchase from them, are illustrated below: | |
![]() |
30 |
The Certificates | ||||
The Offered Certificates | ||||
A. | General | We are offering the following classes of commercial mortgage pass-through certificates as part of Series 2016-GC37: | ||
· | Class A-1 | |||
· | Class A-2 | |||
· | Class A-3 | |||
· | Class A-4 | |||
· | Class A-AB | |||
· | Class X-A | |||
· | Class X-B | |||
· | Class A-S | |||
· | Class B | |||
· | Class EC | |||
· | Class C | |||
The Series 2016-GC37 certificates will consist of the above classes, together with the following classes that are not being offered by this prospectus: Class D, Class X-D, Class E, Class F, Class G, Class H and Class R certificates. | ||||
B. | Certificate Balances | |||
or Notional Amounts | Subject to the discussion in the following paragraph, each class of the offered certificates will have the approximate initial certificate balance (or notional amount, in the case of each class of the Class X-A and Class X-B certificates) set forth in the table under “Certificate Summary” in this prospectus, which certificate balance (or notional amount) may vary up to 5% on the closing date. | |||
The initial certificate balance of each class of the Class A-S, Class B and Class C certificates shown in the table under “Certificate Summary” in this prospectus represents the maximum certificate balance of such class without giving effect to any issuance of Class EC certificates. The initial certificate balance of the Class EC certificates shown in the table under “Certificate Summary” in this prospectus is equal to the aggregate of the maximum initial certificate balances of the Class A-S, Class B and Class C certificates, which is the maximum certificate balance of the Class EC certificates that could be issued in an exchange. The actual certificate balance of the Class EC certificates or any class of exchangeable certificates issued on the closing date may be less than the maximum certificate balance of that class and may be zero. The certificate balances of the Class A-S, Class B and Class C certificates to be issued on the closing date will be reduced, in required proportions, by an amount equal to the certificate balance of the Class EC certificates issued on the closing date. |
31 |
The aggregate certificate balance of any class of principal balance certificates or trust component outstanding at any time represents the maximum amount that its holders (or, in the case of a trust component, the holders of the Class EC certificates and the class of exchangeable certificates evidencing an interest in that trust component) are entitled to receive at such time as distributions allocable to principal from the cash flow on the mortgage loans and the other assets in the issuing entity, subject to reduction as described below in this“—The Certificates—The Offered Certificates” section. | |||
See “Description of the Certificates—General” in this prospectus. | |||
C. | Pass-Through Rates | Each class of the offered certificates (other than the Class EC certificates) will accrue interest at an annual rate called a pass-through rate on the basis of a 360-day year consisting of twelve 30-day months or a “30/360 basis.” The approximate initial pass-through rate for each class of offered certificates is set forth in the table under “Certificate Summary” in this prospectus. | |
For any distribution date, the pass-through rate with respect to each class of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class A-S and Class B certificates will be fixed at the initial pass-through rate for such class set forth in the table under “Certificate Summary” in this prospectus. | |||
For any distribution date, the pass-through rate with respect to the Class C certificates will be a per annum rate equal to the weighted average of the net interest rates on the mortgage loans (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time. | |||
The pass-through rate of the Class X-A certificates will generally be a per annum rate equal to the excess, if any, of (i) the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time, over (ii) the weighted average of the pass-through rates of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S trust component as described in this prospectus. | |||
The pass-through rate of the Class X-B certificates will generally be a per annum rate equal to the excess, if any, of (i) the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as in effect from time to time, over (ii) the pass-through rate of the Class B trust component as described in this prospectus. | |||
The Class EC certificates will not have a pass-through rate, but will be entitled to receive the sum of the interest distributable on the percentage interests of the Class A-S, Class B and Class C trust components represented by the Class EC certificates. The pass-through rates on the Class A-S, Class B and Class C trust components will at all times be the same as the pass-through rates on the Class A-S, Class B and Class C certificates, respectively. |
32 |
For purposes of calculating the pass-through rate on any class of certificates or trust component that has a pass-through rate limited by, equal to or based on the weighted average of the net mortgage interest rates on the mortgage loans: | ||||
· | the mortgage loan interest rates will not reflect any default interest rate, any rate increase occurring after an anticipated repayment date (if applicable), any loan term modifications agreed to by the master servicer, an outside servicer, the special servicer or an outside special servicer or any modifications resulting from a borrower’s bankruptcy or insolvency; and | |||
· | with respect to each mortgage loan that accrues interest on the basis of the actual number of days in a month, assuming a 360-day year, the related mortgage loan interest rate (net of the administrative fee rate) for any month that is not a 30-day month will be recalculated so that the amount of interest that would accrue at that rate in that month, calculated on a 30/360 basis, will equal the amount of net interest that actually accrues on that mortgage loan in that month, adjusted for any withheld amounts and/or closing date deposits as described under “Description of the Certificates— Distributions” and “The Pooling and Servicing Agreement—Accounts” in this prospectus. | |||
See “Description of the Certificates—Distributions—Priority of Distributions”, “—Distributions—Pass-Through Rates”and “—Distributions—Interest Distribution Amounts”in this prospectus. | ||||
D. | Exchangeable Certificates | If you own Class A-S, Class B and Class C certificates in an exchange proportion that we describe in this prospectus, you will be able to exchange them for a proportionate interest in the Class EC certificates, and vice versa. The Class A-S, Class B and Class C certificates are collectively referred to as “exchangeable certificates.” You can exchange your exchangeable certificates or Class EC certificates by notifying the certificate administrator. If you own Class EC certificates, those certificates will entitle you to receive principal and interest in the amounts that would otherwise have been payable on the applicable proportion of Class A-S, Class B and Class C certificates exchangeable for those Class EC certificates. Any such allocations of principal and interest as between classes of exchangeable certificates will have no effect on the principal or interest entitlements of any other class of certificates. Exchanges will be subject to various conditions that we describe in this prospectus. | ||
See “Description of the Certificates—Exchangeable Certificates” in this prospectus for a description of the exchangeable certificates and exchange procedures. See also “Risk Factors—The Exchangeable Certificates and Class EC CertificatesAre Subject to Additional Risks.” | ||||
E. | Servicing and | |||
Administration Fees | The master servicer and the special servicer are entitled to a master servicing fee and a special servicing fee, respectively, generally from the interest payments on the mortgage loans (or any serviced loan combinations, if applicable) in the case of the master servicer, and from the collection account in the case of the special servicer;provided, that the special servicer for this securitization transaction (acting in such capacity) will not receive any special servicing fee with respect to any outside serviced mortgage loan. The master servicing fee for each distribution date will generally be calculated based on: (i) the |
33 |
outstanding principal balance of each mortgage loan in the issuing entity and each serviced companion loan and any successor REO loan; and (ii) the related master servicing fee rate, which includes any sub-servicing fee rate and primary servicing fee rate and ranges on a loan-by-loan basis from 0.00500% to 0.08250% per annum. For presentation purposes, the master servicing fee rate includes, with respect to an outside serviced mortgage loan, the servicing fee rate payable to the outside servicer. | |||
The master servicer and the special servicer are also entitled to additional fees and amounts, including income on the amounts held in permitted investments to the extent specified in this prospectus and the pooling and servicing agreement. | |||
The special servicing fee for each distribution date is generally calculated based on the outstanding principal balance of each specially serviced loan or REO loan (that is not part of an outside serviced loan combination) and the special servicing fee rate, which is equal to the greater of 0.25% per annum and the rate that would result in a special servicing fee of $3,500 for the related month. | |||
In addition, the special servicer is entitled to (a) liquidation fees from (and generally calculated at a rate of 1.0%, or such lower rate as would not result in a liquidation fee that is more than $1,000,000, applied to) the recovery of liquidation proceeds, insurance proceeds, condemnation proceeds and other payments in connection with a full or discounted payoff of (or unscheduled partial payment in connection with a workout with respect to) a specially serviced loan or REO loan (that is not part of an outside serviced loan combination), subject to a minimum liquidation fee of $25,000, and (b) workout fees from (and generally calculated at a rate of 1.0%, or such lower rate as would not result in a workout fee that is more than $1,000,000, applied to) collections on any mortgage loan or companion loan serviced under the pooling and servicing agreement for this securitization transaction, that had previously been a specially serviced loan, but had been worked out, subject to a minimum workout fee of $25,000, in each case net of certain amounts and calculated as further described under “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” in this prospectus. | |||
With respect to the outside serviced mortgage loans set forth in the table below, the outside servicer under the outside servicing agreement governing the servicing of that loan will, or is expected to, be entitled to a servicing fee at a rate equal to aper annum rate set forth in the table below, and the outside special servicer under the related outside servicing agreement will, or is expected to, be entitled to a special servicing fee at a rate equal to theper annum rate, as well as a workout fee and liquidation fee at the respective percentages, set forth below. In addition, each party to the outside servicing agreement governing the servicing of an outside serviced loan combination will, or is expected to, be entitled to receive other fees and reimbursements with respect to each outside serviced mortgage loan in amounts, from sources, and at frequencies, that are similar, but not necessarily identical, to those described above and, in certain cases (for example, with respect to unreimbursed special servicing fees and servicing advances with respect to the subject outside serviced loan combination), such amounts will be reimbursable from general collections on the mortgage loans in this securitization to the extent that such amounts are (i) not recoverable from the subject outside serviced loan combination and (ii) allocable to |
34 |
the related outside serviced mortgage loan pursuant to the related intercreditor agreement. See “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. | |||
Outside Serviced Mortgage Loan Fees |
Mortgaged Property Name | Outside (Primary) Servicer Fee | Outside Special Servicer Fee | Workout Fee(1) | Liquidation Fee(1) | |||||
Sheraton Denver Downtown Fee | 0.00250% | The greater of 0.25%per annum and the rate that would result in a special servicing fee of $3,500 per month | 1.0% | 1.0% | |||||
79 Madison Avenue | 0.00250% | The greater of 0.25%per annum and the rate that would result in a special servicing fee of $3,500 per month | 1.0% | 1.0% | |||||
Austin Block 21 | 0.00750% | The greater of 0.25%per annum and the rate that would result in a special servicing fee of $3,500 per month | 1.0% | 1.0% | |||||
600 Broadway | (2) | (2) | (2) | (2) | |||||
5 Penn Plaza | 0.00250% | The greater of 0.25%per annum and the rate that would result in a special servicing fee of $3,500 per month | 1.0% | 1.0% | |||||
Park Place | 0.02000% | The greater of 0.25%per annum and the rate that would result in a special servicing fee of $3,500 per month | 1.0% | 1.0% |
(1) | Subject to such limitations and minimum thresholds as may be provided in the related outside servicing agreement. See “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Fees and Expenses” (including the fee table and the related footnotes contained under that heading). | ||||
(2) | With respect to the 600 Broadway mortgage loan, as to which servicing is expected to shift from one outside servicing agreement to another outside servicing agreement, both (i) during such time as the related loan combination is serviced pursuant to the CGCMT 2016-P3 pooling and servicing agreement and (ii) after the 600 Broadway controlling pari passu companion loan is securitized and servicing shifts to a new outside servicing agreement, the related outside servicer (or primary servicer) will be entitled to a primary servicing fee that is expected to accrue at 0.00250% per annum, and the related outside special servicer will be entitled to (x) a special servicing fee accruing at the rate to be specified in the related outside servicing agreement (which, pursuant to the related co-lender agreement, will be no greater than 0.25% per annum), (y) a workout fee calculated at the rate to be specified in the related outside servicing agreement (which, pursuant to the related co-lender agreement, will be no greater than 1.0%), and (z) a liquidation fee calculated at the rate to be specified in the related outside servicing agreement (which, pursuant to the related co-lender agreement, will be no greater than 1.0%). | ||||
See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”and“—Servicing and Other Compensation and Payment of Expenses”. | |||||
The operating advisor is entitled to a fee from general collections on the mortgage loans for each distribution date, calculated based on the outstanding principal balance of each mortgage loan in the issuing entity and each successor REO loan and the operating advisor fee rate of 0.00240% per annum. The operating advisor is also entitled to a consulting fee with respect to each major decision as to which the operating advisor has consultation rights, which will be a fee for each |
35 |
such major decision equal to $12,000 or such lesser amount as the related borrower agrees to pay with respect to the subject serviced mortgage loan (or serviced loan combination, if applicable). | |||
The asset representations reviewer will be entitled to an upfront fee of $5,000 on the closing date to be paid by the sponsors. The asset representations reviewer will also be entitled to an ongoing fee on each distribution date calculated on the outstanding principal amount of each mortgage loan and successor REO loan at a per annum rate equal to 0.00036%. Upon the completion of any asset review with respect to each delinquent loan, the asset representations reviewer will be entitled to a per loan fee in an amount described in “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Asset Representations Reviewer Compensation”. | |||
Each party to the pooling and servicing agreement will also be entitled to be reimbursed by the issuing entity for costs, expenses and liabilities borne by them in certain circumstances. Fees and expenses payable by the issuing entity to any party to the pooling and servicing agreement are generally payable prior to any distributions to certificateholders. | |||
Additionally, with respect to each distribution date, an amount equal to the product of 0.00050%per annum multiplied by the outstanding principal amount of each mortgage loan and any REO loan will be payable to CRE Finance Council®(“CREFC®”) as an intellectual property royalty license fee for use of their names and trademarks, including in the investor reporting package. This fee will be payable prior to any distributions to certificateholders. | |||
The fees of the trustee and the certificate administrator will be payable monthly from general collections on the mortgage loans for each distribution date, calculated on the outstanding principal balance of the pool of mortgage loans in the issuing entity and the combined trustee/certificate administrator fee rate of 0.00750% per annum. | |||
Each of the master servicing fee, the special servicing fee, the operating advisor fee, the asset representations reviewer ongoing fee, the CREFC® intellectual property royalty license fee and the trustee/certificate administrator fee will be calculated on the same interest accrual basis as the related mortgage loan (or any related serviced companion loan) and prorated for any partial period. See “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” in this prospectus. | |||
The administrative fee rate will be the sum of the master servicing fee rate (which, with respect to each outside serviced mortgage loan, includes the per annum servicing fee rate payable to the outside servicer), the operating advisor fee rate, the CREFC® intellectual property royalty license fee rate, the asset representations reviewer ongoing fee rate and the trustee/certificate administrator fee rate and is set forth on Annex A to this prospectus for each mortgage loan. | |||
The master servicing fees, the special servicing fees, the liquidation fees, the workout fees, the operating advisor fees, the CREFC® intellectual property royalty license fee, the asset representations reviewer ongoing fee and the trustee/certificate administrator fees, including any such fees payable with respect to the outside serviced mortgage loans, will be paid prior to distributions to certificateholders of the available distribution amount as described under “The Pooling and Servicing Agreement— |
36 |
Withdrawals from the Collection Account” and “Description of the Certificates—Distributions—Method, Timing and Amount” in this prospectus. | ||||
Also, see “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus. | ||||
See “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” and“—Limitation on Liability; Indemnification”. See also“The Pooling and Servicing Agreement—Withdrawals from the Collection Account”and “Description of the Certificates—Distributions—Method, Timing and Amount”. | ||||
Distributions | ||||
A. | Amount and Order of | |||
Distributions | On each distribution date, funds available for distribution from the mortgage loans, net of (i) specified expenses of the issuing entity, including fees payable to, and costs and expenses reimbursable to, the master servicer, the special servicer, the certificate administrator, the trustee, the operating advisor and the asset representations reviewer, and (ii) any yield maintenance charges and prepayment premiums, 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-AB, Class X-A and Class X-B certificates: to interest on the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B certificates, up to, and pro rata in accordance with, their respective interest entitlements. | ||||
Second: Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates: to the extent of funds allocable to principal received or advanced on the mortgage loans: | ||||
(A) | to principal on the Class A-AB certificates until their certificate balance has been reduced to the Class A-AB scheduled principal balance set forth on Annex F to this prospectus for the relevant distribution date; | |||
(B) | to principal on the Class A-1 certificates until their certificate balance has been reduced to zero, all remaining funds available for distribution of principal remaining after the distributions pursuant to clause (A) above; | |||
(C) | to principal on the Class A-2 certificates until their certificate balance has been reduced to zero, all remaining funds available for distribution of principal remaining after the distributions pursuant to clauses (A) and (B) above; | |||
(D) | to principal on the Class A-3 certificates until their certificate balance has been reduced to zero, all remaining funds available for distribution of principal remaining after the distributions pursuant to clauses (A) through (C) above; | |||
(E) | to principal on the Class A-4 certificates until their certificate balance has been reduced to zero, all remaining funds available for distribution of principal remaining after the distributions pursuant to clauses (A) through (D) above; and |
37 |
(F) | to principal on the Class A-AB certificates until their certificate balance has been reduced to zero, all remaining funds available for distribution of principal remaining after the distributions pursuant to clauses (A) through (E) above. | |||
However, if the certificate balances of each and every class of certificates other than the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates have been reduced to zero as a result of the allocation of mortgage loan losses (and other unanticipated expenses) 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 and Class A-AB certificates, pro rata, based on their respective certificate balances and without regard to the Class A-AB scheduled principal balance. | ||||
Third: Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates: to reimburse the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates, pro rata, based on the aggregate unreimbursed losses, for any unreimbursed losses on the mortgage loans that were previously allocated to reduce the certificate balances of those classes, together with interest. | ||||
Fourth: Class A-S trust component: To pay amounts on the Class A-S trust component and, thus, concurrently, to the Class A-S and Class EC certificates as follows: (a) to interest on the Class A-S trust component (and, therefore, to the Class A-S and Class EC certificates pro rata based on their respective percentage interests in the Class A-S trust component) in the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class with a higher priority (in this case, the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates), to principal on the Class A-S trust component (and, therefore, to the Class A-S and Class EC certificates pro rata based on their respective percentage interests in the Class A-S trust component) until its certificate balance has been reduced to zero; and (c) to reimburse the Class A-S trust component (and, therefore, the Class A-S and Class EC certificates pro rata based on their respective percentage interests in the Class A-S trust component) for any unreimbursed losses on the mortgage loans that were previously allocated to reduce the certificate balance of that trust component (and, therefore, those certificates), together with interest. | ||||
Fifth: Class B trust component: To pay amounts on the Class B trust component and, thus, concurrently, to the Class B and Class EC certificates as follows: (a) to interest on the Class B trust component (and, therefore, to the Class B and Class EC certificates pro rata based on their respective percentage interests in the Class B trust component) in the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class and trust component with a higher priority (in this case, the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S trust component), to principal on the Class B trust component (and, therefore, to the Class B and Class EC certificates pro rata based on their respective percentage interests in the Class B trust component) until its certificate balance has been reduced to zero; and (c) to reimburse the Class B trust component (and, therefore, the Class B and Class EC certificates pro rata based on their respective percentage interests in the Class B trust component) for any unreimbursed losses on the mortgage loans that were previously allocated to reduce the | ||||
38 |
certificate balance of that trust component (and, therefore, those certificates), together with interest. | |||
Sixth: Class C trust component: To pay amounts on the Class C trust component and, thus, concurrently, to the Class C and Class EC certificates as follows: (a) to interest on the Class C trust component (and, therefore, to the Class C and Class EC certificates pro rata based on their respective percentage interests in the Class C trust component) in the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class and trust component with a higher priority (in this case, the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S and Class B trust components), to principal on the Class C trust component (and, therefore, to the Class C and Class EC certificates pro rata based on their respective percentage interests in the Class C trust component) until its certificate balance has been reduced to zero; and (c) to reimburse the Class C trust component (and, therefore, the Class C and Class EC certificates pro rata based on their respective percentage interests in the Class C trust component) for any unreimbursed losses on the mortgage loans that were previously allocated to reduce the certificate balance of that trust component (and, therefore, those certificates), together with interest. | |||
Seventh: Non-offered certificates: in the amounts and order of priority described in “Description of the Certificates—Distributions—Priority of Distributions” in this prospectus. | |||
For more information, see “Description of the Certificates—Distributions—Priority of Distributions” in this prospectus. | |||
B. | Interest and Principal | ||
Entitlements | A description of each class’s and trust component’s interest entitlement can be found in “Description of the Certificates—Distributions—Interest Distribution Amount” and “—Distributions—Priority of Distributions” in this prospectus. As described in those sections, there are circumstances in which your interest entitlement for a distribution date could be less than one full month’s interest at the related pass-through rate on your certificate’s principal amount or notional amount (or, in the case of the Class EC certificates, the related pass-through rates on the applicable percentage interest of the related certificate balances of the Class A-S, Class B and Class C trust components). | ||
On each distribution date, the Class EC certificates will be entitled to receive a proportionate share of the amounts distributable on the Class A-S, Class B and Class C trust components, and therefore, of the amounts that would otherwise have been distributed as interest and principal payments on the Class A-S, Class B and Class C certificates had an exchange not occurred, as described under “Description of the Certificates—Exchangeable Certificates” in this prospectus. Any such allocations of principal and interest as between the Class EC certificates, on the one hand, and the Class A-S, Class B and Class C certificates, on the other, will have no effect on the principal or interest entitlements of any other class of certificates. | |||
A description of the amount of principal required to be distributed to the classes entitled to principal on a particular distribution date also can be found in “Description of the Certificates—Distributions—Principal Distribution Amount” and “—Distributions—Priority of Distributions” in this prospectus. |
39 |
C. | Yield Maintenance Charges and | ||
Prepayment Premiums | Yield maintenance charges and prepayment premiums with respect to the mortgage loans will be allocated to the certificates as described in “Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums.” | ||
For an explanation of the calculation of yield maintenance charges, see “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”. | |||
D. | Subordination, Allocation of | ||
Losses and Certain Expenses | The amount available for distribution will be applied in the order described in “—Distributions—Amount and Order of Distributions” above. | ||
The following chart generally describes the manner in which the payment rights of certain classes of certificates and trust components will be senior or subordinate, as the case may be, to the payment rights of other classes of certificates and trust components. The chart shows entitlement to receive principal and interest (other than excess interest that accrues on a mortgage loan that has an anticipated repayment date (if any)) on any distribution date in descending order (beginning with the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B certificates). Among the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B certificates, payment rights of certain classes will be more particularly described in “Description of the Certificates—Distributions” in this prospectus. It also shows the manner in which mortgage loan losses are allocated in ascending order (beginning with certain Series 2016-GC37 certificates that are not being offered by this prospectus). Principal losses on the mortgage loans allocated to a class of certificates or trust component will reduce the related certificate balance of that class or trust component. However, no such principal losses will be allocated to the Class R, Class X-A, Class X-B or Class X-D certificates, although loan losses will reduce the notional amount of the Class X-A certificates (to the extent such losses are allocated to the Class A-1, Class A-2, Class A-3, Class A-4 or Class A-AB certificates or the Class A-S trust component), the Class X-B certificates (to the extent such losses are allocated to the Class B trust component) and the Class X-D certificates (to the extent such losses are allocated to the Class D certificates), and, therefore, the amount of interest they accrue. | |||
40 |
![]() | ||||
* | Interest only certificates. No principal payments or realized loan losses in respect of principal will be allocated to the Class X-A and Class X-B certificates. However, mortgage loan losses will reduce the notional amounts of the Class X-A and Class X-B certificates, in each case, to the extent such losses reduce the certificate balance of a related class of principal balance certificates or a related trust component. | |||
** | Distributions and losses allocated to a trust component will be concurrently allocated to the related class of exchangeable certificates that evidences a percentage interest in such trust component and to the Class EC certificates. Distributions of principal and interest and allocations of mortgage loan losses to the Class A-S trust component will be made pro rata to the Class A-S certificates and the Class EC certificates in proportion to their respective percentage interests in the Class A-S trust component. Distributions of principal and interest and allocations of mortgage loan losses to the Class B trust component will be made pro rata to the Class B certificates and the Class EC certificates in proportion to their respective percentage interests in the Class B trust component. Distributions of principal and interest and allocations of mortgage loan losses to the Class C trust component will be made pro rata to the Class C certificates and the Class EC certificates in proportion to their respective percentage interests in the Class C trust component. See “Description of the Certificates—Distributions” in this prospectus. | |||
*** | Other than the Class R certificates. | |||
Credit enhancement will be provided solely by certain classes of subordinate certificates that will be subordinate to certain classes of senior certificates as described under “Description of the Certificates—Subordination; Allocation of Realized Losses”. No other form of credit enhancement will be available for the benefit of the holders of the offered certificates. | ||||
Mortgage loan losses and principal payments, if any, on the mortgage loans that are allocated to a class of certificates having a certificate balance will reduce that certificate balance. | ||||
To the extent funds are available on a subsequent distribution date for distribution on your offered certificates, you will be reimbursed for any |
41 |
losses allocated to your offered certificates (or, in the case of the Class EC certificates, allocated to the percentage interests evidenced thereby in the Class A-S, Class B and/or Class C trust components, as applicable) with interest at the pass-through rate on those offered certificates or trust components. | |||
See “Description of the Certificates—Subordination; Allocation of Realized Losses” for more detailed information regarding the subordination provisions applicable to the certificates and the allocation of losses to the certificates. | |||
E. Shortfalls in Available Funds | The following types of shortfalls in available funds will reduce distributions to the classes of certificates or trust components with the lowest payment priorities: | ||
· | shortfalls resulting from the payment of special servicing fees and other additional compensation that the special servicer or the outside special servicer, as applicable, is entitled to receive; | ||
· | shortfalls resulting from the payment of asset representations reviewer asset review fees payable in connection with any asset review by the asset representations reviewer to the extent not paid by the related sponsor; | ||
· | shortfalls resulting from interest on advances made by the master servicer, the special servicer or the trustee, or an outside servicer, outside special servicer or outside trustee, as applicable (to the extent not covered by late payment charges or default interest paid by the related borrower); | ||
· | shortfalls resulting from the application of appraisal reductions to reduce interest advances; | ||
· | shortfalls resulting from extraordinary expenses of the issuing entity including indemnification payments payable to the parties to the pooling and servicing agreement and the parties to the outside pooling and servicing agreement; | ||
· | shortfalls resulting from a modification of a mortgage loan’s interest rate or principal balance; and | ||
· | shortfalls resulting from other unanticipated or default-related expenses of the issuing entity. | ||
In addition, prepayment interest shortfalls that are not covered by certain compensating interest payments made by the master servicer are required to be allocated to the interest-bearing certificates (other than the Class A-S, Class B, Class EC and Class C certificates) and the trust components (and, therefore, the Class A-S, Class B, Class EC and Class C certificates), on a pro rata basis, to reduce the amount of the interest payment on such classes of certificates and trust components. See “Description of the Certificates—Distributions—Priority of Distributions”. | |||
42 |
Advances | ||
A. Principal and Interest Advances | The master servicer is required to advance delinquent monthly debt service payments with respect to each mortgage loan (including any REO mortgage loan) in the issuing entity (including the outside serviced mortgage loans), unless it determines that the advance will be non-recoverable from collections on that mortgage loan. The master servicer will not be required to advance amounts deemed non-recoverable from related loan collections. The master servicer will not be required or permitted to make an advance for balloon payments, default interest, excess interest, any other interest in excess of a mortgage loan’s regular interest rate, prepayment premiums or yield maintenance charges or delinquent monthly debt service payments on the companion loan(s). The amount of the interest portion of any advance will be subject to reduction to the extent that an appraisal reduction amount exists with respect to the related mortgage loan (and with respect to any mortgage loan that is part of a loan combination, to the extent that such appraisal reduction amount is allocated to the related mortgage loan). There may be other circumstances in which the master servicer will not be required to advance a full month of principal and/or interest. | |
In the event that the master servicer fails to make any required advance, the trustee will be required to make that advance unless the trustee determines that the advance will be non-recoverable from related loan collections. See “The Pooling and Servicing Agreement—Advances”. If an advance is made, the master servicer will not advance its servicing fee, but will advance the trustee/certificate administrator fee, the operating advisor fee, the asset representations reviewer ongoing fee and the CREFC® intellectual property royalty license fee. The master servicer or trustee, as applicable, will be entitled to reimbursement from general collections on the mortgage loans for advances determined to be non-recoverable from related loan collections. This may result in losses on your certificates. | ||
None of the master servicer, the special servicer or the trustee will make, or be permitted to make, any principal or interest advance with respect to any companion loan that is not held by the issuing entity. | ||
B. Property Protection Advances | The master servicer also may be required to make advances to pay delinquent real estate taxes and assessments, ground lease rent payments, condominium assessments, hazard insurance premiums and similar expenses necessary to protect and maintain the mortgaged property, to maintain the lien on the mortgaged property or enforce the related mortgage loan documents with respect to the mortgage loans and any companion loans (other than those that are part of an outside serviced loan combination), unless the advance is determined to be non-recoverable from related loan proceeds. | |
The special servicer will have no obligation to make any advances. | ||
In the event that the master servicer fails to make a required advance of this type, the trustee will be required to make that advance unless the trustee determines that the advance is non-recoverable from related loan collections. The master servicer is not required, but in certain circumstances is permitted, to advance amounts deemed non-recoverable from related loan collections. See “The Pooling and Servicing Agreement—Advances”. The master servicer or the trustee, as applicable, will be entitled to reimbursement from general collections on the mortgage loans for advances determined to be non-recoverable |
43 |
from related loan collections. This may result in losses on your certificates. | ||
With respect to each outside serviced mortgage loan, the outside servicer (and the outside trustee, as applicable) under the outside servicing agreement governing the servicing of the related outside serviced loan combination will be required to make similar advances with respect to delinquent real estate taxes, assessments and hazard insurance premiums as described above. | ||
C. Interest on Advances | The master servicer and the trustee, as applicable, will be entitled to interest on all advances as described in this prospectus. Interest accrued on outstanding advances may result in reductions in amounts otherwise payable on the certificates. No interest will accrue on advances with respect to principal or interest due on a mortgage loan until any grace period applicable to the scheduled monthly payment on that mortgage loan has expired. | |
The master servicer and the trustee will each be entitled to receive interest on advances they make at the prime rate, compounded annually. If the interest on an advance is not recovered from default interest or late payments on the mortgage loan, a shortfall will result which will have the same effect as a liquidation loss on a defaulted mortgage loan. | ||
See “Description of the Certificates—Subordination; Allocation of Realized Losses” and “The Pooling and Servicing Agreement—Advances”. | ||
With respect to each outside serviced mortgage loan, the applicable makers of advances under the outside servicing agreement governing the servicing of the related outside serviced loan combination will similarly be entitled to interest on advances, and any accrued and unpaid interest on property protection advances made in respect of such outside serviced loan combination may be reimbursed from general collections on the other mortgage loans included in the issuing entity to the extent not recoverable from collections on the related outside serviced loan combination and to the extent allocable to the related outside serviced mortgage loan in accordance with the related intercreditor agreement. | ||
The Mortgage Pool | ||
General | The issuing entity’s primary assets will be 54 fixed rate commercial mortgage loans, with an aggregate outstanding principal balance as of the cut-off date of $694,726,725. The mortgage loans are secured by first liens on various types of commercial, multifamily and manufactured housing community properties, located in 19 states. See “Risk Factors—Commercial, Multifamily and Manufactured Housing Community Lending Is Dependent on Net Operating Income; Information May Be Limited or Uncertain”. | |
Fee Simple / Leasehold | Sixty-three (63) mortgaged properties, collectively securing approximately 98.7% of the aggregate principal balance of the pool of mortgage loans, by allocated loan amount, as of the cut-off date, are each subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien on a fee simple estate in the entire related mortgaged property. For purposes of this prospectus, an encumbered interest will be characterized as a “fee interest” and not a leasehold interest if (i) the borrower has a fee interest in all or substantially all of the mortgaged property, or (ii) the mortgage loan is | |
44 |
secured by the borrower’s leasehold interest in the mortgaged property as well as the borrower’s (or other fee owner’s) overlapping fee interest in the related mortgaged property. | |||
One (1) mortgaged property, securing approximately 1.3% of the aggregate principal balance of the pool of mortgage loans, by allocated loan amount, as of the cut-off date, is subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien on (x) one or more leasehold interests in a portion of the related mortgaged property and (y) one or more fee interests in the remaining portion of the related mortgaged property. | |||
See “Description of the Mortgage Pool—Statistical Characteristics of the Mortgage Loans—Leasehold Interests”. | |||
The Loan Combinations | Six (6) mortgage loans, collectively representing approximately 32.4% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, are each part of a split loan structure (referred to as a “loan combination”) that is comprised of the subject mortgage loan (sometimes referred to as a “split mortgage loan”) and one or more relatedpari passuor subordinate companion loans (each referred to as a “companion loan”) that are held outside the issuing entity. The subject mortgage loan and its related companion loan(s) comprising any particular loan combination are: (i) each evidenced by one or more separate promissory notes; (ii) obligations of the same borrower(s); (iii) cross-defaulted; and (iv) collectively secured by the same mortgage(s) and/or deed(s) of trust encumbering the related mortgaged property or portfolio of mortgaged properties. | ||
A companion loan may beparipassu in right of payment with, or subordinate in right of payment to, the related mortgage loan. In connection therewith: | |||
· | If a companion loan ispari passu in right of payment with the related split mortgage loan, then such companion loan would constitute a “pari passu companion loan” and the related loan combination would constitute a “pari passu loan combination”. | ||
· | If a companion loan is subordinate in right of payment to the related split mortgage loan, then such companion loan would constitute a “subordinate companion loan” and the related loan combination would constitute an “AB loan combination”. | ||
· | If a loan combination includes both a pari passu companion loan and a subordinate companion loan, the discussions in this prospectus regarding both pari passu loan combinations and AB loan combinations will apply to such loan combination. | ||
45 |
The identity of, and certain other information regarding, the loan combinations related to this securitization transaction are set forth in the following table: |
Loan Combination Summary
Mortgaged Property Name | Mortgage Loan Seller | Mortgage Loan Cut-off Date Balance | Mortgage Loan as Approx. % of Initial Pool Balance | Aggregate Pari Passu Companion Loan Cut-off Date Balance | Holder(s) of Companion Loan(s) | Mortgage Loan LTV Ratio(1) | Loan Combination LTV Ratio(1) | Mortgage Loan Underwritten NCF DSCR(1) | Loan Combination Underwritten NCF DSCR(1) | Controlling Note Included in Issuing Entity (Y/N) / If no, Identity of Controlling Note / Outside Controlling Noteholder | ||||||||
Sheraton Denver Downtown Fee | CGMRC | $70,000,000 | 10.1 | % | $110,000,000 | CGCMT 2016-GC36 | 75.0% | 75.0% | 1.28x | 1.28x | N / Note A-1 / CGCMT 2016-GC36 | |||||||
79 Madison Avenue | CGMRC | $40,000,000 | 5.8 | % | $45,000,000 | CGCMT 2016-P3 | 44.7% | 44.7% | 1.52x | 1.52x | N / Note A-1 / CGCMT 2016-P3 | |||||||
Austin Block 21 | GSMC | $39,876,237 | 5.7 | % | $109,659,651 | CGCMT 2016-GC36 | 62.6% | 62.6% | 1.51x | 1.51x | N / Note A-1 / CGCMT 2016-GC36 | |||||||
600 Broadway | BNY Mellon | $30,000,000 | (2) | 4.3 | % | $90,000,000 | (2) | Various(2) | 54.5% | 54.5% | 1.61x | 1.61x | N / Note A-4 / German American Capital Corporation(2) | |||||
5 Penn Plaza | CGMRC | $25,000,000 | (3) | 3.6 | % | $235,000,000 | (3) | Various(3) | 48.1% | 48.1% | 1.64x | 1.64x | N / Note A-1 / CGCMT 2016-GC36 | |||||
Park Place | CGMRC | $20,000,000 | (4) | 2.9 | % | $73,000,000 | (4) | Various(4) | 66.4% | 66.4% | 1.44x | 1.44x | N / Note A-1 / CGCMT 2016-GC36 |
(1) | Calculated including the relatedpari passu companion loan(s), but excluding any related subordinate companion loans. There are no related subordinate companion loans. | |||
(2) | The 600 Broadway loan combination is comprised of the followingpari passu loans: (i) the 600 Broadway mortgage loan (which is treated herein as a single mortgage loan) that is evidenced by the non-controlling note A-2-2 (with an outstanding principal balance as of the cut-off date of $10,000,000, and which is currently held by The Bank of New York Mellon) and the non-controlling note A-6 (with an outstanding principal balance as of the cut-off date of $20,000,000, and which is currently held by German American Capital Corporation and is expected to be acquired by The Bank of New York Mellon contemporaneously with the closing of, and thereafter contributed by it into, this securitization transaction); (ii) the three 600 Broadway pari passu companion loans (which are expected to be treated as a single companion loan) that are evidenced by the non-controlling note A-1 (with an outstanding principal balance as of the cut-off date of $20,000,000), the non-controlling note A-2-1 (with an outstanding principal balance as of the cut-off date of $10,000,000) and the non-controlling note A-3 (with an outstanding principal balance as of the cut-off date of $20,000,000), respectively, each of which was contributed to the CGCMT 2016-P3 securitization transaction, and (iii) the three 600 Broadway pari passu companion loans (which are expected to be treated as a single companion loan) that are evidenced by the controlling note A-4 (with an outstanding principal balance as of the cut-off date of $20,000,000), the non-controlling note A-5-1 (with an outstanding principal balance as of the cut-off date of $10,000,000), and the non-controlling note A-5-2 (with an outstanding principal balance as of the cut-off date of $10,000,000), respectively, each of which is currently held by German American Capital Corporation and is expected to be contributed to the DBJPM 2016-C1 securitization transaction by German American Capital Corporation. Based on the publicly available preliminary prospectus for the DBJPM 2016-C1 securitization transaction, that securitization transaction is scheduled to close prior to this securitization transaction. | |||
(3) | The 5 Penn Plaza loan combination is comprised of the followingpari passuloans: (i) the 5 Penn Plaza mortgage loan that is evidenced by the non-controlling note A-2-II (with an outstanding principal balance as of the cut-off date of $25,000,000); (ii) the 5 Penn Plaza pari passu companion loan that is evidenced by the controlling note A-1 (with an outstanding principal balance as of the cut-off date of $115,000,000) and was contributed to the CGCMT 2016-GC36 securitization transaction; (iii) the 5 Penn Plaza pari passu companion loan that is evidenced by the non-controlling note A-2-I (with an outstanding principal balance as of the cut-off date of $42,000,000) and was contributed to the CGCMT 2016-P3 securitization transaction; and (iv) the 5 Penn Plaza pari passu companion loan that is evidenced by the non-controlling note A-3 (with an outstanding principal balance as of the cut-off date of $78,000,000) and was contributed to the JPMBB 2016-C1 securitization transaction. | |||
(4) | The Park Place loan combination is comprised of the followingpari passu loans: (i) the Park Place mortgage loan that is evidenced by the non-controlling note A-2-1 (with an outstanding principal balance as of the cut-off date of $20,000,000); (ii) the Park Place pari passu companion loan that is evidenced by the controlling note A-1 (with an outstanding principal balance as of the cut-off date of $50,000,000) and was contributed to the CGCMT 2016-GC36 securitization transaction; and (iii) the Park Place pari passu companion loan that is evidenced by the non-controlling note A-2-2 (with an outstanding principal balance as of the cut-off date of $23,000,000), is currently held by Citigroup Global Markets Realty Corp. and is expected to be contributed to one or more future commercial mortgage securitization transactions. | |||
With respect to any mortgage loan that is part of a loan combination, the loan-to-value ratio, debt service coverage ratio and debt yield have been calculated based on both that mortgage loan and any related pari passu | ||||
46 |
companion loan(s), but without regard to any related subordinate companion loan(s), unless otherwise indicated. | |||
There are no serviced loan combinations, serviced companion loans, serviced outside controlled loan combinations, subordinate companion loans or AB loan combinations related to this securitization transaction and, therefore, all references in this prospectus to “serviced loan combinations”, “serviced companion loans”, “serviced outside controlled loan combinations”, “subordinate companion loans”, “AB loan combinations” or any related terms should be disregarded. | |||
The outside serviced mortgage loans will be serviced and administered pursuant to a pooling and servicing agreement, trust and servicing agreement and/or other servicing arrangement for the securitization of one or more related companion loans. The identity of, and certain other items of information regarding, the outside serviced mortgage loan(s) are set forth in the following table: | |||
Outside Serviced Mortgage Loans Summary |
Mortgaged Property Name | Mortgage Loan Seller | Outside Servicing Agreement | Mortgage Loan as Approx. % of Initial Pool Balance | Outside Servicer | Outside Special Servicer | Outside Trustee | Outside Certificate Administrator | Outside Custodian | Initial Outside Controlling Class Representative (1) | |||||||||
Sheraton Denver Downtown Fee | CGMRC | CGCMT 2016-GC36 | 10.1% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
79 Madison Avenue | CGMRC | CGCMT 2016-P3 | 5.8% | Wells Fargo Bank, National Association | C-III Asset Management LLC | Wilmington Trust, National Association | Citibank, N.A. | Citibank,N.A. | Raith Capital Partners, LLC | |||||||||
Austin Block 21 | GSMC | CGCMT 2016-GC36 | 5.7% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
600 Broadway | BNY Mellon | CGCMT 2016-P3(2) | 4.3% | Wells Fargo Bank, National Association(2) | C-III Asset Management LLC(2) | Wilmington Trust, National Association(2) | Citibank, N.A.(2) | Citibank, N.A.(2) | (2)(3) | |||||||||
5 Penn Plaza | CGMRC | CGCMT 2016-GC36 | 3.6% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
Park Place | CGMRC | CGCMT 2016-GC36 | 2.9% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. |
(1) | The related transaction documents may provide that the initial outside controlling class representative may either be the entity specified or an affiliate thereof. | ||
(2) | The 600 Broadway mortgage loan is currently being serviced and administered pursuant to the CGCMT 2016-P3 pooling and servicing agreement until the securitization of the 600 Broadway controlling pari passu companion loan. However, after the securitization of the 600 Broadway controlling pari passu companion loan, the 600 Broadway mortgage loan will be serviced and administered pursuant to the pooling and servicing agreement governing the securitization of the 600 Broadway controlling pari passu companion loan. The 600 Broadway controlling pari passu companion loan is currently held by German American Capital Corporation, but is expected to be contributed to the DBJPM 2016-C1 securitization transaction prior to the closing date for this securitization transaction. It is expected that, pursuant to the 600 Broadway pooling and servicing agreement, Wells Fargo Bank, National Association, will be the applicable master servicer, certificate administrator and custodian, Midland Loan Services, a Division of PNC Bank, National Association, will | ||
47 |
be the applicable special servicer, and Wilmington Trust, National Association, will be the applicable trustee. It is anticipated that Eightfold Real Estate Capital Fund IV, L.P. (or an affiliate thereof) will be the initial outside controlling class representative for the DBJPM 2016-C1 securitization transaction. | |||
(3) | The outside controlling class representative for the CGCMT 2016-P3 securitization, Raith Capital Partners, LLC, will have certain consultation rights, but no control rights, with respect to certain major servicing matters relating to the 600 Broadway loan combination. | ||
See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. | |||
In the case of any loan combination, the allocation of payments to the subject mortgage loan and its related companion loan(s), whether on a senior/subordinated or a pari passu basis (or some combination thereof), is generally effected through a co-lender agreement, intercreditor agreement, agreement among noteholders or comparable agreement to which the respective holders of the subject promissory notes are parties (any such agreement being referred to in this prospectus as a “co-lender agreement”). That co-lender agreement will govern the relative rights and obligations of such holders and, in connection therewith, will provide that one of those holders will be the “controlling note holder” entitled (directly or through a representative) to (i) approve or direct material servicing decisions involving the related loan combination (while the remaining such holder(s) generally are only entitled to non-binding consultation rights in such regard) and (ii) in some cases, replace the special servicer with respect to the related loan combination with or without cause. In addition, that co-lender agreement will designate whether servicing of the related loan combination is to be governed by the pooling and servicing agreement for this securitization or the pooling and servicing agreement, trust and servicing agreement and/or other comparable agreement for a securitization involving a related companion loan or portion thereof. | |||
For more information regarding the loan combination(s), see “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”. Also, see “Significant Loan Summaries” in Annex B to this prospectus. | |||
Each outside controlling class representative and each holder of a companion loan may have interests in conflict with those of the holders of the offered certificates. See “Risk Factors—Potential Conflicts of Interest of a Directing Holder, any Outside Controlling Class Representative and any Companion Loan Holder”, “—Realization on a Mortgage Loan That Is Part of a Serviced Loan Combination May Be Adversely Affected by the Rights of the Related Serviced Companion Loan Holder” and “—Rights of any Outside Controlling Class Representative Under any Outside Servicing Agreement Could Adversely Affect Your Investment”. |
48 |
Additional Characteristics of the Mortgage Loans |
The following table sets forth certain anticipated approximate characteristics of the pool of mortgage loans as of the cut-off date (unless otherwise indicated). | ||
Cut-off Date Mortgage Loan Characteristics |
All Mortgage Loans | |||
Initial Pool Balance(1) | $694,726,725 | ||
Number of Mortgage Loans | 54 | ||
Number of Mortgaged Properties | 64 | ||
Number of Crossed Groups | NAP | ||
Crossed Groups as a percentage of Initial Pool Balance | NAP | ||
Range of Cut-off Date Balances | $847,077 to $70,000,000 | ||
Average Cut-off Date Balance | $12,865,310 | ||
Range of Mortgage Rates | 4.34000% to 5.90000% | ||
Weighted Average Mortgage Rate | 4.94473% | ||
Range of original terms to Maturity Date | 60 months to 120 months | ||
Weighted average original term to Maturity Date | 119 months | ||
Range of Cut-off Date remaining terms to Maturity Date | 56 months to 120 months | ||
Weighted average Cut-off Date remaining term to Maturity Date | 116 months | ||
Range of original amortization terms(2) | 240 months to 360 months | ||
Weighted average original amortization term(2) | 347 months | ||
Range of remaining amortization terms(2) | 238 months to 360 months | ||
Weighted average remaining amortization term(2) | 346 months | ||
Range of Cut-off Date LTV Ratios(3)(4) | 44.7% to 75.1% | ||
Weighted average Cut-off Date LTV Ratio(3)(4) | 65.4% | ||
Range of Maturity Date LTV Ratios(3)(5) | 40.6% to 75.0% | ||
Weighted average Maturity Date LTV Ratio(3)(5) | 57.5% | ||
Range of UW NCF DSCR(3) | 1.20x to 2.18x | ||
Weighted average UW NCF DSCR(3) | 1.46x | ||
Range of Debt Yield on Underwritten NOI(3) | 5.8% to 15.2% | ||
Weighted average Debt Yield on Underwritten NOI(3) | 9.6% | ||
Percentage of Initial Pool Balance consisting of: Amortizing Balloon | 22.7% | ||
Interest Only then Amortizing Balloon | 50.8% | ||
Interest Only | 26.5% | ||
Percentage of Initial Pool Balance consisting of: Mortgage Loans with mezzanine debt | 3.6% | ||
Mortgaged Properties with single tenants | 2.7% | ||
(1) | Subject to a permitted variance of plus or minus 5%. | |||
(2) | Does not include mortgage loans that pay interest-only until their maturity dates. | |||
(3) | With respect to each mortgage loan that is part of a loan combination, the Cut-off Date LTV Ratio, Maturity Date LTV Ratio, UW NCF DSCR and Debt Yield on Underwritten NOI are calculated based on both that mortgage loan and any relatedpari passu companion loan(s), but without regard to any related subordinate companion loan(s), unless otherwise indicated. Other than as specifically noted, the Cut-off Date LTV Ratio, Maturity Date LTV Ratio, UW NCF DSCR and Debt Yield on Underwritten NOI information for each mortgage loan is presented in this prospectus without regard to any other indebtedness (whether or not secured by the related mortgaged property, ownership interests in the related borrower or otherwise) that currently exists or that may be incurred by the related borrower or its owners in the future. | |||
49 |
(4) | Unless otherwise indicated, the Cut-off Date LTV Ratio for each mortgage loan is calculated using an “as-is” appraised value (as set forth on Annex A to this prospectus). In the case of 8 mortgage loans, collectively representing approximately 14.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, each of the respective Cut-off Date LTV Ratios was calculated using (i) an appraised value that is based on certain adjustments and/or assumptions, (ii) the cut-off date principal balance of a mortgage loan less an economic holdback taken at origination, or (iii) an “as-is” appraised value plus related property improvement plan costs reserved for at origination, in each case as further described in the definitions of “Appraised Value” and/or “Cut-off Date LTV Ratio” under “Description of the Mortgage Pool—Certain Calculations and Definitions.” The weighted average Cut-off Date LTV Ratio for the mortgage pool using only unadjusted “as-is” appraised values and the cut-off date principal balance of each mortgage loan, and without making any of the adjustments and/or assumptions described in the definitions of “Appraised Value” and/or “Cut-off Date LTV Ratio” under “Description of the Mortgage Pool—Certain Calculations and Definitions”, is 66.2%. | ||
(5) | Unless otherwise indicated, the Maturity Date LTV Ratio for each mortgage loan is calculated using an “as-is” appraised value (as set forth on Annex A to this prospectus). In the case of 12 mortgage loans, collectively representing approximately 25.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, each of the respective Maturity Date LTV Ratios was calculated using (i) an appraised value that is based on certain adjustments and/or assumptions or (ii) an “as stabilized” appraised value (as opposed to the related “as-is” appraised value), in each case as further described in the definitions of “Appraised Value” and/or “Maturity Date LTV Ratio” under “Description of the Mortgage Pool—Certain Calculations and Definitions.” The weighted average Maturity Date LTV Ratio for the mortgage pool using only unadjusted “as-is” appraised values for each mortgage loan, and without making any of the adjustments and/or assumptions described in the definitions of “Appraised Value” and/or “Maturity Date LTV Ratio” under “Description of the Mortgage Pool—Certain Calculations and Definitions”, is 58.9%. | ||
See “Description of the Mortgage Pool—Certain Calculations and Definitions” for important general and specific information regarding the manner of calculation of the underwritten debt service coverage ratios, underwritten debt yield ratios and loan-to-value ratios. | |||
All of the mortgage loans accrue interest on an actual/360 basis. | |||
Except as specifically provided in this prospectus, various information presented in this prospectus is subject to the following general conventions: | |||
· | with respect to any mortgage loan that is part of a loan combination, information regarding loan-to-value ratios, debt service coverage ratios, debt yields and cut-off date balances per net rentable square foot, pad, room or unit, as applicable, is calculated including the principal balance and debt service payment of the relatedpari passu companion loan(s), but (unless otherwise indicated) is calculated excluding the principal balance and debt service payment of any related subordinate companion loan(s) (or any other subordinate debt encumbering the related mortgaged property or any related mezzanine debt or preferred equity); | ||
· | unless otherwise indicated (including in the prior bullet), the loan-to-value ratio, the debt service coverage ratio, debt yield and mortgage rate information for each mortgage loan is presented in this prospectus without regard to any other indebtedness (whether or not secured by the related mortgaged property, ownership interests in the related borrower or otherwise) that currently exists or that may be incurred by the related borrower or its owners in the future, in order to present statistics for the related mortgage loan without combination with the other indebtedness; | ||
· | the sum of the numerical data in any column in a table may not equal the indicated total due to rounding; | ||
50 |
· | unless otherwise indicated, all figures and percentages presented in this prospectus are calculated as described under “Description of the Mortgage Pool—Certain Calculations and Definitions” and, unless otherwise indicated, such figures and percentages are approximate and in each case, unless the context indicates otherwise, represent the indicated figure or percentage of the aggregate principal balance of the pool of mortgage loans as of the cut-off date; | ||
· | the descriptions in this prospectus of the mortgage loans and the mortgaged properties are based upon the mortgage pool as it is expected to be constituted as of the cut-off date, assuming that (i) all scheduled principal and interest payments due on or before the cut-off date will be made, (ii) there are no defaults, delinquencies or prepayments on, or modifications of, any mortgage loan or the companion loan(s) on or prior to the cut-off date, and (iii) each mortgage loan with an anticipated repayment date (if any) is paid in full on its related anticipated repayment date; | ||
· | when information presented in this prospectus with respect to the mortgaged properties is expressed as a percentage of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, if a mortgage loan is secured by more than 1 mortgaged property, the percentages are based on an allocated loan amount that has been assigned to each of the related mortgaged properties based upon one or more of the related appraised values, the relative underwritten net cash flow or prior allocations reflected in the related mortgage loan documents as set forth on Annex A to this prospectus; | ||
· | in general, when a mortgage loan is cross-collateralized and cross-defaulted with one or more other mortgage loans, we present loan-to-value ratio, debt service coverage ratio and debt yield information for the cross-collateralized group on an aggregate basis in the manner described in this prospectus; on an individual basis, without regard to the cross-collateralization feature, any mortgage loan that is part of a cross-collateralized group of mortgage loans may have a higher loan-to-value ratio, lower debt service coverage ratio and/or lower debt yield than is presented in this prospectus; and | ||
· | for purposes of the presentation of information in this prospectus, certain loan-to-value ratio, appraised value, debt yield, debt service coverage ratio and/or cut-off date balance information or other underwritten statistics may be based on certain adjustments, assumptions and/or estimates, as further described under “Description of the Mortgage Pool—Certain Calculations and Definitions” and “—Statistical Characteristics of the Mortgage Loans”. | ||
For further information regarding the Mortgage Loans, see “Description of the Mortgage Pool”. | |||
Modified and Refinanced Mortgage Loans | Certain of the mortgage loans were refinancings in whole or in part of loans that were (or refinancings of temporary bridge loans that in turn refinanced loans that were) in default at the time of refinancing or otherwise involved discounted pay-offs or provided acquisition financing for the related borrower’s purchase of the related mortgaged property at a foreclosure sale or after becoming REO, as described below: |
51 |
· | With respect to the mortgage loan secured by the mortgaged property identified on Annex A to this prospectus as Deerfield Plaza, representing approximately 2.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the mortgage loan refinanced a prior loan, which matured in October 2015. The prior loan was refinanced post maturity in December 2015 and, other than charging late interest, no remedies were pursued by the prior servicer. | ||
· | With respect to the mortgage loan secured by the mortgaged property identified on Annex A to this prospectus as Estates at Westernaire, representing approximately 1.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount, proceeds of such mortgage loan financed the acquisition of such mortgaged property after its having become REO. | ||
See “Description of the Mortgage Pool—Default History, Bankruptcy Issues and Other Proceedings”. | |||
Certain risks relating to bankruptcy proceedings are described in “Risk Factors—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans”. | |||
Loans Underwritten Based on Projections of Future Income |
With respect to 6 of the mortgaged properties, representing approximately 15.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount, such mortgaged properties (i) were constructed or the subject of a major renovation that was completed within 12 calendar months prior to the cut-off date and, therefore, the related mortgaged property has no prior operating history, (ii) were acquired by the borrower under the related mortgage loan or an affiliate thereof within 12 calendar months prior to the cut-off date and such borrower or affiliate was unable to provide the related mortgage loan seller with historical financial information for such acquired mortgaged property or (iii) are single tenant properties subject to triple-net leases with the related tenant where the related borrower did not provide the related mortgage loan seller with historical financial information for the related mortgaged property. | ||
See “Description of the Mortgage Pool—Certain Calculations and Definitions” and “—Statistical Characteristics of the Mortgage Loans—Loans Underwritten Based on Projections of Future Income Resulting From Mortgaged Properties with Limited Prior Operating History”. | |||
Certain Mortgage Loans with Material Lease Termination Options |
Certain mortgage loans have material lease early termination options. See Annex B to this prospectus for information regarding material lease termination options for the major commercial tenants by base rent at the mortgaged properties securing the largest 15 mortgage loans (considering each crossed group as a single mortgage loan) by principal balance as of the cut-off date. Also, see “Description of the Mortgage Pool—Tenant Issues—Lease Expirations and Terminations” for information on material tenant lease expirations and early termination options. | ||
Removal of Mortgage Loans From the Mortgage Pool |
Generally, a mortgage loan may only be removed from the mortgage pool as a result of (a) a repurchase or substitution by a sponsor for any | ||
52 |
mortgage loan for which it cannot remedy the material breach (or, in certain cases, a breach that is deemed to be material) or material document defect (or, in certain cases, a defect that is deemed to be material) affecting such mortgage loan under the circumstances described in this prospectus, (b) the exercise of a purchase option by a mezzanine lender, or the holder of a subordinate companion loan, in each case if any, or (c) a final disposition of a mortgage loan such as a payment in full or a sale of a defaulted mortgage loan or REO property. See “Risk Factors—Your Yield May Be Affected by Defaults, Prepayments and Other Factors”, “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions”, “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties”. | |||
Additional Aspects of the Certificates | |||
Denominations | The offered certificates with certificate balances that are initially offered and sold to purchasers will be issued in minimum denominations of $10,000 and integral multiples of $1 in excess of $10,000. The offered certificates with notional amounts will be issued, maintained and transferred only in minimum denominations of authorized initial notional amounts of not less than $1,000,000 and in integral multiples of $1 in excess of $1,000,000. | ||
Registration, Clearance and Settlement | Each class of offered certificates will initially be registered in the name of Cede & Co., as nominee of The Depository Trust Company, or DTC. You may hold offered certificates through: (1) DTC in the United States; or (2) Clearstream Banking, société anonyme or Euroclear Bank, as operator of the Euroclear System. Transfers within DTC, Clearstream Banking, société anonyme or Euroclear Bank, as operator of the Euroclear System, will be made in accordance with the usual rules and operating procedures of those systems. | ||
We may elect to terminate the book-entry system through DTC (with the consent of the DTC participants), Clearstream Banking, société anonyme or Euroclear Bank, as operator of the Euroclear System, with respect to all or any portion of any class of the offered certificates. | |||
See “Description of the Certificates—Delivery, Form, Transfer and Denomination—Book-Entry Registration”. | |||
Information Available to Certificateholders | On each distribution date, the certificate administrator will prepare and make available to each certificateholder, a statement as to the distributions being made on that date. Additionally, under certain circumstances, certificateholders of record may be entitled to certain other information regarding the issuing entity. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. | ||
Deal Information/Analytics | Certain information concerning the mortgage loans and the certificates may also be available to subscribers through the following services: | ||
· | Bloomberg, L.P., Trepp, LLC, Intex Solutions, Inc., BlackRock Financial Management, Inc. and Markit Group Limited; | ||
53 |
· | The certificate administrator’s website initially located at www.sfcitidirect.com; and | ||
· | The master servicer’s website initially located at www.wellsfargo.com/com/comintro. | ||
Optional Termination | On any distribution date on which the aggregate unpaid principal balance of the mortgage loans remaining in the issuing entity is less than 1.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, certain specified persons will have the option to purchase all of the mortgage loans (and all property acquired through exercise of remedies in respect of any mortgage loan) remaining in the issuing entity at the price specified in this prospectus. Exercise of this option will terminate the issuing entity and retire the then outstanding certificates. | ||
The issuing entity may also be terminated in connection with a voluntary exchange of all the then-outstanding certificates (but excluding the Class R certificates) for the mortgage loans remaining in the issuing entity, if (i) the aggregate certificate balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class D certificates and the Class A-S, Class B and Class C trust components (and, correspondingly, the Class A-S, Class B, Class EC and Class C certificates) and the notional amounts of the Class X-A, Class X-B and Class X-D certificates have been reduced to zero, (ii) the master servicer is paid a fee specified in the pooling and servicing agreement, and (iii) all of the holders of those classes of outstanding certificates voluntarily participate in the exchange. | |||
See “The Pooling and Servicing Agreement—Termination; Retirement of Certificates”. | |||
Required Repurchases or Substitutions of Mortgage Loans; Loss of Value Payment |
Under certain circumstances, the related mortgage loan seller may be obligated to (i) repurchase (without payment of any yield maintenance charge or prepayment premium) or substitute for an affected mortgage loan from the issuing entity or (ii) make a cash payment that would be deemed sufficient to compensate the issuing entity, in the event of a document defect or a breach of a representation and warranty made by the related mortgage loan seller with respect to the mortgage loan in the mortgage loan purchase agreement that materially and adversely affects (or, in certain cases, is deemed to materially and adversely affect) the value of the mortgage loan or any related REO property or the interests of the certificateholders in the mortgage loan or any related REO property or causes the mortgage loan to be other than a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Internal Revenue Code of 1986, as amended (the “Code”) (but without regard to the rule of Treasury Regulations Section 1.860G-2(f)(2) that causes a defective loan to be treated as a “qualified mortgage”). See “The Mortgage Loan Purchase Agreements”. | ||
Sale of Defaulted Mortgage Loans and REO Properties |
Pursuant to the pooling and servicing agreement for this securitization transaction, the special servicer may solicit offers for defaulted mortgage loans (or a defaulted pari passu loan combination) serviced thereunder and related REO properties and, in the absence of a cash offer at least equal to such defaulted mortgage loan’s (or defaulted pari passu loan combination’s) outstanding principal balance plus all accrued and unpaid interest and outstanding costs and expenses and certain other amounts under the pooling and servicing agreement, the special servicer may | ||
54 |
accept the first (and, if multiple offers are received, the highest) cash offer from any person that constitutes a fair price for the defaulted serviced mortgage loan (or defaulted serviced pari passu loan combination or relevant portion thereof, if applicable) or related REO property, determined as described in “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties”, unless the special servicer determines, in accordance with the servicing standard (and subject to the requirements of any related co-lender agreement), that rejection of such offer would be in the best interests of the certificateholders and any related affected companion loan holder(s) (as a collective whole as if such certificateholders and such serviced pari passucompanion loan holder constituted a single lender and with respect to a loan combination that includes a subordinate companion loan, taking into account the subordinate nature of such subordinate companion loan). | |||
If a mortgage loan that is part of a serviced loan combination (if any) becomes a defaulted mortgage loan, and if the special servicer decides to sell such defaulted mortgage loan as described in the prior paragraph, then the special servicer will be required to sell any related serviced pari passu companion loan(s) together with such defaulted mortgage loan as a single whole loan. In connection with any such sale, the special servicer will be required to follow the procedures set forth under “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties”. | |||
Pursuant to the co-lender agreement with respect to any serviced AB loan combination, the holder of the related subordinate companion loan has a right to purchase the related defaulted mortgage loan (together with any related serviced pari passu companion loan) as described in “Description of the Mortgage Pool—The Loan Combinations”. | |||
Pursuant to the related outside servicing agreement, the party acting as outside special servicer with respect to any outside serviced loan combination may offer to sell to any person (or may offer to purchase) for cash such outside serviced loan combination during such time as such loan combination constitutes a defaulted mortgage loan under the related outside servicing agreement and, in connection with any such sale, the outside special servicer is required to sell both the related outside serviced mortgage loan and the related pari passu companion loan(s) as a single whole loan. | |||
Pursuant to each mezzanine loan intercreditor agreement with respect to the mortgage loans with mezzanine indebtedness, the holder of the related mezzanine loan has the right to purchase the related mortgage loan as described in “Description of the Mortgage Pool—Additional Indebtedness”. Additionally, in the case of mortgage loans that permit certain equity owners of the borrower to incur future mezzanine debt as described in “Description of the Mortgage Pool—Additional Indebtedness”, the related future mezzanine lender may have the option to purchase the related mortgage loan after certain defaults. | |||
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” and “Description of the Mortgage Pool—The Loan Combinations”. | |||
55 |
Other Investment Considerations | |||
Material Federal Income Tax Consequences |
Two (2) separate real estate mortgage investment conduit (commonly known as a REMIC) elections will be made with respect to designated portions of the issuing entity. The designations for each REMIC created under the pooling and servicing agreement are as follows: | ||
· | The lower-tier REMIC will hold the mortgage loans and certain other assets of the issuing entity and will issue certain classes of uncertificated regular interests to an upper-tier REMIC. | ||
· | The upper-tier REMIC will hold the lower-tier REMIC regular interests and will issue the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A, Class X-B, Class D, Class X-D, Class E, Class F, Class G and Class H certificates and the Class A-S, Class B and Class C trust components as classes of regular interests in the upper-tier REMIC. | ||
The portions of the issuing entity consisting of the Class A-S, Class B and Class C trust components and the related distribution account, beneficial ownership of which is represented by the Class A-S, Class B, Class EC and Class C certificates, will be treated as a grantor trust for federal income tax purposes, as further described under “Material Federal Income Tax Consequences”. | |||
Pertinent federal income tax consequences of an investment in the offered certificates include: | |||
· | Each class of offered certificates (other than the exchangeable certificates and the Class EC certificates) and the trust components will constitute REMIC “regular interests”. | ||
· | The offered certificates (other than the exchangeable certificates and the Class EC certificates) and the trust components will be treated as newly originated debt instruments for federal income tax purposes. | ||
· | Each class of exchangeable certificates and the Class EC certificates will evidence beneficial ownership of one or more trust components which will be treated as a grantor trust for federal income tax purposes. | ||
· | You will be required to report income on your offered certificates in accordance with the accrual method of accounting. | ||
It is anticipated, for federal income tax purposes, that the Class X-A and Class X-B certificates and the Class C trust component will be issued with original issue discount, and that the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S and Class B trust components will be issued at a premium. | |||
See “Material Federal Income Tax Consequences”. | |||
Yield Considerations | You should carefully consider the matters described under “Risk Factors—Your Yield May Be Affected by Defaults,Prepayments and Other Factors” and “Yield, Prepayment and Maturity Considerations”, which may affect significantly the yields on your investment. | ||
56 |
Certain ERISA Considerations | Subject to important considerations described under “ERISA Considerations”, the offered certificates are eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts. | ||
Legal Investment | No class of the offered certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the 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”. | ||
The issuing entity will not be registered under the Investment Company Act. The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act (both as defined in “Risk Factors—Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity and Other Aspects of the Offered Certificates”). | |||
Ratings | The offered certificates will not be issued unless each of the offered classes receives a credit rating from one or more of the nationally recognized statistical rating organizations engaged by the depositor to rate the offered certificates. The decision not to engage one or more other rating agencies in the rating of certain classes of certificates to be issued in connection with this transaction may negatively impact the liquidity, market value and regulatory characteristics of those classes of certificates. Neither the depositor nor any other person or entity will have any duty to notify you if any other nationally recognized statistical rating organization issues, or delivers notice of its intention to issue, unsolicited ratings on one or more classes of certificates after the date of this prospectus. | ||
See “Risk Factors—Your Yield May Be Affected by Defaults, Prepayments and Other Factors”, “—Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded” and“Ratings”. |
57 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
58 |
Risk Factors
You should carefully consider the following risks before making an investment decision. In particular, distributions on your certificates will depend on payments received on, and other recoveries with respect to, the mortgage loans. Therefore, you should carefully consider the risk factors relating to the mortgage loans and the mortgaged properties.
If any of the following events or circumstances identified as risks actually occur or materialize, your investment could be materially and adversely affected. We note that additional risks and uncertainties not presently known to us may also impair your investment.
If you are considering an investment in a class of exchangeable certificates or the Class EC certificates you should carefully consider the risks that are specifically applicable to the related class(es) of certificates exchangeable therefor, since they would generally apply to your certificates if you make an exchange.
This prospectus also contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus.
The Offered Certificates May Not Be a Suitable Investment for You
The offered certificates are not suitable investments for all investors. In particular, you should not purchase any class of offered certificates unless you understand and are able to bear the risk that the yield to maturity of, the aggregate amount and timing of distributions on, and the market value of the offered certificates are subject to material variability from period to period and give rise to the potential for significant loss over the life of the offered certificates. The interaction of the foregoing factors and their effects are impossible to predict and are likely to change from time to time. As a result, an investment in the offered certificates involves substantial risks and uncertainties and should be considered only by sophisticated institutional investors with substantial investment experience with similar types of securities and who have conducted appropriate due diligence on the mortgage loans and the offered certificates.
Combination or “Layering” of Multiple Risks May Significantly Increase Risk of Loss
Although the various risks discussed in this prospectus are generally described separately, you should consider the potential effects of the interplay of multiple risk factors. Where more than one significant risk factor is present, the risk of loss to an investor in the certificates may be significantly increased.
The Offered Certificates Are Limited Obligations; If Assets Are Not Sufficient, You May Not Be Paid
The offered certificates, when issued, will represent beneficial interests in the issuing entity. The offered certificates will not represent an interest in, or obligation of, the sponsors, the depositor, the master servicer, the special servicer, the operating advisor, the certificate administrator, the trustee, the underwriters, or any of their respective affiliates, or any other person. The primary assets of the issuing entity will be the notes evidencing the mortgage loans, and the primary security and source of payment for the mortgage loans will be the mortgaged properties and the other collateral described in this prospectus. Payments on the offered certificates are expected to be derived from payments made by the borrowers on the mortgage loans. We cannot assure you that the cash flow from the mortgaged properties and the proceeds of any sale or refinancing of the mortgaged properties will be sufficient to pay the principal of, and interest on, the mortgage loans or to distribute in full the amounts of interest and principal to which the holders of the offered certificates are entitled.
No governmental agency or instrumentality will guarantee or insure payment on the offered certificates.
Furthermore, some classes of offered certificates will represent a subordinate right to receive payments out of collections and/or advances on the trust assets.
If the trust assets are insufficient to make payments on your certificates, no other assets will be available to you for payment of the deficiency, and you will bear the resulting loss. See “Description of the Certificates—General”.
59 |
Any Credit Support for Your Offered Certificates May Be Insufficient to Protect You Against All Potential Losses
The rating agencies that assign ratings to your offered certificates will establish the amount of credit support, if any, for your offered certificates based on, among other things, an assumed level of defaults, delinquencies and losses with respect to the related mortgage assets. Actual losses may, however, exceed the assumed levels. See “Description of the Certificates—Subordination; Allocation of Realized Losses”. If actual losses on the underlying mortgage loans exceed the assumed levels, you may be required to bear the additional losses.
Your Yield May Be Affected by Defaults, Prepayments and Other Factors
General
The yield to maturity on each class of the offered certificates will depend in part on the following:
· | the purchase price for the certificates; |
· | the rate and timing of principal payments on the mortgage loans (both voluntary and involuntary), and the allocation of principal prepayments to the respective classes of offered certificates with principal balances; and |
· | the allocation of shortfalls and losses on the mortgage loans to the respective classes of offered certificates. |
Any changes in the weighted average lives of your certificates may adversely affect your yield. In general, if you buy a certificate at a premium, and principal distributions occur faster than expected, your actual yield to maturity will be lower than your anticipated yield. If principal distributions are very high, holders of certificates purchased at a premium might not fully recover their initial investment. Conversely, if you buy a certificate at a discount and principal distributions occur more slowly than expected, your actual yield to maturity will be lower than your anticipated yield. The potential effect that prepayments may have on the yield of your certificates will increase as the discount deepens or the premium increases. If the amount of interest payable on your certificates is disproportionately large as compared to the amount of principal payable on your certificates, or if your certificates entitle you to receive payments of interest but no payments of principal, then you may fail to recover your original investment under some prepayment scenarios.
In addition, prepayments resulting in a shortening of weighted average lives of your certificates may be made at a time of low interest rates when you may be unable to reinvest the resulting payment of principal on your certificates at a rate comparable to the effective yield anticipated by you in making your investment in the certificates, while delays and extensions resulting in a lengthening of those weighted average lives may occur at a time of high interest rates when you may have been able to reinvest principal payments that would otherwise have been received by you at higher rates.
In addition, the extent to which prepayments on the mortgage loans in the issuing entity ultimately affect the weighted average life of the certificates will depend on the terms of the certificates, more particularly:
· | a class of certificates that entitles the holders of those certificates to a disproportionately larger share of the prepayments on the mortgage loans increases the “call risk” or the likelihood of early retirement of that class if the rate of prepayment is relatively fast; and |
· | a class of certificates that entitles the holders of the certificates to a disproportionately smaller share of the prepayments on the mortgage loans increases the likelihood of “extension risk” or an extended average life of that class if the rate of prepayment is relatively slow. |
60 |
The Investment Performance and Average Life of Your Offered Certificates Will Depend Upon Payments, Defaults and Losses on the Underlying Mortgage Loans, and Those Payments, Defaults and Losses May Be Highly Unpredictable
Payments of principal and/or interest on your offered certificates will depend upon, among other things, the rate and timing of payments on the underlying mortgage loans. Prepayments on the underlying mortgage loans may result in a faster rate of principal payments on your offered certificates, thereby resulting in a shorter average life for your offered certificates than if those prepayments had not occurred.
The rate and timing of principal prepayments on pools of mortgage loans varies among pools and is influenced by a variety of economic, demographic, geographic, social, tax and legal factors. Accordingly, neither you nor we can predict the rate and timing of principal prepayments on the mortgage loans underlying your offered certificates. As a result, repayment of your offered certificates could occur significantly earlier or later, and the average life of your offered certificates could be significantly shorter or longer, than you expected.
The extent to which prepayments on the underlying mortgage loans ultimately affect the average life of your offered certificates depends on the terms and provisions of your offered certificates. A class of offered certificates may entitle the holders to a pro rata share of any prepayments on the underlying mortgage loans, to all or a disproportionately large share of those prepayments, or to none or a disproportionately small share of those prepayments. If you are entitled to a disproportionately large share of any prepayments on the underlying mortgage loans, your offered certificates may be retired at an earlier date. If, however, you are only entitled to a small share of the prepayments on the underlying mortgage loans, the average life of your offered certificates may be extended. Your entitlement to receive payments, including prepayments, of principal of the underlying mortgage loans may—
· | vary based on the occurrence of specified events, such as the retirement of one or more other classes of certificates, or |
· | be subject to various contingencies, such as prepayment and default rates with respect to the underlying mortgage loans. |
Each of the mortgage loans underlying the offered certificates will specify the terms on which the related borrower must repay the outstanding principal amount of the loan. The rate, timing and amount of scheduled payments of principal may vary, and may vary significantly, from mortgage loan to mortgage loan. The rate at which the underlying mortgage loans amortize will directly affect the rate at which the principal balance or notional amount of your offered certificates is paid down or otherwise reduced.
In addition, any mortgage loan underlying the offered certificates may permit the related borrower during some or all of the loan term to prepay the loan. In general, a borrower will be more likely to prepay its mortgage loan when it has an economic incentive to do so, such as obtaining a larger loan on the same underlying real property or a lower or otherwise more advantageous interest rate through refinancing. If a mortgage loan includes some form of prepayment restriction, the likelihood of prepayment should decline. These restrictions may include—
· | an absolute or partial prohibition against voluntary prepayments during some or all of the loan term, or |
· | a requirement that voluntary prepayments be accompanied by some form of prepayment premium, fee or charge during some or all of the loan term. |
In many cases, however, there will be no restriction associated with the application of insurance proceeds or condemnation proceeds as a prepayment of principal.
Notwithstanding the terms of the mortgage loans backing your offered certificates, the amount, rate and timing of payments and other collections on those mortgage loans will, to some degree, be unpredictable because of borrower defaults and because of casualties and condemnations with respect to the underlying real properties.
61 |
The investment performance of your offered certificates may vary materially and adversely from your expectations due to—
· | the rate of prepayments and other unscheduled collections of principal on the underlying mortgage loans being faster or slower than you anticipated, or |
· | the rate of defaults on the underlying mortgage loans being faster, or the severity of losses on the underlying mortgage loans being greater, than you anticipated. |
The actual yield to you, as a holder of an offered certificate, may not equal the yield you anticipated at the time of your purchase, and the total return on investment that you expected may not be realized. In deciding whether to purchase any offered certificates, you should make an independent decision as to the appropriate prepayment, default and loss assumptions to be used.
We are not aware of any relevant publicly available or authoritative statistics with respect to the historical prepayment experiences of commercial mortgage loans. For this purpose, principal payments include both voluntary prepayments, if permitted, and involuntary prepayments, such as prepayments resulting from the application of loan reserves, property releases, casualty or condemnation, defaults and liquidations or repurchases upon breaches of representations and warranties or material document defects or purchases by the holder of a subordinate companion loan or a mezzanine lender pursuant to a purchase option or sales of defaulted mortgage loans. The rate at which voluntary prepayments occur on the mortgage loans will be affected by a variety of factors, including:
· | the terms of the mortgage loans, including, the length of any prepayment lockout period and the applicable yield maintenance charges and prepayment premiums and the extent to which the related mortgage loan terms may be practically enforced; |
· | the level of prevailing interest rates; |
· | the availability of mortgage credit; |
· | the master servicer’s or special servicer’s ability to enforce yield maintenance charges and prepayment premiums; |
· | the failure to meet certain requirements for the release of escrows; |
· | the occurrence of casualties or natural disasters; and |
· | economic, demographic, tax, legal or other factors. |
See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Prepayment Protections and Certain Involuntary Prepayments” for a description of certain prepayment protections and other factors that may influence the rate of prepayment of the mortgage loans. See “—Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable” below.
In addition, if a sponsor or guarantor repurchases any mortgage loan from the issuing entity due to breaches of representations or warranties or document defects, the repurchase price paid will be passed through to the holders of the certificates with the same effect as if the mortgage loan had been prepaid in part or in full, and no yield maintenance charge or other prepayment charge would be payable. Additionally, the holder of any subordinate companion loan or any mezzanine lender 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. As a result of such a repurchase or purchase, investors in the Class X-A and Class X-B certificates and any classes of certificates purchased at a premium might not fully recoup their initial investment. In this respect, see “The Mortgage Loan Purchase Agreements—Representations and Warranties” and “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans”.
A rapid rate of principal prepayments, liquidations and/or principal losses on the mortgage loans could result in the failure to recoup the initial investment in the Class X-A and/or Class X-B certificates. Investors in the
62 |
Class X-A and Class X-B certificates should fully consider the associated risks, including the risk that an extremely rapid rate of amortization, prepayment or other liquidation of the mortgage loans could result in the failure of such investors to recoup fully their initial investments. The yield to maturity of the Class X-A and/or Class X-B certificates may be adversely affected by the prepayment of mortgage loans with higher net mortgage rates. See “—A Rapid Rate of Principal Prepayments, Liquidations and/or Principal Losses on the Mortgage Loans Could Result in the Failure to Recoup the Initial Investment in the Class X-A and Class X-B Certificates” and“Yield, Prepayment and Maturity Considerations—Yield on the Class X-A and Class X-B Certificates”.
Your Yield May Be Adversely Affected by Prepayments Resulting from Earnout Reserves
With respect to certain mortgage loans, earnout escrows may have been established at origination, which funds may be released to the related borrower upon satisfaction of certain conditions. If such conditions with respect to any such mortgageloan are not satisfied, the amounts reserved in such escrows may be applied to the payment of the mortgage loan, which would have the same effect on the offered certificates as a prepayment of the mortgage loan, except that such application of funds would not be accompanied by any prepayment premium or yield maintenance charge. See Annex A to this prospectus. The pooling and servicing agreement will provide that unless required by the mortgage loan documents, the master servicer will not apply such amounts as a prepayment if no event of default has occurred.
Losses and Shortfalls May Change Your Anticipated Yield
If losses on the mortgage loans exceed the aggregate certificate balance of the classes of certificates subordinated to a particular class, that class will suffer a loss equal to the full amount of the excess (up to the outstanding certificate balance of that class). Even if losses on the mortgage loans are not borne by your certificates, those losses may affect the weighted average life and yield to maturity of your certificates.
For example, certain shortfalls in interest as a result of involuntary prepayments may reduce the funds available to make payments on your certificates. In addition, if the master servicer or the trustee is reimbursed out of general collections on the mortgage loans included in the issuing entity for any advance that it has determined is not recoverable out of collections on the related mortgage loan, then to the extent that this reimbursement is made from collections of principal on the mortgage loans in the issuing entity, that reimbursement will reduce the amount of principal available to be distributed on the certificates and will result in a reduction of the certificate balance (or notional amount) of a class of certificates. See “Description of the Certificates—Distributions”. Likewise, if the master servicer or the trustee is reimbursed out of principal collections on the mortgage loans for any workout delayed reimbursement amounts, that reimbursement will reduce the amount of principal available to be distributed on the certificates on that distribution date. This reimbursement would have the effect of reducing current payments of principal on the offered certificates with principal balances and extending the weighted average lives of those certificates. See “Description of the Certificates—Distributions”.
In addition, to the extent losses are realized on the mortgage loans, first the Class H certificates, then the Class G certificates, then the Class F certificates, then the Class E certificates, then the Class D certificates, then the Class C trust component (and correspondingly, the Class C certificates and the Class EC certificates, pro rata based on their respective percentage interests in the Class C trust component), then the Class B trust component (and correspondingly, the Class B certificates and the Class EC certificates, pro rata based on their respective percentage interests in the Class B trust component), then the Class A-S trust component (and correspondingly, the Class A-S certificates and the Class EC certificates, pro rata based on their respective percentage interests in the Class A-S trust component) and, then, pro rata, the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates, based on their respective certificate balances, will bear such losses up to an amount equal to the respective outstanding certificate balance thereof. A reduction in the certificate balance of the Class A-1, Class A-2, Class A-3, Class A-4 or Class A-AB certificates or the Class A-S trust component will result in a corresponding reduction in the notional amount of the Class X-A certificates. A reduction in the certificate balance of the Class B trust component will result in a corresponding reduction in the notional amount of the Class X-B certificates. No representation is made as to the anticipated rate or timing of prepayments (voluntary or involuntary) or rate, timing or amount of liquidations or losses on the mortgage loans or as to the anticipated yield to maturity of any such offered certificate. See “Yield, Prepayment and Maturity Considerations”.
63 |
The Class EC certificates and the applicable class of exchangeable certificates will be subject to a realized loss or shortfall on any trust component to the extent of their percentage interest in such trust component. See “Description of the Certificates—Distributions”.
Modifications of the Terms of the Mortgage Loans May Affect the Amount and Timing of Payments on Your Offered Certificates
The master servicer or special servicer may, within prescribed limits, extend and modify mortgage loans underlying your offered certificates that are in default or as to which a payment default is imminent in order to maximize recoveries on the defaulted loans. The master servicer or special servicer is only required to determine that any extension or modification is reasonably likely to produce a greater recovery than a liquidation of the real property securing the defaulted loan. There is a risk that the decision of the master servicer or special servicer to extend or modify a mortgage loan may not in fact produce a greater recovery.
The master servicer (or any related primary servicer) will be responsible for servicing the mortgage loans underlying your offered certificates regardless of whether such mortgage loans are performing or have become delinquent or have otherwise been transferred to special servicing. As delinquencies or defaults occur, the special servicer and any sub-servicer will be required to utilize an increasing amount of resources to work with borrowers to maximize collections on the mortgage loans serviced by it. This may include modifying the terms of such mortgage loans that are in default or whose default is reasonably foreseeable. At each step in the process of trying to bring a defaulted mortgage loan current or in maximizing proceeds to the certificateholders, the special servicer and any sub-servicer will be required to invest time and resources not otherwise required when collecting payments on performing mortgage loans. Modifications of mortgage loans implemented by the special servicer or any sub-servicer in order to maximize ultimate proceeds of such mortgage loans to the certificateholders may have the effect of, among other things, reducing or otherwise changing the mortgage rate, forgiving or forbearing payments of principal, interest or other amounts owed under the mortgage loan, extending the final maturity date of the mortgage loan, capitalizing or deferring delinquent interest and other amounts owed under the mortgage loan, forbearing payment of a portion of the principal balance of the mortgage loan or any combination of these or other modifications. Any modified mortgage loan may remain in the issuing entity, and the modification may result in a reduction in (or may eliminate) the funds received by the issuing entity with respect to such mortgage loan.
The ability to modify mortgage loans by each of the master servicer and the special servicer may be limited by several factors. First, if the master servicer or special servicer, as applicable, has to consider a large number of modifications, operational constraints may affect the ability of such servicer to adequately address all of the needs of the borrowers. Furthermore, the terms of the pooling and servicing agreement will significantly limit the actions of the master servicer, and will prohibit the special servicer from taking certain actions, in connection with a loan modification, such as an extension of the loan term beyond a specified date such as a specified number of years prior to the rated final distribution date. You should consider the importance of the role of the special servicer in maximizing collections for the transaction and the impediments the special servicer may encounter when servicing delinquent or defaulted mortgage loans. In some cases, failure by the special servicer to timely modify the terms of a defaulted mortgage loan may reduce amounts available for distribution on your offered certificates. In addition, even if a loan modification is successfully completed, there can be no assurance that the related borrower will continue to perform under the terms of the modified mortgage loan.
You should note that modifications that are designed to maximize collections in the aggregate may adversely affect a particular class of certificates in the transaction. The pooling and servicing agreement will obligate the master servicer and special servicer not to consider the interests of individual classes of certificates. You should also note that in connection with considering a modification or other type of loss mitigation, the master servicer or special servicer may incur or bear related out-of-pocket expenses, such as appraisal fees, which would be reimbursed to such servicer from the transaction as servicing advances and paid from amounts received on the modified loan or from other mortgage loans in the related mortgage pool but in each case, prior to distributions being made on your offered certificates.
Release, Casualty and Condemnation of Collateral May Reduce the Yield on Your Certificates
Notwithstanding the prepayment provisions described in this prospectus, certain of the mortgage loans permit the release of a mortgaged property (or a portion of the mortgaged property) subject to the satisfaction of certain conditions described under“Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”. In order to obtain such release (other than with respect to the release of certain non-material portions of the
64 |
mortgaged properties which may not require payment of a release price), the related borrower may be required (among other things) to pay a release price, which in some cases may not include a prepayment premium or yield maintenance charge on all or a portion of such payment. In addition, some mortgage loans may provide that the application of casualty or condemnation proceeds to pay down the subject mortgage loan does not need to be accompanied by a prepayment premium or yield maintenance charge. Any such prepayments may adversely affect the yield to maturity of your certificates. See “—Your Yield May Be Affected by Defaults, Prepayments and Other Factors” in this prospectus.
In addition, certain mortgage loans provide for the release, without prepayment or defeasance, of outparcels or other portions of the related mortgaged property that were given no value or minimal value in the underwriting process, subject to the satisfaction of certain conditions. Certain of the mortgage loans also permit the related borrower to add or substitute collateral under certain circumstances.
See“Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Partial Releases” and Annex A for further details regarding the various release provisions.
Certain Classes of the Offered Certificates Are Subordinate to, and Are Therefore Riskier Than, Other Classes
The Class A-S, Class B, Class EC and Class C certificates are subordinate to other classes of certificates. If you purchase any offered certificates that are subordinate to one or more other classes, then your offered certificates will provide credit support to such other senior classes. As a result, you will receive payments after, and must bear the effects of losses on the trust assets before, the holders of the senior classes.
When making an investment decision, you should consider, among other things—
· | the payment priorities of the respective classes of the certificates, |
· | the order in which the principal balances of the respective classes of the certificates with balances will be reduced in connection with losses and default-related shortfalls, and |
· | the characteristics and quality of the mortgage loans in the trust. |
A Rapid Rate of Principal Prepayments, Liquidations and/or Principal Losses on the Mortgage Loans Could Result in the Failure to Recoup the Initial Investment in the Class X-A and Class X-B Certificates
TheClass X-A and Class X-B certificates will not be entitled to distributions of principal but instead will accrue interest on their respective notional amounts.
Theyield to maturity on the X-A certificates will be especially sensitive to the rate and timing of reductions made to the certificate balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB certificates and the Class A-S trust component. The yield to maturity of the Class X-B certificates will be especially sensitive to the rate and timing of reductions made to the certificate balance of the Class B trust component. In each case, the causes of such reductions in the applicable certificate balances may include delinquencies and losses on the mortgage loans due to liquidations, principal payments (including both voluntary and involuntary prepayments, delinquencies, defaults and liquidations) on the mortgage loans and payments with respect to purchases and repurchases thereof, which may fluctuate significantly from time to time. A rate of principal payments and liquidations on the mortgage loans that is more rapid than expected by investors may have a material adverse effect on the yield to maturity of the Class X-A and/or Class X-B certificates and may result in holders not fully recouping their initial investments. The yield to maturity of the Class X-A and/or Class X-B certificates may be adversely affected by the prepayment of mortgage loans with higher net mortgage rates. See “Yield, Prepayment and Maturity Considerations—Yield on the Class X-A and Class X-B Certificates”.
65 |
The Exchangeable Certificates and Class EC Certificates Are Subject to Additional Risks
Certain Factors May Limit Exchangeability
The characteristics of the Class EC certificates will reflect, in the aggregate, the characteristics of the Class A-S, Class B and Class C certificates. As a result, the Class EC certificates will be subject to the same risks as the Class A-S, Class B and Class C certificates described in this prospectus. Investors are also encouraged to consider a number of factors that will limit a certificateholder’ s ability to exchange exchangeable certificates:
· | At the time of a proposed exchange, a certificateholder must own exchangeable certificates in the requisite exchangeable proportion to make the desired exchange, as described under “Description of the Certificates—Exchangeable Certificates—Exchanges”. |
· | A certificateholder that does not own exchangeable certificates in such requisite exchangeable proportion may be unable to obtain the necessary exchangeable certificates or may be able only to exchange the portion (if any) of its exchangeable certificates that represents such requisite exchangeable proportion. Another certificateholder may refuse to sell its certificates at a reasonable (or any) price or may be unable to sell them, or certificates may have been purchased or placed into other financial structures and thus may be unavailable. Such circumstances may prevent you from obtaining exchangeable certificates in the proportions necessary to effect an exchange. |
· | Exchanges will no longer be permitted following the date when the then-current principal balance of the Class A-S trust component (and, correspondingly, to the extent evidencing an interest in the Class A-S trust component, the Class A-S certificates and the applicable component of the Class EC certificates) is reduced to zero as a result of the payment in full of all interest and principal on that trust component. |
· | Certificates may only be held in authorized denominations. |
Your Right to Receive Distributions on Exchangeable Certificates and Class EC Certificates Will Be Subordinated
As described in this prospectus, if you acquire any exchangeable certificates or Class EC certificates, then your rights to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will be subordinated to those of the holders of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B certificates. If you acquire Class B certificates, then your rights to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will also be subordinated to those of the holders of the Class A-S certificates and (insofar as the Class EC certificates represent an interest in the Class A-S trust component) the holders of the Class EC certificates. If you acquire Class C certificates, then your rights to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will also be subordinated to those of the holders of the Class B certificates and (insofar as the Class EC certificates represent an interest in the Class A-S and Class B trust components) the holders of the Class EC certificates. If you acquire Class EC certificates, then your rights to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will also be subordinated to: (a) insofar as the Class EC certificates represent an interest in the Class B and Class C trust components, those of the holders of the Class A-S certificates; and (b) insofar as the Class EC Certificates represent an interest in the Class C trust component, those of the holders of the Class B certificates. See “Description of the Certificates—Subordination; Allocation of Realized Losses”.
Book-Entry Registration Will Mean You Will Not Be Recognized as a Holder of Record
Your offered certificates will be issued in book-entry form through the facilities of the Depository Trust Company.
66 |
Your certificates will be initially represented by one or more certificates registered in the name of Cede & Co., as the nominee for DTC, and will not be registered in your name. As a result, you will not be recognized as a certificateholder, or holder of record of your certificates and
· | you will be able to exercise your rights as a certificateholder only indirectly through the Depository Trust Company and its participating organizations; |
· | you may have only limited access to information regarding your offered certificates; |
· | you may suffer delays in the receipt of payments on your offered certificates; and |
· | your ability to pledge or otherwise take action with respect to your offered certificates may be limited due to the lack of a physical certificate evidencing your ownership of those certificates. |
See “Description of the Certificates—Delivery, Form, Transfer and Denomination—Book-Entry Registration”.
The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Have Adversely Affected and May Continue to Adversely Affect the Value of CMBS
In recent years, the real estate and securitization markets, including the market for commercial mortgage-backed securities (“CMBS”), as well as global financial markets and the economy generally, have experienced significant dislocations, illiquidity and volatility. The United States economic recovery has been weak and may not be sustainable for any specific period of time, and the global or United States economy could slip into an even more significant recession. Declining real estate values, coupled with diminished availability of leverage and/or refinancings for commercial and multifamily real estate have resulted in increased delinquencies and defaults on commercial and multifamily mortgage loans. In addition, the downturn in the general economy has affected the financial strength of many commercial and multifamily real estate tenants and has resulted in increased vacancies, decreased rents and/or other declines in income from, or the value of, commercial and multifamily real estate. Any continued downturn may lead to decreased occupancy, decreased rents or other declines in income from, or the value of, commercial and multifamily real estate, which would likely have an adverse effect on CMBS that are backed by loans secured by such commercial and multifamily real estate and thus affect the liquidity and/or values of such CMBS.
In addition to credit factors directly affecting CMBS, the continuing fallout from a downturn in the residential mortgage-backed securities market and markets for other asset-backed and structured products has also contributed to a decline in the market value and liquidity of CMBS. The deterioration of other structured products markets may continue to adversely affect the value of CMBS. Even if your offered certificates are performing as anticipated, the value of your offered certificates in the secondary market may nevertheless decline as a result of a deterioration in general market conditions for other asset-backed or structured products. Trading activity associated with CMBS indices may also drive spreads on those indices wider than spreads on CMBS, thereby resulting in a decrease in value of your offered certificates.
Additionally, decreases in the value of commercial properties and the tightening by commercial real estate lenders of underwriting standards have prevented many commercial mortgage borrowers from refinancing their mortgages. A very substantial amount of U.S. mortgage loans, with balloon payment obligations in excess of their respective current property values, are maturing over the coming three years. These circumstances have increased delinquency and default rates of securitized commercial mortgage loans, and may lead to widespread commercial mortgage defaults. In addition, the declines in commercial real estate values have resulted in reduced borrower equity, hindering a borrower’s ability to refinance in an environment of increasingly restrictive lending standards and giving them less incentive to cure delinquencies and avoid foreclosure. Higher loan-to-value ratios are likely to result in lower recoveries on foreclosure, and an increase in loss severities above those that would have been realized had commercial property values remained the same or continued to increase. Defaults, delinquencies and losses have further decreased property values, thereby resulting in additional defaults by commercial mortgage borrowers, further credit constraints, further declines in property values and further adverse effects on the perception of the value of CMBS. Even if the real estate market does recover, the mortgaged properties and therefore, the certificates, may decline in value. Any further economic downturn may adversely affect the financial resources of the borrowers under the mortgage loans and may result in the inability
67 |
of the borrowers to make principal and interest payments on the mortgage loans. In the event of default by the borrower under a mortgage loan, the certificateholders would likely suffer a loss on their investment.
As a result of all of these factors, we cannot assure you that a dislocation in the CMBS market will not re-occur or become more severe.
Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity and Other Aspects of the Offered Certificates
We make no representations as to the proper characterization of the offered certificates for legal investment, financial institution regulatory, financial reporting or other purposes, as to the ability of particular investors to purchase the offered certificates under applicable legal investment or other restrictions or as to the consequences of an investment in the offered certificates for such purposes or under such restrictions. We note that regulatory or legislative provisions applicable to certain investors may have the effect of limiting or restricting their ability to hold or acquire CMBS, which in turn may adversely affect the ability of investors in the offered certificates who are not subject to those provisions to resell their certificates in the secondary market. For example:
· | Effective January 1, 2014, EU Regulation 575/2013 (the “CRR”) imposes on European Economic Area (“EEA”) credit institutions and investment firms (and their consolidated affiliates) (each, an “Affected Investor”) investing in securitizations issued on or after January 1, 2011, or in securitizations issued prior to that date where new assets are added or substituted after December 31, 2014: (a) a requirement (the “Retention Requirement”) that the originator, sponsor or original lender of such securitization has explicitly disclosed that it will retain, on an ongoing basis, a material net economic interest which, in any event, shall not be less than 5% in the transaction; and (b) a requirement (the “Due Diligence Requirement”) that the Affected Investor has undertaken certain due diligence in respect of the securitization and the underlying exposures and has established procedures for monitoring them on an ongoing basis. National regulators in EEA member states impose penal risk weights on securitization investments in respect of which the Retention Requirement or the Due Diligence Requirement has not been satisfied in any material respect by reason of the negligence or omission of the Affected Investor. Requirements similar to the Retention Requirement and the Due Diligence Requirement (the “Similar Requirements”): (i) apply to investments in securitizations by investment funds managed by EEA investment managers subject to EU Directive 2011/61/EU (the Alternative Investment Fund Managers Directive (the “AIFMD”)); (ii) will apply from January 1, 2016 to investments in securitizations by EEA insurance and reinsurance undertakings subject to the Solvency II Directive 2009/138/EC (“Solvency II”); and (iii) subject to the adoption of certain secondary legislation, will apply to investments in securitizations by EEA undertakings for collective investment in transferable securities. Similar Requirements are not identical to the Retention Requirement and Due Diligence Requirement in CRR, and in particular, additional due diligence requirements apply to investors subject to AIFMD and Solvency II. Similar Requirements not yet in effect may, when they become effective, apply to securitization instruments already issued, including the certificates. |
· | Prospective investors should be aware that none of the originators, the sponsors, the depositor or the issuing entity intends to retain a material net economic interest in the securitization constituted by the issue of the certificates in accordance with the Retention Requirement or to take any other action which may be required by prospective investors for the purposes of their compliance with the Retention Requirement, the Due Diligence Requirement or Similar Requirements. Consequently, the certificates may not be a suitable investment for Affected Investors or the other types of EEA regulated investors mentioned above. As a result, the price and liquidity of the certificates in the secondary market may be adversely affected. This could adversely affect your ability to transfer certificates or the price you may receive upon your sale of certificates. |
· | The European Commission has recently published a legislative proposal for an EU framework for simple, transparent and standardized securitizations which, among other things, would repeal the risk retention requirements described above and replace them with a single regime. It is impossible to predict the effect that any such future changes would have on Affected Investors or the other types of EEA regulated investors mentioned above. Prospective investors are responsible for monitoring and assessing changes to the Retention Requirements, the Due Diligence Requirement and Similar Requirements. |
68 |
· | Recent changes in federal banking and securities laws, including those resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in the United States, may have an adverse effect on issuers, investors and other participants in the asset-backed securities markets. In particular, new capital regulations, which were adopted by the U.S. banking regulators in July 2013 and began phasing in on January 1, 2014, implement (i) many aspects of the increased capital framework agreed upon by the Basel Committee on Banking Supervision (“BCBS”) in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and also (ii) changes required by the Dodd-Frank Act. These new capital regulations eliminate reliance on credit ratings and otherwise alter, and in most cases increase, the capital requirements imposed on depository institutions and their holding companies, including with respect to ownership of asset-backed securities such as CMBS. Additional phases of compliance began on January 1, 2015 and January 1, 2016, respectively. Further changes in capital requirements were announced by the BCBS in January 2016 and, when implemented in the United States, these changes may have an adverse effect on investments in asset-backed securities. As a result of these regulations, investments in CMBS like the certificates by financial institutions subject to these regulations may result in greater capital charges to these financial institutions, and the treatment of CMBS for their regulatory capital purposes may otherwise be adversely affected. Such developments could reduce the attractiveness of investments in CMBS for such entities. |
· | The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the regulations adopted to implement Section 619 of the Dodd-Frank Act (such statutory provision, together with such implementing regulations, the “Volcker Rule”). The Volcker Rule generally prohibits “banking entities” (which is broadly defined to include U.S. banks and bank holding companies and many non-U.S. banking entities, together with their respective subsidiaries and other affiliates) from (i) engaging in proprietary trading, (ii) acquiring or retaining an ownership interest in or sponsoring a “covered fund” and (iii) entering into certain relationships with such funds. Under the Volcker Rule, unless otherwise jointly determined by specified federal regulators, a “covered fund” does not include an issuer that may rely on an exclusion or exemption from the definition of “investment company” under the Investment Company Act other than the exclusions contained in Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act. The Volcker Rule became effective on July 21, 2012, and final regulations implementing the Volcker Rule were adopted on December 10, 2013, with conformance required by July 21, 2015 (or by July 21, 2016 in respect of investments in and relationships with covered funds that were in place prior to December 31, 2013, with the possibility of a further one-year extension). Although prior to the deadlines for conformance, banking entities were or are required to make good-faith efforts to conform their activities and investments to the Volcker Rule, the general effects of the Volcker Rule remain uncertain. Any prospective investor in the certificates, including a U.S. or foreign bank or a subsidiary or other affiliate thereof, should consult its own legal advisors regarding such matters and other effects of the Volcker Rule. |
· | The Financial Accounting Standards Board has adopted changes to the accounting standards for structured products. These changes, or any future changes, may affect the accounting for entities such as the issuing entity, could under certain circumstances require an investor or its owner generally to consolidate the assets of the issuing entity in its financial statements and record third parties’ investments in the issuing entity as liabilities of that investor or owner or could otherwise adversely affect the manner in which the investor or its owner must report an investment in commercial mortgage-backed securities for financial reporting purposes. |
· | For purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended, no class of offered certificates will constitute “mortgage related securities.” |
· | In a number of cases that have been filed alleging certain violations of the Trust Indenture Act of 1939, as amended (the “TIA”), certain lower courts have held that the TIA was applicable to certain agreements similar to the Pooling and Servicing Agreement and that the mortgage-backed certificates issued pursuant to such agreements were not exempt under Section 304(a)(2) of the TIA. (See for example,Retirement Board of the Policemen’s Annuity and Benefit Fund of the City of |
69 |
Chicago v. The Bank of New York Mellon, 11 Civ. 5459 (WHP) (S.D.N.Y. Apr. 3, 2012),Policemen’s Annuity and Benefit Fund of the City of Chicago v. Bank of America, et.al, 12 Civ. 2865 (KBF) (S.D.N.Y. Dec. 7, 2012) andAmerican Fidelity Assurance Co. v. Bank of New York Mellon, No. Civ-11-1284-D (W.D. Okla. December 26, 2013)). These rulings are contrary to more than three decades of market practice, as well as guidance regarding Section 304(a)(2) of the TIA that had previously been provided by the staff of the Division of Corporation Finance and that, prior to April 24, 2015, had been posted on the SEC’s website as Division of Corporation Finance Interpretive Response 202.01 (“CDI 202.01”). See alsoHarbor Financial, Inc., 1988 SEC No-Act. LEXIS 1463 (Oct. 31, 1988) (in which the SEC staff agreed that certificates evidencing an interest in a pool of mortgage loans could be issued without qualification of the issuing instrument under the TIA). In addition, on December 23, 2014, the United States Court of Appeals for the Second Circuit reversed the lower court’s ruling inRetirement Bd. of the Policemen’s Annuity regarding the applicability of the TIA to trusts governed by pooling and servicing agreements under New York law, holding that the mortgaged-backed securities at issue are exempt under Section 304(a)(2) of the TIA. The plaintiffs/appellants in that case filed a petition for rehearing en banc with the Second Circuit, which was denied on April 13, 2015, and such plaintiffs/appellants filed a petition for writ of certiorari to the United States Supreme Court on September 10, 2015, which was denied on January 11, 2016. On April 24, 2015, CDI 202.01 was withdrawn by the SEC staff without any indication of the reason for such withdrawal. If theAmerican Fidelity Assurance Company case is affirmed on appeal, there would be a split in the United States circuit courts regarding this issue. While the implication of a determination that the TIA does apply to the Pooling and Servicing Agreement is unclear, such a determination may have an adverse effect on the issuing entity and/or your certificates. |
Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities should consult with their own legal, accounting and other advisors in determining whether, and to what extent, the offered certificates will constitute legal investments for them or are subject to investment or other restrictions, unfavorable accounting treatment, capital charges or reserve requirements. See“Legal Investment”.
None of the issuing entity, the depositor, the underwriters, the mortgage loan sellers or any other party to the transaction makes any representation to any prospective investor or purchaser of the offered certificates regarding the regulatory capital treatment of their investment in the offered certificates on the closing date or at any time in the future.
Other External Factors May Adversely Affect the Value and Liquidity of Your Investment; Global, National and Local Economic Factors
Due to factors not directly relating to the offered certificates or the underlying mortgage loans, the market value of the offered certificates can decline even if the offered certificates, the mortgage loans or the mortgaged properties are performing at or above your expectations.
The global financial markets have recently experienced increased volatility due to uncertainty surrounding the level and sustainability of the sovereign debt of various countries. Much of this uncertainty has related to certain countries that participate in the European Monetary Union and whose sovereign debt is generally denominated in Euros, the common currency shared by members of that union. In addition, some economists, observers and market participants have expressed concerns regarding the sustainability of the monetary union and the common currency in their current form. Concerns regarding sovereign debt may spread to other countries at any time. Furthermore, many state and local governments in the United States are experiencing, and are expected to continue to experience, severe budgetary strain. One or more states could default on their debt, or one or more significant local governments could default on their debt or seek relief from their debt under Title 11 of the United States Code, as amended (the “Bankruptcy Code”) or by agreement with their creditors. Any or all of the circumstances described above may lead to further volatility in or disruption of the credit markets at any time.
70 |
Moreover, other types of events, domestic or international, may affect general economic conditions, consumer confidence and financial markets:
· | Wars, revolts, insurrections, armed conflicts, energy supply or price disruptions, terrorism, political crises, natural disasters and man-made disasters may have an adverse effect on the mortgaged properties and/or your certificates; |
· | Trading activity associated with indices of CMBS may drive spreads on those indices wider than spreads on CMBS, thereby resulting in a decrease in value of such CMBS, including your certificates, and spreads on those indices may be affected by a variety of factors, and may or may not be affected for reasons involving the commercial and multifamily real estate markets and may be affected for reasons that are unknown and cannot be discerned; and |
· | The market value of your certificates also may be affected by many other factors, including the then-prevailing interest rates and market perceptions of risks associated with commercial mortgage lending. A change in the market value of the certificates may be disproportionately impacted by upward or downward movements in the current interest rates. |
Investors should consider that the foregoing factors may adversely affect the performance of the mortgage loans and accordingly the performance of the offered certificates.
The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline
The offered certificates may have limited or no liquidity.
As described above under “—The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Have Adversely Affected and May Continue to Adversely Affect the Value of CMBS” and “—Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity and Other Aspects of the Offered Certificates”, the secondary market for mortgage-backed securities recently experienced extremely limited liquidity. The adverse conditions described above as well as other adverse conditions could continue to severely limit the liquidity for mortgage-backed securities and cause disruptions and volatility in the market for CMBS.
Your certificates will not be listed on any national securities exchange or the NASDAQ stock market 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, or one or more of their affiliates, currently intend to make a market in the certificates, none of the underwriters has any obligation to do so, any market-making may be discontinued at any time, and we cannot assure you 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. We do not expect that you will have any redemption rights with respect to your offered certificates.
Lack of liquidity will impair your ability to sell your offered certificates and may prevent you from doing so at a time when you may want or need to. Lack of liquidity could adversely affect the market value of your offered certificates.
In addition, the market value of the offered certificates will also be influenced by the supply of and demand for CMBS generally. The supply of CMBS will depend on, among other things, the amount of commercial and multifamily mortgage loans, whether newly originated or held in portfolios, that are available for securitization. A number of factors will affect investors’ demand for CMBS, including:
· | the availability of alternative investments that offer higher yields or are perceived as being a better credit risk, having a less volatile market value or being more liquid; |
· | legal and other restrictions that prohibit a particular entity from investing in CMBS or limit the amount or types of CMBS that it may acquire or require it to maintain increased capital or reserves as a result of its investment in CMBS; |
71 |
· | accounting standards that may affect an investor’s characterization or treatment of an investment in CMBS for financial reporting purposes; |
· | increased regulatory compliance burdens imposed on CMBS or securitizations generally, or on classes of securitizers, that may make securitization a less attractive financing option for commercial mortgage loans; |
· | investors’ perceptions regarding the commercial and multifamily real estate markets, which may be adversely affected by, among other things, a decline in real estate values or an increase in defaults and foreclosures on commercial mortgage loans; |
· | investors’ perceptions regarding the capital markets in general, which may be adversely affected by political, social and economic events completely unrelated to the commercial real estate markets; and |
· | the impact on demand generally for CMBS as a result of the existence or cancellation of government-sponsored economic programs. |
If you decide to sell any offered certificates, the ability to sell your offered certificates will depend on, among other things, whether and to what extent a secondary market then exists for these offered certificates, and you may have to sell at a discount from the price you paid for reasons unrelated to the performance of the offered certificates or the mortgage loans.
Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded
Ratings assigned to the offered certificates by the nationally recognized statistical rating organizations engaged by the depositor:
· | are based on, among other things, the economic characteristics of the mortgaged properties and other relevant structural features of the transaction; |
· | do not represent any assessment of the yield to maturity that a certificateholder may experience; |
· | reflect only the views of the respective rating agencies as of the date such ratings were issued; |
· | may be reviewed, revised, suspended, downgraded, qualified or withdrawn entirely by the applicable rating agency as a result of changes in or unavailability of information; |
· | may have been determined based on criteria that included an analysis of historical mortgage loan data that may not reflect future experience; |
· | may reflect assumptions by such rating agencies regarding performance of the mortgage loans that are not accurate, as evidenced by the significant amount of downgrades, qualifications and withdrawals of ratings assigned to previously issued CMBS by the hired rating agencies and other nationally recognized statistical rating organizations during the recent credit crisis; and |
· | do not consider to what extent the offered certificates will be subject to prepayment or that the outstanding principal amount of any class of offered certificates will be prepaid and do not consider the likelihood of early optional termination of any trust. |
The amount, type and nature of credit support given the offered certificates will be determined on the basis of criteria established by each rating agency rating classes of the offered certificates. Those criteria are sometimes based upon an actuarial analysis of the behavior of mortgage loans in a larger group. There can be no assurance that the historical data supporting any such actuarial analysis will accurately reflect future experience, or that the data derived from a large pool of mortgage loans will accurately predict the delinquency, foreclosure or loss experience of any particular pool of mortgage loans. In other cases, such criteria may be based upon determinations of the values of the properties that provide security for the mortgage loans. However, we cannot
72 |
assure you that those values will not decline in the future. As a result, the credit support required in respect of the offered certificates may be insufficient to fully protect the holders of those certificates from losses on the related mortgage asset pool.
In addition, the rating of any class of offered certificates below an investment grade rating by any nationally recognized statistical rating organization, whether upon initial issuance of such class of certificates or as a result of a ratings downgrade, could adversely affect the ability of an employee benefit plan or other investor to purchase or retain those offered certificates. See “ERISA Considerations” and“Legal Investment”.
Nationally recognized statistical rating organizations that were not engaged by the depositor to rate the offered certificates may nevertheless issue unsolicited credit ratings on one or more classes of offered certificates, relying on information they receive pursuant to Rule 17g-5 under the Securities Exchange Act of 1934, as amended, or otherwise. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from any ratings assigned by a rating agency engaged by the depositor. The issuance of unsolicited ratings by any nationally recognized statistical rating organization on a class of the offered certificates that are lower than ratings assigned by a rating agency engaged by the depositor may adversely impact the liquidity, market value and regulatory characteristics of that class.
As part of the process of obtaining ratings for the offered certificates, the depositor had initial discussions with and submitted certain materials to five nationally recognized statistical rating organizations. Based on preliminary feedback from those nationally recognized statistical rating organizations at that time, the depositor selected three of those nationally recognized statistical rating organizations to rate the offered certificates but not the others, due in part to their initial subordination levels for the various classes of the offered and non-offered certificates. In the case of one of the three nationally recognized statistical rating organizations selected by the depositor, the depositor has requested ratings for only certain classes of the offered certificates, due in part to the initial subordination levels provided by such nationally recognized statistical rating organization for the various classes of the offered certificates. Had the depositor selected alternative nationally recognized statistical rating organizations to rate the offered certificates, we cannot assure you as to the ratings that such other nationally recognized statistical rating organizations would have ultimately assigned to the offered certificates. Although unsolicited ratings may be issued by any nationally recognized statistical rating organization, a nationally recognized statistical rating organization might be more likely to issue an unsolicited rating if it was not selected after having provided preliminary feedback to the depositor. Had the depositor requested each of the engaged nationally recognized statistical rating organizations to rate all classes of the offered certificates, we cannot assure you as to the ratings that any such engaged nationally recognized statistical rating organization would have ultimately assigned to the classes of offered certificates that it did not rate.
Furthermore, the Securities and Exchange Commission may determine that any or all of the rating agencies engaged by the depositor to rate the offered certificates no longer qualify as a nationally recognized statistical rating organization, or are no longer qualified to rate the offered certificates, and that determination may also have an adverse effect on the liquidity, market value and regulatory characteristics of the offered certificates.
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. No person is obligated to maintain the rating on any offered certificate, and accordingly, there can be no assurance to you that the ratings assigned to any offered certificate on the date on which the certificate is originally issued will not be lowered or withdrawn by a rating agency at any time thereafter.
If any rating is revised or withdrawn or if any rating agencies retained by the depositor, a sponsor or an underwriter to provide a security rating on any class of offered certificates no longer qualifies as a “nationally recognized statistical rating organization” or is no longer qualified to rate any such class of offered certificates, the liquidity, market value and regulatory characteristics of your offered certificates may be adversely affected.
We are not obligated to maintain any particular rating with respect to the offered certificates, and the ratings initially assigned to the offered certificates by any or all of the rating agencies engaged by the depositor to rate the offered certificates could change adversely as a result of changes affecting, among other things, the underlying mortgage loans, the mortgaged properties, the sponsors, the certificate administrator, the trustee, the operating advisor, the master servicer or the special servicer, or as a result of changes to ratings criteria employed by any or all of the rating agencies engaged by the depositor to rate the offered certificates. Although these changes would not necessarily be or result from an event of default on any underlying mortgage loan, any adverse change
73 |
to the ratings of the offered certificates would likely have an adverse effect on the market value, liquidity and/or regulatory characteristics of those certificates.
To the extent that the provisions of the pooling and servicing agreement or any mortgage loan serviced thereunder condition any action, event or circumstance on the delivery of a rating agency confirmation, the pooling and servicing agreement will require delivery or deemed delivery of a rating agency confirmation only from the rating agencies engaged by the depositor to rate the offered certificates (and, in the case of certain actions, events or consequences related to any serviced pari passu companion loan that is included in a securitization transaction, the related companion loan rating agencies).
Further, certain actions provided for in loan agreements may require a rating agency confirmation be obtained from the rating agencies engaged by the depositor to rate the offered certificates as a precondition to taking such action. In certain circumstances, this condition may be deemed to have been met or waived without such a rating agency confirmation being obtained. In the event such an action is taken without a rating agency confirmation being obtained, we cannot assure you that the applicable rating agency will not downgrade, qualify or withdraw its ratings as a result of the taking of such action. Rating agency confirmations with respect to any outside serviced mortgage loan will also be subject to the terms and provisions of the related outside servicing agreement. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—’Due-On-Sale’ and ‘Due-On-Encumbrance’ Provisions”, “The Pooling and Servicing Agreement—Rating Agency Confirmations” and “Ratings” for additional considerations regarding the ratings, including a description of the process of obtaining confirmations of ratings for the offered certificates.
There can be no assurance that an unsolicited rating will not be issued prior to or after the closing date of the issuance of the certificates, and none of the depositor, any related sponsor or any related underwriter is obligated to inform investors (or potential investors) if an unsolicited rating is issued after the date of this prospectus. Consequently, if you intend to purchase the certificates, you should monitor whether an unsolicited rating of the certificates has been issued by a non-hired rating agency and should consult with your financial and legal advisors regarding the impact of an unsolicited rating on the certificates.
Any downgrading or unsolicited rating of a class of offered certificates to below “investment grade” may affect your ability to purchase or retain, or otherwise impact the regulatory characteristics, of those certificates.
Commercial, Multifamily and Manufactured Housing Community Lending Is Dependent on Net Operating Income; Information May Be Limited or Uncertain
The mortgage loans are secured by various income-producing commercial, multifamily and manufactured housing community properties. The repayment of a commercial, multifamily or manufactured housing community mortgage 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, multifamily or manufactured housing property is determined, in substantial part, by the capitalization of the property’s ability to produce cash flow. However, net operating income can be volatile and may be insufficient to cover debt service on the commercial, multifamily or manufactured housing community mortgage loan at any given time.
For certain historical financial information relating to the mortgaged properties, including net operating income for the most recent reporting period and prior three calendar years, to the extent available, prospective investors should review Annex A to this prospectus. Certain mortgage loans are secured in whole or in part by mortgaged properties that have no prior operating history available or otherwise lack historical financial figures and information. A mortgaged property may lack prior operating history or historical financial information for various reasons including because it is newly constructed or renovated, it is a recent acquisition by the related borrower or it is a single-tenant property that is subject to a triple net lease. In addition, a tenant’s lease may contain confidentiality provisions that restrict the sponsors’ access to or disclosure of such tenant’s financial information. Although the underwritten net cash flows and underwritten net operating income for mortgaged properties are derived principally from current rent rolls or tenant leases, underwritten net cash flows may also, in some cases, be based on (i) leases (or letters of intent) that are not yet in place (and may still be under negotiation), (ii) tenants that may have signed a lease (or letter of intent) or a lease amendment expanding the leased space, but are not yet in occupancy and/or are not yet paying rent, (iii) tenants that are leasing on a month-to-month basis and have the right to terminate their leases on a monthly basis, and/or (iv) historical expenses, adjusted to account for inflation, significant occupancy increases and a market rate management fee. However, we cannot assure you that such tenants will execute leases (or letters of intent) or expand their space
74 |
or, in any event, that actual cash flows from such mortgaged properties will meet such projected cash flows, income and expense levels or that those funds will be sufficient to meet the payment obligations of the related mortgage loans.
See “—Underwritten Net Cash Flow Could Be Based on Incorrect or Failed Assumptions” below and “Description of the Mortgage Pool—Additional Mortgage Loan Information”. See also “—Repayment of a Commercial or Multifamily Mortgage Loan Depends Upon the Performance and Value of the Underlying Real Property, Which May Decline Over Time, and the Related Borrower’s Ability to Refinance the Property, of Which There Is No Assurance” for a discussion of factors that could adversely affect the net operating income and property value of commercial mortgaged properties.
Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed
The mortgage loans are not insured or guaranteed by any person or entity, governmental or otherwise.
Investors should treat each mortgage loan as a non-recourse loan. If a default occurs, recourse generally may be had only against the specific properties and other assets that have been pledged to secure the loan. Consequently, payment prior to maturity is dependent primarily on the sufficiency of the net operating income of the mortgaged property. Payment at maturity is primarily dependent upon the market value of the mortgaged property and the borrower’s ability to sell or refinance the mortgaged property.
Although the mortgage loans generally are non-recourse in nature, certain mortgage loans contain non-recourse carveouts for liabilities such as a result of fraud by the borrower, certain voluntary insolvency proceedings or other matters. Certain mortgage loans set forth under “Description of the Mortgage Pool—Non-Recourse Carveout Limitations” either do not contain non-recourse carveouts or contain material limitations to non-recourse carveouts. Often these obligations are guaranteed by an affiliate of the related borrower, although liability under any such guaranty may be capped or otherwise limited in amount or scope. Furthermore, certain guarantors may be foreign entities or individuals which, while subject to the domestic governing law provisions in the guaranty and related mortgage loan documents, could nevertheless require enforcement of any judgment in relation to a guaranty in a foreign jurisdiction, which could, in turn, cause a significant time delay or result in the inability to enforce the guaranty under foreign law. Additionally, the guarantor’s net worth and liquidity may be less (and in some cases, materially less) than amounts due under the related mortgage loan or the guarantor’s sole asset may be its interest in the related borrower. Certain mortgage loans may have the benefit of a general payment guaranty of a portion of the indebtedness under the mortgage loan. In all cases, however, the mortgage loans should be considered to be non-recourse obligations because neither the depositor nor the sponsors make any representation or warranty as to the obligation or ability of any borrower or guarantor to pay any deficiencies between any foreclosure proceeds and the mortgage loan indebtedness.
Underwritten Net Cash Flow Could Be Based on Incorrect or Failed Assumptions
As described in “Description of the Mortgage Pool—Certain Calculations and Definitions” and Annex A to this prospectus, underwritten net cash flow means cash flow (including any cash flow from master leases) as adjusted based on a number of assumptions used by the related sponsor. No representation is made that the underwritten net cash flow set forth in this prospectus as of the cut-off date or any other date represents actual future net cash flows. For example, with respect to certain mortgage loans included in the issuing entity, the occupancy of the related mortgaged property reflects tenants that may not have yet actually executed leases (or letters of intent) or that have signed leases but have not yet taken occupancy and/or are not paying full contractual rent or tenants that are seeking or may in the future seek to sublet all or a portion of their respective spaces, or tenants that are “dark” tenants but paying rent, or space that has been master leased to an affiliate of a borrower. You should review these assumptions and make your own determination of the appropriate assumptions to be used in determining underwritten net cash flow. In many cases, co-tenancy provisions were assumed to be satisfied and vacant space was assumed to be occupied and space that was due to expire was assumed to have been re-let, in each case at market rates that may have exceeded current rent.
In the event of the inaccuracy of any assumptions or projections used in connection with the calculation of underwritten net cash flow, the actual net cash flow could be significantly different (and, in some cases, may be materially less) than the underwritten net cash flow presented in this prospectus, and this would change other numerical information presented in this prospectus based on or derived from the underwritten net cash flow, such as the debt service coverage ratios presented in this prospectus.
75 |
In addition, the debt service coverage ratios set forth in this prospectus 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—Certain Calculations and Definitions” for additional information on certain of the mortgage loans in the issuing entity.
The Mortgage Loans Have Not Been Reviewed or Reunderwritten by Us
Althoughthe sponsors have conducted a review of the mortgage loans to be sold to us for this securitization transaction, we, as the depositor for this securitization transaction, have neither originated the mortgage loans nor conducted a review or re-underwriting of the mortgage loans. Instead, we have relied on the representations and warranties made by the applicable sponsors and the remedies for breach of a representation and warranty as described under “The Mortgage Loan Purchase Agreements—Representations and Warranties” and “—Cures, Repurchases and Substitutions”,and the sponsors’ description of their respective underwriting criteria described under “Transaction Parties—The Originators—Citigroup Global Markets Realty Corp. and Pillar Multifamiliy, LLC”,“—Rialto Mortgage Finance, LLC”,“—The Bank of New York Mellon”, “—KGS-Alpha Real Estate Capital Markets, LLC”, “—The Goldman Originator” and “—RAIT Funding, LLC”. A description of the review conducted by each sponsor for this securitization transaction is set forth under “Transaction Parties—The Sponsors and the Mortgage Loan Sellers—Citigroup Global Markets Realty Corp.—Review of CGMRC Mortgage Loans”,“—Rialto Mortgage Finance, LLC—Review of Rialto Mortgage Loans”, “—The Bank of New York Mellon—Review of BNY Mellon Mortgage Loans”, “—KGS-Alpha Real Estate Capital Markets, LLC—Review of KGS Mortgage Loans”,“—Goldman Sachs Mortgage Company—Review of GSMC Mortgage Loans”,and “—RAIT Funding, LLC—Review of RAIT Mortgage Loans”.
The representations and warranties made by the sponsors may not cover all of the matters that one would review in underwriting a mortgage loan and you should not view them as a substitute for re-underwriting the mortgage loans. Furthermore, these representations and warranties in some respects represent an allocation of risk rather than a confirmed description of the mortgage loans.If we had reunderwritten the mortgage loans or the related loan combinations, it is possible that the reunderwriting process may have revealed problems with a mortgage loan not covered by a representation or warranty or may have revealed inaccuracies in the representations and warranties. See “—Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans” and “—Any Loss of Value Payment Made by a Sponsor May Not be Sufficient to Cover All Losses on a Defective Mortgage Loan”and“The Mortgage Loan Purchase Agreements—Representations and Warranties” and “—Cures, Repurchases and Substitutions”.
As a result of the foregoing, you are advised and encouraged to make your own investment decision based on a careful review of the information set forth in this prospectus and your own view of the mortgage pool.
Historical Information Regarding the Mortgage Loans May Be Limited
Some of the mortgage loans that we intend to include in the issuing entity were made to enable the related borrower to acquire the related mortgaged property, and in certain cases, the mortgaged properties were recently constructed. The underwritten net cash flows and underwritten net operating incomes for such mortgaged properties are derived principally from current rent rolls or tenant leases and the appraisers’ projected expense levels. However, we cannot assure you that actual cash flows from such mortgaged properties will meet such projected cash flows, income and expense levels or that those funds will be sufficient to meet the payment obligations of the related mortgage loans.
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.
Ongoing Information Regarding the Mortgage Loans and the Offered Certificates May Be Limited
The primary source of ongoing information regarding the offered certificates, including information regarding the status of the related mortgage loans and any credit support for the offered certificates, will be the periodic reports delivered to you and the information we file with the Securities and Exchange Commission.See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. We cannot assure you that any additional ongoing information regarding the offered certificates will be available through any other
76 |
source. The limited nature of the available information in respect of the offered certificates may adversely affect their liquidity, even if a secondary market for the offered certificates does develop.
We are not aware of any source through which pricing information regarding the offered certificates will be generally available on an ongoing basis or on any particular date.
Static Pool Data Would Not Be Indicative of the Performance of This Pool
As a result of the distinct nature of the pool of mortgage loans to be included in the issuing entity, and the separate mortgage loans within the pool, this prospectus does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations by any sponsor of assets of the type to be securitized (known as “static pool data”). In particular, static pool data showing a low level of delinquencies and defaults would not be indicative of the performance of this pool or any other pools of mortgage loans originated by the same sponsor or sponsors. While there may be certain common factors affecting the performance and value of income-producing real properties in general, those factors do not apply equally to all income-producing real properties and, in many cases, there are unique factors that will affect the performance and/or value of a particular income-producing real property. Therefore, you should evaluate this offering on the basis of the information set forth in this prospectus with respect to the mortgage loans, and not on the basis of any successful performance of other pools of securitized commercial mortgage loans.
Performance of the Certificates Will Be Highly Dependent on the Performance of Tenants and Tenant Leases
Any tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a reduction or failure to make rental payments when due. If tenants’ sales were to decline, percentage rents may decline and, further, tenants may be unable to pay their base rent or other occupancy costs. If a tenant defaults in its obligations to a property owner, that property owner may experience delays in enforcing its rights as lessor and may incur substantial costs and experience significant delays associated with protecting its investment, including costs incurred in renovating and reletting the property.
Additionally, the income from, and market value of, the mortgaged properties leased to various tenants would be adversely affected if:
· | space in the mortgaged properties could not be leased or re-leased or substantial re-leasing costs were required and/or the cost of performing landlord obligations under existing leases materially increased; |
· | leasing or re-leasing is restricted by exclusive rights of tenants to lease the mortgaged properties or other covenants not to lease space for certain uses or activities, or covenants limiting the types of tenants to which space may be leased; |
· | a significant tenant were to become a debtor in a bankruptcy case; |
· | rental payments could not be collected for any other reason; or |
· | a borrower fails to perform its obligations under a lease resulting in the related tenant having a right to terminate such lease. |
In addition, certain of the mortgage loans may have tenants who are leasing their spaces on a month-to-month basis and have the right to terminate their leases on a monthly basis.
A Tenant Concentration May Result in Increased Losses
A deterioration in the financial condition of a tenant, the failure of a tenant to renew its lease or the exercise by a tenant of an early termination right can be particularly significant if a mortgaged property is owner-occupied, leased to a single tenant, or if any tenant makes up a significant portion of the rental income at the mortgaged property.
77 |
Concentrations of particular tenants among the mortgaged properties or within a particular business or industry at one or multiple mortgaged properties increase the possibility that financial problems with such tenants or such business or industry sectors could affect the mortgage loans. In these cases, business issues for a particular tenant could have a disproportionately large impact on the pool of mortgage loans and adversely affect distributions to certificateholders. Similarly, an issue with respect to a particular industry could also have a disproportionately large impact on the pool of mortgage loans. In addition, the mortgage loans may be adversely affected if a tenant at the mortgaged property is highly specialized, or dependent on a single industry or only a few customers for its revenue. See “—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” below and “Description of the Mortgage Pool—Tenant Issues—Tenant Concentrations” for information on tenant concentrations in the mortgage pool.
Mortgaged Properties Leased to Multiple Tenants Also Have Risks
If a mortgaged property has multiple tenants, re-leasing expenditures may be more frequent than in the case of mortgaged properties with fewer tenants, thereby reducing the cash flow available for payments on the related mortgage loan. Multi-tenant mortgaged properties also may experience higher continuing vacancy rates and greater volatility in rental income and expenses. See Annex A to this prospectus for tenant lease expiration dates for the 5 largest tenants at each mortgaged property.
Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks
If a mortgaged property is leased in whole or substantial part to the borrower under the mortgage loan or to an affiliate of the borrower, there may be conflicts of interest. 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 of interest arising where a borrower is affiliated with a tenant at a mortgaged property will not adversely impact the value of the related mortgage loan. See “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases and Master Leases” for information on properties leased in whole or in part to borrowers and their affiliates.
Tenant Bankruptcy Could Result in a Rejection of the Related Lease
The bankruptcy or insolvency of a major tenant or a number of smaller tenants, such as in retail properties, may have an adverse impact on the mortgaged properties affected and the income produced by such mortgaged properties. Under the Bankruptcy Code, a tenant has the option of assuming or rejecting or, subject to certain conditions, assuming and assigning to a third party, any unexpired lease. If the tenant rejects the lease, the landlord’s claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim against the tenant and a lessor’s damages for lease rejection are generally subject to certain limitations. We cannot assure you that tenants of the mortgaged properties will continue making payments under their leases or that tenants will not file for bankruptcy protection in the future or, if any tenants so file, that they will continue to make rental payments in a timely manner. See “Certain Legal Aspects of the Mortgage Loans—Bankruptcy Issues”. See “Description of the Mortgage Pool—Default History, Bankruptcy Issues and Other Proceedings” for information regarding bankruptcy issues with respect to certain mortgage loans.
In the case of certain mortgage loans included in the mortgage pool, it may be possible that the related master lease could be construed in a bankruptcy as a financing lease or other arrangement under which the related master lessee (and/or its affiliates) would be deemed as effectively the owner of the related mortgaged property, rather than a tenant, which could result in potentially adverse consequences for the trust, as the holder of such mortgage loan, including a potentially greater risk of an unfavorable plan of reorganization and competing claims of creditors of the related master lessee and/or its affiliates. See “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases and Master Leases”.
Leases That Are Not Subordinated to the Lien of the Mortgage or Do Not Contain Attornment Provisions May Have an Adverse Impact at Foreclosure
In certain jurisdictions, if tenant leases are subordinated to the liens created by the mortgage but do not contain attornment provisions that require the tenant to subordinate the lease if the mortgagee agrees to enter into a non-disturbance agreement, the tenants may terminate their leases upon the transfer of the property to a foreclosing lender or purchaser at foreclosure. Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and
78 |
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 issuing entity will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property (unless otherwise agreed to with the tenant). Also, if the lease contains provisions inconsistent with the mortgage (e.g., provisions relating to application of insurance proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., a right of first refusal to purchase the property), the provisions of the lease will take precedence over the provisions of the mortgage. Not all leases were reviewed to ascertain the existence of attornment or subordination provisions.
With respect to certain of the mortgage loans, the related borrower 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 is not subordinate to the related mortgage. This may impede the mortgagee’s ability to sell the related mortgaged property at foreclosure, or, upon foreclosure, this may affect the value and/or marketability of the related mortgaged property. See “Description of the Mortgage Pool—Tenant Issues—Purchase Options, Rights of First Offer and Rights of First Refusal” for information regarding material purchase options, rights of first offer and/or rights of first refusal, if any, with respect to mortgaged properties securing certain mortgage loans.
Early Lease Termination Options May Reduce Cash Flow
Any exercise of a termination right by a tenant at a mortgaged property could result in vacant space at the related mortgaged property, renegotiation of the lease with the related tenant or re-letting of the space on a date earlier than the lease expiration date shown on Annex A to this prospectus or in rent rolls. Any such vacated space may not be re-let. Furthermore, similar termination and/or abatement rights may arise in the future or materially adversely affect the related borrower’s ability to meet its obligations under the related mortgage loan documents. See “Description of the Mortgage Pool—Tenant Issues—Lease Expirations and Terminations” for information on material tenant lease expirations and early termination options.
Mortgaged Properties Leased to Not-for-Profit Tenants Also Have Risks
Certain mortgaged properties, which may include office, retail and multifamily properties, among others, may have tenants that are charitable institutions that generally rely on contributions from individuals and government grants or other subsidies to pay rent on such properties and other operating expenses. We cannot assure you that the rate, frequency and level of individual contributions or governmental grants and subsidies will continue with respect to any such institution. A reduction in contributions or grants may impact the ability of the related institution to pay rent, and there can be no assurance that the related borrower will be in a position to meet its obligations under the related mortgage loan documents if such tenant fails to pay its rent.
Certain Aspects of Co-Lender, Intercreditor and Similar Agreements Executed in Connection with Mortgage Loans Underlying Your Offered Certificates May Be Unenforceable
One or more mortgage loans included in the trust is part of a split loan structure or loan combination that includes a subordinate non-trust mortgage loan or may be senior to one or more other mortgage loans made to a common borrower and secured by the same real property collateral. Pursuant to a co-lender, intercreditor or similar agreement, a subordinate lender may have agreed that it not take any direct actions with respect to the related subordinated debt, including any actions relating to the bankruptcy of the related borrower, and that the holder of the related mortgage loan that is included in our trust — directly or through an applicable servicer — 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 subordinate lender. While subordination agreements are generally enforceable in bankruptcy, in its decision in In re 203 North LaSalle Street Partnership, 246 B.R. 325 (Bankr. N.D. Ill. March 10, 2000), the United States Bankruptcy Court for the Northern District of Illinois refused to enforce a provision of a subordination agreement that allowed a first mortgagee to vote a second mortgagee’s claim with respect to a Chapter 11 reorganization plan on the grounds that pre-bankruptcy contracts cannot override rights expressly provided by federal bankruptcy law. This holding, which 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 subordinate lender’s objections. In the event the foregoing holding is followed with respect to a co-lender relationship related to one of the mortgage loans underlying your offered certificates, the trust’s recovery with respect to the related borrower in a bankruptcy
79 |
proceeding may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed.
Mezzanine Debt May Reduce the Cash Flow Available to Reinvest in a Mortgaged Property and may Increase the Likelihood that a Borrower Will Default on a Mortgage Loan Underlying Your Offered Certificates
In the case of one or more mortgage loans included in the trust, a direct and/or indirect equity holder in the related borrower may have pledged, or be permitted to pledge, its equity interest to secure financing to that equity holder. Such financing is often referred to as mezzanine debt. While a lender on mezzanine debt has no security interest in or rights to the related mortgaged property, a default under the subject mezzanine loan could cause a change in control of the related borrower.
In addition, if, in the case of any mortgage loan, equity interests in the related borrower have been pledged to secure mezzanine debt, then the trust may be subject to an intercreditor or similar agreement that, among other things:
· | grants the mezzanine lender cure rights and/or a purchase option with respect to the subject underlying mortgage loan under certain default scenarios or reasonably foreseeable default scenarios; |
· | limits modifications of payment terms of the subject underlying mortgage loan; and/or |
· | limits or delays enforcement actions with respect to the subject underlying mortgage loan. |
Furthermore, mezzanine debt reduces the mezzanine borrower’s indirect equity in the subject mortgaged property and therefore may reduce its incentive to invest cash in order to support that mortgaged property.
Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses
The effect of mortgage pool loan losses will be more severe if the losses relate to mortgage loans that account for a disproportionately large percentage of the pool’s aggregate principal balance. As mortgage loans pay down or properties are released, the remaining mortgage loans may face a higher risk with respect to the diversity of property types and property characteristics and with respect to the number of borrowers.
See the table titled “Distribution of Remaining Terms to Maturity”in Annex C to this prospectus for a stratification of the remaining terms to maturity of the mortgage loans. Because principal on the offered certificates and the trust components is payable in sequential order of payment priority, and a class or trust component receives principal only after the preceding class(es) or trust component(s), as applicable, have been paid in full, classes or trust components that have a lower sequential priority are more likely to face these types of risk of concentration than classes or trust components with a higher sequential priority.
A concentration of mortgage loans secured by the same mortgaged property types can increase the risk that a decline in a particular industry or business would have a disproportionately large impact on the pool of mortgage loans. Mortgaged property types representing more than 5.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (based on allocated loan amount) are office, retail, multifamily, hospitality, land and mixed use. See“Description of the Mortgage Pool—Statistical Characteristics of the Mortgage Loans—Property Types” for information on the types of mortgaged properties securing the mortgage loans in the mortgage pool.
Repayments by borrowers and the market value of the related mortgaged properties could be affected by economic conditions generally or specific to particular geographic areas or regions of the United States, and concentrations of mortgaged properties in particular geographic areas may increase the risk that conditions in the real estate market where the mortgaged property is located, or other adverse economic or other developments or natural disasters (e.g., earthquakes, floods, forest fires, tornadoes or hurricanes or changes in governmental rules or fiscal policies) affecting a particular region of the country, could increase the frequency and severity of losses on mortgage loans secured by those mortgaged properties. Mortgaged properties securing more than 5.0% of
80 |
the aggregate principal balance of the pool of mortgage loans as of the cut-off date (based on allocated loan amount) are located in New York, Colorado, Texas, Illinois, Virginia, Michigan, Ohio and California. See “Description of the Mortgage Pool—Statistical Characteristics of the Mortgage Loans—Geographic Concentrations”.
Some of the mortgaged properties are located in areas that, based on low population density, poor economic demographics (such as higher than average unemployment rates, lower than average annual household income and/or overall loss of jobs) and/or negative trends in such regards, would be considered secondary or tertiary markets.
A concentration of mortgage loans with the same borrower or related borrowers also can pose increased risks:
· | if a borrower that owns or controls several mortgaged properties (whether or not all of them secure mortgage loans in the mortgage pool) experiences financial difficulty at one mortgaged property, it could defer maintenance at another mortgaged property in order to satisfy current expenses with respect to the first mortgaged property; |
· | a borrower could also attempt to avert foreclosure by filing a bankruptcy petition that might have the effect of interrupting debt service payments on the mortgage loans in the mortgage pool secured by that borrower’s mortgaged properties (subject to the master servicer’s and the trustee’s obligation to make advances for monthly payments) for an indefinite period; and |
· | mortgaged properties owned by the same borrower or related borrowers are likely to have common management, common general partners and/or common managing members increasing the risk that financial or other difficulties experienced by such related parties could have a greater impact on the pool of mortgage loans. See “—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans” below. |
See “Description of the Mortgage Pool—Statistical Characteristics of the Mortgage Loans” for information on the composition of the mortgage pool by property type and geographic distribution and loan concentration.
Repayment of a Commercial or Multifamily Mortgage Loan Depends Upon the Performance and Value of the Underlying Real Property, Which May Decline Over Time, and the Related Borrower’s Ability to Refinance the Property, of Which There Is No Assurance
Most of the Mortgage Loans Underlying Your Offered Certificates Will Be Nonrecourse.
You should consider all of the mortgage loans underlying your offered certificates to be nonrecourse loans. This means that, in the event of a default, recourse will be limited to the related real property or properties securing the defaulted mortgage loan. In the event that the income generated by a real property were to decline as a result of the poor economic performance of that property, with the result that the property is not able to support debt service payments on the related mortgage loan, neither the related borrower nor any other person would be obligated to remedy the situation by making payments out of their own funds. In such a situation, the borrower could choose instead to surrender the related mortgaged property to the lender or let it be foreclosed upon. In those cases where recourse to a borrower or guarantor is permitted by the loan documents, we generally will not undertake any evaluation of the financial condition of that borrower or guarantor. Consequently, full and timely payment on each mortgage loan underlying your offered certificates will depend on one or more of the following:
· | the sufficiency of the net operating income of the applicable real property; |
· | the market value of the applicable real property at or prior to maturity; and |
· | the ability of the related borrower to refinance or sell the applicable real property. |
81 |
In general, the value of a multifamily or commercial property will depend on its ability to generate net operating income. The ability of an owner to finance a multifamily or commercial property will depend, in large part, on the property’s value and ability to generate net operating income.
None of the mortgage loans underlying your offered certificates will be insured or guaranteed by any governmental entity or private mortgage insurer.
The risks associated with lending on multifamily and commercial properties are inherently different from those associated with lending on the security of single-family residential properties. This is because, among other reasons, multifamily rental and commercial real estate lending generally involves larger loans and, as described above, repayment is dependent upon:
· | the successful operation and value of the related mortgaged property, and |
· | the related borrower’s ability to refinance the mortgage loan or sell the related mortgaged property. |
See “—The Types of Properties That Secure the Mortgage Loans Present Special Risks” below.
Many Risk Factors Are Common to Most or All Multifamily and Commercial Properties.
The following factors, among others, will affect the ability of a multifamily or commercial property to generate net operating income and, accordingly, its value:
· | the location, age, functionality, design and construction quality of the subject property; |
· | perceptions regarding the safety, convenience and attractiveness of the property; |
· | the characteristics of the neighborhood where the property is located; |
· | the degree to which the subject property competes with other properties in the area; |
· | the proximity and attractiveness of competing properties; |
· | the existence and construction of competing properties; |
· | the adequacy of the property’s management and maintenance; |
· | tenant mix and concentration; |
· | national, regional or local economic conditions, including plant closings, industry slowdowns and unemployment rates; |
· | local real estate conditions, including an increase in or oversupply of comparable commercial or residential space; |
· | demographic factors; |
· | customer confidence, tastes and preferences; |
· | retroactive changes in building codes and other applicable laws; |
· | changes in governmental rules, regulations and fiscal policies, including environmental legislation; and |
· | vulnerability to litigation by tenants and patrons. |
82 |
Particular factors that may adversely affect the ability of a multifamily or commercial property to generate net operating income include:
· | an increase in interest rates, real estate taxes and other operating expenses; |
· | an increase in the capital expenditures needed to maintain the property or make improvements; |
· | a decline in the financial condition of a major tenant and, in particular, a sole tenant or anchor tenant; |
· | an increase in vacancy rates; |
· | a decline in rental rates as leases are renewed or replaced; |
· | natural disasters and civil disturbances such as earthquakes, hurricanes, floods, eruptions, terrorist attacks or riots; and |
· | environmental contamination. |
The volatility of net operating income generated by a multifamily or commercial property over time will be influenced by many of the foregoing factors, as well as by:
· | the length of tenant leases; |
· | the creditworthiness of tenants; |
· | the rental rates at which leases are renewed or replaced; |
· | 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 maintain or replace tenants. |
Therefore, commercial and multifamily properties with short-term or less creditworthy sources of revenue and/or relatively high operating costs, such as those operated as hospitality and self storage properties, can be expected to have more volatile cash flows than commercial and multifamily properties with medium- to long-term leases from creditworthy tenants and/or relatively low operating costs. A decline in the real estate market will tend to have a more immediate effect on the net operating income of commercial and multifamily properties with short-term revenue sources and may lead to higher rates of delinquency or defaults on the mortgage loans secured by those properties.
The Successful Operation of a Multifamily or Commercial Property Depends on Tenants.
Generally, multifamily and commercial properties are subject to leases. The owner of a multifamily or commercial property typically uses lease or rental payments for the following purposes:
· | to pay for maintenance and other operating expenses associated with the property; |
· | to fund repairs, replacements and capital improvements at the property; and |
· | to service mortgage loans secured by, and any other debt obligations associated with operating, the property. |
Accordingly, mortgage loans secured by income-producing 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.
83 |
Factors that may adversely affect the ability of an income-producing property to generate net operating income from lease and rental payments include:
· | a general inability to lease space; |
· | an increase in vacancy rates, which may result from tenants deciding not to renew an existing lease or discontinuing operations; |
· | an increase in tenant payment defaults or any other inability to collect rental payments; |
· | a decline in rental rates as leases are entered into, renewed or extended at lower rates; |
· | an increase in the capital expenditures needed to maintain the property or to make improvements; |
· | a decline in the financial condition and/or bankruptcy or insolvency of a significant or sole tenant; and |
· | an increase in leasing costs and/or the costs of performing landlord obligations under existing leases. |
With respect to any mortgage loan backing the offered certificates, you should anticipate that, unless the related mortgaged property is owner occupied, one or more—and possibly all—of the leases at the related mortgaged property will expire at varying rates during the term of that mortgage loan and some tenants will have, and may exercise, termination options. In addition, some government-sponsored tenants will have the right as a matter of law to cancel their leases for lack of appropriations.
Additionally, in some jurisdictions, if tenant leases are subordinated to the lien created by the related mortgage instrument but do not contain attornment provisions, which are 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, that mortgaged property could experience a further decline in value if such tenants’ leases were terminated.
Some mortgage loans that back offered certificates may be secured by mortgaged properties with tenants that are related to or affiliated with a borrower. In those cases a default by the borrower may coincide with a default by the affiliated tenants. Additionally, even if the property becomes a foreclosure property, it is possible that an affiliate of the borrower may remain as a tenant.
Dependence on a Single Tenant or a Small Number of Tenants Makes a Property Riskier Collateral.
In those cases where an income-producing property is leased to a single tenant or is primarily leased to one or a small number of major tenants, a deterioration in the financial condition or a change in the plan of operations of any of those tenants can have particularly significant effects on the net operating income generated by the property. If any of those tenants defaults under or fails to renew its lease, the resulting adverse financial effect on the operation of the property will be substantially more severe than would be the case with respect to a property occupied by a large number of less significant tenants.
An income-producing property operated for retail, office or industrial purposes also may be adversely affected by a decline in a particular business or industry if a concentration of tenants at the property is engaged in that business or industry.
Accordingly, factors that will affect the operation and value of a commercial property include:
· | the business operated by the tenants; |
· | the creditworthiness of the tenants; and |
· | the number of tenants. |
84 |
Tenant Bankruptcy Adversely Affects Property Performance.
The bankruptcy or insolvency of a major tenant, or a number of smaller tenants, at a commercial property may adversely affect the income produced by the property. Under federal bankruptcy law, 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 unless there is collateral securing the claim. The claim would be limited to:
· | the unpaid rent due under the lease, without acceleration, for the period prior to the filing of the bankruptcy petition or any earlier repossession by the landlord, or surrender by the tenant, of the leased premises, plus |
· | the rent reserved by the lease, without acceleration, for the greater of one year and 15%, not to exceed three years, of the term of the lease following the filing of the bankruptcy petition or any earlier repossession by the landlord, or surrender by the tenant, of the leased premises. |
The Success of an Income-Producing Property Depends on Reletting Vacant Spaces.
The operations at an income-producing property will be adversely affected if the owner or property manager is unable to renew leases or relet space on comparable terms when existing leases expire and/or become defaulted. Even if vacated space is successfully relet, the costs associated with reletting, including tenant improvements and leasing commissions in the case of income-producing properties operated for retail, office or industrial purposes, can be substantial, could exceed any reserves maintained for that purpose and could reduce cash flow from the income-producing properties. Moreover, if a tenant at an income-producing property defaults in its lease obligations, the landlord 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 property.
If an income-producing property has multiple tenants, re-leasing expenditures may be more frequent than in the case of a property with fewer tenants, thereby reducing the cash flow generated by the multi-tenanted property. Multi-tenanted properties may also experience higher continuing vacancy rates and greater volatility in rental income and expenses.
Property Value May Be Adversely Affected Even When Current Operating Income Is Not.
Various factors may affect the value of multifamily and commercial properties without affecting their current net operating income, including:
· | changes in interest rates; |
· | the availability of refinancing sources; |
· | changes in governmental regulations, licensing or fiscal policy; |
· | changes in zoning or tax laws; and |
· | potential environmental or other legal liabilities. |
Property Management May Affect Property Operations and Value.
The operation of an income-producing property will depend upon the property manager’s performance and viability. The property manager generally is responsible for:
· | responding to changes in the local market; |
· | planning and implementing the rental structure, including staggering durations of leases and establishing levels of rent payments; |
· | operating the property and providing building services; |
85 |
· | managing operating expenses; and |
· | ensuring that maintenance and capital improvements are carried out in a timely fashion. |
Income-producing properties that derive revenues primarily from short-term rental commitments, such as hospitality or self storage properties, generally require more intensive management than properties leased to tenants under long-term leases.
By controlling costs, providing appropriate and efficient services to tenants and maintaining improvements in good condition, a property manager can—
· | maintain or improve occupancy rates, business and cash flow, |
· | reduce operating and repair costs, and |
· | preserve building value. |
On the other hand, management errors can, in some cases, impair the long term viability of an income-producing property.
Certain of the mortgaged properties will be managed by affiliates of the related borrower or by the related borrower. If a mortgage loan is in default or undergoing special servicing, such relationship could disrupt the management of the related mortgaged property, which may adversely affect cash flow. However, the related mortgage loans will generally permit, in the case of mortgaged properties managed by borrower affiliates, the lender to remove the related property manager upon the occurrence of one or more of the following: an event of default, a decline in cash flow below a specified level or the failure to satisfy some other specified performance trigger.
We make no representation or warranty as to the skills of any present or future managers. 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. Further, certain individuals involved in the management or general business development at certain mortgaged properties may engage in unlawful activities or otherwise exhibit poor business judgment that adversely affect operations and ultimately cash flow at such properties.
Maintaining a Property in Good Condition Is Expensive.
The owner may be required to expend a substantial amount to maintain, renovate or refurbish a commercial or multifamily property. Failure to do so may materially impair the property’s ability to generate cash flow. The effects of poor construction quality will increase over time in the form of increased maintenance and capital improvements. Even superior construction will deteriorate over time if management does not schedule and perform adequate maintenance in a timely fashion. There can be no assurance that an income-producing property will generate sufficient cash flow to cover the increased costs of maintenance and capital improvements in addition to paying debt service on the mortgage loan(s) that may encumber that property.
Competition Will Adversely Affect the Profitability and Value of an Income-Producing Property.
Some income-producing properties are located in highly competitive areas. Comparable income-producing properties located in the same area compete on the basis of a number of factors including:
· | rental rates; |
· | location; |
· | type of business or services and amenities offered; and |
· | nature and condition of the particular property. |
86 |
The profitability and value of an income-producing property may be adversely affected by a comparable property that:
· | offers lower rents; |
· | has lower operating costs; |
· | offers a more favorable location; or |
· | offers better facilities. |
Costs of renovating, refurbishing or expanding an income-producing property in order to remain competitive can be substantial.
The Types of Properties That Secure the Mortgage Loans Present Special Risks
General
As discussed under “—Repayment of a Commercial or Multifamily Mortgage Loan Depends Upon the Performance and Value of the Underlying Real Property, Which May Decline Over Time, and the Related Borrower’s Ability to Refinance the Property, of Which There Is No Assurance” above, the adequacy of an income-producing property as security for a mortgage loan depends in large part on its value and ability to generate net operating income. Set forth below is a discussion of some of the various factors that may affect the value and operations of the properties which secure the mortgage loans.
Office Properties
Factors affecting the value and operation of an office property include:
· | the strength, stability, number and quality of the tenants, particularly significant tenants, at the property; |
· | the physical attributes and amenities of the building in relation to competing buildings, including the condition of the HVAC system, parking and the building’s compatibility with current business wiring requirements; |
· | whether the area is a desirable business location, including local labor cost and quality, tax environment, including tax benefits, and quality of life issues, such as schools and cultural amenities; |
· | the location of the property with respect to the central business district or population centers; |
· | demographic trends within the metropolitan area to move away from or towards the central business district; |
· | social trends combined with space management trends, which may change towards options such as telecommuting or hoteling to satisfy space needs; |
· | tax incentives offered to businesses or property owners by cities or suburbs adjacent to or near where the building is located; |
· | local competitive conditions, such as the supply of office space or the existence or construction of new competitive office buildings; |
· | the quality and philosophy of building management; |
· | access to mass transportation; |
87 |
· | accessibility from surrounding highways/streets; |
· | changes in zoning laws; and |
· | the financial condition of the owner of the property. |
With respect to some office properties, one or more tenants may have the option, at any time or after the expiration of a specified period, to terminate their leases at the subject property. In many cases, the tenant is required to provide notice and/or pay penalties in connection with the exercise of its termination option. Generally, the full rental income generated by the related leases will be taken into account in the underwriting of the related underlying mortgage loan. Notwithstanding any disincentives with respect to a termination option, there can be no assurance that a tenant will not exercise such an option, especially if the rent paid by that tenant is in excess of market rent. In such event, there may be a decrease in the cash flow generated by such mortgaged properties and available to make payments on the related offered certificates.
Office properties may be adversely affected by an economic decline in the business operated by their tenants. The risk associated with that economic decline is increased if revenue is dependent on a single tenant or if there is a significant concentration of tenants in a particular business or industry.
Office properties are also subject to competition with other office properties in the same market. Competitive factors affecting an office property include:
· | rental rates; |
· | the building’s age, condition and design, including floor sizes and layout; |
· | access to public transportation and availability of parking; and |
· | amenities offered to its tenants, including sophisticated building systems, such as fiber optic cables, satellite communications or other base building technological features. |
The cost of refitting office space for a new tenant is often higher than for other property types.
The success of an office property also depends on the local economy. Factors influencing a company’s decision to locate in a given area include:
· | the cost and quality of labor; |
· | tax incentives; and |
· | quality of life considerations, such as schools and cultural amenities. |
The strength and stability of the local or regional economy will affect an office property’s ability to attract stable tenants on a consistent basis. A central business district may have a substantially different economy from that of a suburb.
Retail Properties
The term “retail property” encompasses a broad range of properties at which businesses sell consumer goods and other products and provide various entertainment, recreational or personal services to the general public. Some examples of retail properties include—
· | shopping centers, |
· | factory outlet centers, |
· | malls, |
88 |
· | automotive sales and service centers, |
· | consumer oriented businesses, |
· | department stores, |
· | grocery stores, |
· | convenience stores, |
· | specialty shops, |
· | gas stations, |
· | movie theaters, |
· | fitness centers, |
· | bowling alleys, |
· | salons, and |
· | dry cleaners. |
A number of factors may affect the value and operation of a retail property. Some of these factors include:
· | the strength, stability, number and quality of the tenants; |
· | tenants’ sales; |
· | tenant mix; |
· | whether the property is in a desirable location; |
· | the physical condition and amenities of the building in relation to competing buildings; |
· | whether a retail property is anchored, shadow anchored or unanchored and, if anchored or shadow anchored, the strength, stability, quality and continuous occupancy of the anchor tenant or the shadow anchor, as the case may be, are particularly important factors; and |
· | the financial condition of the owner of the property. |
Unless owner occupied, retail properties generally derive all or a substantial percentage of their income from lease payments from commercial tenants. Therefore, it is important for the owner of a retail property to attract and keep tenants, particularly significant tenants, that are able to meet their lease obligations. In order to attract tenants, the owner of a retail property may be required to—
· | lower rents, |
· | grant a potential tenant a free rent or reduced rent period, |
· | improve the condition of the property generally, or |
· | make at its own expense, or grant a rent abatement to cover, tenant improvements for a potential tenant. |
89 |
A prospective tenant will also be interested in the number and type of customers that it will be able to attract at a particular retail property. The ability of a tenant at a particular retail property to attract customers will be affected by a number of factors related to the property and the surrounding area, including:
· | competition from other retail properties; |
· | perceptions regarding the safety, convenience and attractiveness of the property; |
· | perceptions regarding the safety of the surrounding area; |
· | demographics of the surrounding area; |
· | the strength and stability of the local, regional and national economies; |
· | traffic patterns and access to major thoroughfares; |
· | the visibility of the property; |
· | availability of parking; |
· | the particular mixture of the goods and services offered at the property; |
· | customer tastes, preferences and spending patterns; and |
· | the drawing power of other tenants. |
The success of a retail property is often dependent on the success of its tenants’ businesses. A significant component of the total rent paid by tenants of retail properties is often tied to a percentage of gross sales or revenues. Declines in sales or revenues of the tenants will likely cause a corresponding decline in percentage rents and/or impair the tenants’ ability to pay their rent or other occupancy costs. A default by a tenant under its lease could result in delays and costs in enforcing the landlord’s rights. Retail properties would be directly and adversely affected by a decline in the local economy and reduced consumer spending.
Repayment of a mortgage loan secured by a retail property will be affected by the expiration of space leases at the property and the ability of the borrower to renew or relet the space on comparable terms. Even if vacant space is successfully relet, the costs associated with reletting, including tenant improvements, leasing commissions and free rent, may be substantial and could reduce cash flow from a retail property.
With respect to some retail properties, one or more tenants may have the option, at any time or after the expiration of a specified period, to terminate their leases at the subject property. In many cases, the tenant is required to provide notice and/or pay penalties in connection with the exercise of its termination option. Generally, the full rental income generated by the related leases will be taken into account in the underwriting of the related underlying mortgage loan. Notwithstanding any disincentives with respect to a termination option, there can be no assurance a tenant will not exercise such an option, especially if the rent paid by that tenant is in excess of market rent. In such event, there may be a decrease in the cash flow generated by such mortgaged properties and available to make payments on the related offered certificates.
The presence or absence of an anchor tenant in a multi-tenanted retail property can be important. Anchor tenants play a key role in generating customer traffic and making the center desirable for other tenants. Retail properties that are anchored have traditionally been perceived as less risky than unanchored properties. As to any given retail property, an anchor tenant is generally understood to be a nationally or regionally recognized tenant whose space is, in general, materially larger in size than the space occupied by other tenants at the same retail property and is important in attracting customers to the retail property. Retail properties that have anchor tenant-owned stores often have reciprocal easement and operating agreements between the property owner and such anchor tenants containing certain operating and maintenance covenants. Although an anchor tenant is required to pay a contribution toward common area maintenance and real estate taxes on the improvements and related real property, an anchor tenant that owns its own parcel does not pay rent.
90 |
Certain tenant estoppels will have been obtained from anchor and certain other tenants in connection with the origination of the mortgage loans that identify disputes between the related borrower and the applicable tenant, or alleged defaults or potential defaults by the applicable property owner under the lease or a reciprocal easement and operating agreement. Such disputes, defaults or potential defaults, could lead to a termination or attempted termination of the applicable lease or reciprocal easement and operating agreement by the tenant or to litigation against the related borrower. We cannot assure you that these tenant disputes will not have a material adverse effect on the ability of the related borrowers to repay their portion of the mortgage loan. In addition, we cannot assure you that the tenant estoppels obtained identify all potential disputes that may arise with tenants.
A retail property may also benefit from a shadow anchor. A shadow anchor is a store or business that satisfies the criteria for an anchor store or business, but which may be located at an adjoining property or on a portion of the subject retail property that is not collateral for the related mortgage loan. A shadow anchor may own the space it occupies. In those cases where the property owner does not control the space occupied by the anchor store or business, the property owner may not be able to take actions with respect to the space that it otherwise typically would, such as granting concessions to retain an anchor tenant or removing an ineffective anchor tenant.
In some cases, an anchor tenant or a shadow anchor may cease to operate at the property, thereby leaving its space unoccupied even though it continues to pay rent on or even own the vacant space. If an anchor tenant or a shadow anchor ceases operations at a retail property or if its sales do not reach a specified threshold, other tenants at the property may be entitled to terminate their leases prior to the scheduled expiration date or to pay rent at a reduced rate for the remaining term of the lease.
Accordingly, the following factors, among others, will adversely affect the economic performance of an anchored retail property, including:
· | an anchor tenant’s failure to renew its lease; |
· | termination of an anchor tenant’s lease; |
· | the bankruptcy or economic decline of an anchor tenant or a shadow anchor; |
· | the cessation of the business of a self-owned anchor or of an anchor tenant, notwithstanding its continued ownership of the previously occupied space or its continued payment of rent, as the case may be; or |
· | a loss of an anchor tenant’s or shadow anchor’s ability to attract shoppers. |
Retail properties may also face competition from sources outside a given real estate market or with lower operating costs. For example, all of the following compete with more traditional department stores and specialty shops for consumer dollars:
· | factory outlet centers; |
· | discount shopping centers and clubs; |
· | catalogue retailers; |
· | home shopping networks and programs; |
· | internet web sites and electronic media shopping; and |
· | telemarketing. |
Similarly, home movie rentals and pay-per-view movies provide alternate sources of entertainment to movie theaters. Continued growth of these alternative retail outlets and entertainment sources, which are often characterized by lower operating costs, could adversely affect the rents collectible at retail properties.
91 |
Gas stations, automotive sales and service centers and dry cleaners also pose unique environmental risks because of the nature of their businesses and the types of products used or sold in those businesses.
Multifamily Rental Properties
In addition to the factors discussed under “—Repayment of a Commercial or Multifamily Mortgage Loan Depends Upon the Performance and Value of the Underlying Real Property, Which May Decline Over Time, and the Related Borrower’s Ability to Refinance the Property, of Which There Is No Assurance”, factors affecting the value and operation of a multifamily rental property include:
· | the physical attributes of the property, such as its age, appearance, amenities and construction quality, in relation to competing buildings; |
· | the types of services or amenities offered at the property; |
· | the location of the property; |
· | distance from employment centers and shopping areas; |
· | the characteristics of the surrounding neighborhood, which may change over time; |
· | the rents charged for dwelling units at the property relative to the rents charged for comparable units at competing properties; |
· | the ability of management to provide adequate maintenance and insurance; |
· | the property’s reputation; |
· | the level of mortgage interest rates, which may encourage tenants to purchase rather than lease housing; |
· | the existence or construction of competing or alternative residential properties in the local market, including other apartment buildings and complexes, manufactured housing communities, mobile home parks and single-family housing; |
· | compliance with and continuance of any government housing rental subsidy programs and/or low income housing tax credit or incentive programs from which the property receives benefits; |
· | the ability of management to respond to competition; |
· | the tenant mix and whether the property is primarily occupied by workers from a particular company or type of business, personnel from a local military base or students; |
· | in the case of student housing facilities, the reliance on the financial well-being of the college or university to which it relates, competition from on-campus housing units, and the relatively higher turnover rate compared to other types of multifamily tenants; |
· | adverse local, regional or national economic conditions, which may limit the amount that may be charged for rents and may result in a reduction in timely rent payments or a reduction in occupancy levels; |
· | local factory or other large employer closings; |
· | state and local regulations, which may affect the property owner’s ability to evict tenants or to increase rent to the market rent for an equivalent apartment; |
92 |
· | the extent to which the property is subject to land use restrictive covenants or contractual covenants that require that units be rented to low income tenants; |
· | the extent to which the cost of operating the property, including the cost of utilities and the cost of required capital expenditures, may increase; |
· | whether the property is subject to any age restrictions on tenants; |
· | the extent to which increases in operating costs may be passed through to tenants; and |
· | the financial condition of the owner of the property. |
Because units in a multifamily rental property are leased to individuals, usually for no more than a year, the property is likely to respond relatively quickly to a downturn in the local economy or to the closing of a major employer in the area.
In addition, multifamily rental properties are typically in markets that, in general, are characterized by low barriers to entry. Thus, a particular multifamily rental property market with historically low vacancies could experience substantial new construction and a resultant oversupply of rental units within a relatively short period of time. Since apartments within a multifamily rental property are typically leased on a short-term basis, the tenants residing at a particular property may easily move to alternative multifamily rental properties with more desirable amenities or locations or to single family housing.
Some states regulate the relationship between an owner and its tenants at a multifamily rental property. Among other things, these states may—
· | require written leases; |
· | require good cause for eviction; |
· | require disclosure of fees; |
· | prohibit unreasonable rules; |
· | prohibit retaliatory evictions; |
· | prohibit restrictions on a resident’s choice of unit vendors; |
· | limit the bases on which a landlord may increase rent; or |
· | prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner’s building. |
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.
Some counties and municipalities also impose rent control and/or rent stabilization regulations on apartment buildings. These regulations may limit rent increases to—
· | fixed percentages, |
· | percentages of increases in the consumer price index, |
· | increases set or approved by a governmental agency, or |
· | increases determined through mediation or binding arbitration. |
93 |
In many cases, the rent control or rent stabilization laws do not provide for decontrol of rental rates upon vacancy of individual units. Any limitations on a landlord’s ability to raise rents at a multifamily rental property may impair the landlord’s ability to repay a mortgage loan secured by the property or to meet operating costs.
Some multifamily rental properties are subject to land use restrictive covenants or contractual covenants in favor of federal or state housing agencies. These covenants generally require that a minimum number or percentage of units be rented to tenants who have incomes that are substantially lower than median incomes in the area or region. These covenants may limit the potential rental rates that may be charged at a multifamily rental property, the potential tenant base for the property or both. An owner may subject a multifamily rental property to these covenants in exchange for tax credits or rent subsidies. When the credits or subsidies cease, net operating income will decline. In addition, the differences in rents between subsidized or supported properties and other multifamily rental properties in the same area may not be a sufficient economic incentive for some eligible tenants to reside at a subsidized or supported property that may have fewer amenities or be less attractive as a residence. As a result, occupancy levels at a subsidized or supported property may decline, which may adversely affect the value and successful operation of the property.
Hospitality Properties
Hospitality properties may involve different types of hotels and motels, including:
· | full service hotels; |
· | resort hotels with many amenities; |
· | limited service hotels; |
· | hotels and motels associated with national or regional franchise chains; |
· | hotels that are not affiliated with any franchise chain but may have their own brand identity; and |
· | other lodging facilities. |
Factors affecting the value, operation and economic performance of a hospitality property include:
· | the location of the property and its proximity to major population centers or attractions; |
· | the seasonal nature of business at the property; |
· | the level of room rates relative to those charged by competitors; |
· | quality and perception of the franchise affiliation; |
· | economic conditions, either local, regional or national, which may limit the amount that can be charged for a room and may result in a reduction in occupancy levels; |
· | the existence or construction of competing hospitality properties; |
· | nature and quality of the services and facilities; |
· | financial strength and capabilities of the owner and operator; |
· | the need for continuing expenditures for modernizing, refurbishing and maintaining existing facilities; |
· | increases in operating costs, which may not be offset by increased room rates; |
· | the property’s dependence on business and commercial travelers and tourism; |
94 |
· | changes in travel patterns caused by changes in access, energy prices, labor strikes, relocation of highways, the reconstruction of additional highways or other factors; and |
· | changes in travel patterns caused by perceptions of travel safety, which perceptions can be significantly and adversely influenced by terrorist acts and foreign conflict as well as apprehension regarding the possibility of such acts or conflicts. |
Because limited service hotels and motels are relatively quick and inexpensive to construct and may quickly reflect a positive value, an over-building of these hotels and motels could occur in any given region, which would likely adversely affect occupancy and daily room rates. Further, because rooms at hospitality properties are generally rented for short periods of time, hospitality properties tend to be more sensitive to adverse economic conditions and competition than many other types of commercial properties. Additionally, the revenues of some hospitality properties, particularly those located in regions whose economies depend upon tourism, may be highly seasonal in nature and/or may be adversely affected by prolonged unfavorable weather conditions.
Hospitality properties may be operated under franchise agreements. The continuation of a franchise is typically subject to specified operating standards and other terms and conditions. The franchisor periodically inspects its licensed properties to confirm adherence to its operating standards. The failure of the hospitality property to maintain those standards or adhere to those other terms and conditions could result in the loss or cancellation of the franchise license. It is possible that the franchisor could condition the continuation of a franchise license on the completion of capital improvements or the making of capital expenditures that the owner of the hospitality property determines are too expensive or are otherwise unwarranted in light of the operating results or prospects of the property. In that event, the owner of the hospitality property may elect to allow the franchise license to lapse. In any case, if the franchise is terminated, the owner of the hospitality property may seek to obtain a suitable replacement franchise, which may be at significantly higher fees than the previous franchise, or to operate property independently of a franchise license. The loss of a franchise license could have a material adverse effect upon the operations or value of the hospitality property because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchisor.
The viability of any hospitality property that is a franchise of a national or a regional hotel or motel chain is dependent upon:
· | the continued existence and financial strength of the franchisor; |
· | the public perception of the franchise service mark; and |
· | the duration of the franchise licensing agreement. |
The transferability of franchise license agreements may be restricted. The consent of the franchisor would be required for the continued use of the franchise license by the hospitality property following a foreclosure. Conversely, a lender may be unable to remove a franchisor that it desires to replace following a foreclosure. Additionally, any provision in a franchise agreement or management agreement providing for termination because of a bankruptcy of a franchisor or manager will generally not be enforceable.
In the event of a foreclosure on a hospitality property, the lender or other purchaser of the hospitality property may not be entitled to the rights under any associated operating, liquor and other licenses. That party would be required to apply in its own right for new operating, liquor and other licenses. There can be no assurance that a new license could be obtained or that it could be obtained promptly. The lack of a liquor license in a hospitality property could have an adverse impact on the revenue from that property or on its occupancy rate.
Mixed Use Properties
Certain properties are mixed use properties. Such mortgaged property is subject to the risks relating to the property types described in “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—General—Office Properties”, “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—General—Retail Properties” and “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—General—Hospitality Properties”. See Annex A for the 5 largest tenants (by net rentable area
95 |
leased) at each mixed use property. A mixed use property may be subject to additional risks, including the property manager’s inexperience in managing the different property types that comprise such mixed use property.
See “Description of the Mortgage Pool—Statistical Characteristics of the Mortgage Loans—Property Types—Mixed Use Properties”.
Warehouse, Mini-Warehouse and Self Storage Facilities
Warehouse, mini-warehouse and self storage properties are considered vulnerable to competition because both acquisition costs and break-even occupancy are relatively low. Depending on their location, mini-warehouses and self storage facilities tend to be adversely affected more quickly by a general economic downturn than other types of commercial properties. In addition, it would require substantial capital expenditures to convert a warehouse, mini-warehouse or self storage property to an alternative use. This will materially impair the liquidation value of the property if its operation for storage purposes becomes unprofitable due to decreased demand, competition, age of improvements or other factors.
Successful operation of a warehouse, mini-warehouse or self storage property depends on—
· | building design, |
· | location and visibility, |
· | tenant privacy, |
· | efficient access to the property, |
· | proximity to potential users, including apartment complexes or commercial users, |
· | services provided at the property, such as security, |
· | age and appearance of the improvements, and |
· | quality of management. |
In addition, it is difficult to assess the environmental risks posed by warehouse, mini-warehouse and self storage properties due to tenant privacy restrictions, tenant anonymity and unsupervised access to such facilities. Therefore, these facilities may pose additional environmental risks to investors. Environmental site assessments performed with respect to warehouse, mini-warehouse and self storage properties would not include an inspection of the contents of the facilities. Therefore, it would not be possible to provide assurance that any of the units included in these kinds of facilities are free from hazardous substances or other pollutants or contaminants.
A self storage property may be affiliated with a franchise company through a franchise agreement. The performance of a self storage property affiliated with a franchise company may be affected by the continued existence and financial strength of the franchisor, the public perception of a service mark, and the duration of the franchise agreement. The transferability of franchise license agreements is restricted. In the event of a foreclosure, the lender or its agent would not have the right to use the franchise license without the franchisor’s consent.
Manufactured Housing Communities, Mobile Home Parks and Recreational Vehicle Parks
Manufactured housing communities and mobile home parks consist of land that is divided into “spaces” or “home sites” that are primarily leased to owners of the individual mobile homes or other housing units. The home owner often invests in site-specific improvements such as carports, steps, fencing, skirts around the base of the home, and landscaping. The land owner typically provides private roads within the park, common facilities and, in many cases, utilities. In general, the individual mobile homes and other housing units will not constitute material collateral for a mortgage loan underlying the offered certificates.
96 |
Recreational vehicle parks lease spaces primarily or exclusively for motor homes, travel trailers and portable truck campers, primarily designed for recreational, camping or travel use. 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. In general, parks that lease recreational vehicle spaces can be viewed as having a less stable tenant population than parks occupied predominantly by mobile homes.
Factors affecting the successful operation of a manufactured housing community, mobile home park or recreational vehicle park include:
· | location of the manufactured housing property; |
· | the ability of management to provide adequate maintenance and insurance; |
· | the number of comparable competing properties in the local market; |
· | the age, appearance, condition and reputation of the property; |
· | whether the property is subject to any age restrictions on tenants; |
· | the quality of management; and |
· | the types of facilities and services it provides. |
Manufactured housing communities and mobile home parks also compete against alternative forms of residential housing, including—
· | multifamily rental properties, |
· | cooperatively-owned apartment buildings, |
· | condominium complexes, and |
· | single-family residential developments. |
Recreational vehicle parks also compete against alternative forms of recreation and short-term lodging, such as staying at a hotel at the beach.
Manufactured housing communities, mobile home parks and recreational vehicle parks have few improvements (which are highly specialized) and are “special purpose” properties that could not be readily converted to general residential, retail or office use. This will adversely affect the liquidation value of the property if its operation as a manufactured housing community, mobile home park or recreational vehicle park, as the case may be, becomes unprofitable due to competition, age of the improvements or other factors.
Some states regulate the relationship of an owner of a manufactured housing community or mobile home park and its tenants in a manner similar to the way they regulate the relationship between a landlord and tenant at a multifamily rental property. In addition, some states also regulate changes in the use of a manufactured housing community or mobile home park and require that the owner give written notice to its tenants a substantial period of time prior to the projected change.
In addition to state regulation of the landlord-tenant relationship, numerous counties and municipalities impose rent control and/or rent stabilization on manufactured housing communities and mobile home parks. These ordinances may limit rent increases to—
· | fixed percentages, |
97 |
· | percentages of increases in the consumer price index, |
· | increases set or approved by a governmental agency, or |
· | increases determined through mediation or binding arbitration. |
In many cases, the rent control or rent stabilization laws either do not permit vacancy decontrol or permit vacancy decontrol only in the relatively rare event that the mobile home or manufactured housing unit is removed from the homesite. Local authority to impose rent control or rent stabilization on manufactured housing communities and mobile home parks is pre-empted by state law in some states and rent control or rent stabilization is not imposed at the state level in those states. In some states, however, local rent control and/or rent stabilization ordinances are not pre-empted for tenants having short-term or month-to-month leases, and properties there may be subject to various forms of rent control or rent stabilization with respect to those tenants.
Health Care-Related Properties
Health care-related properties include:
· | hospitals; |
· | medical offices; |
· | skilled nursing facilities; |
· | nursing homes; |
· | congregate care facilities; and |
· | in some cases, assisted living centers and housing for seniors. |
Health care-related facilities, particularly nursing homes, may receive a substantial portion of their revenues from government reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare are subject to:
· | statutory and regulatory changes; |
· | retroactive rate adjustments; |
· | administrative rulings; |
· | policy interpretations; |
· | delays by fiscal intermediaries; and |
· | government funding restrictions. |
In addition, nursing facilities and assisted living facilities that are dependent on revenues from other third party payors (other than Medicare and Medicaid), such as private insurers, are also affected by the reimbursement policies of those payors.
All of the foregoing can adversely affect revenues from the operation of a health care-related facility. Moreover, governmental payors have employed cost-containment measures that limit payments to health care providers. In addition, there are currently under consideration various proposals for national health care relief that could further limit these payments.
Health care-related facilities are subject to significant governmental regulation of the ownership, operation, maintenance and/or financing of those properties. Providers of long-term nursing care and other medical services
98 |
are highly regulated by federal, state and local law. They are subject to numerous factors which can increase the cost of operation, limit growth and, in extreme cases, require or result in suspension or cessation of operations, including:
· | federal and state licensing requirements; |
· | facility inspections; |
· | rate setting; |
· | disruptions in payments; |
· | reimbursement policies; |
· | audits, which may result in recoupment of payments made or withholding of payments due; |
· | laws relating to the adequacy of medical care, distribution of pharmaceuticals, use of equipment, personnel operating policies and maintenance of and additions to facilities and services; |
· | patient care liability claims, including those generated by the recent advent of the use of video surveillance, or “granny cams”, by family members or government prosecutors to monitor care and limited availability and increased costs of insurance; and |
· | shortages in staffing, increases in labor costs and labor disputes. |
Under applicable federal and state laws and regulations, Medicare and Medicaid reimbursements generally may not be made to any person other than the provider who actually furnished the related material goods and services. Accordingly, in the event of foreclosure on a health care-related facility, neither a lender nor other 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 property prior to foreclosure. Furthermore, in the event of foreclosure, there can be no assurance that a lender or other purchaser in a foreclosure sale would be entitled to the rights under any required licenses and regulatory approvals. The lender or other purchaser may have to apply in its own right for those licenses and approvals. There can be no assurance that a new license could be obtained or that a new approval would be granted. In addition, there can be no assurance that the facilities will remain licensed and loss of licensure/provider arrangements by a significant number of facilities could have a material adverse effect on a borrower’s ability to meet its obligations under the related mortgage loan and, therefore, on distributions on your certificates.
With respect to health care-related properties, the regulatory environment has intensified, particularly the long-term care service environment for large, for profit, multi-facility providers. For example, in the past few years, federal prosecutors have utilized the federal false claims act to prosecute nursing facilities that have quality of care deficiencies or reported instances of possible patient abuse and neglect, falsification of records, failure to report adverse events, improper use of restraints, and certain other care issues. Since facilities convicted under the false claims act may be liable for triple damages plus mandatory civil penalties, nursing facilities often settled with the government for a substantial amount of money rather than defending the allegations.
The extensive federal, state and local regulations affecting health care-related facilities include regulations on the financial and other arrangements that facilities enter into during the normal course of business. For example, anti-kickback laws prohibit certain business practices and relationships that might affect the provision and cost of health care services reimbursable under Medicare and Medicaid programs, including the payment or receipt of money or anything else of value in return for the referral of patients whose care will be paid by those programs. Sanctions for violations include criminal penalties and civil sanctions, fines and possible exclusion from payor programs. Federal and state governments have used monetary recoveries derived from prosecutions to strengthen their fraud detection and enforcement programs. There can be no assurance that government officials charged with responsibility for enforcing the anti-kickback and/or self-referral laws will not assert that certain arrangements or practices are in violation of such provisions. The operations of a nursing facility or assisted living facility could be adversely affected by the failure of its arrangements to comply with such laws or similar state laws enacted in the future.
99 |
Each state also has a Medicaid Fraud Control Unit, which typically operates as a division of the state Attorney General’s Office or equivalent, which conducts criminal and civil investigations into alleged abuse, neglect, mistreatment and/or misappropriation of resident property. In some cases, the allegations may be investigated by the state Attorney General, local authorities and federal and/or state survey agencies. There are Medicaid Fraud Control Unit and state Attorney General investigations pending and, from time to time, threatened against providers, relating to or arising out of allegations of potential resident abuse, neglect or mistreatment.
Further, the nursing facilities and assisted living facilities are likely to compete on a local and regional basis with each other and with other providers who operate similar facilities. They may also compete with providers of long term care services in other settings, such as hospital rehabilitation units or home health agencies or other community-based providers. The formation of managed care networks and integrated delivery systems, as well as increasing government efforts to encourage the use of home and community-based services instead of nursing facility services, could also adversely affect nursing facilities or assisted living facilities if there are incentives that lead to the utilization of other facilities or community-based home care providers, instead of nursing facility or assisted living providers, or if competition drives down prices paid by residents. Some of the competitors of the subject facilities may be better capitalized, may offer services not offered by the facilities, or may be owned by agencies supported by other sources of income or revenue not available to for-profit facilities, such as tax revenues and charitable contributions. The success of a facility also depends upon the number of competing facilities in the local market, as well as upon other factors, such as the facility’s age, appearance, reputation and management, resident and family preferences, referrals by and affiliations with managed care organizations, relationship with other health care providers and other health care networks, the types of services provided and, where applicable, the quality of care and the cost of that care. If the facilities fail to attract patients and residents and compete effectively with other health care providers, their revenues and profitability may decline.
Health care-related facilities are generally special purpose properties that could not be readily converted to general residential, retail or office use. This will adversely affect their liquidation value. Furthermore, transfers of health care-related facilities are subject to regulatory approvals under state, and in some cases federal, law not required for transfers of most other types of commercial properties. Moreover, in certain circumstances, such as when federal or state authorities believe that liquidation may adversely affect the health, safety or welfare of the nursing facility and/or assisted living facility residents, a facility operator may not be allowed to liquidate for an indeterminate period of time. Finally, the receipt of any liquidation proceeds could be delayed by the approval process of any state agency necessary for the transfer of a mortgaged property and even reduced to satisfy governmental obligations of the facility, such as audit recoupments from nursing facilities.
Restaurants and Taverns
Factors affecting the economic viability of individual restaurants, taverns and other establishments that are part of the food and beverage service industry include:
· | competition from facilities having businesses similar to a particular restaurant or tavern; |
· | perceptions by prospective customers of safety, convenience, services and attractiveness; |
· | the cost, quality and availability of food and beverage products; |
· | negative publicity, resulting from instances of food contamination, food-borne illness and similar events; |
· | changes in demographics, consumer habits and traffic patterns; |
· | the ability to provide or contract for capable management; and |
· | retroactive changes to building codes, similar ordinances and other legal requirements. |
Adverse economic conditions, whether local, regional or national, may limit the amount that may be charged for food and beverages and the extent to which potential customers dine out. Because of the nature of the business, restaurants and taverns tend to respond to adverse economic conditions more quickly than do many other types of commercial properties. Furthermore, the transferability of any operating, liquor and other licenses
100 |
to an entity acquiring a bar or restaurant, either through purchase or foreclosure, is subject to local law requirements.
The food and beverage service industry is highly competitive. The principal means of competition are—
· | market segment, |
· | product, |
· | price, |
· | value, |
· | quality, |
· | service, |
· | convenience, |
· | location, and |
· | the nature and condition of the restaurant facility. |
A restaurant or tavern operator competes with the operators of comparable establishments in the area in which its restaurant or tavern is located. Other restaurants could have—
· | lower operating costs, |
· | more favorable locations, |
· | more effective marketing, |
· | more efficient operations, or |
· | better facilities. |
The location and condition of a particular restaurant or tavern will affect the number of customers and, to an extent, the prices that may be charged. The characteristics of an area or neighborhood in which a restaurant or tavern is located may change over time or in relation to competing facilities. Also, the cleanliness and maintenance at a restaurant or tavern will affect its appeal to customers. In the case of a regionally- or nationally-known chain restaurant, there may be costly expenditures for renovation, refurbishment or expansion, regardless of its condition.
Factors affecting the success of a regionally- or nationally-known chain restaurant include:
· | actions and omissions of any franchisor, including management practices that— |
1. adversely affect the nature of the business, or
2. require renovation, refurbishment, expansion or other expenditures;
· | the degree of support provided or arranged by the franchisor, including its franchisee organizations and third-party providers of products or services; and |
· | the bankruptcy or business discontinuation of the franchisor or any of its franchisee organizations or third-party providers. |
101 |
Chain restaurants may be operated under franchise agreements
Those agreements typically do not contain provisions protective of lenders. A borrower’s rights as franchisee typically may be terminated without informing the lender, and the borrower may be precluded from competing with the franchisor upon termination. In addition, a lender that acquires title to a restaurant site through foreclosure or similar proceedings may be restricted in the use of the site or may be unable to succeed to the rights of the franchisee under the related franchise agreement. The transferability of a franchise may be subject to other restrictions. Also, federal and state franchise regulations may impose additional risk, including the risk that the transfer of a franchise acquired through foreclosure or similar proceedings may require registration with governmental authorities or disclosure to prospective transferees.
Charitable Organizations and Other Non-Profit Tenants
Charitable organizations and other non-profit tenants generally depend on donations from individuals and government grants and subsidies to meet expenses (including rent) and pay for maintenance and capital expenditures. The extent of those donations is dependent on the extent to which individuals are prepared to make donations, which is influenced by a variety of social, political and economic factors, and whether the governmental grants and subsidies will continue with respect to any such institution. Donations may be adversely affected by economic conditions, whether local, regional or national. A reduction in donations, government grants or subsidies may impact the ability of the related institution to pay rent and there can be no assurance that a borrower leasing to a charitable organization or other non-profit tenant will be in a position to meet its obligations under the related mortgage loan documents if such tenant fails to pay.
Churches and Other Religious Facilities. Churches and other religious facilities generally depend on charitable donations to meet expenses and pay for maintenance and capital expenditures. The extent of those donations is dependent on the attendance at any particular religious facility and the extent to which attendees are prepared to make donations, which is influenced by a variety of social, political and economic factors. Donations may be adversely affected by economic conditions, whether local, regional or national. Religious facilities are often located in special purpose properties that are not readily convertible to alternative uses. This will adversely affect their liquidation value.
Private Schools and Other Cultural and Educational Institutions. The cash flows generated from private schools and other cultural and educational institutions are generally dependent on student enrollment or other attendance and the ability of such students or attendees to pay tuition and related fees, which, in some cases, is dependent on the ability to obtain financial aid or loans. Enrollment and/or attendance at a private school or cultural and educational institution may decrease due to, among other factors:
· | changing local demographics; |
· | competition from other schools or cultural and educational institutions; |
· | increases in tuition and/or reductions in availability of student loans, government grants or scholarships; and |
· | reductions in education spending as a result of changes in economic conditions in the area of the school or cultural and educational institution; and poor performance by teachers, administrative staff or students; or mismanagement at the private school or cultural and educational institution. |
Parking Lots and Garages. The primary source of income for parking lots and garages is the rental fees charged for parking spaces. Factors affecting the success of a parking lot or garage include:
· | the number of rentable parking spaces and rates charged; |
· | the location of the lot or garage and, in particular, its proximity to places where large numbers of people work, shop or live; |
· | the amount of alternative parking spaces in the area; |
102 |
· | the availability of mass transit; and |
· | the perceptions of the safety, convenience and services of the lot or garage. |
Any Analysis of the Value or Income Producing Ability of a Commercial or Multifamily Property Is Highly Subjective and Subject to Error
Mortgage loans secured by liens on income-producing properties are substantially different from mortgage loans made on the security of owner-occupied single-family homes. The repayment of a loan secured by a lien on an income-producing property is typically dependent upon—
· | the successful operation of the property, and |
· | its ability to generate income sufficient to make payments on the loan. |
This is particularly true because most or all of the mortgage loans underlying the offered certificates will be nonrecourse loans.
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 derived or expected to be derived from the related real property collateral for a twelve-month period that is available to pay debt service on the subject mortgage loan, to |
· | the annualized payments of principal and/or interest on the subject mortgage loan and any other senior and/or pari passu loans that are secured by the related real property collateral. |
The amount described in the first bullet point 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 real property. A more detailed discussion of its calculation is provided under “Description of the Mortgage Pool—Certain Calculations and Definitions”.
The cash flow generated by a multifamily or commercial property will generally fluctuate over time and may or may not be sufficient to—
· | make the loan payments on the related mortgage loan, |
· | cover operating expenses, and |
· | fund capital improvements at any given time. |
Operating revenues of a nonowner occupied, income-producing property may be affected by the condition of the applicable real estate market and/or area economy. Properties leased, occupied or used on a short-term basis, such as—
· | some health care-related facilities, |
· | hotels and motels, |
· | recreational vehicle parks, and |
· | mini-warehouse and self storage facilities, |
tend to be affected more rapidly by changes in market or business conditions than do properties typically leased for longer periods, such as—
103 |
· | warehouses, |
· | retail stores, |
· | office buildings, and |
· | industrial facilities. |
Some commercial properties may be owner-occupied or leased to a small number of tenants. Accordingly, the operating revenues may depend substantially on the financial condition of the borrower or one or a few tenants. Mortgage loans secured by liens on owner-occupied and single tenant properties may pose a greater likelihood of default and loss than loans secured by liens on multifamily properties or on multi-tenant commercial properties.
Increases in property operating expenses can increase the likelihood of a borrower default on a multifamily or commercial mortgage loan secured by the property. Increases in property operating expenses may result from:
· | increases in energy costs and labor costs; |
· | increases in interest rates and real estate tax rates; and |
· | changes in governmental rules, regulations and fiscal policies. |
Some net leases of commercial properties may provide that the lessee, rather than the borrower/ landlord, is responsible for payment of operating expenses. However, a net lease will result in stable net operating income to the borrower/landlord only if the lessee is able to pay the increased operating expense while also continuing to make rent payments.
Lenders also look to the loan-to-value ratio of a mortgage loan as a factor in evaluating the likelihood of loss 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 mortgage loan and any other senior and/or pari passu loans that are secured by the related real property collateral, to |
· | the estimated value of the related real property based on an appraisal, a cash flow analysis, a recent sales price or another method or benchmark of valuation. |
A low loan-to-value ratio means the borrower has a large amount of its own equity in the multifamily or commercial property that secures its loan. In these circumstances—
· | the borrower has a greater incentive to perform under the terms of the related mortgage loan in order to protect that equity, and |
· | the lender has greater protection against loss on liquidation following a borrower default. |
However, loan-to-value ratios are not necessarily an accurate measure of the likelihood of liquidation loss in a pool of multifamily and commercial mortgage loans. For example, the value of a multifamily or commercial property as of the date of initial issuance of the offered certificates may be less than the estimated value determined at loan origination. The value of any real property, in particular a multifamily or commercial property, will likely fluctuate from time to time. Moreover, even a current appraisal is not necessarily a reliable estimate of value. Appraised values of income-producing properties are generally based on—
· | the market comparison method, which takes into account the recent resale value of comparable properties at the date of the appraisal; |
104 |
· | the cost replacement method, which takes into account the cost of replacing the property at the date of the appraisal; |
· | the income capitalization method, which takes into account the property’s projected net cash flow; or |
· | a selection from the values derived from the foregoing methods. |
Each of these appraisal methods presents analytical difficulties. For example—
· | it is often difficult to find truly comparable properties that have recently been sold; |
· | the replacement cost of a property may have little to do with its current market value; and |
· | income capitalization is inherently based on inexact projections of income and expense and the selection of an appropriate capitalization rate and discount rate. |
If more than one appraisal method is used and significantly different results are produced, an accurate determination of value and, correspondingly, a reliable analysis of the likelihood of default and loss, is even more difficult.
The value of a multifamily or commercial property will be affected by property performance. As a result, if a multifamily or commercial mortgage loan defaults because the income generated by the related property is insufficient to pay operating costs and expenses as well as debt service, then the value of the property will decline and a liquidation loss may occur.
See “—Repayment of a Commercial or Multifamily Mortgage Loan Depends Upon the Performance and Value of the Underlying Real Property, Which May Decline Over Time, and the Related Borrower’s Ability to Refinance the Property, of Which There Is No Assurance” above.
Changes in Pool Composition Will Change the Nature of Your Investment
The mortgage loans underlying your certificates will amortize at different rates and mature on different dates. In addition, some of those mortgage loans may be prepaid or liquidated. As a result, the relative composition of the mortgage asset pool will change over time.
If you purchase certificates with a pass-through rate that is equal to or calculated based upon a weighted average of interest rates on the underlying mortgage loans, your pass-through rate will be affected, and may decline, as the relative composition of the mortgage pool changes.
In addition, as payments and other collections of principal are received with respect to the underlying mortgage loans, the remaining mortgage pool backing your offered certificates may exhibit an increased concentration with respect to property type, number and affiliation of borrowers and geographic location.
Tenancies-in-Common May Hinder Recovery
Certain of the mortgage loans included in the issuing entity may have borrowers that own the related mortgaged properties as tenants-in-common. In general, with respect to a tenant-in-common ownership structure, each tenant-in-common owns an undivided share in the property and if such tenant-in-common desires to sell its interest in the property (and is unable to find a buyer or otherwise needs to force a partition) the tenant-in-common has the ability to request that a court order a sale of the property and distribute the proceeds to each tenant in common proportionally. As a result, if a tenant-in-common that has not waived its right of partition or similar right exercises a right of partition, the related mortgage loan may be subject to prepayment. The bankruptcy, dissolution or action for partition by one or more of the tenants-in-common could result in an early repayment of the related mortgage loan, significant delay in recovery against the tenant-in-common borrowers, particularly if the tenant-in-common borrowers file for bankruptcy separately or in series (because each time a tenant-in-common borrower files for bankruptcy, the bankruptcy court stay will be reinstated), a material impairment in property management and a substantial decrease in the amount recoverable upon the related mortgage loan. Not all tenants-in-common under the mortgage loans will be single-purpose entities. Each
105 |
tenant-in-common borrower has waived its right to partition, reducing the risk of partition. However, we cannot assure you that, if challenged, this waiver would be enforceable. In addition, in some cases, the related mortgage loan documents may provide for full recourse (or in an amount equal to its pro rata share of the debt) to the related tenant-in-common borrower or the guarantor if a tenant-in-common files for partition.
Risks Relating to Enforceability of Cross-Collateralization Arrangements
Cross-collateralization arrangements may be terminated in certain circumstances under the terms of the related mortgage loan documents. Cross-collateralization arrangements whereby multiple borrowers grant their respective mortgaged properties as security for one or more mortgage loans could be challenged as fraudulent conveyances by the creditors or the bankruptcy estate of any of the related borrowers.
Among other things, a legal challenge to the granting of the liens may focus on the benefits realized by that borrower from the respective mortgage loan proceeds, as well as the overall cross-collateralization. If a court were to conclude that the granting of the liens was an avoidable fraudulent conveyance, that court could subordinate all or part of the mortgage loan to other debt of that borrower, recover prior payments made on that mortgage loan, or take other actions such as invalidating the mortgage loan or the mortgages securing the cross-collateralization. See “—Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable—Cross-Collateralization Arrangements”.
In addition, when multiple real properties secure a mortgage loan, the amount of the mortgage encumbering any particular one of those properties may be less than the full amount of the related aggregate mortgage loan indebtedness, to minimize recording tax. This mortgage amount is generally established at 100% to 150% of the appraised value or allocated loan amount for the mortgaged property and will limit the extent to which proceeds from the property will be available to offset declines in value of the other properties securing the same mortgage loan.
See “Description of the Mortgage Pool—Statistical Characteristics of the Mortgage Loans” for a description of mortgage loans that are cross-collateralized and cross-defaulted with each other, if any, or that are secured by multiple properties owned by multiple borrowers.
Inadequacy of Title Insurers May Adversely Affect Payments on Your Certificates
Title insurance for a mortgaged property generally insures a lender against risks relating to a lender not having a first lien with respect to a mortgaged property as of the date such policy is issued, and in some cases can insure a lender against specific other risks. The protection afforded by title insurance depends on the ability of the title insurer to pay claims made upon it. We cannot assure you that:
· | a title insurer will have the ability to pay title insurance claims made upon it; |
· | a title insurer will maintain its present financial strength; or |
· | a title insurer will not contest claims made upon it. |
In addition, title insurance policies do not cover all risks relating to a lender not having a first lien with respect to a mortgaged property, and in certain cases, the lender may be subject to a more senior lien despite the existence of a title insurance policy. In those circumstances, the existence of a senior lien may limit the issuing entity’s recovery on that property, which may adversely affect payments on your certificates.
The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property
The operation and performance of a mortgage loan (or loan combination) will depend in part on the identity of the persons or entities who control the related borrower and the related mortgaged property. The performance of a mortgage loan (or loan combination) may be adversely affected if control of a borrower changes, which may occur, for example, by means of transfers of direct or indirect ownership interests in the borrower, or if the mortgage loan (or loan combination) is assigned to and assumed by another person or entity along with a transfer of the property to that person or entity.
106 |
Many of the mortgage loans generally place certain restrictions on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations, although there is already existing mezzanine debt, and mezzanine debt is permitted in the future, in the case of certain mortgage loans. We cannot assure you the ownership of any of the borrowers would not change during the term of the related mortgage loan and result in a material adverse effect on your certificates. See “Description of the Mortgage Pool—Additional Indebtedness” and “—Certain Terms of the Mortgage Loans—‘Due-On-Sale’ and ‘Due-On-Encumbrance’ Provisions”.
A Borrower May Be Unable to Repay Its Remaining Principal Balance on the Maturity Date or Anticipated Repayment Date; Longer Amortization Schedules and Interest-Only Provisions Increase Risk
Mortgage loans with substantial remaining principal balances at their maturity date or anticipated repayment date, as applicable, involve greater risk than fully-amortizing mortgage loans. This is because the borrower may be unable to repay the mortgage loan at that time. In addition, fully amortizing mortgage loans which may pay interest on an “actual/360” basis but have fixed monthly payments may, in effect, have a small balloon payment due at maturity.
All of the mortgage loans have amortization schedules that are significantly longer than their respective terms to maturity (or, if applicable, any related anticipated repayment date), and many of the mortgage loans require only payments of interest for part or all of such respective terms. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Due Dates; Mortgage Rates; Calculations of Interest”. A longer amortization schedule or an interest-only provision in a mortgage loan will result in a higher amount of principal outstanding under the mortgage loan at any particular time, including at the maturity date (or, if applicable, anticipated repayment date) of the mortgage loan, than would have otherwise been the case had a shorter amortization schedule been used or had the mortgage loan had a shorter interest-only period or not included an interest-only provision at all. That higher principal amount outstanding could both (i) make it more difficult for the related borrower to make the required balloon payment at maturity and (ii) lead to increased losses for the issuing entity either during the loan term or at maturity if the mortgage loan becomes a defaulted mortgage loan.
A borrower’s ability to repay a mortgage loan (or loan combination) on its maturity date or anticipated repayment date, as applicable, typically will depend upon its ability either to refinance the mortgage loan (or loan combination) or to sell the mortgaged property at a price sufficient to permit repayment. A borrower’s ability to achieve either of these goals will be affected by a number of factors, including:
· | the availability of, and competition for, credit for commercial, multifamily or manufactured housing community real estate projects, which fluctuate over time; |
· | the prevailing interest rates; |
· | the net operating income generated by the mortgaged property; |
· | the fair market value of the related mortgaged property; |
· | the borrower’s equity in the related mortgaged property; |
· | significant tenant rollover at the related mortgaged properties (see “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Retail Properties” and “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Office Properties”); |
· | the borrower’s financial condition; |
· | the operating history and occupancy level of the mortgaged property; |
· | reductions in applicable government assistance/rent subsidy programs; |
· | the tax laws; and |
· | prevailing general and regional economic conditions. |
107 |
With respect to any split mortgage loan, the risks relating to balloon payment obligations are enhanced by the existence of the related companion loan(s).
Whether or not losses are ultimately sustained, any delay in the collection of a balloon payment on the maturity date or anticipated repayment date that would otherwise be distributable on your certificates will likely extend the weighted average life of your certificates.
None of the sponsors, any party to the pooling and servicing agreement or any other person will be under any obligation to refinance any mortgage loan. However, in order to maximize recoveries on defaulted mortgage loans, the pooling and servicing agreement permits the special servicer (and each outside servicing agreement governing the servicing of an outside serviced mortgage loan permits the related outside special servicer) to extend and modify mortgage loans in a manner consistent with the applicable servicing standard, subject to the limitations (or, in the case of an outside serviced mortgage loan, limitations of the type) described under “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Modifications, Waivers and Amendments”. We cannot assure you, however, that any extension or modification will increase the present value of recoveries in a given case.
Neither the master servicer nor the special servicer will have the ability to extend or modify an outside serviced mortgage loan because each outside serviced mortgage loan is being serviced pursuant to the applicable outside servicing agreement. Whether or not losses are ultimately sustained, any delay in collection of a balloon payment that would otherwise be distributable in respect of a class of certificates, whether such delay is due to a borrower default or to modification of an outside serviced mortgage loan by the outside special servicer, will likely extend the weighted average life of such class of certificates.
The credit crisis and economic downturn have resulted in tightened lending standards and a reduction in capital available to refinance mortgage loans at maturity. These factors have increased the risk that refinancing may not be available. We cannot assure you that each borrower under a balloon loan will have the ability to repay the principal balance of such mortgage loan on the related maturity date or anticipated repayment date, as applicable.
See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”.
Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable
Cross-Collateralization Arrangements.
It may be possible to challenge cross-collateralization arrangements involving more than one borrower as a fraudulent conveyance, even if the borrowers are related. If one of those borrowers were to become a debtor in a bankruptcy case, creditors of the bankrupt party or the representative of the bankruptcy estate of the bankrupt party could seek to have the bankruptcy court avoid any lien granted by the bankrupt party to secure repayment of another borrower’s loan. In order to do so, the court would have to determine that—
· | the bankrupt party— |
1. was insolvent at the time of granting the lien,
2. was rendered insolvent by the granting of the lien,
3. was left with inadequate capital, or
4. was not able to pay its debts as they matured; and
· | the bankrupt party did not, when it allowed its property to be encumbered by a lien securing the other borrower’s loan, receive fair consideration or reasonably equivalent value for pledging its property for the equal benefit of the other borrower. |
108 |
If the court were to conclude that the granting of the lien was an avoidable fraudulent conveyance, it could nullify the lien or security instrument effecting the cross-collateralization. The court could also allow the bankrupt party to recover payments it made under the avoided cross-collateralization. See “—Risks Relating to Enforceability of Cross-Collateralization Arrangements” above.
Prepayment Premiums, Fees and Charges.
Under federal bankruptcy law and the laws of a number of states, the enforceability of any mortgage loan provisions that require prepayment lockout periods or payment of a yield maintenance charge or a prepayment premium, fee or charge upon an involuntary or a voluntary prepayment, is unclear. Provisions requiring yield maintenance charges or prepayment premiums, fees or charges also may be interpreted as constituting the collection of interest for usury purposes. Accordingly, we cannot assure you that the obligation to pay a yield maintenance charge or prepayment premium, fee or charge will be enforceable. In addition, if provisions requiring yield maintenance charges or prepayment premiums, fees or charges upon involuntary prepayment were unenforceable, borrowers would have an incentive to default in order to prepay their loans. Also, we cannot assure you that foreclosure proceeds will be sufficient to pay an enforceable yield maintenance charge or prepayment premium, fee or charge.
Due-on-Sale and Debt Acceleration Clauses.
Some or all of the mortgage loans included in one of our trusts may contain a due-on-sale clause, which permits the lender, with some exceptions, to accelerate the maturity of the mortgage loan upon the sale, transfer or conveyance of—
· | the related real property, or |
· | a majority ownership interest in the related borrower. |
We anticipate that all of the mortgage loans included in one of our trusts will contain some form of debt-acceleration clause, which permits the lender to accelerate the debt upon specified monetary or non-monetary defaults by the related borrower.
The courts of all states will enforce acceleration clauses in the event of a material payment default. The equity courts of any state, however, may refuse to allow the foreclosure of a mortgage, deed of trust or other security instrument or to permit the acceleration of the indebtedness if:
· | the default is deemed to be immaterial, |
· | the exercise of those remedies would be inequitable or unjust, or |
· | the circumstances would render the acceleration unconscionable. |
See “Certain Legal Aspects of the Mortgage Loans—Due-On-Sale and Due-On-Encumbrance Provisions”.
Assignments of Leases.
Some or all of the mortgage loans included in one of our trusts may be secured by, among other things, an assignment of leases and rents. Under that document, the related borrower will assign its right, title and interest as landlord under the leases on the related real property and the income derived from those leases to the lender as further security for the related mortgage loan, while retaining a license to collect rents for so long as there is no default. In the event the borrower defaults, the license terminates and the lender is entitled to collect rents. In some cases, those assignments may not be perfected as security interests prior to actual possession of the cash flow. Accordingly, state law may require that the lender take possession of the property and obtain a judicial appointment of a receiver before becoming entitled to collect the rents. Lenders that actually take possession of the property, however, may incur potentially substantial risks attendant to being a mortgagee in possession. The risks include liability for environmental clean up costs and other risks inherent to property ownership. In addition, the commencement of bankruptcy or similar proceedings by or with respect to the borrower will adversely affect the lender’s ability to collect the rents. See “Certain Legal Aspects of the Mortgage Loans—Bankruptcy Issues.”
109 |
Defeasance.
A mortgage loan underlying the offered certificates may permit the related borrower, during the periods specified and subject to the conditions set forth in the loan, to pledge to the holder of the mortgage loan a specified amount of direct, non-callable United States government securities and thereby obtain a release of the related mortgaged property. The cash amount which a borrower must expend to purchase, or must deliver to a master servicer in order for the master servicer to purchase, the required United States government securities may be in excess of the principal balance of the mortgage loan. A court could interpret that excess amount as a form of prepayment premium or could take it into account for usury purposes. In some states, some forms of prepayment premiums are unenforceable. If the payment of that excess amount were held to be unenforceable, the remaining portion of the cash amount to be delivered may be insufficient to purchase the requisite amount of United States government securities.
Jurisdictions with One Action or Security First Rules and/or Anti-Deficiency Legislation May Limit the Ability of the Special Servicer to Foreclose on a Real Property or to Realize on Obligations Secured by a Real Property
Several states, including California, have laws that prohibit more than one “judicial action” to enforce a mortgage obligation, requiring the lender to exhaust the real property security for such obligation first and/or limiting the ability of the lender to recover a deficiency judgment from the obligor following the lender’s realization upon the collateral. This could be particularly problematic for cross-collateralized, cross-defaulted or multi-property mortgage loans secured by real properties located in multiple states where only some of those states have such rules. A lender who proceeds in violation of these rules may run the risk of forfeiting collateral and/or forfeiting the right to enforce the underlying obligation. In some jurisdictions, the benefits of such laws may also be available to a guarantor of the underlying obligation, thereby limiting the ability of the lender to recover against a guarantor without first proceeding against the collateral and without a judicial foreclosure. Accordingly, where real properties are located in jurisdictions in which “one action”, “security first” and/or “anti-deficiency” rules may be applicable, the special servicer should seek to obtain advice of counsel prior to enforcing any of the trust’s rights under any of the related mortgage loans and/or guarantees of those mortgage loans. As a result, the special servicer may incur additional – and perhaps significant additional – delay and expense in foreclosing on the underlying real properties located in states affected by “one action”, “security first” or “anti-deficiency” rules. See “Certain Legal Aspects of the Mortgage Loans—Foreclosure—One Action and Security First Rules” and “—Foreclosure—Anti-Deficiency Legislation”.
Appraisals May Not Reflect Current or Future Market Value of Each Property
Appraisals were obtained with respect to each of the mortgaged properties at or about the time of origination of the applicable mortgage loan (or loan combination, if applicable) or at or around the time of the acquisition of the mortgage loan (or loan combination, if applicable) by the related sponsor. See Annex A to this prospectus for dates of the latest appraisals for the mortgaged properties.
In general, appraisals represent the analysis and opinion of qualified appraisers and are not guarantees of present or future value. One appraiser may reach a different conclusion than that of a different appraiser with respect to the same property. The appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller and, in certain cases, may have taken into consideration the purchase price paid by the borrower. The amount could be significantly higher than the amount obtained from the sale of a mortgaged property in a distress or liquidation sale. Information regarding the appraised values of the mortgaged properties (including loan-to-value ratios) presented in this prospectus is not intended to be a representation as to the past, present or future market values of the mortgaged properties. For example, in some cases, a borrower or its affiliate may have acquired the related mortgaged property for a price or otherwise for consideration in an amount that is less than the related appraised value specified on Annex A to this prospectus, including at a foreclosure sale or through acceptance of a deed-in-lieu of foreclosure. Historical operating results of the mortgaged properties used in these appraisals, as adjusted by various assumptions, estimates and subjective judgments on the part of the appraiser, may not be comparable to future operating results. In addition, other factors may impair the mortgaged properties’ value without affecting their current net operating income, including:
· | changes in governmental regulations, zoning or tax laws; |
· | potential environmental or other legal liabilities; |
110 |
· | the availability of refinancing; and |
· | changes in interest rate levels. |
In certain cases, appraisals may reflect “as-is”, “as stabilized” or other values. However, the appraised value reflected in this prospectus with respect to each mortgaged property, except as described under “Description of the Mortgage Pool—Certain Calculations and Definitions”, reflects only the “as-is” value (or, in certain cases, may reflect the “as stabilized” or other value as a result of the satisfaction of the related conditions or assumptions unless otherwise specified), which may contain certain assumptions, such as future construction completion, projected re-tenanting or increased tenant occupancies. See “Description of the Mortgage Pool—Appraised Value”.
We cannot assure you that the information set forth in this prospectus regarding appraised values or loan-to-value ratios accurately reflects past, present or future market values of the mortgaged properties. Additionally, with respect to the appraisals setting forth assumptions, particularly those setting forth extraordinary assumptions, as to the “as-is”, “as stabilized” or other values, we cannot assure you that those assumptions are or will be accurate or that the “as-is”, “as stabilized” or other values will be the value of the related mortgaged property at the indicated stabilization date or at maturity. 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. See “Transaction Parties—The Sponsors and the Mortgage Loan Sellers” for additional information regarding the appraisals.
Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties
Certain of the mortgaged properties are properties which are currently undergoing or, in the future, are expected to undergo redevelopment, expansion or renovation. To the extent applicable, we cannot assure you that any escrow or reserve collected will be sufficient to complete the current renovation or be otherwise sufficient to satisfy any tenant improvement expenses at a mortgaged property. Failure to complete those planned improvements may have a material adverse effect on the cash flow at the mortgaged property and the related borrower’s ability to meet its payment obligations under the related mortgage loan documents.
Certain of the hospitality properties securing the mortgage loans are currently undergoing or are scheduled to undergo renovations or property improvement plans (“PIPs”). In some circumstances, these renovations or PIPs may necessitate taking a portion of the available guest rooms temporarily offline, temporarily decreasing the number of available rooms and the revenue generating capacity of the related hotel. In other cases, these renovations may involve renovations of common spaces or external features of the related hotel, which may cause disruptions or otherwise decrease the attractiveness of the related hotel to potential guests. These PIPs may be required under the related franchise or management agreement and a failure to timely complete them may result in a termination or expiration of a franchise or management agreement and may be an event of default under the related mortgage loan.
Certain of the retail properties securing the mortgage loans are currently undergoing or are scheduled to undergo renovations or property expansions. Such renovations or expansions may be required under one or more tenant leases and a failure to timely complete such renovations or expansions may result in a termination of any such lease and may have a material adverse effect on the cash flow at any such mortgaged property and the related borrower’s ability to meet its payment obligations under the related mortgage loan documents.
We cannot assure you that current or planned redevelopment, expansion or renovation will be completed, that such redevelopment, expansion or renovation will be completed in the time frame contemplated, or that, when and if redevelopment, expansion or renovation is completed, such redevelopment, expansion or renovation will improve the operations at, or increase the value of, the related mortgaged property. Failure of any of the foregoing to occur could have a material negative impact on the related mortgaged property, which could affect the ability of the related borrower to repay the related mortgage loan.
In the event the related borrower fails to pay the costs for work completed or material delivered in connection with such ongoing redevelopment, expansion or renovation, the portion of the mortgaged property on which there
111 |
are renovations may be subject to mechanics’ 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. See “Description of the Mortgage Pool—Redevelopment, Expansion and Renovation” for information regarding mortgaged properties which are currently undergoing or, in the future, are expected to undergo redevelopment or renovation.
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
A borrower may be required to incur costs to comply with various existing and future federal, state or local laws and regulations applicable to the related mortgaged property, for example, zoning laws and the Americans With Disabilities Act of 1990, as amended, which requires all public accommodations to meet certain federal requirements related to access and use by persons with disabilities. If a property does not currently comply with that Act, the property owner may be required to incur significant costs in order to effect that compliance. This will reduce the amount of cash flow available to cover other required maintenance and capital improvements and to pay debt service on the mortgage loan(s) that may encumber that property. There can be no assurance that the owner will have sufficient funds to cover the costs necessary to comply with that Act. In addition, noncompliance could result in the imposition of fines by the federal government or an award or damages to private litigants. See “Certain Legal Aspects of the Mortgage Loans—Americans with Disabilities Act”.
Increases in Real Estate Taxes May Reduce Available Funds
Certain of the mortgaged properties securing the mortgage loans have or may in the future have the benefit of reduced real estate taxes in connection with a local government “payment in lieu of taxes” program (often known as a “PILOT” program) or other tax abatement arrangements. Upon expiration of such program or if such programs were otherwise terminated, the related borrower would be required to pay higher, and in some cases substantially higher, real estate taxes. Prior to expiration of such program, the tax benefit to the mortgaged property may decrease throughout the term of the expiration date until the expiration of such program. An increase in real estate taxes may impact the ability of the borrower to pay debt service on the mortgage loan.
See “Description of the Mortgage Pool—Real Estate and Other Tax Considerations” for descriptions of real estate tax matters relating to certain mortgaged properties.
Risks Relating to Tax Credits
With respect to certain mortgage loans secured by multifamily properties, the related property owners may be entitled to receive low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code, which provides a tax credit from the state tax credit allocating agency to owners of multifamily rental properties meeting the definition of low-income housing. The total amount of tax credits to which a property owner is entitled is generally based upon the percentage of total units made available to qualified tenants. The owners of the mortgaged properties subject to the tax credit provisions may use the tax credits to offset income tax that they may otherwise owe and the tax credits may be shared among the equity owners of the project. In general, the tax credits on the applicable mortgage loans will be allocated to equity investors in the borrower.
The tax credit provisions limit the gross rent for each low-income unit. Under the tax credit provisions, a property owner must comply with the tenant income restrictions and rental restrictions over a minimum 15-year compliance period, although the property owner may take the tax credits on an accelerated basis over a 10-year period. In the event a multifamily rental property does not maintain compliance with the tax credit restrictions on tenant income or rental rates or otherwise satisfy the tax credit provisions of the Internal Revenue Code, the property owner may suffer a reduction in the amount of available tax credits and/or face the recapture of all or part of the tax credits related to the period of noncompliance and face the partial recapture of previously taken tax credits. The loss of tax credits, and the possibility of recapture of tax credits already taken, may provide significant incentive for the property owner to keep the related multifamily rental property in compliance with these tax credit restrictions, which may limit the income derived from the related property.
If the issuing entity were to foreclose on such a property it would be unable to take advantage of the tax credits, but could sell the property with the right to the remaining credits to a tax paying investor. Any subsequent
112 |
property owner would continue to be subject to rent limitations unless an election was made to terminate the tax credits, in which case the property could be operated as a market rate property after the expiration of three years. The limitations on rent and on the ability of potential buyers to take advantage of the tax credits may limit the issuing entity’s recovery on that property.
Condemnation of a Mortgaged Property May Adversely Affect Distributions on Certificates
From time to time, there may be condemnations pending or threatened against one or more of the mortgaged properties securing the mortgage loans. The proceeds payable in connection with a total condemnation may not be sufficient to restore the related mortgaged property or to satisfy the remaining indebtedness of the related mortgage loan. The occurrence of a partial condemnation may have a material adverse effect on the continued use of, or income generated by, the affected mortgaged property. Therefore, we cannot assure you that the occurrence of any condemnation will not have a negative impact upon distributions on your offered certificates.
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
Some of the mortgaged properties securing the mortgage loans included in the issuing entity may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable for any reason. For example, a mortgaged property may not be readily convertible due to restrictive covenants related to such mortgaged property, including in the case of mortgaged properties that are subject to a condominium regime or subject to a ground lease, the use and other restrictions imposed by the condominium declaration and other related documents, especially in a situation where a mortgaged property does not represent the entire condominium regime. Additionally, any vacancy with respect to self storage facilities, hospitality properties, independent living facilities, bowling alleys, restaurants, shopping malls, water parks, theater space, music venues, dental or medical offices, health clubs, gas stations, data centers, sound studios and properties with drive-thrus would not be easily converted to other uses due to their unique construction requirements. In addition, converting commercial properties to alternative uses generally requires substantial capital expenditures and could result in a significant adverse effect on, or interruption of, the revenues generated by such properties.
In addition, the limited adaptability of certain shopping malls that have proven unprofitable may result in high (and possibly extremely high) loss severities on mortgage loans secured by those shopping malls. For example, it is possible that a significant amount of advances made by the applicable servicer(s) of a mortgage loan secured by a shopping mall property, combined with low liquidation proceeds in respect of that property, may result in a loss severity exceeding 100% of the outstanding principal balance of that mortgage loan.
Zoning or other restrictions also may prevent alternative uses. See “—Risks Related to Zoning Non-Compliance and Use Restrictions” below.
Lending on Condominium Units Creates Risks for Lenders That Are Not Present When Lending on Non-Condominiums
Some mortgage loans underlying the certificates will be secured by—
· | the related borrower’s interest in a commercial condominium unit or multiple units in a residential condominium project, and |
· | the related voting rights in the owners’ association for the subject building, development or project. |
Condominium interests in buildings and/or other improvements in some cases constitute less than a majority of voting rights and result in the related borrower not having control of the related condominium or owners association. The board of managers or directors of the related condominium generally has discretion to make decisions affecting the condominium building, and we cannot assure you that the related borrower under a mortgage loan secured by one or more interests in that condominium will have any control over decisions made by the related board of managers or directors. Thus, decisions made by that board of managers or directors, including regarding assessments to be paid by the unit owners, insurance to be maintained on the condominium and many other decisions affecting the maintenance of the building, may have a significant impact on the related mortgage loans that are secured by mortgaged properties consisting of such condominium interests. We cannot
113 |
assure you that the related board of managers or directors will always act in the best interests of the related borrower under the related mortgage loans. In addition, with respect to each such mortgage loan, there are certain circumstances when insurance proceeds must be used to repair and restore the related mortgaged property in accordance with the terms of the governing documents for the condominium.
In addition, due to the nature of condominiums, a default on the part of the borrower with respect to such mortgaged properties will not allow the special servicer the same flexibility in realizing on the collateral as is generally available with respect to commercial properties that are not condominium units. The rights of other unit or property owners, the documents governing the management of the condominium units and the state and local laws applicable to condominium units must be considered. In addition, in the event of a casualty with respect to a condominium, due to the possible existence of multiple loss payees on any insurance policy covering such property, there could be a delay in the allocation of related insurance proceeds, if any. Consequently, servicing and realizing upon the collateral consisting of condominium interests could subject the certificateholders to a greater delay, expense and risk than with respect to a mortgage loan secured by a commercial property that is not a condominium unit.
Furthermore, certain properties may be subject to certain low-income housing restrictions in order to remain eligible for low-income housing tax credits or governmental subsidized rental payments that could prevent the conversion of the mortgaged property to alternative uses. The liquidation value of any mortgaged property, subject to limitations of the kind described above or other limitations on convertibility of use, may be substantially less than would be the case if the property were readily adaptable to other uses. See “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Multifamily Rental Properties”.
Lending on Ground Leases Creates Risks for Lenders That Are Not Present When Lending on an Actual Ownership Interest in a Real Property
The encumbered interest will be characterized as a “fee interest” if (i) the borrower has a fee interest in all or substantially all of the mortgaged property (provided that if the borrower has a leasehold interest in any portion of the mortgaged property, such portion is not, individually or in the aggregate, material to the use or operation of the mortgaged property), or (ii) the mortgage loan is secured by the borrower’s leasehold interest in the mortgaged property as well as the borrower’s (or other fee owner’s) overlapping fee interest in the related mortgaged property.
Leasehold mortgage loans are subject to certain risks not associated with mortgage loans secured by a lien on the fee estate of the borrower. The most significant of these risks is that if the related borrower’s leasehold were to be terminated upon a lease default, the lender would lose its security in the leasehold interest. Generally, each related ground lease or a lessor estoppel requires the lessor to give the lender notice of the borrower’s defaults under the ground lease and an opportunity to cure them, permits the leasehold interest to be assigned to the lender or the purchaser at a foreclosure sale, in some cases only upon the consent of the lessor, and contains certain other protective provisions typically included in a “mortgageable” ground lease, although not all these protective provisions are included in each case. If the ground lease does not provide for notice to a lender of a default thereunder on the part of the borrower, together with a reasonable opportunity for the lender to cure the default, the lender may be unable to prevent termination of the lease and may lose its collateral.
Upon the bankruptcy of a lessor or a lessee under a ground lease, the debtor has the right to assume or reject the lease. If a debtor lessor rejects the lease, the lessee has the right pursuant to Section 365(h) of the U.S. bankruptcy code (11 U.S.C. Section 365(h)) to treat such lease as terminated by rejection or remain in possession of its leased premises for the rent otherwise payable under the lease for the remaining term of the ground lease (including renewals) and to offset against such rent any damages incurred due to the landlord’s failure to perform its obligations under the lease. If a debtor lessee/borrower rejects any or all of the lease, the leasehold lender could succeed to the lessee/borrower’s position under the lease only if the lease specifically grants the lender such right. If both the lessor and the lessee/borrower are involved in bankruptcy proceedings, the issuing entity or the trustee on its behalf may be unable to enforce the bankrupt lessee/borrower’s pre-petition agreement to refuse to treat a ground lease rejected by a bankrupt lessor as terminated. In such circumstances, a ground lease could be terminated and the trustee could be deprived of its security interest in the leasehold estate, notwithstanding lender protection provisions contained in the ground lease or in the mortgage.
114 |
Some of the ground leases securing the mortgage loans may provide that the ground rent payable under the related ground lease increases during the term of the mortgage loan. These increases may adversely affect the cash flow and net income of the related borrower.
A leasehold lender could lose its security unless (i) the leasehold lender holds a fee mortgage, (ii) the ground lease requires the lessor to enter into a new lease with the leasehold lender upon termination or rejection of the ground lease, or (iii) the bankruptcy court, as a court of equity, allows the leasehold lender to assume the ground lessee’s obligations under the ground lease and succeed to the ground lessee’s position. Although not directly covered by the 1994 Amendments to the U.S. bankruptcy code, such a result would be consistent with the purpose of the 1994 Amendments to the U.S. bankruptcy code granting the holders of leasehold mortgages permitted under the terms of the lease the right to succeed to the position of a leasehold mortgagor. Although consistent with the U.S. bankruptcy code, such position may not be adopted by the applicable bankruptcy court.
Further, in a decision by the United States Court of Appeals for the Seventh Circuit (Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir. 2003)) the court ruled with respect to an unrecorded lease of real property that where a statutory sale of the fee interest in leased property occurs under Section 363(f) of the U.S. bankruptcy code (11 U.S.C. Section 363(f)) upon the bankruptcy of a landlord, such sale terminates a lessee’s possessory interest in the property, and the purchaser assumes title free and clear of any interest, including any leasehold estates. Pursuant to Section 363(e) of the U.S. bankruptcy code (11 U.S.C. Section 363(a)), a lessee may request the bankruptcy court to prohibit or condition the statutory sale of the property so as to provide adequate protection of the leasehold interest; however, the court ruled that this provision does not ensure continued possession of the property, but rather entitles the lessee to compensation for the value of its leasehold interest, typically from the sale proceeds. While there are certain circumstances under which a “free and clear” sale under Section 363(f) of the U.S. 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) through (4) of the U.S. bankruptcy code otherwise permits the sale), we cannot assure you that those circumstances would be present in any proposed sale of a leased premises. As a result, we cannot assure you that, in the event of a statutory sale of leased property pursuant to Section 363(f) of the U.S. bankruptcy code, the lessee will be able to maintain possession of the property under the ground lease. In addition, we cannot assure you that the lessee and/or the lender will be able to recoup the full value of the leasehold interest in bankruptcy court. Most of the ground leases contain standard protections typically obtained by securitization lenders, however, certain of the ground leases with respect to a mortgage loan included in the Issuing Entity may not.
With respect to certain of the mortgage loans, the related borrower may have given to certain lessors under the related ground lease a right of first refusal in the event a sale is contemplated or an option to purchase all or a portion of the mortgaged property and these provisions, if not waived, may impede the mortgagee’s ability to sell the related mortgaged property at foreclosure or adversely affect the foreclosure process.
See “Certain Legal Aspects of the Mortgage Loans—Bankruptcy Issues”.
Leased Fee Properties Have Special Risks
Land subject to a ground lease presents special risks. In such cases, where the borrower owns the fee interest but not the related improvements, such borrower will only receive the rental income from the ground lease and not from the operation of any related improvements. Any default by the ground lessee would adversely affect the borrower’s ability to make payments on the related mortgage loan. While ground leases may contain certain restrictions on the use and operation of the related mortgaged property, the ground lessee generally enjoys the rights and privileges of a fee owner, including the right to construct, alter and remove improvements and fixtures from the land and to assign and sublet the ground leasehold interest. However, the borrower has the same risk of interruptions in cash flow if such ground lessee defaults under its lease as it would on another single tenant commercial property, without the control over the premises that it would ordinarily have as landlord. In addition, in the event of a condemnation, the borrower would only be entitled to an allocable share of the condemnation proceeds. Furthermore, the insurance requirements are often governed by the terms of the ground lease and, in some cases, certain subtenants may be allowed to self-insure. The ground lessee is commonly permitted to mortgage its ground leasehold interest, and the leasehold lender will often have notice and cure rights with respect to material defaults under the ground lease. In addition, leased fee interests are less frequently purchased and sold than other interests in commercial real property. It may be difficult for the issuing entity, if it became a foreclosing lender, to sell the fee interests if the tenant and its improvements remain on the land. In
115 |
addition, if the improvements are nearing the end of their useful life, there could be a risk that the tenant defaults in lieu of performing any obligations it may otherwise have to raze the structure and return the land in raw form to the developer. Furthermore, leased fee interests are generally subject to the same risks associated with the property type for which the ground lessee operates the premises because that use is likely a significant source of revenue for the payment of ground rent.
Risks Related to Zoning Non-Compliance and Use Restrictions
Certain of the mortgaged properties may not comply with current zoning laws, including density, use, parking, height, landscaping, open space and set back requirements, due to changes in zoning requirements after such mortgaged properties were constructed. These properties, as well as those for which variances or special permits were issued or for which non-conformity with current zoning laws is otherwise permitted, are considered to be a “legal non-conforming use” and/or the improvements are considered to be “legal non-conforming structures.” This means that the borrower is not required to alter its structure to comply with the existing or new law; however, the borrower may not be able to rebuild the premises “as-is” in the event of a substantial casualty loss. This may adversely affect the cash flow of the property following the loss. If a substantial casualty were to occur, we cannot assure you that insurance proceeds would be available to pay the mortgage loan in full. In addition, if a non-conforming use were to be discontinued and/or the property were repaired or restored in conformity with the current law, the value of the property or the revenue producing potential of the property may not be equal to that before the casualty.
In addition, certain of the mortgaged properties that do not conform to current zoning laws may not be “legal non-conforming uses” or “legal non-conforming structures.” The failure of a mortgaged property to comply with zoning laws or to be a “legal non-conforming use” or “legal non-conforming structure” may adversely affect the market value of the mortgaged property or the borrower’s ability to continue to use it in the manner it is currently being used or may necessitate material additional expenditures to remedy non-conformities. In some cases, the related borrower has obtained law and ordinance insurance to cover additional costs that result from rebuilding or building improvements at the mortgaged property in accordance with current zoning requirements. However, if as a result of the applicable zoning laws the rebuilt improvements are smaller or less attractive to tenants than the original improvements, the resulting loss in income will generally not be covered by law and ordinance insurance.
In addition, certain of the mortgaged properties may be subject to certain use restrictions and/or operational requirements imposed pursuant to development agreements, ground leases, restrictive covenants, reciprocal easement agreements or operating agreements or historical landmark designations or, in the case of those mortgaged properties that are condominiums, condominium declarations or other condominium use restrictions or regulations, especially in a situation where the mortgaged property does not represent the entire condominium building. Such use restrictions could include, for example, limitations on the character of the improvements or the properties, limitations affecting noise and parking requirements, among other things, and limitations on the borrowers’ right to operate certain types of facilities within a prescribed radius. These limitations impose upon the borrower stricter requirements with respect to repairs and alterations, including following a casualty loss. These limitations could adversely affect the ability of the related borrower to lease the mortgaged property on favorable terms, thus adversely affecting the borrower’s ability to fulfill its obligations under the related mortgage loan.
See“Description of the Mortgage Pool—Zoning and Use Restrictions” for examples of mortgaged properties that are subject to restrictions relating to the use of the mortgaged properties or have other material zoning issues.
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.
116 |
State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed-in-Lieu of Foreclosure and Reduce Net Proceeds
Many jurisdictions impose recording taxes on mortgages which, if not paid at the time of the recording of the mortgage, may impair the ability of the lender to foreclose the mortgage. Such taxes, interest, and penalties could be significant in amount and would, if imposed, reduce the net proceeds realized by the issuing entity in liquidating the real property securing the related mortgage loan.
Earthquake, Flood and Other Insurance May Not Be Available or Adequate
Natural disasters, including earthquakes, floods and hurricanes, may adversely affect the mortgaged properties securing the underlying mortgage loans. For example, real properties located in California may be more susceptible to certain hazards, such as earthquakes or widespread fires, than properties in other parts of the country, and real properties located in coastal states generally may be more susceptible to hurricanes than properties in other parts of the country. Hurricanes and related windstorms, floods and tornadoes have caused extensive and catastrophic physical damage in and to coastal and inland areas located in the Gulf Coast region of the United States and certain other parts of the southeastern United States.
Although the mortgaged properties are required to be insured, or self-insured by a sole tenant of a related building or group of buildings, against certain risks, there is a possibility of casualty loss with respect to the mortgaged properties for which insurance proceeds may not be adequate or which may result from risks not covered by insurance.
Furthermore, with respect to certain mortgage loans, the insurable value of the related mortgaged property as of the origination date of the related mortgage loan was lower than the principal balance of the related mortgage loan. In the event of a casualty when a borrower is not required to rebuild or cannot rebuild, we cannot assure you that the insurance required with respect to the related mortgaged property will be sufficient to pay the related mortgage loan in full and there is no “gap” insurance required under such mortgage loan to cover any difference. In those circumstances, a casualty that occurs near the maturity date may result in an extension of the maturity date of the mortgage loan if the special servicer, in accordance with the servicing standard, determines that such extension was in the best interest of certificateholders.
In addition, certain types of mortgaged properties, such as manufactured housing and recreational vehicle communities, have few or no insurable buildings or improvements and thus do not have casualty insurance or low limits of casualty insurance in comparison with the related mortgage loan balances.
In addition, hazard insurance policies will typically contain co-insurance clauses that in effect require an insured at all times to carry insurance of a specified percentage, generally 80% to 90%, of the full replacement value of the improvements on the related mortgaged property in order to recover the full amount of any partial loss. As a result, even if insurance coverage is maintained, if the insured’s coverage falls below this specified percentage, those clauses generally provide that the insurer’s liability in the event of partial loss does not exceed the lesser of (1) the replacement cost of the improvements less physical depreciation and (2) that proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of those improvements.
Four (4) of the mortgaged properties, securing approximately 6.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, are located in areas that are considered a high earthquake risk (seismic zones 3 or 4). Seismic reports were prepared with respect to these mortgaged properties, and based on those reports, no mortgaged property has a seismic expected loss of greater than 16%.
The mortgage loans do not require flood insurance on the related mortgaged properties unless they are in a flood zone and flood insurance is available; and, in certain instances, even where the related mortgaged property was in a flood zone and flood insurance was available, flood insurance was not required.
We cannot assure you that the borrowers will in the future be able to comply with requirements to maintain adequate insurance with respect to the mortgaged properties, and any uninsured loss could have a material adverse impact on the amount available to make payments on the related mortgage loan, and consequently, the offered certificates. As with all real estate, if reconstruction (for example, following fire or other casualty) or any major repair or improvement is required to the damaged property, changes in laws and governmental regulations
117 |
may be applicable and may materially affect the cost to, or ability of, the borrowers to effect such reconstruction, major repair or improvement. As a result, the amount realized with respect to the mortgaged properties, and the amount available to make payments on the related mortgage loan, and consequently, the offered certificates, could be reduced. In addition, we cannot assure you that the amount of insurance required or provided would be sufficient to cover damages caused by any casualty, or that such insurance will be available in the future at commercially reasonable rates. See also Sponsor Representations and Warranties No. 16 (Insurance) on Annex E-1 to this prospectus and any related exceptions on Annex E-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex E-1 to this prospectus).
Lack of Insurance Coverage Exposes the Trust to Risk for Particular Special Hazard Losses
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of a property by fire, lightning, explosion, smoke, windstorm and hail, subject to the conditions and exclusions specified in the related policy. Most such insurance policies typically do not cover any physical damage resulting from, among other things:
· | war, |
· | riot, strike and civil commotion, |
· | terrorism, |
· | nuclear, biological or chemical materials, |
· | revolution, |
· | governmental actions, |
· | floods and other water-related causes, |
· | earth movement, including earthquakes, landslides and mudflows, |
· | wet or dry rot, |
· | mold, |
· | vermin, and |
· | domestic animals. |
Unless the related mortgage loan documents specifically require the borrower to insure against physical damage arising from these causes, then the resulting losses may be borne by you as a holder of offered certificates.
There is also a possibility of casualty losses on a real property for which insurance proceeds, together with land value, may not be adequate to pay the mortgage loan in full or rebuild the improvements. Consequently, there can be no assurance that each casualty loss incurred with respect to a real property securing one of the mortgage loans included in one of our trusts will be fully covered by insurance or that the mortgage loan will be fully repaid in the event of a casualty.
Furthermore, various forms of insurance maintained with respect to any of the real properties for the mortgage loans included in one of our trusts, 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 loans in that trust. As a result of total limits under any of those blanket policies, losses at other properties covered by the blanket insurance policy may reduce the amount of insurance coverage with respect to a property securing one of the loans in our trust.
118 |
Terrorism Insurance May Not Be Available for All Mortgaged Properties
The occurrence or the possibility of terrorist attacks could (1) lead to damage to one or more of the mortgaged properties if any terrorist attacks occur or (2) result in higher costs for security and insurance premiums or diminish the availability of insurance coverage for losses related to terrorist attacks, particularly for large properties, which could adversely affect the cash flow at those mortgaged properties.
After the September 11, 2001 terrorist attacks in New York City and the Washington, D.C. area, all forms of insurance were impacted, particularly from a cost and availability perspective, including comprehensive general liability and business interruption or rent loss insurance policies required by typical mortgage loans. To give time for private markets to develop a pricing mechanism for terrorism risk and to build capacity to absorb future losses that may occur due to terrorism, the Terrorism Risk Insurance Act of 2002 was enacted on November 26, 2002, establishing the Terrorism Insurance Program. The Terrorism Insurance Program was extended through December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and was subsequently reauthorized on January 12, 2015 for a period of six years through December 31, 2020 pursuant to the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”).
The Terrorism Insurance Program requires insurance carriers to provide terrorism coverage in their basic “all-risk” policies. Any commercial property and casualty terrorism insurance exclusion that was in force on November 26, 2002 is automatically void to the extent that it excluded losses that would otherwise be insured losses. Any state approval of those types of exclusions in force on November 26, 2002 is also void.
Under the Terrorism Insurance Program, the federal government shares in the risk of losses occurring within the United States resulting from acts committed in an effort to influence or coerce United States civilians or the United States government. The federal share of compensation for insured losses of an insurer equals 85% (subject to annual 1% decreases beginning in 2016 until such percentage equals 80%) of the portion of such insured losses that exceed a deductible equal to 20% of the value of the insurer’s direct earned premiums over the calendar year immediately preceding that program year. Federal compensation in any program year is capped at $100 billion (with insurers being liable for any amount that exceeds such cap), and no compensation is payable with respect to a terrorist act unless the aggregate industry losses relating to such act exceed $100 million (subject to annual $20 million increases beginning in 2016 until such threshold equals $200 million). The Terrorism Insurance Program does not cover nuclear, biological, chemical or radiological attacks. Unless a borrower obtains separate coverage for events that do not meet the thresholds or other requirements above, such events will not be covered.
If the Terrorism Insurance Program is not reenacted after its expiration in 2020, premiums for terrorism insurance coverage will likely increase and the terms of such insurance policies may be materially amended to increase stated exclusions or to otherwise effectively decrease the scope of coverage available (perhaps to the point where it is effectively not available). In addition, to the extent that any insurance policies contain “sunset clauses” (i.e., clauses that void terrorism coverage if the federal insurance backstop program is not renewed), then such policies may cease to provide terrorism insurance upon the expiration of the Terrorism Insurance Program. We cannot assure you that the Terrorism Insurance Program or any successor program will create any long term changes in the availability and cost of such insurance. Moreover, future legislation, including regulations expected to be adopted by the Treasury Department pursuant to TRIPRA, may have a material effect on the availability of federal assistance in the terrorism insurance market. In addition, the failure to maintain such terrorism insurance may constitute a default under the related mortgage loan. Even if terrorism insurance is required by the mortgage loan documents for a mortgage loan, that requirement may be subject to a cap on the cost of the premium for terrorism insurance that a borrower is required to pay or a commercially reasonable standard on the availability or cost of the insurance. See “Significant Loan Summaries” in Annex B to this prospectus for a description of any requirements for terrorism insurance for the largest 10 mortgage loans by aggregate principal balance of the pool of mortgage loans as of the cut-off date. To the extent that uninsured or underinsured casualty losses occur with respect to the related mortgaged properties, losses on the mortgage loans may result.
Other mortgaged properties securing mortgage loans may also be insured under a blanket policy or self-insured or insured by a sole tenant. See “—Risks Associated with Blanket Insurance Policies or Self-Insurance” below.
119 |
We cannot assure you that terrorism insurance or the Terrorism Insurance Program will be available or provide sufficient protection against risks of loss on the mortgaged properties resulting from acts of terrorism.
As a result of any of the foregoing, the amount available to make distributions on your certificates could be reduced.
Risks Associated with Blanket Insurance Policies or Self-Insurance
Certain of the mortgaged properties are covered by blanket insurance policies, which also cover other properties of the related borrower or its affiliates (including certain properties in close proximity to the mortgaged properties). In the event that such policies are drawn on to cover losses on such other properties, the amount of insurance coverage available under such policies would thereby be reduced and could be insufficient to cover each mortgaged property’s insurable risks. In addition, with respect to some of the mortgaged properties, a sole or significant tenant is allowed to provide self-insurance against risks.
Additionally, if the mortgage loans that allow coverage under blanket insurance policies are part of a group of mortgage loans with related borrowers, then all of the related mortgaged properties may be covered under the same blanket policy, which may also cover other properties owned by affiliates of such borrowers.
Certain mortgaged properties may also be insured or self-insured by a sole or significant tenant, as further described under “Description of the Mortgage Pool—Insurance Considerations”.
The Mortgage Loan Sellers, the Sponsors and the Depositor Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans
In the event of the bankruptcy, insolvency, receivership or conservatorship of an originator, a mortgage loan seller or the depositor (or certain affiliates thereof), it is possible that the issuing entity’s right to payment from or ownership of certain of the mortgage loans could be challenged. If such challenge is successful, payments on the offered certificates would be reduced or delayed. Even if the challenge is not successful, payments on the offered certificates would be delayed while a court resolves the claim.
An opinion of counsel will be rendered on the closing date to the effect that the transfer of the applicable mortgage loans by each mortgage loan seller to the depositor would generally be respected as a sale in the event of the bankruptcy or insolvency of such mortgage loan seller. Such opinions, however, are subject to various assumptions and qualifications, and there can be no assurance that a bankruptcy trustee, if applicable, or other interested party will not attempt to challenge the issuing entity’s right to payment with respect to the related mortgage loans. Legal opinions do not provide any guaranty as to what any particular court would actually decide, but rather an opinion as to the decision a court would reach if the issues were competently presented and the court followed existing precedent as to legal and equitable principles applicable in bankruptcy cases. In this regard, legal opinions on bankruptcy law matters have inherent limitations primarily because of the pervasive equity powers of bankruptcy courts, the overriding goal of reorganization to which other legal rights and other policies may be subordinated, the potential relevance to the exercise of judicial discretion of future arising facts and circumstances, and the nature of the bankruptcy process. As a result, the Federal Deposit Insurance Corporation (the “FDIC”), a creditor, a bankruptcy trustee or another interested party, including an entity transferring a mortgage loan as debtor-in-possession, could still attempt to assert that the transfer of a mortgage loan was not a sale. If such party’s challenge were successful, payments on the certificates would be reduced or delayed. Even if the challenge were not successful, payments on the certificates would be delayed while a court resolves the claim.
Goldman Sachs Mortgage Company, a sponsor and an originator, is an indirect, wholly-owned subsidiary of Goldman Sachs Bank USA (“GS Bank”), a New York State chartered bank, the deposits of which are insured by the FDIC. If GS Bank were to become subject to receivership, the proceeding would be administered by the FDIC under the Federal Deposit Insurance Act (the “FDIA”); likewise, if GS Bank were to become subject to conservatorship, the agency appointed as conservator would likely be the FDIC as well. The Bank of New York Mellon, a sponsor and an originator, is a New York State chartered bank, the deposits of which are insured by the FDIC. If The Bank of New York Mellon were to become subject to receivership, the proceeding would be administered by the FDIC under the FDIA; likewise, if The Bank of New York Mellon were to become subject to conservatorship, the agency appointed as conservator would likely be the FDIC as well.
120 |
The FDIA gives the FDIC the power to disaffirm or repudiate contracts to which a bank is party at the time of receivership or conservatorship and the performance of which the FDIC determines to be burdensome, in which case the counterparty to the contract has a claim for payment by the receivership or conservatorship estate of “actual direct compensatory damages” as of the date of receivership or conservatorship. In addition, the FDIC has adopted a rule, substantially revised and effective January 1, 2011, establishing a safe harbor (the “FDIC Safe Harbor”) from its repudiation powers for securitizations meeting the requirements of the rule (12 C.F.R. § 360.6). Neither the transfer of the applicable mortgage loans by Goldman Sachs Mortgage Company nor the transfer of the applicable mortgage loans by The Bank of New York Mellon to the depositor is expected to qualify for the FDIC Safe Harbor. However, the FDIC Safe Harbor is non-exclusive.
The issuing entity has been organized as a common law trust, and as such is not eligible to be a “debtor” under the federal bankruptcy laws. If the issuing entity were instead characterized as a “business trust” it could qualify as a debtor under those laws. Bankruptcy courts look at various considerations in making this determination, so it is not possible to predict with any certainty whether or not the issuing entity would be characterized as a “business trust.” If a bankruptcy court were to determine that the issuing entity was a “business trust”, it is possible that payments on the certificates would be delayed while the court resolved the issue.
Furthermore, Title II of the Dodd-Frank Act provides for an orderly liquidation authority (“OLA”) under which the FDIC can be appointed as receiver of certain systemically important non-bank financial companies and their direct or indirect subsidiaries in certain cases. We make no representation as to whether this would apply to any of the sponsors. In January 2011, a former acting general counsel of the FDIC issued a letter in which he expressed his view that, under then-existing regulations, the FDIC, as receiver under the OLA, would not, in the exercise of its OLA repudiation powers, recover as property of a financial company assets transferred by the financial company,provided that the transfer satisfies the conditions for the exclusion of assets from the financial company’s estate under the bankruptcy code. The letter further noted that, while the FDIC staff may be considering recommending further regulations under OLA, its author (the former acting general counsel referred to above) would recommend that such regulations incorporate a 90 day transition period for any provisions affecting the FDIC’s statutory power to disaffirm or repudiate contracts. If, however, the FDIC were to adopt a different approach than that described in the former acting general counsel’s letter, delays or reductions in payments on the offered certificates would occur. As such, we cannot assure you that a bankruptcy would not result in a delay or reduction in payments on the certificates.
The Borrower’s Form of Entity May Cause Special Risks
The borrowers are legal entities rather than individuals. Mortgage loans made to legal entities may entail greater risks of loss than those associated with mortgage loans made to individuals. For example, a legal entity, as opposed to an individual, may be more inclined to seek legal protection from its creditors under the bankruptcy laws. Unlike individuals involved in bankruptcies, most entities generally, but not in all cases, do not have personal assets and creditworthiness at stake. The terms of certain of the mortgage loans require that the borrowers be single-purpose entities, however, we cannot assure you that such borrowers will comply with such requirements. Furthermore, in many cases such borrowers are not required to observe all covenants and conditions which typically are required in order for such borrowers to be viewed under standard rating agency criteria as “special purpose entities.”
Although a borrower may currently be a single-purpose entity, in certain cases the borrowers were not originally formed as single-purpose entities, but at origination of the related mortgage loan (or loan combination, as applicable) their organizational documents were amended. That borrower may have previously owned property other than the related mortgaged property and may not have observed all covenants that typically are required to consider a borrower a “single-purpose entity” and thus may have liabilities arising from events prior to becoming a single-purpose entity. If a borrower has owned property other than the related mortgaged property, engaged in a business other than the operation of the related mortgaged property or even owned and/or operated the related mortgaged property for a material period in advance of the origination of the related mortgage loan, that borrower may be subject to liabilities arising out of its activities prior to the origination of the related mortgage loan, including liabilities that may be unrelated to the related mortgaged property. Furthermore, 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.
In addition, if an underlying mortgage loan is secured by a mortgage on both the related borrower’s leasehold interest in the related mortgaged property and the underlying fee interest in such property, the related
121 |
borrower may be a special purpose entity, but the owner and pledgor of the related fee interest may not be a special purpose entity.
Also any borrower, even an entity structured as a special purpose entity, as an owner of real estate, will be subject to certain potential liabilities and risks as an owner of real estate. We cannot assure you that any borrower will not file for bankruptcy protection or that creditors of a borrower or a corporate or individual general partner or managing member of a borrower will not initiate a bankruptcy or similar proceeding against such borrower or corporate or individual general partner or managing member.
With respect to those borrowers that are structured as special purposes entities, although the terms of the borrower’s organizational documents and/or related loan documents require that the related borrower covenants to be a special purpose entity, in some cases those borrowers are not required to observe all covenants and conditions that typically are required in order for such an entity to be viewed under the standard rating agency criteria as a special purpose entity.
In some cases a borrower may be required to have independent directors, managers or trustees in order to mitigate the risk of a voluntary bankruptcy by that borrower even though it is solvent. However, any director, manager or trustee, even one that is otherwise independent of the applicable borrower and its parent entity, may determine in the exercise of its fiduciary duties to the applicable borrower that a bankruptcy filing is an appropriate course of action to be taken by the applicable borrower. Such determination might take into account the interests and financial condition of affiliates of the applicable borrower, including its parent entity. Accordingly, the financial distress of an affiliate of the borrower on any mortgage loan in one of our trusts might increase the likelihood of a bankruptcy filing by that borrower.
Furthermore, with respect to any affiliated borrowers, creditors of a common parent in bankruptcy may seek to consolidate the assets of such borrowers with those of the parent. Consolidation of the assets of such borrowers would likely have an adverse effect on the funds available to make distributions on your certificates, and may lead to a downgrade, withdrawal or qualification of the ratings of your certificates.
Some of the mortgage loans underlying the offered certificates may have borrowers that are individuals or, alternatively, are entities that either have not been structured to diminish the likelihood of their becoming bankrupt or do not satisfy all the characteristics of special purpose entities. In general, as a result of a borrower not being a special purpose entity or not being limited to owning the related mortgaged property, the borrower may be engaged in activities unrelated to the subject mortgaged property and may incur indebtedness or suffer liabilities with respect to those activities. Further, some of the borrowing entities may have been in existence and conducting business prior to the origination of the related underlying mortgage loans, may own other property that is not part of the collateral for the related underlying mortgage loans and, further, may not have always satisfied all the characteristics of special purpose entities even if they currently do so. This could negatively impact the borrower’s financial conditions, and thus its ability to pay amounts due and owing under the subject underlying mortgage loan. The related mortgage documents and/or organizational documents of those borrowers may not contain the representations, warranties and covenants customarily made by a borrower that is a special purpose entity, such as limitations on indebtedness and affiliate transactions and restrictions on the borrower’s ability to dissolve, liquidate, consolidate, merge, sell all or any material portion of its assets or amend its organizational documents. These provisions are designed to mitigate the possibility that the borrower’s financial condition would be adversely impacted by factors unrelated to the related mortgaged property and the related mortgage loan.
Borrowers not structured as bankruptcy-remote entities may be more likely to become insolvent or the subject of a voluntary or involuntary bankruptcy proceeding because those borrowers may be:
· | operating entities with businesses distinct from the operation of the property with the associated liabilities and risks of operating an ongoing business; and |
· | individuals that have personal liabilities unrelated to the property. |
In addition, certain of the borrowers and their owners may not have an independent director whose consent would be required to file a bankruptcy petition on behalf of the borrower. One of the purposes of an independent director is to avoid a bankruptcy petition filing that is intended solely to benefit a borrower’s affiliate and is not justified by the borrower’s own economic circumstances. Therefore, borrowers without an independent director
122 |
may be more likely to file or be subject to voluntary or involuntary bankruptcy petitions which may adversely affect payments on your certificates.
The mortgage loans underlying the offered certificates may have borrowers that own the related mortgaged properties as tenants-in-common or may permit the related borrowers to convert into a tenant-in-common structure in the future. Generally, in tenant-in-common ownership structures, each tenant-in-common owns an undivided share in the subject real property. If a tenant-in-common desires to sell its interest in the subject real property and is unable to find a buyer or otherwise desires to force a partition, the tenant-in-common has the ability to request that a court order a sale of the subject real property and distribute the proceeds to each tenant-in-common owner proportionally. To reduce the likelihood of a partition action, a tenant-in-common borrower may be required to waive its partition right. However, there can be no assurance that, if challenged, this waiver would be enforceable or that it would be enforced in a bankruptcy proceeding.
The enforcement of remedies against tenant-in-common borrowers may be prolonged because each time a tenant-in-common borrower files for bankruptcy, the bankruptcy court stay is reinstated. While a lender may seek to mitigate this risk after the commencement of the first bankruptcy of a tenant-in-common by commencing an involuntary proceeding against the other tenant-in-common borrowers and moving to consolidate all those cases, there can be no assurance that a bankruptcy court would consolidate those separate cases. Additionally, tenant-in-common borrowers may be permitted to transfer portions of their interests in the subject mortgaged property to numerous additional tenant-in-common borrowers.
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, a significant delay in recovery against the tenant-in-common borrowers, 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 these mortgage loans may be special purpose entities and some of those tenants-in-common may be individuals.
In certain instances, borrowers under mortgage loans use a Delaware statutory trust structure in order to gain certain tax free exchange treatment for property of like kind under Section 1031 of the Internal Revenue Code. These borrowers can be restricted in their ability to actively operate a property, including with respect to loan work-outs, leasing and re-leasing, making material improvements and other material actions affecting the related mortgaged property. In the case of a mortgaged property that is owned by a Delaware statutory trust, there is a risk that obtaining the consent of the holders of the beneficial interests in the Delaware statutory trust will be time consuming and cause delays with respect to the taking of certain actions by or on behalf of the borrower, including with respect to the related mortgaged property.
See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Single-Purpose Entity Covenants”, “—Statistical Characteristics of the Mortgage Loans—Tenancies-in-Common”, and “Certain Legal Aspects of the Mortgage Loans—Bankruptcy Issues”.
Other Debt of the Borrower or Ability to Incur Other Financings Entails Risk
When a borrower (or its constituent members) also has one or more other outstanding loans (even if they arepari passu, subordinated, mezzanine or unsecured loans or another type of equity pledge), the issuing entity is subjected to additional risk such as:
· | the borrower (or its constituent members) may have difficulty servicing and repaying multiple loans; |
· | the existence of another loan will generally also make it more difficult for the borrower to obtain refinancing of the related mortgage loan (or loan combination, if applicable) or sell the related mortgaged property and may thereby jeopardize repayment of the mortgage loan (or loan combination, if applicable); |
· | the need to service additional debt may reduce the cash flow available to the borrower to operate and maintain the mortgaged property and the value of the mortgaged property may decline as a result; |
· | if a borrower (or its constituent members) defaults on its mortgage loan and/or any other loan, actions taken by other lenders such as a suit for collection, foreclosure or an involuntary petition for |
123 |
bankruptcy against the borrower could impair the security available to the issuing entity, including the mortgaged property, or stay the issuing entity’s ability to foreclose during the course of the bankruptcy case; |
· | the bankruptcy of another lender also may operate to stay foreclosure by the issuing entity; and |
· | the issuing entity may also be subject to the costs and administrative burdens of involvement in foreclosure or bankruptcy proceedings or related litigation. |
With respect to any split mortgage loan, although each related companion loan is not an asset of the issuing entity, the related borrower is still obligated to make interest and principal payments on each related companion loan. As a result, the issuing entity is subject to additional risks, including:
· | the risk that the necessary maintenance of the related mortgaged property could be deferred to allow the borrower to pay the required debt service on these other obligations and that the value of the mortgaged property may fall as a result; and |
· | the risk that it may be more difficult for the borrower to refinance these loans or to sell the related mortgaged property for purposes of making any balloon payment on the entire balance of such loans and the related additional debt at maturity. |
With respect to mezzanine financing, while a mezzanine lender has no security interest in the related mortgaged properties, a default under a mezzanine loan could cause a change in control of the related borrower. With respect to mortgage loans that permit mezzanine financing, the relative rights of the mortgagee and the related mezzanine lender will generally be set forth in an intercreditor agreement, which agreements typically provide that the rights of the mezzanine lender (including the right to payment) against the borrower and mortgaged property are subordinate to the rights of the mortgage lender and that the mezzanine lender may not take any enforcement action against the mortgage borrower and mortgaged property.
In addition, the mortgage loan documents related to certain mortgage loans may allow the related borrower to employ so-called “preferred equity” structures, where one or more special limited partners or members receive a preferred return in exchange for an infusion of capital or other type of equity pledge that may require payments of excess cash flow. Such arrangements can present risks that resemble mezzanine debt, including dilution of the sponsor’s equity in the mortgaged property, stress on the cash flow in the form of a preferred return or excess cash payments, and/or potential changes in the management of the related mortgaged property in the event the preferred return is not satisfied.
For additional information, see“Description of the Mortgage Pool—Additional Indebtedness”, “—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
Litigation and Other Legal Proceedings May Adversely Affect a Borrower’s Ability to Repay Its Mortgage Loan
There may be, and there may exist from time to time, legal proceedings pending or threatened against the borrowers, the property sponsors and the managers of the mortgaged properties and their respective affiliates relating to their respective businesses or arising out of their ordinary course of business. We have not undertaken a search for all litigation or disputes that relate to the borrowers, property sponsors or managers for the mortgaged properties and their respective affiliates. Potential investors are advised and encouraged to perform their own searches related to such matters to the extent relevant to their investment decision. It is possible that any such litigation or dispute or any settlement of any litigation or dispute may have a material adverse effect on a borrower’s ability to meet its obligations under the related mortgage loan and, therefore, on distributions on your certificates.
The owner of a multifamily or commercial property may be a defendant in a litigation arising out of, among other things, the following:
· | breach of contract involving a tenant, a supplier or other party; |
124 |
· | negligence resulting in a personal injury; or |
· | responsibility for an environmental problem. |
Any such litigation or dispute may divert the owner’s attention from operating its property. In addition, any such litigation or dispute may materially impair distributions to certificateholders if borrowers or property sponsors must use property income or other income to pay settlements, judgments, legal fees or litigation costs. We cannot assure you that any litigation or dispute or any settlement of any litigation or dispute will not have a material adverse effect on your investment.
In addition, in the event the owner of a borrower experiences financial problems, we cannot assure you that such owner would not attempt to take actions with respect to the mortgaged property that may adversely affect the borrower’s ability to fulfill its obligations under the related mortgage loan. See “Description of the Mortgage Pool—Litigation Considerations”.
Reserves to Fund Certain Necessary Expenditures Under the Mortgage Loans May Be Insufficient for the Purpose for Which They Were Established
The borrowers under some of the mortgage loans made upfront deposits, and/or agreed to make ongoing deposits, to reserves for the payment of various anticipated or potential expenditures, such as (but notlimited to) the costs of tenant improvements and leasing commissions, recommended immediate repairs and seasonality reserves. We cannot assure you that any such reserve will be sufficient, that borrowers will reserve the required amount of funds or that cash flow from the mortgaged properties will be sufficient to fully fund such reserves. See Annex A for additional information with respect to the reserves established for the mortgage loans.
A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans
Numerous statutory provisions, including the Bankruptcy Code and state laws affording relief to debtors, may interfere with and delay the ability of a secured mortgage lender to obtain payment of a loan, to realize upon collateral and/or to enforce a deficiency judgment. For example, under the Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of a bankruptcy petition, and, often, no interest or principal payments are made during the course of the bankruptcy proceeding. Also, under federal bankruptcy law, the filing of a petition in bankruptcy by or on behalf of a junior lien holder may stay the senior lender from taking action to foreclose out such junior lien. Certain of the mortgage loans have sponsors that have previously filed bankruptcy and we cannot assure you that such sponsors will not be more likely than other sponsors to utilize their rights in bankruptcy in the event of any threatened action by the mortgagee to enforce its rights under the related mortgage loan documents. As a result, the issuing entity’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed. See “—Other Debt of the Borrower or Ability to Incur Other Financings Entails Risk” above, “Description of the Mortgage Pool—Default History, Bankruptcy Issues and Other Proceedings” and “Certain Legal Aspects of the Mortgage Loans—Bankruptcy Issues”. In addition, if a court determines that the value of a real property is less than the principal balance of the mortgage loan it secures, the court may reduce the amount of secured indebtedness to the then-value of the property. This would make the lender a general unsecured creditor for the difference between the then-value of the property and the amount of its outstanding mortgage indebtedness.
A bankruptcy court also may:
· | grant a debtor a reasonable time to cure a payment default on a mortgage loan; |
· | reduce monthly payments due under a mortgage loan; |
· | change the rate of interest due on a mortgage loan; or |
· | otherwise alter a mortgage loan’s repayment schedule. |
125 |
Furthermore, the borrower, as debtor-in-possession, or its bankruptcy trustee has special powers to avoid, subordinate or disallow debts. In some circumstances, the claims of a secured lender, such as the trust, may be subordinated to financing obtained by a debtor-in-possession subsequent to its bankruptcy.
Under federal bankruptcy law, a lender may be stayed from enforcing a borrower’s assignment of rents and leases. Federal bankruptcy law also may interfere with a lender’s ability to enforce lockbox requirements. The legal proceedings necessary to resolve these issues can be time consuming and may significantly delay the receipt of rents. Rents also may escape an assignment to the extent they are used by borrower to maintain its property or for other court authorized expenses.
As a result of the foregoing, the related trust’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the total amount ultimately collected may be substantially less than the amount owed.
Additionally, the courts of any state may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the action unconscionable. See “Certain Legal Aspects of the Mortgage Loans—Foreclosure” in this in this prospectus.
Additionally, in February 2012, a bill was passed by the Georgia Senate and introduced in the Georgia State House of Representatives that would limit rights of holders that acquired loans for less than par, by limiting the amount that a purchaser of debt (including the issuing entity) could collect from a guarantor of a commercial mortgage loan to the lesser of the purchase price paid for the debt or the maximum amount of the guarantee. The bill would apply both retroactively and prospectively to all types of loans made to all types of borrowers and presumably to the mortgage loans. If enacted, legislation of this type would appear to interfere with established contractual rights, and as such may be unconstitutional insofar as it would be applied to debt sold or transferred prior to the legislation’s enactment date. This type of measure could undermine the value of the mortgage loans and the special servicer’s workout efforts including, without limitation, the ability to collect on a guaranty or to use the threat of the same as a mechanism to compel a borrower to engage in a workout or provide a deed-in-lieu of foreclosure. The legislative session of the Georgia State House of Representatives ended without a vote on the bill. As a result, the bill died; however, we cannot assure you that a similar bill will not be re-introduced and passed in Georgia or in any other state in future legislative sessions.
See also “—Performance of the Certificates Will Be Highly Dependent on the Performance of Tenants and Tenant Leases”and “—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” above.
Bankruptcy of a Servicer May Adversely Affect Collections on the Mortgage Loans and the Ability to Replace the Servicer
A servicer for the mortgage loans underlying the offered certificates (i.e., the master servicer or the special servicer) may be eligible to become a debtor under the U.S. bankruptcy code or enter into receivership under the Federal Deposit Insurance Act. If a servicer were to become a debtor under the U.S. bankruptcy code or enter into receivership under the Federal Deposit Insurance Act, although the pooling and servicing agreement provides that such an event would be a termination event entitling the trust to terminate the servicer, the provision would most likely not be enforceable. However, a rejection of the servicing agreement by the servicer in a bankruptcy proceeding or repudiation of the pooling and servicing agreement in a receivership under the Federal Deposit Insurance Act would be treated as a breach of the pooling and servicing agreement and give the trust a claim for damages and the ability to appoint a successor servicer. An assumption under the U.S. bankruptcy code would require the servicer to cure its pre-bankruptcy defaults, if any, and demonstrate that it is able to perform following assumption. The bankruptcy court may permit the servicer to assume the pooling and servicing agreement and assign it to a third party. An insolvency by an entity governed by state insolvency law would vary depending on the laws of the particular state. We cannot assure you that a bankruptcy or receivership of the servicer would not adversely impact the servicing of the mortgage loans or that the trust would be entitled to terminate the servicer in a timely manner or at all. If any servicer becomes the subject of bankruptcy or similar proceedings, the trust’s claim to collections in that servicer’s possession at the time of the bankruptcy filing or other similar filing may not be perfected. In this event, funds available to pay principal and interest on your certificates may be delayed or reduced.
126 |
Interests and Incentives of the Underwriter Entities May Not Be Aligned with Your Interests
The activities and interests of the underwriters and their respective affiliates (collectively, the “Underwriter Entities”) will not align with, and may in fact be directly contrary to, those of the certificateholders. The Underwriter Entities are each part of separate global investment banking, securities and investment management firms that provide a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, they actively make markets in and trade financial instruments for their own account and for the accounts of customers. These financial instruments include debt and equity securities, currencies, commodities, bank loans, indices, baskets and other products. The Underwriter Entities’ activities include, among other things, executing large block trades and taking long and short positions directly and indirectly, through derivative instruments or otherwise. The securities and instruments in which the Underwriter Entities take positions, or expect to take positions, include loans similar to the mortgage loans, securities and instruments similar to the offered certificates and other securities and instruments. Market making is an activity where the Underwriter Entities buy and sell on behalf of customers, or for their own account, to satisfy the expected demand of customers. By its nature, market making involves facilitating transactions among market participants that have differing views of securities and instruments. Any short positions taken by the Underwriter Entities and/or their clients through marketing or otherwise will increase in value if the related securities or other instruments decrease in value, while positions taken by the Underwriter Entities and/or their clients in credit derivative or other derivative transactions with other parties, pursuant to which the Underwriter Entities and/or their clients sell or buy credit protection with respect to one or more classes of the offered certificates, may increase in value if the offered certificates default, are expected to default, or decrease in value. The Underwriter Entities and their clients acting through them may execute such transactions, modify or terminate such derivative positions and otherwise act with respect to such transactions, and may exercise or enforce, or refrain from exercising or enforcing, any or all of their rights and powers in connection therewith, without regard to whether any such action might have an adverse effect on the offered certificates or the certificateholders. Additionally, none of the Underwriter Entities will have any obligation to disclose any of these securities or derivatives transactions to you in your capacity as a certificateholder. As a result, you should expect that the Underwriter Entities will take positions that are inconsistent with, or adverse to, the investment objectives of investors in the offered certificates.
As a result of the Underwriter Entities’ various financial market activities, including acting as a research provider, investment advisor, market maker or principal investor, you should expect that personnel in various businesses throughout the Underwriter Entities will have and express research or investment views and make recommendations that are inconsistent with, or adverse to, the objectives of investors in the offered certificates.
If an Underwriter Entity becomes a holder of any of the certificates, through market-making activity or otherwise, any actions that it takes in its capacity as a certificateholder, including voting, providing consents or otherwise will not necessarily be aligned with the interests of other holders of the same class or other classes of the certificates. To the extent an Underwriter Entity makes a market in the certificates (which it is under no obligation to do), it would expect to receive income from the spreads between its bid and offer prices for the certificates. The price at which an Underwriter Entity may be willing to purchase certificates, if it makes a market, will depend on market conditions and other relevant factors and may be significantly lower than the issue price for the certificates and significantly lower than the price at which it may be willing to sell certificates.
In addition, none of the Underwriter Entities will have any obligation to monitor the performance of the certificates or the actions of the master servicer, the special servicer, the certificate administrator, the operating advisor or the trustee and will have no authority to advise the master servicer, the special servicer, the certificate administrator, the operating advisor or the trustee or to direct their actions.
Furthermore, each Underwriter Entity expects that a completed offering will enhance its ability to assist clients and counterparties in the transaction or in related transactions (including assisting clients in additional purchases and sales of the certificates and hedging transactions). The Underwriter Entities expect to derive fees and other revenues from these transactions. In addition, participating in a successful offering and providing related services to clients may enhance the Underwriter Entities’ relationships with various parties, facilitate additional business development, and enable them to obtain additional business and generate additional revenue.
The Underwriter Entities are playing several roles in this transaction. See “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties” and “Plan of Distribution (Underwriter Conflicts of Interest)” in this prospectus for a description of certain affiliations and relationships
127 |
between the underwriters and other participants in this offering. Each of those affiliations and foregoing relationships should be considered carefully by you before you invest in any certificates.
Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned with Your Interests
The originators, the sponsors and their affiliates (including certain of the underwriters) expect to derive ancillary benefits from this offering and their respective incentives may not be aligned with those of purchasers of the offered certificates. The sponsors originated or purchased the mortgage loans in order to securitize the mortgage loans by means of a transaction such as the offering of the offered certificates. The sponsors will sell the mortgage loans to the depositor (an affiliate of Citigroup Global Markets Realty Corp., one of the sponsors, and Citigroup Global Markets Inc., one of the underwriters) on the closing date in exchange for cash, derived from the sale of the offered certificates to investors and/or in exchange for offered certificates. A completed offering would reduce the originators’ exposure to the mortgage loans. The originators made the mortgage loans with a view toward securitizing them and distributing the exposure by means of a transaction such as this offering of offered certificates. In addition, certain mortgaged properties may have tenants that are affiliated with the related originator. See “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases and Master Leases”. This offering of offered certificates will effectively transfer the originators’ exposure to the mortgage loans to purchasers of the offered certificates.
The originators, the sponsors and their affiliates expect to receive various benefits, including compensation, commissions, payments, rebates, remuneration and business opportunities, in connection with or as a result of this offering of offered certificates and their interests in the mortgage loans. The sponsors and their affiliates will effectively receive compensation, and may record a profit, in an amount based on, among other things, the amount of proceeds (net of transaction expenses) received from the sale of the offered certificates to investors relative to their investment in the mortgage loans. The benefits to the originators, the sponsors and their affiliates arising from the decision to securitize the mortgage loans may be greater than they would have been had other assets been selected.
Furthermore, the sponsors and/or their affiliates may benefit from a completed offering of the offered certificates because the offering would establish a market precedent and a valuation data point for securities similar to the offered certificates, thus enhancing the ability of the sponsors and their affiliates to conduct similar offerings in the future and permitting them to adjust the fair value of the mortgage loans or other similar assets or securities held on their balance sheet, including increasing the carrying value or avoiding decreasing the carrying value of some or all of such similar positions.
In addition, the originators, the sponsors or any of their respective affiliates may benefit from certain relationships, including financial dealings, with any borrower, any non-recourse carveout guarantor or any of their respective affiliates, aside from the origination of mortgage loans or contribution of mortgage loans into this securitization transaction.
The originators, the sponsors and/or their respective affiliates may have originated and sold or retained mezzanine loans and/or companion loans (or may in the future originate permitted mezzanine loans) related to the mortgage loans. Such transactions may cause the originators, the sponsors and their respective affiliates or their clients or counterparties who purchase the mezzanine loans and/or companion loans, as applicable, to have economic interests and incentives that do not align with, and that may be directly contrary to, those of an investor in the offered certificates. In addition, these transactions or actions taken to maintain, adjust or unwind any positions in the future, may, individually or in the aggregate, have a material effect on the market for the offered certificates (if any), including adversely affecting the value of the offered certificates, particularly in illiquid markets. The originators, the sponsors and their affiliates will have no obligation to take, refrain from taking or cease taking any action with respect to a mezzanine loan or companion loan based on the potential effect on an investor in the offered certificates, and may receive substantial returns from these transactions.
In some cases, following the transfer of the mortgage loans to the issuing entity, the originators, the sponsors or their respective affiliates may be the holders of companion loans related to their mortgage loans.See “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”. Any holder of any such pari passu companion loan will have certain consultation rights with respect to servicing decisions involving the related outside serviced loan combination. However, neither the outside servicer nor the outside special servicer will be required to take or to refrain from taking any action pursuant to the advice,
128 |
recommendations or instructions from the holder of a pari passu companion loan or its representative, or due to any failure to approve an action by any such party, or due to an objection by any such party that would cause either the outside servicer or the outside special servicer to violate applicable law, the related mortgage loan documents, the outside servicing agreement (including the servicing standard), any related co-lender agreement or intercreditor agreement or the REMIC provisions of the Code. See “Description of the Mortgage Pool—Additional Indebtedness”and “—The Loan Combinations” for more information regarding the rights of any companion loan holder.
Further, various originators, sponsors and their respective affiliates are acting in multiple capacities in or with respect to this transaction, which may include, without limitation, acting as one or more transaction parties or a subcontractor or vendor thereof, participating in interim servicing and/or custodial arrangements with certain transaction parties, providing warehouse financing to, or receiving warehouse financing from, certain other originators or sponsors prior to transfer of the related mortgage loans to the issuing entity, performing certain underwriting services for the originators on a contractual basis and/or conducting due diligence on behalf of an investor with respect to the underlying mortgage loans prior to their transfer to the issuing entity. For a description of certain of the foregoing relationships and arrangements, see “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
These roles and other potential relationships may give rise to conflicts of interest as described above and under “—Interests and Incentives of the Underwriter Entities May Not Be Aligned with Your Interests,” “—Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans” and “—Other Potential Conflicts of Interest May Affect Your Investment”. Each of the foregoing relationships and related interests should be considered carefully by you before you invest in any offered certificates.
Potential Conflicts of Interest of the Master Servicer, the Special Servicer, the Trustee, any Outside Servicer and any Outside Special Servicer
The master servicer, a special servicer or sub-servicer or any of their respective affiliates, may purchase certificates evidencing interests in the trust.
In addition, the master servicer, the special servicer or a sub-servicer for the trust, or any of their respective affiliates, may have interests in, or other financial relationships with, borrowers under the related mortgage loans. These relationships may create conflicts of interest.
The pooling and servicing agreement provides that the mortgage loans serviced thereunder are required to be administered in accordance with the servicing standard without regard to ownership of any certificate by the master servicer or the special servicer or any of their respective affiliates. See “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans”. Each outside servicing agreement provides that the related outside serviced loan combination is required to be administered in accordance with a servicing standard set forth therein. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
Notwithstanding the foregoing, the master servicer, the special servicer or any of their respective sub-servicers and, as it relates to servicing and administration of any outside serviced loan combination, any outside servicer, any outside special servicer, or any of their respective sub-servicers, may have interests when dealing with the mortgage loans that are in conflict with those of holders of the certificates, especially if:
· | as it relates to the servicing and administration of mortgage loans under the pooling and servicing agreement, the master servicer, the special servicer, a sub-servicer or any of their respective affiliates holds certificates of this securitization transaction or any commercial mortgage-backed securities that evidence an interest in or are secured by the assets of an issuing entity, which assets include a serviced companion loan (or a portion of or interest in a serviced companion loan) (such securities, “serviced companion loan securities”), or |
· | as it relates to servicing and administration of any outside serviced loan combination under the related outside servicing agreement, any related outside servicer, any related outside special servicer, a sub-servicer or any of their respective affiliates, holds certificates of this securitization transaction or any securitization involving a companion loan in such outside serviced loan combination; |
129 |
or, in any case, any of the foregoing parties or any of their respective affiliates has financial interests in or financial dealings with an applicable borrower, any of its affiliates or a sponsor. Each of these relationships may create a conflict of interest. For example, if the special servicer or its affiliate holds a subordinate class of certificates or serviced companion loan securities, the special servicer might seek to reduce the potential for losses allocable to those certificates or serviced companion loan securities from the applicable specially serviced loans by deferring acceleration in hope of maximizing future proceeds. However, that action could result in less proceeds to the issuing entity than would be realized if earlier action had been taken. Furthermore, none of the master servicer, the special servicer or a sub-servicer is required to act in a manner more favorable to the holders of offered certificates or any particular class of offered certificates than to the holders the non-offered certificates, any serviced companion loan holder or the holder of any serviced companion loan securities.
Each of the master servicer and the special servicer services and is expected to continue to service, in the ordinary course of its business, existing and new mortgage loans for third parties, or itself or its affiliates, including portfolios of mortgage loans similar to the mortgage loans included in the issuing entity. The real properties securing these other mortgage loans may be in the same markets as, and compete with, or have owners, obligors or property managers in common with, certain of the mortgaged properties securing the mortgage loans that will be included in the issuing entity. As a result of the services described above, the interests of each of the master servicer and the special servicer and each of its affiliates and their clients may differ from, and conflict with, the interests of the issuing entity. Consequently, personnel of the master servicer or the special servicer, as applicable, may perform services, on behalf of the issuing entity, with respect to the mortgage loans at the same time as they are performing services, on behalf of other persons, with respect to other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans included in the issuing entity. This may pose inherent conflicts for the master servicer or the special servicer.
The special servicer may enter into one or more arrangements with the controlling class representative, a directing holder, a controlling class certificateholder or other certificateholders or a companion loan holder (or an affiliate or a third-party representative of one or more of the preceding) to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, the special servicer’s appointment (or continuance) as special servicer under the pooling and servicing agreement and/or the co-lender agreements and limitations on the right of such person to replace the special servicer. The master servicer may enter into an agreement with a sponsor to purchase the servicing rights to the related mortgage loans and/or the right to be appointed as the master servicer with respect to such mortgage loans. Any person that enters into such an economic arrangement with the master servicer or special servicer, as the case may be, may be influenced by such economic arrangement when deciding whether to appoint such master servicer or whether to appoint or replace such special servicer from time to time, and such consideration would not be required to take into account the best interests of the certificateholders or any group of certificateholders. See “—Other Potential Conflicts of Interest May Affect Your Investment” below.
Further, the master servicer, the special servicer, the certificate administrator, the trustee and their respective affiliates are acting in multiple capacities in or related to this transaction, which may include, without limitation, participating in interim servicing and/or custodial arrangements with certain transaction parties, providing warehouse financing to certain originators or sponsors prior to transfer of their related mortgage loans to the issuing entity, and/or conducting due diligence on behalf of an investor with respect to the underlying mortgage loans prior to their transfer to the issuing entity. For a description of certain of the foregoing relationships and arrangements, see “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”. Also see “—Interests and Incentives of the Underwriter Entities May Not Be Aligned with Your Interests”, “—Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans” and “—Other Potential Conflicts of Interest May Affect Your Investment”.
Although the master servicer and the special servicer will be required to service and administer the mortgage loan pool in accordance with the servicing standard and, accordingly, without regard to their rights to receive compensation under the pooling and servicing agreement and without regard to any potential obligation to repurchase or substitute a mortgage loan if the master servicer or special servicer is a mortgage loan seller, the possibility of receiving additional servicing compensation in the nature of assumption and modification fees, the continuation of receiving fees to service or specially service a mortgage loan, or the desire to avoid a repurchase demand resulting from a breach of a representation and warranty or material document default may under certain circumstances provide the master servicer or the special servicer, as the case may be, with an economic disincentive to comply with this standard.
130 |
Similarly, with respect to the outside serviced mortgage loans, conflicts described above may arise with respect to an outside servicer, an outside special servicer, a sub-servicer, or any of their respective affiliates.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
Additional Compensation to the Master Servicer and the Special Servicer and Interest on Advances Will Affect Your Right to Receive Distributions on Your Offered Certificates
The master servicer and the trustee will each be entitled to receive interest on unreimbursed advances made by that party with respect to the mortgage loans. This interest will generally accrue from the date on which the related advance was made or the related expense was incurred through the date of reimbursement. In addition, under certain circumstances, including a default by the borrower in the payment of principal and interest on a mortgage loan, that mortgage loan will become specially serviced and the related special servicer will be entitled to compensation for performing special servicing functions pursuant to the pooling and servicing agreement. Similar considerations exist with respect to outside servicers, outside special servicers and outside trustees in connection with the servicing of the outside serviced mortgage loans. The right to receive interest on advances or special servicing compensation is senior to the rights of certificateholders to receive distributions on the offered certificates. Thus, the payment of interest on advances and the payment of special servicing compensation may lead to shortfalls in amounts otherwise distributable on your offered certificates.
Inability to Replace the Master Servicer Could Affect Collections and Recoveries on the Mortgage Loans
The structure of the servicing fee payable to the master servicer might affect the ability to find a replacement master servicer. Although the trustee is required to replace the master servicer if the master servicer is terminated or resigns, if the trustee is unwilling (including for example because the servicing fee is insufficient) or unable (including for example, because the trustee does not have the systems to service mortgage loans), it may be necessary to appoint a replacement master servicer. Because the master servicing fee is generally structured as a percentage of the outstanding principal balance of each mortgage loan, it may be difficult to replace the servicer at a time when the balance of the mortgage loans has been significantly reduced because the fee may be insufficient to cover the costs associated with servicing the mortgage assets and/or related REO properties remaining in the mortgage pool. The performance of the mortgage assets may be negatively impacted, beyond the expected transition period during a servicing transfer, if a replacement master servicer is not retained within a reasonable amount of time.
Potential Conflicts of Interest of the Operating Advisor
Park Bridge Lender Services LLC, a limited liability company organized under the laws of New York, has been appointed as the initial operating advisor. See “Transaction Parties—The Operating Advisor and the Asset Representations Reviewer”. After the occurrence and during the continuance of a control termination event), the operating advisor will be required to consult on a non-binding basis with the special servicer with respect to certain actions of the special servicer in respect of the applicable specially serviced mortgage loan(s) and/or companion loan(s);provided that the operating advisor may consult regarding a serviced outside controlled loan combination only if and to the extent that the holder of the related split mortgage loan is granted consultation rights under the related co-lender agreement. Additionally, after the occurrence and during the continuance of a control termination event, the master servicer or the special servicer, as applicable, will be required to use commercially reasonable efforts consistent with the servicing standard to collect an operating advisor consulting fee from the related borrower in connection with a major decision with respect to the applicable serviced mortgage loan(s) and/or serviced companion loan(s), to the extent not prohibited by the related mortgage loan documents. In acting as operating advisor, the operating advisor is required to act solely on behalf of the issuing entity, in the best interest of, and for the benefit of, the certificateholders (as a collective whole as if such certificateholders (and, if applicable, any related serviced pari passu companion loan holder) constituted a single lender) and will have no fiduciary duty to any party. See “The Pooling and Servicing Agreement—Operating Advisor”.
In the normal course of conducting its business, Park Bridge Lender Services LLC and its affiliates may have rendered services to, performed surveillance of, and negotiated with, numerous parties engaged in activities related to structured finance and commercial mortgage securitization. These parties may have included institutional investors, the depositor, the sponsors, the mortgage loan sellers, the originators, the certificate administrator, the trustee, the master servicer, the special servicer, a directing holder, a companion loan holder,
131 |
the controlling class representative or collateral property owners or affiliates of any of those parties. Each of these relationships, to the extent they exist, may continue in the future and may involve a conflict of interest with respect to Park Bridge Lender Services LLC’s duties as operating advisor. We cannot assure you that the existence of these relationships and other relationships in the future will not impact the manner in which Park Bridge Lender Services LLC performs its duties under the pooling and servicing agreement.
Notwithstanding the foregoing, the operating advisor and its affiliates may have interests that are in conflict with those of certificateholders, especially if the operating advisor or any of its affiliates holds certificates or has financial interests in or other financial dealings with any of the parties to this transaction, a borrower or a parent of a borrower.
Additionally, Park Bridge Lender Services LLC or its affiliates, in the ordinary course of their business, may in the future (a) perform for third parties contract underwriting services and advisory services as well as service or specially service mortgage loans and (b) acquire mortgage loans for their own account, including, in each such case, mortgage loans similar to the mortgage loans that will be included in the issuing entity. The real properties securing these other mortgage loans may be in the same markets as, and compete with, certain of the mortgaged properties securing the mortgage loans that will be included in the issuing entity. Consequently, personnel of Park Bridge Lender Services LLC may perform services, on behalf of the issuing entity, with respect to the mortgage loans included in the issuing entity at the same time as they are performing services with respect to, or while Park Bridge Lender Services LLC or its affiliates are holding, other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans included in the issuing entity. This may pose inherent conflicts for Park Bridge Lender Services LLC.
Potential Conflicts of Interest of the Asset Representations Reviewer
Park Bridge Lender Services LLC, a limited liability company organized under the laws of New York, has been appointed as the initial asset representations reviewer with respect to the mortgage loans. See “Transaction Parties—The Operating Advisor and the Asset Representations Reviewer”.In the normal course of conducting its business, Park Bridge Lender Services LLC and its affiliates may have rendered services to, performed surveillance of, and negotiated with, numerous parties engaged in activities related to structured finance and commercial mortgage securitization. These parties may have included institutional investors, the depositor, the sponsors, the mortgage loan sellers, the originators, the certificate administrator, the trustee, the master servicer, the special servicer, a directing holder, a companion loan holder, the controlling class representative or collateral property owners or affiliates of any of those parties. Each of these relationships, to the extent they exist, may continue in the future and may involve a conflict of interest with respect to Park Bridge Lender Services LLC’s duties as asset representations reviewer. We cannot assure you that the existence of these relationships and other relationships in the future will not impact the manner in which Park Bridge Lender Services LLC performs its duties under the pooling and servicing agreement.
Notwithstanding the foregoing, the asset representations reviewer and its affiliates may have interests that are in conflict with those of certificateholders, especially if the asset representations reviewer or any of its affiliates holds certificates or has financial interests in or other financial dealings with any of the parties to this transaction, a borrower or a parent of a borrower.
Additionally, Park Bridge Lender Services LLC or its affiliates, in the ordinary course of their business, may in the future (a) perform for third parties contract underwriting services and advisory services as well as service or specially service mortgage loans and (b) acquire mortgage loans for their own account, including, in each such case, mortgage loans similar to the mortgage loans that will be included in the issuing entity. The real properties securing these other mortgage loans may be in the same markets as, and compete with, certain of the mortgaged properties securing the mortgage loans that will be included in the issuing entity. Consequently, personnel of Park Bridge Lender Services LLC may perform services, on behalf of the issuing entity, with respect to the mortgage loans included in the issuing entity at the same time as they are performing services with respect to, or while Park Bridge Lender Services LLC or its affiliates are holding, other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans included in the issuing entity. This may pose inherent conflicts for Park Bridge Lender Services LLC.
132 |
Potential Conflicts of Interest of a Directing Holder, any Outside Controlling Class Representative and any Companion Loan Holder
It is expected that Eightfold Real Estate Capital Fund IV, L.P. (or its affiliate) will be the initial controlling class representative and initial directing holder with respect to all of the mortgage loans and loan combinations serviced under the pooling and servicing agreement (other than any serviced outside controlled loan combination).
The controlling class representative will be controlled by the controlling class certificateholders, and the holders of the controlling class will have no duty or liability to any other certificateholder. Likewise, no holder of a serviced companion loan or any representative thereof will have any duty or liability to any certificateholder. See “The Pooling and Servicing Agreement—Directing Holder”. Any directing holder may have interests in conflict with those of some or all of the certificateholders. As a result, it is possible that such directing holder (for so long as it is permitted to do so (e.g., in the case of the controlling class representative, for so long as a control termination event does not exist)) may direct the special servicer to take actions that conflict with the interests of holders of certain classes of the certificates. Accordingly, the special servicer may, based on such direction, take actions with respect to the applicable specially serviced mortgage loan(s) for which the special servicer is responsible that could adversely affect the holders of some or all of the classes of certificates. However, the special servicer is not permitted to take actions that are prohibited by law or violate the servicing standard or the terms of the mortgage loan documents. In addition, except as limited by certain conditions described under “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause”, the special servicer may be removed and replaced with or without cause with respect to the applicable mortgage loan(s) and companion loan(s) serviced under the pooling and servicing agreement at any time by (and with a successor to be appointed by) the controlling class representative or other directing holder, as applicable (in the case of the controlling class representative, for so long as a control termination event does not exist, and other than with respect to any serviced outside controlled loan combination or any excluded mortgage loan). See “The Pooling and Servicing Agreement—Directing Holder” and “—Termination of the Special Servicer Without Cause”.
Neither the holders of the serviced companion loans nor any of their representatives will be a party to the pooling and servicing agreement, but one or more of such parties will be a third party beneficiary thereof and their rights may affect the servicing of the related mortgage loan.
Similarly, the related outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder), has, with respect to an outside serviced loan combination, certain consent and consultation rights and rights to replace the related outside special servicer under the related outside servicing agreement, and (so long as a consultation termination event does not exist) the controlling class representative for this securitization transaction will have certain consultation rights with respect to such outside serviced loan combination.
Any or all of the controlling class representative for this securitization transaction, an outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder), and the outside controlling note holder of a serviced outside controlled loan combination may have interests that are in conflict with those of any or all of the certificateholders, especially if the applicable party or any affiliate thereof holds certificates, or has financial interests in or other financial dealings (as lender or otherwise) with a borrower or a parent of a borrower. Each of these relationships may create a conflict of interest.
The special servicer, at the direction of or upon consultation with, as applicable, a serviced companion loan holder(or its representative), may take actions with respect to the related serviced loan combination that could adversely affect the holders of some or all of the classes of the certificates, to the extent described under “Description of the Mortgage Pool—The Loan Combinations”. No serviced companion loan holder (or its representative) will have any duty to the holders of any class of certificates and may have interests in conflict with those of the certificateholders. As a result, it is possible that a serviced companion loan holder (or its representative) may advise (or, if it is the outside controlling note holder of a serviced outside controlled loan combination, may direct) the special servicer to take actions that conflict with the interests of holders of certain classes of the certificates.
No certificateholder may take any action against the controlling class representative for this securitization transaction, any outside controlling class representative (or, in the case of an outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder)or any
133 |
serviced companion loan holder (or its representative) for having acted solely in its own interests. See “Description of the Mortgage Pool—The Loan Combinations”, “The Pooling and Servicing Agreement—Directing Holder” and “—Termination of the Special Servicer Without Cause”.
Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans
The anticipated initial investor in the Class E, Class F, Class G and Class H certificates (the “B-Piece Buyer”) was given the opportunity by the sponsors to perform due diligence on the mortgage loans originally identified by the sponsors for inclusion in the issuing entity, and to request the removal, re-sizing or change in other features of some or all of the mortgage loans. The B-Piece Buyer may have adjusted the mortgage pool as originally proposed by the sponsors by removing or otherwise excluding certain proposed mortgage loans. In addition, the B-Piece Buyer received or may receive price adjustments or cost mitigation arrangements in connection with accepting certain mortgage loans in the mortgage pool.
We cannot assure you that you or another investor would have made the same requests to modify the original pool as the B-Piece Buyer or that the final pool as influenced by the B-Piece Buyer’s feedback will not adversely affect the performance of your certificates and benefit the performance of the B-Piece Buyer’s certificates. Because of the differing subordination levels, the B-Piece Buyer has interests that may, in some circumstances, differ from those of purchasers of other classes of certificates, and may desire a portfolio composition that benefits the B-Piece Buyer but that does not benefit other investors. In addition, the B-Piece Buyer may enter into hedging or other transactions or otherwise have business objectives that also could cause its interests with respect to the mortgage pool to diverge from those of other purchasers of the certificates. The B-Piece Buyer performed due diligence solely for its own benefit and has no liability to any person or entity for conducting its due diligence. The B-Piece Buyer is not required to take into account the interests of any other investor in the certificates in exercising remedies or voting or other rights in its capacity as owner of the Class E, Class F, Class G and Class H certificates or in making requests or recommendations to the sponsors as to the selection of the mortgage loans and the establishment of other transaction terms. Investors are not entitled to rely on in any way the B-Piece Buyer’s acceptance of a mortgage loan. The B-Piece Buyer’s acceptance of a mortgage loan does not constitute, and may not be construed as, an endorsement of such mortgage loan, the underwriting for such mortgage loan or the originator of such mortgage loan.
The B-Piece Buyer will have no liability to any certificateholder for any actions taken by it as described in the preceding two paragraphs.
The B-Piece Buyer or its designee will constitute the initial controlling class representative and, accordingly, the initial directing holder with respect to the serviced mortgage loans and serviced companion loans other than any serviced outside controlled loan combination and any excluded mortgage loan. The controlling class representative will have certain rights to direct and consult with the special servicer with respect to the applicable serviced loans. In addition, the controlling class representative will generally have certain consultation rights with regard to some or all of the outside serviced mortgage loans under each related co-lender agreement. See “—Potential Conflicts of Interest of a Directing Holder, any Outside Controlling Class Representative and any Companion Loan Holder” above.
Because the incentives and actions of the B-Piece Buyer may, in some circumstances, differ from or be adverse to those of purchasers of the offered certificates, you are advised and encouraged to make your own investment decision based on a careful review of the information set forth in this prospectus and your own view of the mortgage pool.
Conflicts of Interest May Occur as a Result of the Rights of the Controlling Class Representative, an Outside Controlling Class Representative or a Controlling Note Holder to Terminate the Special Servicer of the Related Loan Combination
With respect to each loan combination, the controlling class representative, an outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder) or the outside controlling note holder of a serviced outside controlled loan combination, as applicable, will be entitled, under certain circumstances, to remove the special servicer or outside special servicer, as applicable, for such loan combination and, in such circumstances, appoint a successor special servicer or successor outside special servicer, as applicable, for such loan combination (or have certain consent rights with respect to such removal or replacement).
134 |
The party with this appointment power may have special relationships or interests that conflict with those of the holders of one or more classes of certificates. In addition, that party does not have any duties to the holders of any class of certificates, may act solely in its own interests, and will have no liability to any certificateholders for having done so. No certificateholder may take any action against the controlling class representative, an outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder)or the outside controlling note holder of a serviced outside controlled companion loan, as applicable (under the pooling and servicing agreement for this securitization or any other servicing agreement), or against any other parties for having acted solely in their own respective interests. See “Description of the Mortgage Pool—The Loan Combinations” for a description of these rights to terminate a special servicer.
Other Potential Conflicts of Interest May Affect Your Investment
A special servicer (whether the initial special servicer or a successor) may enter into one or more arrangements with the controlling class representative, a controlling class certificateholder, a companion loan holder, a holder of a security backed, in whole or in part, by a companion loan, or any other certificateholders (or an affiliate or a third-party representative of one or more of the preceding) to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, the appointment (or continuance) of such special servicer under the pooling and servicing agreement and, with respect to any serviced loan combinations, the related co-lender agreement and limitations on the right of such person to replace the special servicer.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
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; |
· | these property managers also may manage and/or franchise additional properties, including properties that may compete with the mortgaged properties; and |
· | affiliates of the managers and/or the borrowers, or the managers and/or the borrowers themselves, also may own other properties, including competing properties. |
None of the borrowers, property managers or any of their affiliates or any employees of the foregoing has any duty to favor the leasing of space in the mortgaged properties over the leasing of space in other properties, one or more of which may be adjacent to or near the mortgaged properties.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
Your Lack of Control Over the Issuing Entity and Servicing of the Mortgage Loans Can Create Risks
Except as described below, you and other certificateholders generally do not have a right to vote and do not have the right to make decisions with respect to the administration of the issuing entity. See “The Pooling and Servicing Agreement—General”.
Those decisions are generally made, subject to the express terms of the pooling and servicing agreement, by the master servicer, the special servicer, the trustee or the certificate administrator, as applicable. Any decision made by one of those parties in respect of the issuing entity, even if that decision is determined to be in your best interests by that party, may be contrary to the decision that you or other certificateholders would have made and may negatively affect your interests.
Except as limited by certain conditions described under “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause”, the special servicer (but not any outside special servicer for any outside
135 |
serviced loan combination) may be removed with or without cause: (a) with respect to a serviced outside controlled loan combination, by the related outside controlling note holder; and (b) with respect to the other serviced mortgage loans and serviced companion loans (but excluding any excluded mortgage loan), by the controlling class representative (so long as no control termination event exists). See “The Pooling and Servicing Agreement—Directing Holder” and “—Termination of the Special Servicer Without Cause”.
After the occurrence and during continuance of a control termination event, the holders of at least 25% of the voting rights of the certificates (other than the Class R certificates) may request a vote to replace the special servicer under the pooling and servicing agreement (except with respect to a serviced outside controlled loan combination). The subsequent vote may result in the termination and replacement of the special servicer if (within 180 days of the initial request for that vote) the holders of (a) at least 75% of a quorum of certificateholders (which quorum consists of the holders of certificates evidencing at least 75% of the aggregate voting rights (taking into account the application of any appraisal reduction amounts to notionally reduce the certificate balances) of the certificates (other than the Class R certificates)), or (b) more than 50% of the voting rights of each class of certificates other than the Class X-A, Class X-B, Class X-D and Class R certificates (but, for purposes of this clause (b), considering only those classes of certificates that have, in each such case, an outstanding certificate balance, as notionally reduced by any appraisal reduction amounts then allocable to the subject class of certificates, equal to or greater than 25% of an amount equal to (i) the initial certificate balance of such class of certificates minus (ii) payments of principal previously made with respect to such class of certificates, and considering each class of the Class A-S, Class B and Class C certificates together with the Class EC certificates’ applicable percentage interest of the related Class A-S, Class B or Class C trust component as a single “Class” for such purpose) vote affirmatively to so terminate and replace. With respect to the outside serviced mortgage loans, it is expected that after the occurrence and during continuance of a control termination event or equivalent event under the related outside servicing agreement the certificateholders relating to each outside servicing agreement will have similar rights to remove the outside special servicer. In addition, after the occurrence and during the continuance of a consultation termination event, the operating advisor may recommend the replacement of the special servicer (with respect to the applicable mortgage loan(s) and companion loan(s) serviced under the pooling and servicing agreement); provided that the operating advisor may not recommend the removal of the special servicer with respect to a serviced outside controlled loan combination without the consent of the related controlling note holder. That recommendation may result in the termination and replacement of the special servicer (with respect to the applicable mortgage loan(s) and companion loan(s)) if (within 180 days of the initial request for a vote) the holders of more than 50% of the voting rights of each class of certificates other than the Class X-A, Class X-B, Class X-D and Class R certificates (but considering only those classes of certificates that have, in each such case, an outstanding certificate balance, as notionally reduced by any appraisal reduction amounts then allocable to the subject class of certificates, equal to or greater than 25% of an amount equal to (i) the initial certificate balance of such class of certificates minus (ii) payments of principal previously made with respect to such class of certificates, and considering each class of the Class A-S, Class B and Class C certificates together with the Class EC certificates’ applicable percentage interest of the related Class A-S, Class B or Class C trust component as a single “Class” for such purpose) vote affirmatively to so terminate and replace. See “Description of the Mortgage Pool—The Loan Combinations”, “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause” and “—Servicing of the Outside Serviced Mortgage Loans”.
The outside special servicer for any outside serviced loan combination will be subject to removal and replacement by the related outside controlling class representative or in connection with a securityholder vote generally in a manner similar to that contemplated by the preceding two paragraphs, in each case subject to certain conditions provided in the related outside servicing agreement and the related co-lender agreement. In addition, with respect to any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder, as controlling note holder of such outside serviced loan combination, may terminate and replace the outside special servicer for such loan combination, subject to certain conditions provided in the related outside servicing agreement and the related co-lender agreement.
In addition, a directing holder will have certain consent and/or consultation rights with respect to the applicable mortgage loan(s) and companion loan(s) under the pooling and servicing agreement under certain circumstances, as described in this prospectus;provided,however, that a directing holder may lose any such rights upon the occurrence of certain events. See “The Pooling and Servicing Agreement—Directing Holder”. Similarly, any outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder)may have certain consent and consultation rights with respect to the related outside serviced loan combination under the outside servicing agreement and the related co-lender agreement, which (in the case of an outside controlling
136 |
class representative) it may lose upon the occurrence of certain events specified in the applicable outside servicing agreement. See “Description of the Mortgage Pool—The Loan Combinations”.
In addition, if any mortgage loan becomes an “excluded controlling class mortgage loan” (i.e., a mortgage loan or loan combination with respect to which the controlling class representative or any controlling class certificateholder is a borrower party), the controlling class representative or any controlling class certificateholder that is a borrower party (each, as applicable, an “excluded controlling class holder”) will not be entitled to have access to any related “excluded information”, including any asset status reports, final asset status reports or any summaries related thereto (and any other information identified in the pooling and servicing agreement), with respect to such excluded controlling class mortgage loan. Although the pooling and servicing agreement will require (i) each excluded controlling class holder to certify that it acknowledges and agrees that it is prohibited from accessing and reviewing (and it agrees not to access and review) any related excluded information and (ii) the controlling class representative or any controlling class certificateholder that is not an excluded controlling class holder to certify and agree that they will not share any such excluded information with any excluded controlling class holder, we cannot assure you that such excluded controlling class holders will not access, obtain, review and/or use, or the controlling class representative or any controlling class certificateholder that is not an excluded controlling class holder will not share with such excluded controlling class holder, such related excluded information in a manner that adversely impacts your certificates.
In addition, while there is an operating advisor with certain obligations in respect of reviewing the compliance of the special servicer with certain of its obligations under the pooling and servicing agreement, the operating advisor (i) has no control rights over actions by the special servicer at any time, (ii) has no ability to communicate with, or directly influence the actions of, the borrowers at any time, (iii) has no consultation rights over actions by the special servicer prior to the occurrence and continuance of a control termination event, (iv) has no consultation rights in connection with a serviced outside controlled loan combination unless consultation rights are granted to the issuing entity as holder of the related split mortgage loan and (v) has no consultation rights in connection with the outside serviced loan combinations, and the special servicer is under no obligation at any time to act upon any of the operating advisor’s recommendations. In addition, the operating advisor only has the limited obligations and duties set forth in the pooling and servicing agreement, and has no fiduciary duty, has no other duty except with respect to its specific obligations under the pooling and servicing agreement and has no duty or liability to any particular class of certificates or any certificateholder. It is not intended that the operating advisor act as a surrogate for the certificateholders. Investors should not rely on the operating advisor to monitor the actions of any directing holder or special servicer, other than to the limited extent specifically required in respect of certain actions of the special servicer at certain prescribed times under the pooling and servicing agreement, or to affect the special servicer’s actions under the pooling and servicing agreement.
In certain limited circumstances, certificateholders have the right to vote on matters affecting the issuing entity. In some cases these votes are by certificateholders taken as a whole and in others the vote is by class. In all cases voting is based on the outstanding certificate balance (or outstanding notional amount, as applicable), which is reduced (or indirectly reduced in the case of a notional amount) by realized losses. In certain cases with respect to the termination of the special servicer, the operating advisor and the asset representations reviewer, certain voting rights will also be reduced by appraisal reduction amounts. These limitations on voting could adversely affect your ability to protect your interests with respect to matters voted on by certificateholders. You have no rights to vote on any servicing matters related to any outside serviced loan combination. See “Description of the Certificates—Voting Rights”.
The Controlling Pari Passu Companion Loan for the 600 Broadway Loan Combination Is Expected to Be Contributed to an Outside Securitization That Has Not Yet Closed, and the Provisions of the Related Outside Servicing Agreement Expected to Govern Such Loan Combination Have Yet to Be Finalized
The 600 Broadway loan combination is currently being serviced and administered pursuant to the CGCMT 2016-P3 pooling and servicing agreementuntil the securitization of the 600 Broadway controlling pari passu companion loan, after which it is expected that the 600 Broadway loan combination will be serviced and administered pursuant to the pooling and servicing agreement for the securitization transaction to which the 600 Broadway controlling pari passu companion loan is contributed, which is expected to be the DBJPM 2016-C1 securitization transaction. However, the DBJPM 2016-C1 securitization transaction has not closed, and the provisions of the 600 Broadway pooling and servicing agreement have not yet been finalized, although such provisions will be required, pursuant to the related co-lender agreement, to satisfy the requirements described under “Description of the Mortgage Pool—The Loan Combinations—The600 Broadway Loan Combination”.
137 |
Prospective investors should be aware that they will not have any control over, nor any assurance as to whether, the closing of the DBJPM 2016-C1 securitization transaction actually occurs, nor will they have any assurance as to the particular terms of the 600 Broadway pooling and servicing agreement, except to the extent of compliance with the requirements referred to in the previous sentence.
Rights of the Directing Holder and the Operating Advisor Could Adversely Affect Your Investment
In connection with the taking of certain actions that would be a major decision in connection with the servicing of a specially serviced mortgage loan or, if applicable, loan combination under the pooling and servicing agreement (and, in the case of the controlling class representative, for so long as a control termination event does not exist and the related mortgage loan is not an excluded mortgage loan), the special servicer generally will be required to obtain the consent of the related directing holder. After the occurrence and during the continuance of a control termination event, the special servicer generally will be required to consult with the controlling class representative (until the occurrence and during the continuance of a consultation termination event unless an excluded mortgage loan is involved) and the operating advisor; provided that such consultation will occur with respect to a serviced outside controlled loan combination if and to the extent that the holder of the related split mortgage loan is granted consultation rights under the related co-lender agreement. These actions and decisions include, among others, certain loan modifications, including modifications of monetary terms, foreclosure or comparable conversion of the related mortgaged property or properties, and certain sales of the mortgage loan(s) or, if applicable, loan combination(s), or any related REO property or properties for less than the outstanding principal amount plus accrued interest, fees and expenses. See “The Pooling and Servicing Agreement—Directing Holder” for a list of actions and decisions requiring consultation with the operating advisor and/or the controlling class representative following the occurrence of a control termination event. As a result of these obligations, the special servicer may take actions with respect to a serviced mortgage loan that could adversely affect the interests of investors in one or more classes of offered certificates.
You will be acknowledging and agreeing, by your purchase of offered certificates, that any directing holder: (i) may have special relationships and interests that conflict with those of holders of one or more classes of certificates; (ii) may act solely in its own interests (or, in the case of the controlling class representative, in the interests of the holders of the controlling class); (iii) does not have any duties to the holders of any class of certificates (other than, in the case of the controlling class representative, the controlling class); (iv) may take actions that favor its own interests (or, in the case of the controlling class representative, the interests of the holders of the controlling class) over the interests of the holders of one or more classes of certificates; and (v) will have no liability whatsoever (other than, in the case of the controlling class representative, to the related controlling class certificateholder(s)) for having so acted as set forth in (i) – (iv) above, and that no certificateholder may take any action whatsoever against any directing holder or any affiliate, director, officer, employee, shareholder, member, partner, agent or principal of any directing holder for having so acted.
Realization on a Mortgage Loan That Is Part of a Serviced Loan Combination May Be Adversely Affected by the Rights of the Related Serviced Companion Loan Holder
If a serviced pari passu loan combination were to become defaulted, the related co-lender agreement requires the special servicer, in the event it determines to sell the related mortgage loan in accordance with the terms of the pooling and servicing agreement, to sell the related serviced pari passu companion loan(s) together with such defaulted mortgage loan. We cannot assure you that such a required sale of a defaulted loan combination (or applicable portion thereof) would not adversely affect the ability of the special servicer to sell such mortgage loan, or the price realized for such mortgage loan, following a default on the related serviced pari passu loan combination. Further, given that, pursuant to the co-lender agreement for any such serviced pari passu loan combination (other than any such loan combination that is a serviced outside controlled loan combination), the serviced pari passu companion loan holder is not the directing holder, and the issuing entity as holder of the related mortgage loan is the directing holder (with the right to consent to material servicing decisions and replace the special servicer, subject to the conditions specified under “The Pooling and Servicing Agreement—Directing Holder” and “—Termination of the Special Servicer Without Cause”), with respect to any such serviced pari passu loan combination, the related serviced pari passu companion loan may not be as marketable as the related mortgage loan held by the issuing entity. Accordingly, if any such sale does occur with respect to the serviced pari passu loan combination, then the net proceeds realized by the certificateholders in connection with such sale may be less than would be the case if only the related mortgage loan were subject to such sale.
138 |
In the case of a serviced outside controlled loan combination, a related companion loan holder or its representative will generally have the right to consent to certain servicing actions with respect to such loan combination by the master servicer or special servicer, as applicable (and, in certain cases, direct the special servicer to take certain servicing actions with respect to such loan combination). In addition, for so long as a consultation termination event does not exist, unless an excluded mortgage loan is involved (or unless the controlling note is a subordinate companion loan in an AB loan combination), the controlling class representative will have non-binding consultation rights with respect to certain servicing decisions involving any serviced outside controlled loan combination.
In connection with the servicing of a serviced pari passu loan combination, the related serviced pari passu companion loan holder or its representative (if it is not otherwise exercising the rights of directing holder) will be entitled to consult with the special servicer regarding material servicing actions, including making recommendations as to alternative actions to be taken by the special servicer with respect to such serviced pari passu loan combination, and such recommended servicing actions could adversely affect the holders of some or all of the classes of certificates. The serviced pari passu companion loan holder and its representative may have interests in conflict with those of the holders of some or all of the classes of certificates, and it is possible that the serviced pari passu companion loan holder or its representative may advise the special servicer to take actions that conflict with the interests of the holders of certain classes of the certificates. Notwithstanding the foregoing, any such consultation with the serviced pari passu companion loan holder or its representative is non-binding, and in no event is the special servicer obligated at any time to follow or take any alternative actions recommended by such serviced pari passu companion loan holder (or its representative).
With respect to any serviced AB loan combination, pursuant to the terms of the pooling and servicing agreement, if such serviced AB loan combination becomes a defaulted mortgage loan, and if the special servicer determines to sell the related serviced mortgage loan, then such sale will be subject to (and the proceeds derived therefrom may be affected by) the right of the subordinate companion loan holder to purchase, and cure defaults under, the related defaulted mortgage loan (together with any related serviced pari passu companion loans, if any) as and to the extent described in“Description of the Mortgage Pool—The Loan Combinations”.
You will be acknowledging and agreeing, by your purchase of offered certificates, that, with respect to any mortgage loan that is part of a serviced loan combination, the related serviced companion loan holder:
· | may have special relationships and interests that conflict with those of holders of one or more classes of certificates; |
· | may act solely in its own interests, without regard to your interests; |
· | does not have any duties to any other person, including the holders of any class of certificates; |
· | may take actions that favor its interests over the interests of the holders of one or more classes of certificates; and |
· | will have no liability whatsoever for having so acted and that no certificateholder may take any action whatsoever against the serviced companion loan holder or any director, officer, employee, agent, representative or principal of the serviced companion loan holder for having so acted. |
Rights of any Outside Controlling Class Representative Under any Outside Servicing Agreement Could Adversely Affect Your Investment
With respect to each outside serviced loan combination, the related outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder)will have rights comparable to those of the controlling class representative for this securitization transaction, and accordingly, prospective investors should consider the following:
· | An outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder) may have interests in conflict with those of the holders of some or all of the classes of certificates. |
139 |
· | With respect to any outside serviced loan combination, although the outside special servicer is not permitted to take actions which are prohibited by law or violate the servicing standard under the related outside servicing agreement or the terms of the related mortgage loan documents, it is possible that the related outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder) may direct the outside special servicer to take actions with respect to the outside serviced loan combination that conflict with the interests of the holders of certain classes of the certificates. |
You will be acknowledging and agreeing, by your purchase of offered certificates, that, with respect to any outside serviced mortgage loan, the related outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder):
· | may have special relationships and interests that conflict with those of holders of one or more classes of certificates; |
· | may act solely in its own interests, without regard to your interests; |
· | does not have any duties to any other person, including the holders of any class of certificates; |
· | may take actions that favor its interests over the interests of the holders of one or more classes of certificates; and |
· | will have no liability whatsoever for having so acted and that no certificateholder may take any action whatsoever against such outside controlling class representative (or other controlling note holder) or any director, officer, employee, agent or principal of such outside controlling class representative (or other controlling note holder) for having so acted. |
You Will Not Have Any Control Over the Servicing of Any Outside Serviced Mortgage Loan
Each outside serviced mortgage loan is secured by one or more mortgaged properties that also secure a companion loan that is not an asset of the issuing entity and is being serviced under an outside servicing agreement, which is the pooling and servicing agreement, trust and servicing agreement or other servicing arrangement governing the securitization of such companion loan, by the outside servicer and outside special servicer, and in accordance with the servicing standard provided for in the outside servicing agreement. Further, pursuant to the related co-lender agreement and the outside servicing agreement, the related outside controlling class representative (or, in the case of any outside serviced loan combination as to which the related controlling note has not been securitized, the related controlling note holder) (and not any party to our securitization transaction)has certain rights to direct and advise the outside special servicer with respect to such outside serviced loan combination (including the related outside serviced mortgage loan). As a result, you will have less control over the servicing of the outside serviced mortgage loans than you would if the outside serviced mortgage loans are being serviced by the master servicer and the special servicer under the pooling and servicing agreement for your certificates.
See “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans
Each sponsor is the sole warranting party in respect of the mortgage loans sold by such sponsor to us (however, KGS Holdings, L.P. will guarantee KGS-Alpha Real Estate Capital Markets, LLC’s repurchase and substitution obligations under the related mortgage loan purchase agreement, and RAIT Financial Trust will guarantee RAIT Funding, LLC’s repurchase and substitution obligations under the related mortgage loan purchase agreement, as described in “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions”). Neither we nor any of our affiliates (except Citigroup Global Markets Realty Corp. in its capacity as a sponsor) are obligated to repurchase or substitute any mortgage loan or make any loss of value payment in connection with either a breach of any sponsor’s representations and warranties or any document defects, if such
140 |
sponsor defaults on its obligation to do so. We cannot assure you that the sponsors (or, if applicable, any related guarantor(s)) will have the financial ability to effect such repurchases or substitutions or make such payment to compensate the issuing entity. In addition, the sponsors (or, if applicable, any related guarantor(s)) may have various legal defenses available to them in connection with a repurchase or substitution obligation. In particular, in the case of any outside serviced mortgage loan that is serviced under the pooling and servicing agreement entered into in connection with the securitization of a relatedpari passu companion loan, the asset representations reviewer under that pooling and servicing agreement may review the diligence file relating to suchpari passu companion loan concurrently with the review of the asset representations reviewer of the related mortgage loan for this transaction, and their findings may be inconsistent, and such inconsistency may allow the related mortgage loan seller to challenge the findings of the asset representations reviewer of the affected mortgage loan. Any mortgage loan that is not repurchased or substituted and that is not a “qualified mortgage” for a REMIC may cause designated portions of the issuing entity to fail to qualify as one or more REMICs or cause the issuing entity to incur a tax. See “The Mortgage Loan Purchase Agreements” for a summary of certain representations and warranties and the remedies in connection therewith.
Any Loss of Value Payment Made by a Sponsor May Not Be Sufficient to Cover All Losses on a Defective Mortgage Loan
In lieu of repurchasing or substituting a mortgage loan in connection with either a material breach of the related sponsor’s representations and warranties or any material document defects (other than a material breach or material document defect that is related to a mortgage loan not being a “qualified mortgage” within the meaning of Code Section 860G(a)(3)), the related sponsor may make a payment to the trust to compensate it for the loss of value of the affected mortgage loan. Upon its making such payment, the sponsor will be deemed to have cured the related material breach or material defect in all respects. Although such “loss of value payment” may only be made to the extent that the special servicer, with the consent of the controlling class representative prior to the occurrence of a Control Termination Event, deems such amount to be sufficient to compensate the trust for the related material breach or material document defect, we cannot assure you that such payment will fully compensate the trust for such material breach or material document defect in all respects. See “The Mortgage Loan Purchase Agreements—Representations and Warranties” and “—Cures, Repurchases and Substitutions” in this prospectus for a summary discussion of the loss of value payment.
Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses
The issuing entity could become liable for a material adverse environmental condition at an underlying mortgaged property. Any such potential liability could reduce or delay payments on the offered certificates. Environmental reports were prepared for the mortgaged properties as described in “Description of the Mortgage Pool—Environmental Considerations”; however, it is possible that the environmental reports and/or supplemental “Phase II” sampling did not reveal all environmental liabilities, or that there are material environmental liabilities of which we are not aware. Also, the environmental condition of the mortgaged properties in the future could be affected by the activities of tenants and occupants or by third parties unrelated to the borrowers. For a more detailed description of environmental matters that may affect the mortgaged properties, see “—Environmental Liabilities Will Adversely Affect the Value and Operation of the Contaminated Property and May Deter a Lender from Foreclosing” below and “Certain Legal Aspects of the Mortgage Loans—Environmental Considerations”.
141 |
Environmental Liabilities Will Adversely Affect the Value and Operation of the Contaminated Property and May Deter a Lender from Foreclosing
There can be no assurance—
· | as to the degree of environmental testing conducted at any of the real properties securing the mortgage loans that back your offered certificates; |
· | that the environmental testing conducted by or on behalf of the applicable originators or any other parties in connection with the origination of those mortgage loans or otherwise identified all adverse environmental conditions and risks at the related real properties; |
· | that the results of the environmental testing were accurately evaluated in all cases; |
· | that the related borrowers have implemented or will implement all operations and maintenance plans and other remedial actions recommended by any environmental consultant that may have conducted testing at the related real properties; or |
· | that the recommended action will fully remediate or otherwise address all the identified adverse environmental conditions and risks. |
Environmental site assessments vary considerably in their content, quality and cost. Even when adhering to good professional practices, environmental consultants will sometimes not detect significant environmental problems because to do an exhaustive environmental assessment would be far too costly and time-consuming to be practical.
In addition, the current environmental condition of a real property securing a mortgage loan underlying your offered certificates could be adversely affected by—
· | tenants at the property, such as gasoline stations or dry cleaners, or |
· | conditions or operations in the vicinity of the property, such as leaking underground storage tanks at another property nearby. |
Various United States federal, state, local and municipal environmental laws, ordinances and regulations may make a current or previous owner or operator of real property liable for the costs of removal or remediation of hazardous or toxic substances on, under or adjacent to the property. Those laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances. For example, certain laws impose liability for release of asbestos-containing materials into the air or require the removal or containment of the materials. The owner’s liability for any required remediation generally is unlimited and could exceed the value of the property and/or the total assets of the owner. In addition, the presence of hazardous or toxic substances, or the failure to remediate the adverse environmental condition, may adversely affect the owner’s or operator’s ability to use the affected property. In some states, contamination of a property may give rise to a lien on the property to ensure payment of the costs of cleanup. In some states, this lien has priority over the lien of a pre-existing mortgage, deed of trust or other security instrument. In addition, third parties may seek recovery from owners or operators of real property for cleanup costs, property damage or personal injury associated with releases of or other exposure to hazardous substances, including asbestos and lead-based paint. Persons who arrange for the disposal or treatment of hazardous or toxic substances may be liable for the costs of removal or remediation of the substances at the disposal or treatment facility.
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, as well as other federal and state laws, provide that a secured lender, such as one of our trusts, may be liable as an “owner” or “operator” of the real property, regardless of whether the borrower or a previous owner caused the environmental damage, if—
· | agents or employees of the lender are deemed to have participated in the management of the borrower, or |
142 |
· | the lender actually takes possession of a borrower’s property or control of its day-to-day operations, including through the appointment of a receiver or foreclosure. |
Although recently enacted legislation clarifies the activities in which a lender may engage without becoming subject to liability under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and similar federal laws, that legislation has no applicability to state environmental laws. Moreover, future laws, ordinances or regulations could impose material environmental liability.
Federal law requires owners of residential housing constructed prior to 1978—
· | to disclose to potential residents or purchasers information in their possession regarding the presence of known lead-based paint or lead-based paint-related hazards in such housing, and |
· | to deliver to potential residents or purchasers a United States Environmental Protection Agency approved information pamphlet describing the potential hazards to pregnant women and young children, including that the ingestion of lead-based paint chips and/or the inhalation of dust particles from lead-based paint by children can cause permanent injury, even at low levels of exposure. |
In addition, owners may be liable for injuries to their tenants resulting from exposure under various laws that impose affirmative obligations on property owners of residential housing containing lead-based paint.
The owner’s liability for any required remediation generally is not limited by law and could, accordingly, exceed the value of the property and/or the aggregate assets of the owner. The presence of, or strong potential for contamination by, hazardous substances consequently can have a materially adverse effect on the owner’s ability to refinance the property or to sell the property to a third party, the value of the property and a borrower’s ability to repay its mortgage loan.
Certain Types of Operations Involved in the Use and Storage of Hazardous Materials May Lead to an Increased Risk of Issuing Entity Liability
Portions of some of the mortgaged properties securing the mortgage loans may include tenants that operate as, were previously operated as, or are located near other properties currently or previously operated as, on-site dry-cleaners or gasoline stations. Both types of operations involve the use and storage of hazardous materials, leading to an increased risk of liability to the tenant, the landowner and, under certain circumstances, a lender (such as the issuing entity) under environmental laws. These operations incur ongoing costs to comply with environmental permit or license requirements and other environmental laws governing, among other things, containment systems and underground storage tank systems. Any liability to borrowers under environmental laws, especially in connection with releases into the environment of gasoline, dry-cleaning solvents or other hazardous substances from underground storage tank systems or otherwise, could also adversely impact the related borrower’s ability to repay the related mortgage loan.
Tax Matters and Changes in Tax Law May Adversely Impact the Mortgage Loans or Your Investment
General
If an entity intended to qualify as a REMIC fails to satisfy one or more of the REMIC provisions of the Code during any taxable year, the Code provides that such entity will not be treated as a REMIC for such year and any year thereafter. In such event, the issuing entity, including the Upper-Tier REMIC and the Lower-Tier REMIC, would likely be treated as one or more separate associations taxable as a corporation under Treasury regulations, and the offered certificates may be treated as stock interests in those associations and not as debt instruments. The Code authorizes the granting of relief from disqualification if failure to meet one or more of the requirements for REMIC status occurs inadvertently and steps are taken to correct the conditions that caused disqualification within a reasonable time after the discovery of the disqualifying event. The relief may be granted by either allowing continuation as a REMIC or by ignoring the cessation entirely. However, any such relief may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the REMIC’s income for the period of time during which the requirements for REMIC status are not satisfied. While the United States Department of the Treasury is authorized to issue regulations regarding the granting of relief from disqualification
143 |
if the failure to meet one or more of the requirements of REMIC status occurs inadvertently and in good faith, no such regulations have been issued.
In addition, changes to REMIC restrictions on loan modifications may impact your investment in the offered certificates. See “—Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates”below.
Tax Considerations Relating to Foreclosure
If the issuing entity acquires a mortgaged property (or, in the case of an outside serviced mortgage loan, a beneficial interest in a mortgaged property) subsequent to a default on the related mortgage loan pursuant to a foreclosure or deed-in-lieu of foreclosure, the special servicer (or, in the case of an outside serviced mortgage loan, the related outside special servicer) would be required to retain an independent contractor to operate and manage such mortgaged property. Among other items, the independent contractor generally will not be able to perform construction work other than repair, maintenance or certain types of tenant build-outs, unless the construction was more than 10% completed when the mortgage loan defaulted or when the default of the mortgage loan became imminent. Any (i) net income from such operation (other than qualifying “rents from real property”) (ii) rental income based on the net profits of a tenant or sub-tenant or allocable to a service that is non-customary in the area and for the type of property involved and (iii) rental income attributable to personal property leased in connection with a lease of real property, if the rent attributable to the personal property exceeds 15% of the total rent for the taxable year, will subject the Lower-Tier REMIC to federal tax (and possibly state or local tax) on such income at the highest marginal corporate tax rate. No determination has been made whether any portion of the income from the mortgaged properties constitutes “rent from real property”. Any such imposition of tax will reduce the net proceeds available for distribution to certificateholders. The special servicer (or, in the case of an outside serviced mortgage loan, the related outside 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 and any related companion loan holders, as a collective whole, could reasonably be expected to be greater than under another method of operating or leasing the mortgaged property. See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Standards for Conduct Generally in Effecting Foreclosure or the Sale of Defaulted Loans”. In addition, if the issuing entity were to acquire one or more mortgaged properties (or, in the case of an outside serviced mortgage loan, a beneficial interest in a mortgaged property) pursuant to a foreclosure or deed-in-lieu of foreclosure, upon acquisition of those mortgaged properties (or, in the case of an outside serviced mortgage loan, a beneficial interest in a mortgaged property), the issuing entity may in certain jurisdictions, particularly in New York, be required to pay state or local transfer or excise taxes upon liquidation of such properties. Such state or local taxes may reduce net proceeds available for distribution to the certificateholders.
No Gross Up in Respect of the Certificates Held by Non-U.S. Persons
To the extent that any withholding tax is imposed on payments of interest or other payments on any certificates, as a result of any change in applicable law or otherwise, there will be no obligation to make any “gross-up” payments to certificateholders in respect of such taxes and such withholding tax would therefore result in a shortfall to affected certificateholders. See “Material Federal Income Tax Consequences—Taxation of Certain Foreign Investors,” “—Taxation of Class EC and Exchangeable Certificates” and “—FATCA.”
Certain Federal Tax Considerations Regarding Original Issue Discount
Certain classes of certificates may be issued with original issue discount for federal income tax purposes. Original issue discount is taxable when it accrues rather than when it is received, which generally will result in recognition of taxable income in advance of the receipt of cash attributable to that income. Accordingly, investors must have sufficient sources of cash to pay any federal, state or local income taxes with regard to the original issue discount. See “Material Federal Income Tax Consequences—Taxation of the Regular Interests—Original Issue Discount” in this prospectus.
State, Local and Other Tax Considerations
In addition to the federal income tax consequences described under the heading “Material Federal Income Tax Consequences”, potential purchasers should consider the state and local, and any other, tax consequences of the acquisition, ownership and disposition of the offered certificates. State, local and other tax laws may differ
144 |
substantially from the corresponding federal tax law, and this prospectus does not purport to describe any aspects of the tax laws of the states or localities, or any other jurisdiction, in which the mortgaged properties are located or of any other applicable state or locality or other jurisdiction.
It is possible that one or more jurisdictions may attempt to tax nonresident holders of offered certificates solely by reason of the location in that jurisdiction of the depositor, the trustee, the certificate administrator, the sponsors, a related borrower or a mortgaged property or on some other basis, may require nonresident holders of certificates to file returns in such jurisdiction or may attempt to impose penalties for failure to file such returns; and it is possible that any such jurisdiction will ultimately succeed in collecting such taxes or penalties from nonresident holders of offered certificates. We cannot assure you that holders of offered certificates will not be subject to tax in any particular state, local or other taxing jurisdiction.
If any tax or penalty is successfully asserted by any state, local or other taxing jurisdiction, none of the depositor, the sponsors, the related borrower, the trustee, the certificate administrator, the operating advisor, the master servicer or the special servicer will be obligated to indemnify or otherwise to reimburse the holders of certificates for such tax or penalty.
You should consult with your own tax advisor with respect to the various state and local, and any other, tax consequences of an investment in the offered certificates.
Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates
Ordinarily, a grantor trust that modifies a mortgage loan jeopardizes its tax status as a grantor trust, and a REMIC that modifies a mortgage loan jeopardizes its tax status as a REMIC and risks having a 100% penalty tax being imposed on any income from the mortgage loan. A REMIC, and possibly a grantor trust, may avoid such consequences, however, if the default of such mortgage loan is “reasonably foreseeable” or other special circumstances apply.
The IRS has issued Revenue Procedure 2009-45 easing the tax requirements for a servicer to modify a commercial or multifamily mortgage loan held in a REMIC or a grantor trust by interpreting the circumstances when default is “reasonably foreseeable” to include those where the related servicer reasonably believes that there is a “significant risk of default” with respect to the mortgage loan upon maturity of the mortgage loan or at an earlier date, and that by making such modification the risk of default is substantially reduced. Accordingly, if the master servicer or the special servicer determined that a mortgage loan was at significant risk of default and permitted one or more modifications otherwise consistent with the terms of the pooling and servicing agreement, any such modification may impact the timing of payments and ultimate recovery on that mortgage loan, and likewise on one or more classes of certificates.
In addition, the IRS has issued final regulations under the REMIC provisions of the Internal Revenue Code that allow a servicer to modify terms of REMIC-held mortgage loans that relate to changes in collateral, credit enhancement and recourse features, provided that after the modification the mortgage loan remains “principally secured by real property” (that is, as long as the loan continues to satisfy the “REMIC LTV Test”). In general, a mortgage loan meets the REMIC LTV Test if the loan-to-value ratio is no greater than 125%. One of the modifications covered by the final regulations is a release of a lien on one or more of the properties securing a REMIC-held mortgage loan. Following such a release, however, it may be difficult to demonstrate that a mortgage loan still meets the REMIC LTV Test. To provide relief for taxpayers, the IRS has issued Revenue Procedure 2010-30, which describes circumstances in which the IRS will not challenge whether a mortgage loan satisfies the REMIC LTV Test following a lien release. The lien releases covered by Revenue Procedure 2010-30 are “grandfathered transactions” and transactions in which the release is part of a “qualified paydown transaction.” If the value of the real property securing a mortgage loan were to decline, the need to comply with the rules of Revenue Procedure 2010-30 could restrict the special servicer’s actions in negotiating the terms of a workout or in allowing minor lien releases for cases in which a mortgage loan could fail the REMIC LTV Test following the release. This could impact the timing and ultimate recovery on a mortgage loan, and likewise on one or more classes of certificates. Further, if a mortgaged property becomes the subject of a partial condemnation and, after giving effect to the partial taking the mortgaged property has a loan-to-value ratio in excess of 125%, the related mortgage loan may be subject to being paid down by a “qualified amount” (within the meaning of Revenue Procedure 2010-30) notwithstanding the existence of a prepayment lockout period.
You should consider the possible impact on your investment of any existing REMIC or grantor trust restrictions as well as any potential changes to the tax rules governing REMICs or grantor trusts.
145 |
Description of the Mortgage Pool
General
The issuing entity with respect to the Certificates will be Citigroup Commercial Mortgage Trust 2016-GC37 (the “Issuing Entity”). The assets of the Issuing Entity will primarily consist of a pool (the “Mortgage Pool”) of 54 fixed rate mortgage loans (collectively (including, without limitation, any REO Mortgage Loan), the “Mortgage Loans”) with an aggregate principal balance as of their respective due dates in April 2016 (or, in the case of any Mortgage Loan that has its first due date in May 2016, the date that would have been its due date in April 2016 under the terms of that Mortgage Loan if a Monthly Payment were scheduled to be due in that month) (collectively, the “Cut-off Date”), after deducting payments of principal due on such respective dates, of approximately $694,726,725 (with respect to each Mortgage Loan, the “Cut-off Date Balance” and, in the aggregate, the “Initial Pool Balance”).
Each Mortgage Loan is (i) evidenced by one or more promissory notes or similar evidence of indebtedness (each, a “Mortgage Note”) and (ii) secured by (or, in the case of an indemnity deed of trust, backed by a guaranty that is secured by) a mortgage, deed of trust or other similar security instrument (a “Mortgage”) creating a first lien on a fee simple and/or leasehold interest in an office, retail, multifamily, hospitality, land, mixed use, self storage or manufactured housing community property (each, a “Mortgaged Property”) (or, in certain cases, secured by multiple Mortgages encumbering a portfolio of Mortgaged Properties).
When information presented in this prospectus with respect to the Mortgaged Properties is expressed as a percentage of the Initial Pool Balance, if a Mortgage Loan is secured by more than one Mortgaged Property, the percentages are based on an allocated loan amount that has been assigned to each of the related Mortgaged Properties based upon one or more of the related appraised values, the relative underwritten net cash flow or prior allocations reflected in the related Mortgage Loan documents as set forth on Annex A.
The Mortgage Loans are generally non-recourse loans. In the event of a borrower default on a non-recourse Mortgage Loan, recourse may be had only against the specific Mortgaged Property and the other limited assets securing the Mortgage Loan, and not against the borrower’s other assets. The Mortgage Loans are not insured or guaranteed by the Sponsors, the Mortgage Loan Sellers or any other person or entity unrelated to the respective borrower. You should consider all of the Mortgage Loans to be nonrecourse loans as to which recourse in the case of default will be limited to the specific property and other assets, if any, pledged to secure the related Mortgage Loan.
Six (6) of the Mortgage Loans (each such Mortgage Loan, a “Split Mortgage Loan”) are part of a split loan structure (a “Loan Combination”). A Loan Combination consists of the particular Split Mortgage Loan to be included in the Issuing Entity and one or more “companion loans” (each, a “Companion Loan”) that will be held outside the Issuing Entity. If a Companion Loan ispari passu in right of payment to the related Split Mortgage Loan, it may be referred to in this prospectus as a “Pari Passu Companion Loan” and the related Loan Combination may be referred to in this prospectus as a “Pari Passu Loan Combination”. If a Companion Loan is subordinate in right of payment to the related Split Mortgage Loan, it may be referred to in this prospectus as a “Subordinate Companion Loan” and the related Loan Combination may be referred to in this prospectus as an “AB Loan Combination”. If a Loan Combination includes both a Pari Passu Companion Loan and a Subordinate Companion Loan, the discussion in this prospectus regarding both Pari Passu Loan Combinations and AB Loan Combinations will be applicable to such Loan Combination. The subject Split Mortgage Loan and its related Companion Loan(s) comprising any particular Loan Combination are: (i) each evidenced by one or more separate promissory notes; (ii) obligations of the same borrower(s); (iii) cross-defaulted; and (iv) collectively secured by the same mortgage(s) and/or deed(s) of trust encumbering the related Mortgaged Property or portfolio of Mortgaged Properties. Only each Split Mortgage Loan is included in the Issuing Entity. No Companion Loan is an asset of the Issuing Entity. See “—The Loan Combinations” below for more information regarding the identity of, and certain other information regarding, the Loan Combinations, as well as rights of the holders of the Companion Loans and the servicing and administration of the Loan Combinations that will not be serviced under the pooling and servicing agreement for this transaction.
146 |
The Mortgage Loans were originated or acquired by the mortgage loan sellers (or will be acquired, on or prior to the Closing Date, by the mortgage loan sellers) set forth in the following chart (collectively, the “Mortgage Loan Sellers”), and such entities will sell their respective Mortgage Loans to the Depositor, which will in turn transfer the Mortgage Loans to the Issuing Entity:
Mortgage Loan Sellers
Mortgage Loan Seller | Number of Mortgage Loans | Aggregate Cut-Off Date Balance of Mortgage Loans | Approx. % of Initial Pool Balance | |||
Citigroup Global Markets Realty Corp., a New York corporation (“CGMRC”)(1) | 15 (the “CGMRC Mortgage Loans”) | $342,298,366 | 49.3% | |||
Rialto Mortgage Finance, LLC, a Delaware limited liability company (“Rialto”) | 9 (the “Rialto Mortgage Loans”) | 107,425,000 | 15.5 | |||
The Bank of New York Mellon, a New York corporation (“BNY Mellon”)(2) | 6 (the “BNY Mellon Mortgage Loans”) | 92,759,029 | 13.4 | |||
KGS-Alpha Real Estate Capital Markets, LLC, a Delaware limited liability company (“KGS”) | 18 (the “KGS Mortgage Loans”) | 74,730,408 | 10.8 | |||
Goldman Sachs Mortgage Company, a New York limited partnership (“GSMC”) | 3 (the “GSMC Mortgage Loans”) | 56,136,918 | 8.1 | |||
RAIT Funding, LLC, a Delaware limited liability company (“RAIT”) | 3 (the “RAIT Mortgage Loans”) | 21,377,004 | 3.1 | |||
Total | $694,726,725 | 100.0% |
(1) | The Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Williams Mullen Center, representing approximately 7.4% of the Initial Pool Balance was originated by Pillar Multifamily, LLC. The Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6% of the Initial Pool Balance, is part of a Loan Combination that was co-originated by CGMRC and Barclays Bank PLC. Such Mortgage Loan will be sold to the Depositor by CGMRC. |
(2) | The Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the Initial Pool Balance, is part of a Loan Combination that was co-originated by BNY Mellon and German American Capital Corporation. Such Mortgage Loan will be sold to the Depositor by BNY Mellon. |
The Sponsors originated the Mortgage Loans or acquired the MortgageLoans, directly or indirectly, from the originators as set forth in the following chart:
Originators
Originator | Sponsor | Number of Mortgage Loans | Aggregate Principal Balance of Mortgage Loans | Approx. % of Initial Pool Balance | ||||
Citigroup Global Markets Realty Corp.(1) | Citigroup Global Markets Realty Corp. | 14 | $290,553,424 | 41.8% | ||||
Rialto Mortgage Finance, LLC | Rialto Mortgage Finance, LLC | 9 | 107,425,000 | 15.5 | ||||
The Bank of New York Mellon(2) | The Bank of New York Mellon | 6 | 92,759,029 | 13.4 | ||||
KGS-Alpha Real Estate Capital Markets, LLC | KGS-Alpha Real Estate Capital Markets, LLC. | 18 | 74,730,408 | 10.8 | ||||
Goldman Sachs Mortgage Company | Goldman Sachs Mortgage Company | 3 | 56,136,918 | 8.1 | ||||
Pillar Multifamily, LLC | Citigroup Global Markets Realty Corp. | 1 | 51,744,943 | 7.4 | ||||
RAIT Funding, LLC | RAIT Funding, LLC | 3 | 21,377,004 | 3.1 | ||||
Total | 54 | $694,726,725 | 100.0% |
(1) | TheMortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6% of the Initial Pool Balance, is part of a Loan Combination that was co-originated by Citigroup Global Markets Realty Corp. and Barclays Bank PLC, and will be sold to the Depositor by Citigroup Global Markets Realty Corp. |
(2) | The Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the Initial Pool Balance, is part of a Loan Combination that was co-originated by The Bank of New York Mellon and German American Capital Corporation, and will be sold to the Depositor by The Bank of New York Mellon. |
147 |
CGMRC, Rialto, BNY Mellon, KGS, GSMC, Pillar Multifamily, LLC and RAIT are referred to in this prospectus as the “Originators”. CGMRC has acquired or will acquire the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Williams Mullen Center, representing approximately 7.4% of the Initial Pool Balance, from an affiliate of Pillar Multifamily, LLC on or prior to the Closing Date.
Citigroup Commercial Mortgage Securities Inc. (the “Depositor”) will acquire the Mortgage Loans from CGMRC, Rialto, BNY Mellon, KGS, GSMC and RAIT (collectively, the “Sponsors”) on or about April 26, 2016 (the “Closing Date”) pursuant to the respective Mortgage Loan Purchase Agreements (as defined under “The Mortgage Loan Purchase Agreements” below). The Depositor will cause the Mortgage Loans in the Mortgage Pool to be assigned to the Trustee pursuant to the Pooling and Servicing Agreement (as defined under “The Pooling and Servicing Agreement” below).
Certain Calculations and Definitions
This prospectus sets forth certain information with respect to the Mortgage Loans and the Mortgaged Properties. The sum in any column of the tables presented in Annex A, Annex B and Annex C to this prospectus may not equal the indicated total due to rounding. The information in Annex A, Annex B and Annex C to this prospectus with respect to the Mortgage Loans (or any Loan Combination, if applicable) and the Mortgaged Properties is based upon the Mortgage Pool as it is expected to be constituted as of the close of business on the Closing Date, assuming that (i) all scheduled principal and interest payments due on or before the Cut-off Date will be made, (ii) there will be no principal prepayments on or before the Closing Date, and (iii) each Mortgage Loan with an anticipated repayment date pays in full on its related anticipated repayment date. When information presented in this prospectus with respect to the Mortgaged Properties is expressed as a percentage of the Initial Pool Balance, the percentages are, in the case of multiple Mortgaged Properties securing the same Mortgage Loan, based on an allocated loan amount that has been assigned to the related Mortgaged Properties based upon one or more of the related appraised values, the relative underwritten net cash flow or prior allocations reflected in the related Mortgage Loan documents as set forth on Annex A to this prospectus. The statistics in Annex A, Annex B and Annex C to this prospectus were primarily derived from information provided to the Depositor by each Sponsor, which information may have been obtained from the borrowers.
With respect to any Split Mortgage Loan, all debt service coverage ratio, debt yield and loan-to-value ratio information presented in this prospectus is calculated and presented in a manner that reflects the aggregate indebtedness evidenced by the subject Split Mortgage Loan and any related Pari Passu Companion Loan, but without regard to any related Subordinate Companion Loan.
With respect to each Mortgaged Property, the appraisal of such Mortgaged Property, the Phase I environmental report, any Phase II environmental report and any seismic or property condition report obtained in connection with origination (each, a “Third Party Report”) were prepared prior to the date of this prospectus. The information included in the Third Party Reports may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The Third Party Reports may be based on assumptions regarding market conditions and other matters as reflected in those Third Party Reports. The opinions of value rendered by the appraisers in the appraisals are subject to the assumptions and conditions set forth in those appraisals.
“ADR” means, for any hospitality property, average daily rate.
“Allocated Cut-off Date Loan Amount” means, in the case of Mortgage Loans secured by multiple Mortgaged Properties, the allocated Cut-off Date Balance for each Mortgaged Property based on an allocated loan amount that has been assigned to the related Mortgaged Properties based upon the related Mortgage Loan documents or one or more of the related appraised values, the relative underwritten net cash flow or prior allocations reflected in the related Mortgage Loan documents;provided that with respect to any Loan Combination secured by a portfolio of Mortgaged Properties, the Allocated Cut-off Date Loan Amount represents only the pro rata portion of the related Mortgage Loan principal balance amount relative to the related Loan Combination principal balance. Information presented in this prospectus (including Annex A and Annex B) with respect to the Mortgaged Properties expressed as a percentage of the Initial Pool Balance reflects the Allocated Cut-off Date Loan Amount allocated to such Mortgaged Property as of the Cut-off Date.
148 |
“Annual Debt Service” means, for any Mortgage Loan or Companion Loan, the current annualized debt service payable on such Mortgage Loan or Companion Loan as of April 2016 (or, in the case of any Mortgage Loan or Companion Loan that has its first Due Date in May 2016, the anticipated annualized debt service payable on such Mortgage Loan or Companion Loan as of April 2016);provided that with respect to each Mortgage Loan with a partial interest-only period, the Annual Debt Service is calculated based on the debt service due under such Mortgage Loan during the amortization period.
“Appraised Value” means, for each of the Mortgaged Properties and any date of determination, the most current appraised value of such Mortgaged Property as determined by an appraisal of the Mortgaged Property and in accordance with MAI standards, as set forth on Annex A. The appraisals for certain of the Mortgaged Properties may state an “as stabilized”, “hypothetical market value”, “prospective market value upon stabilization” or “as-complete” appraised value (generally as an alternative to, or in addition to, an “as-is” appraised value) for such Mortgaged Properties that assumes that certain events will occur with respect to the re-leasing, renovation or other repositioning of the Mortgaged Property. In addition, in the case of a portfolio of Mortgaged Properties, the appraisals may reflect a “portfolio premium” or an “as-is bulk” appraised value based on the assumption that such portfolio of Mortgaged Properties will be sold as a collective whole. Such values may, to the extent indicated, be reflected elsewhere in this prospectus, on Annex A to this prospectus, and in Annex B to this prospectus. For such Appraised Values and other values on a property-by-property basis, see Annex A to this prospectus and the related footnotes. With respect to each Mortgaged Property, the Appraised Value set forth in this prospectus and on Annex A or Annex B to this prospectus is an “as-is” Appraised Value unless otherwise specified below, and is in each case as determined by an appraisal made not more than 6 months prior to the origination date of the related Mortgage Loan, as described under “Appraisal Date” on Annex A to this prospectus.
In the following cases, the Appraised Value set forth in this prospectus and on Annex A or Annex B to this prospectus is not the “as-is” Appraised Value, but is instead calculated on an “as-complete”, “hypothetical market value” or “as-is bulk” Appraised Value as set forth below:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Orrington Evanston, representing approximately 5.8% of the Initial Pool Balance, the Appraised Value of $60,900,000 assumes the completion of a $3.8 million garage renovation. The borrower reserved $3.75 million at loan closing, and the renovation is expected to be completed in June 2016. |
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as Storage R Us Portfolio, representing approximately 0.8% of the Initial Pool Balance, the Appraised Value represents the aggregate “as-is bulk” appraised value (which is based on the portfolio Appraised Value which is higher than the sum of the Appraised Value of each individual property) of $7,820,000. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as American Self Storage, representing approximately 0.4% of the Initial Pool Balance, the Appraised Value is the “hypothetical market value” appraised value which assumes that certain container units are removed from the Mortgaged Property. |
In addition, for certain Mortgage Loans, the Cut-off Date LTV Ratio and/or the LTV Ratio at Maturity was calculated based on the “as stabilized” Appraised Value as set forth on Annex A or an alternative appraised value (other than as set forth on Annex A) for the related Mortgaged Property, as described under the definitions of Cut-off Date LTV Ratio and/or LTV Ratio at Maturity, as applicable.
“ARD” means, with respect to any Mortgage Loan or Companion Loan, any related Anticipated Repayment Date.
“Balloon Balance” means, with respect to any Mortgage Loan or Companion Loan, the principal balance scheduled to be due on such Mortgage Loan or Companion Loan at maturity or any related Anticipated Repayment Date assuming that all monthly debt service payments are timely received and there are no prepayments or defaults.
149 |
“Crossed Group” identifies each group of Mortgage Loans in the Mortgage Pool that are cross-collateralized and cross-defaulted with each other, if any. Each Crossed Group, if any, is identified by a separate letter on Annex A to this prospectus.
“Cut-off Date LTV Ratio” or “Cut-off Date Loan-to-Value Ratio” generally means, with respect to any Mortgage Loan, the ratio, expressed as a percentage of (1) the Cut-off Date Balance of that Mortgage Loan set forth on Annex A to this prospectus divided by (2) the Appraised Value of the related Mortgaged Property or portfolio of Mortgaged Properties set forth on Annex A to this prospectus, except as set forth below:
· | with respect to any Split Mortgage Loan with a Pari Passu Companion Loan, the calculation of the Cut-off Date LTV Ratio is based on the aggregate principal balance of such Split Mortgage Loan and the related Pari Passu Companion Loan(s); |
· | with respect to any Split Mortgage Loan with a Subordinate Companion Loan, the calculation of the Cut-off Date LTV Ratio does not include the principal balance of the related Subordinate Companion Loan, unless otherwise indicated; |
· | with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Staybridge Cleveland Mayfield, representing approximately 1.6% of the Initial Pool Balance, the Cut-off Date LTV Ratio was calculated using the “as-is” appraised value plus $2,469,353, representing the estimated value of the change-of-ownership PIP at the related Mortgaged Property. 110% of the estimated cost of the PIP was reserved at origination. The Cut-off Date LTV Ratio calculated using solely the “as-is” appraised value of the Mortgaged Property is 72.3%; |
· | with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Holiday Inn Express & Suites Wisconsin, representing approximately 1.3% of the Initial Pool Balance, the Cut-off Date LTV Ratio is calculated using the “as-is” appraised value of $12,200,000 plus a PIP reserve of $1,800,000. Approximately 100% of the value of the PIP was reserved at origination of the Mortgage Loan. The Cut-off Date LTV Ratio calculated using solely the “as-is” appraised value of the Mortgaged Property is 75.6%; |
· | with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Garden Inn – Saint Charles, representing approximately 1.2% of the Initial Pool Balance, the Cut-off Date LTV Ratio was calculated using the “as-is” appraised value plus $1,608,126, representing the estimated cost of a PIP commenced at origination of the Mortgage Loan in connection with the related borrower’s acquisition of the Mortgaged Property. The Cut-off Date LTV Ratio calculated using solely the “as-is” appraised value of the Mortgaged Property is 74.6%. At origination, $1,768,939 was reserved in connection with the PIP, representing 110% of the budgeted PIP amount; and |
· | with respect to the Mortgaged Properties that secure the Mortgage Loans listed in the following table, the respective Cut-off Date LTV Ratio was calculated based on the respective Cut-off Date Balance less a related earnout or holdback reserve, divided by the related Appraised Value set forth on Annex A. The respective Cut-off Date LTV Ratios calculated without adjusting for the related earnout or holdback reserve are as follows: |
Mortgaged Property Name | Approx. % of Initial Pool | Un-AdjustedCut-off Date LTV Ratio | Earnout or Holdback Amount | Cut-off Date LTV Ratio | ||||
Amsdell Self Storage - Cincinnati Portfolio | 2.0% | 76.5% | $700,000 | 72.7% | ||||
Troy Place Apartments | 1.7% | 78.3% | $625,000 | 74.1% |
150 |
· | with respect to each of the Mortgage Loans secured by the Mortgaged Properties or portfolio of Mortgaged Properties identified in the table below, the Cut-off Date LTV Ratio was calculated using the related Appraised Value set forth on Annex A, which in each case is subject to certain adjustments as described under the definition of “Appraised Value” above: |
Mortgaged | Approx. % of Initial Pool | Cut-off Date | “As-Complete”, “As-Is Bulk” or “Hypothetical Market Value” Appraised Value | Cut-off Date LTV Ratio (“As-Is”) |
“As-Is” Appraised Value | |||||
Hilton Orrington Evanston | 5.8% | 65.7% | $60,900,000 | 70.1% | $57,100,000 | |||||
Storage R Us Portfolio | 0.8% | 70.3% | $7,820,000 | 73.4% | $7,490,000 | |||||
American Self Storage | 0.4% | 69.3% | $3,750,000 | 65.0% | $4,000,000 |
“Debt Yield on Underwritten Net Cash Flow” or “Debt Yield on Underwritten NCF” means, with respect to any Mortgage Loan, the related Underwritten Net Cash Flow divided by the Cut-off Date Balance of that Mortgage Loan, except as set forth below:
· | with respect to any Split Mortgage Loan with a Pari Passu Companion Loan, the calculation of the Debt Yield on Underwritten Net Cash Flow is based on the aggregate principal balance of such Split Mortgage Loan and the related Pari Passu Companion Loan(s); and |
· | with respect to any Split Mortgage Loan with a Subordinate Companion Loan, the calculation of the Debt Yield on Underwritten Net Cash Flow does not include the principal balance of the related Subordinate Companion Loan. |
“Debt Yield on Underwritten Net Operating Income” or “Debt Yield on Underwritten NOI” means, with respect to any Mortgage Loan, the related Underwritten Net Operating Income divided by the Cut-off Date Balance of that Mortgage Loan, except as set forth below:
· | with respect any Split Mortgage Loan with a Pari Passu Companion Loan, the calculation of the Debt Yield on Underwritten Net Operating Income is based on the aggregate principal balance of such Split Mortgage Loan and the related Pari Passu Companion Loan(s); and |
· | with respect to any Split Mortgage Loan with a Subordinate Companion Loan, the calculation of the Debt Yield on Underwritten Net Operating Income does not include the principal balance of the related Subordinate Companion Loan. |
“DSCR,” “Debt Service Coverage Ratio,” “Cut-off Date DSCR”, “Underwritten NCF DSCR” or “UW NCF DSCR” generally means, for any Mortgage Loan, the ratio of Underwritten Net Cash Flow produced by the related Mortgaged Property or Mortgaged Properties to the aggregate amount of the Annual Debt Service, except as set forth below:
· | with respect to any Split Mortgage Loan with a Pari Passu Companion Loan, the calculation of the DSCR is based on the Annual Debt Service that is due in connection with such Split Mortgage Loan and the related Pari Passu Companion Loan(s); and |
· | with respect to any Split Mortgage Loan with a Subordinate Companion Loan, the calculation of DSCR does not include the monthly debt service that is due in connection with the Subordinate Companion Loan, unless expressly stated otherwise. |
“Hard Lockbox” means that the borrower is required to direct the tenants to pay rents directly to a lockbox account controlled by the lender. Hospitality, mixed use, multifamily and manufactured housing community properties are considered to have a hard lockbox if credit card receivables are required to be deposited directly into the lockbox account even though cash, checks or “over the counter” receipts are deposited by the manager of the related Mortgaged Property into the lockbox account controlled by the lender. With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, the related property manager(s) established an
151 |
operating account (and the borrower has pledged its rights in such account to the lender) pursuant to the management agreement into which all receipts are deposited, following which the property manager(s) is only required to transfer to the lender’s cash management account (which is subject to an account control agreement and pledged to the lender) amounts from that operating account that would otherwise be payable to the borrower under the related management agreement, after payment of operating expenses, management fees and any reserves required under the management agreement, and the property manager(s) will otherwise have unrestricted access to funds in the operating account to the extent and for the purposes set forth in the management agreement until the management agreement has been terminated. However, the Mortgage Loan documents prohibit the borrower or operating lessee from withdrawing or transferring money from such operating account.
“In-Place Cash Management” means, for funds directed into a lockbox, such funds are generally not made immediately available to the related borrower, but instead are forwarded to a cash management account controlled by the lender and the funds are disbursed according to the related Mortgage Loan documents with any excess remitted to the related borrower or master tenant (unless an event of default or one or more specified trigger events under the related Mortgage Loan documents have occurred and are outstanding) generally on a daily basis. With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, certain funds are directed to operating accounts pledged to the lender and under the control of the related property managers before such funds are required to be deposited into the lockbox account and thereafter forwarded to the cash management account. See the description of the related lockbox account under the definition of “Hard Lockbox” above and “Austin Block 21—Lockbox and Cash Management” in Annex B to this prospectus.
“Largest Tenant” means, with respect to any Mortgaged Property, the tenant occupying the largest amount of net rentable square feet.
“Largest Tenant Lease Expiration” means the date at which the applicable Largest Tenant’s lease is scheduled to expire.
“Loan Per Unit” means the principal balance per unit of measure as of the Cut-off Date.
“Maturity Date LTV Ratio”, “Maturity Date Loan-to-Value Ratio” or “LTV Ratio at Maturity” means, with respect to any Mortgage Loan, the ratio, expressed as a percentage of (1) the Balloon Balance of a Mortgage Loan as adjusted to give effect to the amortization of the applicable Mortgage Loan as of its maturity date, assuming no prepayments or defaults, divided by (2) the Appraised Value of the related Mortgaged Property or portfolio of Mortgaged Properties shown on Annex A to this prospectus, except as set forth below:
· | with respect to any Split Mortgage Loan with a Pari Passu Companion Loan, the calculation of the LTV Ratio at Maturity is based on the aggregate Balloon Balance at maturity of such Split Mortgage Loan and the related Pari Passu Companion Loan(s); |
· | with respect to any Split Mortgage Loan with a Subordinate Companion Loan, the calculation of the LTV Ratio at Maturity does not include the principal balance of the related Subordinate Companion Loan, unless otherwise indicated; |
· | with respect to the Mortgage Loan secured by the Mortgaged Property identified in the table below, the LTV Ratio at Maturity was calculated using the related Appraised Value set forth on Annex A; however, such Appraised Value is subject to certain adjustments as described under the definition of “Appraised Value” above: |
Mortgaged Property Name | Approx. % of Initial Pool Balance | Maturity Date | “As-Is Bulk” Appraised Value | Maturity Date LTV Ratio | “As-Is” Appraised Value | ||||||
Storage R Us Portfolio | 0.8% | 62.3% | $7,820,000 | 65.0% | $7,490,000 |
152 |
· | with respect to each of the Mortgage Loans secured by the Mortgaged Properties or portfolio of Mortgaged Properties identified in the table below, the LTV Ratio at Maturity was calculated using an “as stabilized”, “as stabilized/as completed” or “prospective market value upon stabilization” Appraised Value, as applicable, as opposed to the related “as-is” Appraised Value, each as set forth below: |
Mortgaged Property Name | Approx. % of Initial Pool Balance | Maturity Date | “As Stabilized” Appraised Value | Maturity Date LTV Ratio | “As-Is” Appraised Value | |||||
Hilton Orrington Evanston(1) | 5.8% | 55.3% | $64,100,000 | 62.1% | $57,100,000 | |||||
Hotel on Rivington | 5.3% | 44.9% | $75,000,000 | 51.0% | $66,000,000 | |||||
Park Place | 2.9% | 56.1% | $146,500,000 | 58.7% | $140,000,000 | |||||
Amsdell Self Storage - Cincinnati Portfolio(2) | 2.0% | 64.8% | $19,370,000 | 67.9% | $18,490,000 | |||||
Estates at Westernaire | 1.8% | 51.5% | $21,400,000 | 54.3% | $20,300,000 | |||||
Troy Place Apartments | 1.7% | 60.8% | $16,800,000 | 69.2% | $14,750,000 | |||||
Staybridge Cleveland Mayfield | 1.6% | 49.5% | $19,500,000 | 62.3% | $15,500,000 | |||||
Holiday Inn Express & SuitesWisconsin | 1.3% | 50.6% | $15,000,000 | 62.2% | $12,200,000 | |||||
Hilton Garden Inn - Saint Charles | 1.2% | 51.6% | $14,400,000 | 64.6% | $11,500,000 | |||||
Arizona Pavilion | 1.0% | 57.2% | $11,200,000 | 61.1% | $10,500,000 | |||||
American Self Storage | 0.4% | 49.5% | $4,500,000 | 59.4% | $3,750,000 |
(1) | Using the “As-is” Appraised Value in Annex A to this prospectus of $60,900,000 and would result in a Maturity Date LTV Ratio of 58.2%. |
(2) | The Maturity Date LTV Ratio is calculated using the “as stabilized” Appraised Value for the Mortgaged Property identified on Annex A to this prospectus as CubeSmart Self Storage – Taunton and Compass Self Storage - Hebron. |
We cannot assure you that the value of any particular Mortgaged Property will not have declined from the Appraised Value shown on Annex A to this prospectus. No representation is made that any Appraised Value presented in this prospectus would approximate either the value that would be determined in a current appraisal of the Mortgaged Property or the amount that would be realized upon a sale of the Mortgaged Property.
“Most Recent NOI” and “Trailing 12 NOI” (which is for the period ending as of the date specified in Annex A to this prospectus) is the net operating income for a Mortgaged Property as established by information provided by the borrowers, except that in certain cases such net operating income has been adjusted by removing certain non-recurring expenses and revenue or by certain other normalizations. Most Recent NOI and Trailing 12 NOI do not necessarily reflect accrual of certain costs such as taxes and capital expenditures and do not reflect non-cash items such a depreciation or amortization. In some cases, capital expenditures may have been treated by a borrower as an expense or expenses treated as capital expenditures. Most Recent NOI and Trailing 12 NOI were not necessarily determined in accordance with generally accepted accounting principles. Moreover, Most Recent NOI and Trailing 12 NOI are not a substitute for net income determined in accordance with generally accepted accounting principles as a measure of the results of a property’s operations or a substitute for cash flows from operating activities determined in accordance with generally accepted accounting principles as a measure of liquidity and in certain cases may reflect partial year annualizations.
“Occupancy” means, unless the context clearly indicates otherwise, (i) in the case of multifamily, manufactured housing community, rental and mixed use (to the extent the related Mortgaged Property includes multifamily or manufactured housing community space) properties, the percentage of rental Units, Pads or Beds, as applicable, that are rented as of the Occupancy Date; (ii) in the case of office, retail, mixed use (to the extent the related Mortgaged Property includes office or retail space) and self storage properties, the percentage of the net rentable square footage rented as of the Occupancy Date (subject to, in the case of certain Mortgage Loans, one or more of the additional leasing assumptions); and (iii) in the case of hospitality properties, the percentage of available Rooms occupied for the trailing 12-month period ending on Occupancy Date. In some cases, occupancy was calculated based on assumptions regarding occupancy, such as the assumption that a certain tenant at the Mortgaged Property that has executed a lease, but has not yet taken occupancy and/or has not yet commenced paying rent, will take occupancy on a future date generally expected to occur within twelve months of the Cut-off Date; assumptions regarding the renewal of particular leases and/or the re-leasing of certain space at the related Mortgaged Property; in some cases, assumptions regarding leases under negotiation being executed; in some cases, assumptions regarding tenants taking additional space in the future if currently committed to do so or, in some cases, the exclusion of dark tenants, tenants with material aged receivables, tenants that may have already given notice to vacate their space, bankrupt tenants that have not yet affirmed their lease and certain
153 |
additional leasing assumptions. See the footnotes to Annex A to this prospectus for additional occupancy assumptions. We cannot assure you that the assumptions made with respect to any Mortgaged Property will, in fact, be consistent with that Mortgaged Property’s actual occupancy. See “—Tenant Issues” below.
“Occupancy Date” means the date of determination of the Occupancy of a Mortgaged Property.
“Original Balance” means the principal balance of the Mortgage Loan as of the date of origination.
“Prepayment Penalty Description” or “Prepayment Provision” means the number of payments from the first due date through and including the maturity date or anticipated repayment date, as applicable, for which a Mortgage Loan is, as applicable, (i) locked out from prepayment, (ii) provides for payment of a prepayment premium or yield maintenance charge in connection with a prepayment, (iii) permits defeasance and/or (iv) permits prepayment without a payment of a prepayment premium or a yield maintenance charge.
“Related Group” identifies each group of Mortgage Loans in the Mortgage Pool with sponsors affiliated with other sponsors in the Mortgage Pool. Each Related Group is identified by a separate number on Annex A to this prospectus.
“RevPAR” means, with respect to any hospitality property, revenues per available room.
“Soft Lockbox” means that the related borrower is required to deposit or cause the property manager to deposit all rents collected into a lockbox account. Hospitality, multifamily and manufactured housing community properties are considered to have a soft lockbox if credit card receivables, cash, checks or “over the counter” receipts are deposited into the lockbox account by the borrower or property manager. With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, the related approved music venue manager established an operating account (and the related approved music venue manager has pledged its rights in such account to the lender) pursuant to the related Mortgage Loan documents into which all receipts are deposited, following which the approved music venue manager is only required to transfer to the lender’s lockbox account (which is subject to an account control agreement and pledged to the lender) amounts from that operating account that would otherwise be payable to the borrower under the related lease agreement, after payment of operating expenses, management fees and any reserves required under the lease agreement, and the approved music venue manager will otherwise have unrestricted access to funds in the operating account to the extent and for the purposes set forth in the lease agreement until the lease agreement has been terminated. However, the Mortgage Loan documents prohibit the borrower from withdrawing or transferring money from such operating account.
“Soft Springing Lockbox” means that the related borrower is required to deposit, or cause the property manager to deposit, all rents collected into a lockbox account until the occurrence of an event of default or one or more specified trigger events under the related Mortgage Loan documents, at which time the lockbox converts to a Hard Lockbox.
“Springing Cash Management” means, until the occurrence of an event of default or one or more specified trigger events under the Mortgage Loan documents, revenue from the lockbox account is forwarded to an account controlled by the related borrower (or master tenant) or is otherwise made available to the related borrower (or master tenant). Upon the occurrence of an event of default or such a trigger event, the Mortgage Loan documents require the related revenue to be forwarded to a cash management account controlled by the lender and the funds are disbursed according to the related Mortgage Loan documents.
“Springing Lockbox” means a lockbox that is not currently in place, but the related Mortgage Loan documents require the imposition of a lockbox account upon the occurrence of an event of default or one or more specified trigger events under the related Mortgage Loan documents.
“Underwritten Expenses” with respect to any Mortgage Loan or Mortgaged Property, means an estimate of operating expenses, as determined by the related Originator and generally derived from historical expenses at the Mortgaged Property, the borrower’s budget or appraiser’s estimate, in some cases adjusted for significant occupancy increases and a market-rate management fee. We cannot assure you that the assumptions made with respect to any Mortgaged Property will, in fact, be consistent with that Mortgaged Property’s actual performance.
154 |
“Underwritten Net Cash Flow,” “Net Cash Flow” or “Underwritten NCF” with respect to any Mortgage Loan or Mortgaged Property, means cash flow available for debt service, generally equal to the Underwritten NOI decreased by an amount that the related Originator has determined for tenant improvement and leasing commissions and/or replacement reserves for capital items. Underwritten NCF does not reflect debt service or non-cash items such as depreciation or amortization.
The Underwritten Net Cash Flow for each Mortgaged Property is calculated based on the basis of numerous assumptions and subjective judgments (including, but not limited to, with respect to future occupancy and rental rates), which, if ultimately proved erroneous, could cause the actual net cash flow for the Mortgaged Property to differ materially from the Underwritten Net Cash Flow set forth in this prospectus. In some cases, historical net cash flow for a particular Mortgaged Property, and/or the net cash flow assumed by the applicable appraiser in determining the Appraised Value of the Mortgaged Property, may be less (and, perhaps, materially less) than the Underwritten Net Cash Flow shown in this prospectus for such Mortgaged Property. No representation is made as to the future cash flows of the Mortgaged Properties, nor is the Underwritten Net Cash Flows set forth in this prospectus intended to represent such future cash flows. See “Risk Factors—Underwritten Net Cash Flow Could Be Based on Incorrect or Failed Assumptions”.
“Underwritten Net Operating Income” or “Underwritten NOI” with respect to any Mortgage Loan or Mortgaged Property, means Underwritten Revenues less Underwritten Expenses, as both are determined by the related Originator, based in part upon borrower supplied information (including but not limited to a rent roll, leases, operating statements and budget) for a recent period which is generally the 12 months prior to the origination date or acquisition date of the Mortgage Loan (or Loan Combination, if applicable), adjusted for specific property, tenant and market considerations. Historical operating statements may not be available for newly constructed Mortgaged Properties, Mortgaged Properties with triple net leases, Mortgaged Properties that have recently undergone substantial renovations and/or newly acquired Mortgaged Properties.
The Underwritten NOI for each Mortgaged Property is calculated based on the basis of numerous assumptions and subjective judgments (including, but not limited to, with respect to future occupancy and rental rates), which, if ultimately proved erroneous, could cause the actual net operating income for the Mortgaged Property to differ materially from the Underwritten NOI set forth in this prospectus. In some cases, historical net operating income for a particular Mortgaged Property, and/or the net operating income assumed by the applicable appraiser in determining the Appraised Value of the Mortgaged Property, may be less (and, perhaps, materially less) than the Underwritten NOI shown in this prospectus for such Mortgaged Property. No representation is made as to the future cash flows of the Mortgaged Properties, nor is the Underwritten NOI set forth in this prospectus intended to represent such future cash flows.
“Underwritten Revenues” or “Underwritten EGI” with respect to any Mortgage Loan or Mortgaged Property, means an estimate of operating revenues, as determined by the related Originator and generally derived from the rental revenue (which may include rental revenue related to reimbursement of tenant improvements and leasing commissions) based on leases in place, leases that have been executed but the tenant is not yet paying rent, month-to-month leases (based on current rent roll and annualized), leases that are being negotiated and expected to be signed, additional space that a tenant has committed to take and in certain cases contractual rent steps generally within 17 months following the Cut-off Date, in certain cases certain appraiser estimates of rental income, and in some cases adjusted downward to market rates, with vacancy rates equal to the Mortgaged Property’s historical rate, current rate, market rate or an assumed vacancy as determined by the related Originator; plus any additional recurring revenue fees. Additionally, in determining rental revenue for multifamily rental, manufactured housing community and self storage properties, the related Originator either reviewed rental revenue shown on the certified rolling 12-month operating statements or annualized the rental revenue and reimbursement of expenses shown on rent rolls or recent partial year operating statements with respect to the prior 1- to 12-month periods or in some cases may have relied on information provided in the appraisal for market rental rates and vacancy. In certain cases, with respect to Mortgaged Properties with leases with rent increases or rent decreases during the term of the related Mortgage Loan, Underwritten Revenues were based on the average rent over the term of the Mortgage Loan. In some cases the related Originator included revenue otherwise payable by a tenant but for the existence of an initial “free rent” period or a permitted rent abatement while the leased space is built out. See “—Tenant Issues” below.
“Units,” “Rooms,” “Pads” or “Beds” means (a) in the case of a Mortgaged Property operated as multifamily, the number of apartments, regardless of the size of or number of rooms in such apartment, (b) in the case of a Mortgaged Property that is operated as a hospitality property, the number of guest rooms, (c) in the case of a
155 |
Mortgaged Property that is a manufactured housing community property, the number of pads, or (d) in the case of a Mortgaged Property operated as a student housing property, the number of beds.
“Weighted Average Mortgage Rate” means the weighted average of the Mortgage Rates as of the Cut-off Date.
Statistical Characteristics of the Mortgage Loans
Overview
General Mortgage Loan Characteristics
(As of the Cut-off Date, unless otherwise indicated)
All Mortgage Loans | |
Initial Pool Balance(1) | $694,726,725 |
Number of Mortgage Loans | 54 |
Number of Mortgaged Properties | 64 |
Number of Crossed Groups | NAP |
Crossed Groups as a percentage of Initial Pool Balance | NAP |
Range of Cut-off Date Balances | $847,077 to $70,000,000 |
Average Cut-off Date Balance | $12,865,310 |
Range of Mortgage Rates | 4.34000% to 5.90000% |
Weighted Average Mortgage Rate | 4.94473% |
Range of original terms to Maturity Date | 60 months to 120 months |
Weighted average original term to Maturity Date | 119 months |
Range of Cut-off Date remaining terms to Maturity Date | 56 months to 120 months |
Weighted average Cut-off Date remaining term to Maturity Date | 116 months |
Range of original amortization terms(2) | 240 months to 360 months |
Weighted average original amortization term(2) | 347 months |
Range of remaining amortization terms(2) | 238 months to 360 months |
Weighted average remaining amortization term(2) | 346 months |
Range of Cut-off Date LTV Ratios(3)(4) | 44.7% to 75.1% |
Weighted average Cut-off Date LTV Ratio(3)(4) | 65.4% |
Range of Maturity Date LTV Ratios(3)(5) | 40.6% to 75.0% |
Weighted average Maturity Date LTV Ratio(3)(5) | 57.5% |
Range of UW NCF DSCR(3) | 1.20x to 2.18x |
Weighted average UW NCF DSCR(3) | 1.46x |
Range of Debt Yield on Underwritten NOI(3) | 5.8% to 15.2% |
Weighted average Debt Yield on Underwritten NOI(3) | 9.6% |
Percentage of Initial Pool Balance consisting of: | |
Amortizing Balloon | 22.7% |
Interest Only then Amortizing Balloon | 50.8% |
Interest Only | 26.5% |
Percentage of Initial Pool Balance consisting of: | |
Mortgage Loans with mezzanine debt | 3.6% |
Mortgaged Properties with single tenants | 2.7% |
(1) | Subject to a permitted variance of plus or minus 5%. |
(2) | Does not include Mortgage Loans that pay interest-only until their maturity dates. |
(3) | With respect to each Mortgage Loan that is part of a Loan Combination, the Cut-off Date LTV Ratio, Maturity Date LTV Ratio, UW NCF DSCR and Debt Yield on Underwritten NOI are calculated based on both that Mortgage Loan and any related Pari Passu Companion Loan(s), but without regard to any related Subordinate Companion Loan(s), unless otherwise indicated. Other than as specifically noted, the Cut-off Date LTV Ratio, Maturity Date LTV Ratio, UW NCF DSCR and Debt Yield on Underwritten NOI information for each Mortgage Loan is presented in this prospectus without regard to any other indebtedness (whether or not secured by the related Mortgaged Property, ownership interests in the related borrower or otherwise) that currently exists or that may be incurred by the related borrower or its owners in the future. |
(4) | Unless otherwise indicated, the Cut-off Date LTV Ratio for each Mortgage Loan is calculated using an “as-is” Appraised Value. In the case of 8 Mortgage Loans, collectively representing approximately 14.8% of the Initial Pool Balance, each of the respective Cut-off Date LTV Ratios was calculated using (i) an Appraised Value that is based on certain adjustments and/or assumptions, (ii) the Cut-off Date Balance of a Mortgage Loan less an economic holdback taken at origination, or (iii) an “as-is” Appraised Value plus related property improvement costs reserved for at origination, in each case as further described in the definitions of “Appraised Value” and/or “Cut-off Date LTV Ratio” under “—Certain Calculations and Definitions.” The weighted average Cut-off Date LTV Ratio for the Mortgage Pool using only unadjusted “as-is” appraised values and the Cut-off Date Balance of each Mortgage Loan, and without making any of the adjustments and/or assumptions described in the definitions of “Appraised Value” and/or “Cut-off Date LTV Ratio” under “—Certain Calculations and Definitions”, is 66.2%. |
(5) | Unless otherwise indicated, the Maturity Date LTV Ratio for each Mortgage Loan is calculated using an “as-is” Appraised Value. In the case of 12 Mortgage Loans, collectively representing approximately 25.7% of the Initial Pool Balance, each of the respective Maturity Date LTV Ratios was calculated using (i) an Appraised Value that is based on certain adjustments and/or assumptions or (ii) an “as stabilized” Appraised Value (as opposed to the related “as-is” Appraised Value), in each case as further described in the definitions of “Appraised Value” and/or “Maturity Date LTV Ratio” under “—Certain Calculations and Definitions.” The weighted average Maturity Date LTV Ratio for the Mortgage Pool using only unadjusted “as-is” appraised values for each Mortgage Loan, and without making any of the adjustments and/or assumptions described in the definitions of “Appraised Value” and/or “Maturity Date LTV Ratio” under “—Certain Calculations and Definitions”, is 58.9%. |
156 |
See “—Certain Calculations and Definitions” for important general and specific information regarding the manner of calculation of the underwritten debt service coverage ratios, underwritten debt yield ratios and loan-to-value ratios.
All of the Mortgage Loans (and Loan Combination(s)) are expected to have substantial remaining principal balances as of their respective maturity dates or anticipated repayment dates, as applicable. This includes 29 Mortgage Loans, representing approximately 50.8% of the Initial Pool Balance, that pay interest-only for a portion of their respective terms, 7 Mortgage Loans, representing approximately 26.5% of the Initial Pool Balance, that pay interest-only for their entire terms through their respective maturity dates or anticipated repayment dates and 18 Mortgage Loans, representing approximately 22.7% of the Initial Pool Balance that pay principal and interest for their entire terms and as applicable.
Property Types
The table below shows the property type concentrations of the Mortgaged Properties:
Property Type Distribution(1)
Mortgaged Property Type | Number of Mortgage Loans | Number of Mortgaged Properties | Aggregate Cut-off Date Balance | Approx. % of Initial Pool Balance | ||||
Office | 6 | 6 | $180,335,866 | 26.0% | ||||
CBD | 4 | 4 | 151,344,943 | 21.8 | ||||
General Suburban | 2 | 2 | 28,990,924 | 4.2 | ||||
Retail | 18 | 21 | $136,865,041 | 19.7% | ||||
Anchored | 6 | 6 | 77,220,754 | 11.1 | ||||
Shadow Anchored | 5 | 5 | 27,952,165 | 4.0 | ||||
Single Tenant Retail | 5 | 8 | 18,704,639 | 2.7 | ||||
Unanchored | 2 | 2 | 12,987,483 | 1.9 | ||||
Multifamily | 10 | 13 | $113,077,030 | 16.3% | ||||
Garden | 8 | 11 | 79,527,030 | 11.4 | ||||
High-Rise | 1 | 1 | 22,000,000 | 3.2 | ||||
Mid-Rise | 1 | 1 | 11,550,000 | 1.7 | ||||
Hospitality | 6 | 6 | $112,535,681 | 16.2% | ||||
Full Service | 2 | 2 | 76,500,000 | 11.0 | ||||
Limited Service | 3 | 3 | 24,835,681 | 3.6 | ||||
Extended Stay | 1 | 1 | 11,200,000 | 1.6 | ||||
Land(2) | 1 | 1 | $70,000,000 | 10.1% | ||||
Hospitality | 1 | 1 | 70,000,000 | 10.1 | ||||
Mixed Use | 2 | 2 | $46,176,237 | 6.6% | ||||
Hospitality/Office/Retail | 1 | 1 | 39,876,237 | 5.7 | ||||
Multifamily/Retail | 1 | 1 | 6,300,000 | 0.9 | ||||
Self Storage | 7 | 11 | $29,957,461 | 4.3% | ||||
Self Storage | 7 | 11 | 29,957,461 | 4.3 | ||||
Manufactured Housing | 4 | 4 | $5,779,409 | 0.8% | ||||
Manufactured Housing | 4 | 4 | 5,779,409 | 0.8 | ||||
Total | 54 | 64 | $694,726,725 | 100.0% |
(1) | Because this table presents information relating to Mortgaged Properties and not Mortgage Loans, the information for Mortgage Loans secured by more than one Mortgaged Property is based on allocated loan amounts as set forth on Annex A. |
(2) | The Mortgage Loan is secured by the borrower’s fee interest in the Mortgaged Property, which is comprised of land and improvements that have been ground leased to a ground lessee that operates the improvements on the Mortgaged Property (a hotel). |
Office Properties
Six (6)office properties, representing collateral for approximately 26.0% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 6 of the Mortgage Loans. A large number of factors may adversely affect the operation and value of office properties. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Office Properties”.
157 |
Certain of the office Mortgaged Properties may have specialty use tenants, such as dental or medical offices, physical therapy facilities (including aquatic physical therapy facilities), emergency room facilities, urgent care facilities, data centers, long-term care facilities, restaurants, fitness centers, schools/classrooms, concert halls, rooftop cell towers and/or parking garages, as part of the Mortgaged Property. Further, certain of the office Mortgaged Properties derive a portion of Underwritten Net Revenue from such specialty use tenants. These Mortgaged Properties and the related leased space may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason.
Retail Properties
Twenty-one (21)retail properties, representing collateral for approximately 19.7% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 18 of the Mortgage Loans.
The presence or absence of an “anchor tenant” or a “shadow anchor tenant” in or near a retail property also can be important because anchors play a key role in generating customer traffic and making a center desirable for other tenants.
Certain of the retail Mortgaged Properties may have specialty use tenants, such as theaters, medical and dental offices, emergency room facilities, diagnostic laboratories, fitness centers, health clubs, dry cleaners, classrooms/educational centers, health professional schools, gas stations, schools, daycare facilities, houses of worship, performance studios, night clubs, parking garages, hospitals, animal hospitals, driving schools, hair salons and/or restaurants. These Mortgaged Properties and the related leased space may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason. See ���—Statistical Characteristics of the Mortgage Loans—Specialty Use Concentrations” below and “Risk Factors—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
With respect to the Mortgage Loan secured in part by the Mortgaged Property identified on Annex A to this prospectus as Siena Town Center, representing approximately 1.3% of the Initial Pool Balance, Dotty’s (Nevada Restaurant Services, Inc.), the third largest tenant by net rentable area, is a gaming establishment.
A large number of factors may adversely affect the operation and value of retail properties. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Retail Properties”.
Multifamily Properties
Thirteen (13)multifamily properties, representing collateral for approximately 16.3% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 10 of the Mortgage Loans. A large number of factors may adversely affect the operation and value of multifamily properties. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Multifamily Rental Properties”.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hampshire Tower Apartments, representing approximately 3.2% of the Initial Pool Balance, the Mortgaged Property is subject to a rent stabilization law with the City of Takoma Park, under which all rental rate increases are limited to the rent stabilization allowance published annually by the City of Takoma Park. A twenty (20) year exemption from the City of Takoma Park’s rent stabilization requirements was obtained in 2008 through a rental agreement with the Montgomery County Department of Housing, whereby at least thirty (30) units were required to be leased to very low income tenants (tenants whose income is at or below 40% of the adjusted area median income (“AMI”)), and subject to additional restrictions for other tenants. Subsequent to its purchase of the Mortgaged Property, the borrower executed a revised rental agreement with the Montgomery County Department of Housing, as well as an amendment to that agreement. As part of the amended rental agreement, the Montgomery County Department of Housing agreed to provide a rental subsidy to the borrower in the amount of $276,930 for the three-year period of September 2015 through September 2018, which was paid upfront to the borrower. The unapplied rental subsidy of $210,722 was escrowed at loan closing. The rental subsidy is defined as the difference between the current market rate (as defined in the rental agreement) for tenants who do not qualify (or fail to qualify) for other rental subsidies (“Remaining Tenants”) and the current rent being paid by such tenants. On October 1, 2015, the borrower increased the rents on Remaining Tenants units by 15%. There are currently 171 units at the Mortgaged Property that are designated as Remaining Tenants. Of those 171 units, the
158 |
borrower is receiving a rent subsidy for 86 units for a total of $16,552 per month which is being applied to rental collections each month. As a result of the rent increase on October 1, 2015, plus the $16,552 in monthly rent subsidy, monthly rental collections increased from $226,356 in September 2015 to $257,861 in October 2015.
With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as McCallum Courts and McCallum Glen, representing 2.8% of the Initial Pool Balance, the majority of the tenants are graduate students.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Arbors at Turnberry, representing approximately 2.7% of the Initial Pool Balance, such Mortgaged Property is located across the street from another multifamily property owned by an affiliate of the related borrower and is subject to a shared amenities agreement pursuant to which tenants and residents of such multifamily property may access and use the Mortgaged Property’s amenities, including parking facilities.
With respect to the Mortgage Loan secured in part by the Mortgaged Properties identified on Annex A to this prospectus as Ashgrove Apartments and Slate Run Apartments, collectively securing approximately 1.5% of the Initial Pool Balance by allocated loan amount, tenant voucher programs operated by the Detroit Housing Commission, the Michigan State Housing Development Authority and Miami Valley Housing Opportunities provide voucher payments and rent subsidies to tenants in eight (8) of the 203 residential units at the Mortgaged Property identified on Annex A to this prospectus as Ashgrove Apartments and tenants in five (5) of the 48 residential units at the Mortgaged Property identified on Annex A to this prospectus as Slate Run Apartments.
Hospitality Properties
Six (6)hospitality properties, representing collateral for approximately 16.2% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 6 of the Mortgage Loans. Five (5) of the hospitality Mortgaged Properties, representing collateral for approximately 10.9% of the Initial Pool Balance by allocated loan amount, are flagged hotel properties that are affiliated with a franchise or hotel management company through a franchise or management agreement.
A hospitality property subject to a franchise or management agreement is typically required by the hotel chain to satisfy certain criteria or risk termination of its affiliation. We cannot assure you that the franchise agreement or management agreement will remain in place or that the hotel will continue to be operated under a franchised brand or under its current name. In addition, transferability of a franchise agreement is generally restricted. In the event of a foreclosure, the lender or its agent may not have the right to use the franchise license without the franchisor’s consent. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Hospitality Properties”.
In addition, renovations, replacements and other work are ongoing at certain of the hospitality properties in connection with, among other things, franchise agreement and franchisor program requirements. See “—Redevelopment, Expansion and Renovation” below.
Certain of the hospitality properties may have a parking garage as part of the collateral. These Mortgaged Properties and the related leased space may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason. See “—Statistical Characteristics of the Mortgage Loans—Specialty Use Concentrations” below and “Risk Factors—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Hospitality properties may be particularly affected by seasonality. The Mortgage Loans secured by the Mortgaged Properties identified on Annex A to this prospectus as Hotel on Rivington, Holiday Inn Express & Suites Wisconsin and Holiday Inn Express & Suites Traverse City, representing approximately 7.6% of the Initial Pool Balance, requires a seasonality reserve that was established in connection with the origination of such Mortgage Loan and/or that is required on an ongoing basis.
A large number of factors may adversely affect the operation and value of hospitality properties. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Hospitality Properties”.
159 |
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Orrington Evanston, representing approximately 5.8% of the Initial Pool Balance, the Mortgage Loan documents permit an affiliate of the borrower or an unaffiliated third party to build up to thirty (30) residential units in the air space existing above the hotel parking garage and provide for residential parking for any to-be constructed residential units in the air space existing above or below the hotel parking garage.
Land Properties
One (1) Mortgage Loan, representing approximately 10.1% of the Initial Pool Balance, is secured by a Mortgaged Property that is subject to a ground lease of both the land and improvements to a single tenant. Certain factors may adversely affect the operation and value of a mortgaged property that consists entirely of a leased fee interest. See “Risk Factors—Leased Fee Properties Have Special Risks”.
Mixed Use Properties
Two (2)mixed use properties, representing collateral for approximately 6.6% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 2 of the Mortgage Loans.
Each of the mixed use properties has one or more retail, hospitality, multifamily and/or office components. To the extent a mixed use property has retail, hospitality, multifamily and/or office components, such Mortgaged Property is subject to the risks relating to the applicable property types described in “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Retail Properties”, “—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Hospitality Properties”, “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Retail Properties”,“—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Office Properties”. A mixed use property may be subject to additional risks, including the property manager’s inexperience in managing the different property types that comprise such mixed use property.
Certain of the mixed use properties may have specialty use tenants, such as medical and dental offices, urgent care facilities, bio-medical facilities, music venues, theaters, parking garages, banks, ballroom event spaces, fitness centers, spas and/or restaurants. These Mortgaged Properties and the related leased space may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason. See “—Statistical Characteristics of the Mortgage Loans—Specialty Use Concentrations” below and “Risk Factors—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Self Storage Properties
Eleven (11)self storage properties, representing collateral for approximately 4.3% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 7 of the Mortgage Loans. A large number of factors may adversely affect the operation and value of self storage properties. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Warehouse, Mini-Warehouse and Self Storage Facilities”.
Certain self storage Mortgaged Properties also derive a portion of the Underwritten Revenue from one or more of (a) rent derived from storage spaces used primarily for office and/or warehouse use located at the related Mortgaged Property, (b) rent derived from truck rentals located at the Mortgaged Property, (c) rent derived from on-site apartments leased out to third parties, (d) rent derived from cell tower and/or antenna leases, (e) rent derived from leasing billboard space to third parties, (f) the leasing of certain parking spaces located at the related Mortgaged Properties for purposes of recreational vehicle, other vehicle, and/or boat storage and/or (g) rent derived from retail operations.
Manufactured Housing Community Properties
Four (4)manufactured housing community properties, representing collateral for approximately 0.8% of the Initial Pool Balance by allocated loan amount, secure, in whole or in part, 4 of the Mortgage Loans. A large number of factors may adversely affect the operation and value of manufactured housing community properties. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Manufactured Housing Communities, Mobile Home Parks and Recreational Vehicle Parks”.
160 |
Certain of the manufactured housing community Mortgaged Properties may not be connected in their entirety to public water and/or sewer systems. In such cases, the borrower could incur a substantial expense if it were required to connect the property to such systems in the future. In addition, the use of well water enhances the likelihood that the property could be adversely affected by a recognized environmental condition that impacts soil and groundwater.
In addition, with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Suncoast MHC, representing approximately 0.2% of the Initial Pool Balance, such Mortgaged Property is subject to age restrictions limiting tenancy to seniors.
Specialty Use Concentrations
As indicated on Annex A to this prospectus, certain of the Mortgaged Properties have, as one or more of its 5 largest tenants (based on net rentable square footage) or as a single tenant operating at the related Mortgaged Property, a tenant that operates the property as a specialty use, which may not allow the space to be readily converted to be suitable for another type of tenant, as set forth in the following table.
Specialty Use | Number of Mortgaged Properties | Approx. % of Initial |
Restaurant | 9 | 14.0% |
Gym, fitness center or a health club | 7 | 13.1 |
Bank branch | 4 | 7.2 |
Music Venue | 1 | 5.7 |
Medical, dental, physical therapy or veterinary offices or clinics, outpatient facilities, research or diagnostic laboratories or health management services and/or health professional schools | 5 | 4.4 |
School, educational facility and/or beauty and cosmetology school | 2 | 4.2 |
Call center | 1 | 2.9 |
Spa | 2 | 2.2 |
Religious | 1 | 1.5 |
Gas station | 1 | 0.7 |
Dry cleaners | 1 | 0.5 |
Restaurants are subject to certain unique risks including that the restaurant space is not easily convertible to other types of retail or office space and that the restaurant receipts are not only affected by objective factors but by subjective factors. For instance, restaurant receipts are affected by such varied influences as the current personal income levels in the community, an individual consumer’s preference for type of food, style of dining and restaurant atmosphere, the perceived popularity of the restaurant, food safety concerns related to personal health with the handling of food items at the restaurant or by food suppliers and the actions and/or behaviors of staff and management and level of service to the customers.
The cash flows generated from private schools are generally dependent on student enrollment and the ability of enrolled students to pay tuition, which in some cases is dependent on the ability to obtain financial aid or loans. Enrollment at a private school may decrease due to, among other factors: (i) changing local demographics; (ii) competition from other schools; increases in tuition and/or reductions in availability of student loans, government grants or scholarships; (iii) reductions in education spending as a result of changes in economic conditions in the area of the school; (iv) poor performance by teachers, administrative staff or students; or (v) mismanagement at the private school. See “Risk Factors—The Types of Properties That Secure the Mortgage Loans Present Special Risks—Private Schools and Other Cultural and Educational Institutions”.
Bank branches are specialty-use properties that are outfitted with vaults, teller counters and other customary installations and equipment that require significant capital expenditures. The ability to lease these properties to entities other than financial institutions may be difficult due to the added cost and time of refitting the properties.
These Mortgaged Properties and the related leased space may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason. See “Risk Factors—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
161 |
Mortgage Loan Concentrations
The table below presents the aggregate Cut-off Date Balance and percentage of Initial Pool Balance of the largest Mortgage Loans and the largest groups of Mortgage Loans with related borrowers:
Pool of Mortgage Loans
Aggregate | Approx. % of Initial | |
Top Mortgage Loan | $70,000,000 | 10.1% |
Top 5 Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) | $241,621,179 | 34.8% |
Top 10 Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) | $389,721,179 | 56.1% |
Largest Related-Borrower Concentration(1) | $16,260,681 | 2.3% |
Next Largest Related-Borrower Concentration(1) | $12,300,000 | 1.8% |
(1) | Excludes single-borrower Mortgage Loans and cross-collateralized and cross-defaulted Mortgage Loans that are not otherwise related to a borrower under any other Mortgage Loans. |
Other than with respect to the largest 10 Mortgage Loans(considering any Crossed Group as a single Mortgage Loan), each of the other Mortgage Loans represents no more than approximately 2.9% of the Initial Pool Balance. See“Significant Loan Summaries” in Annex B to this prospectus for more information on the largest 15 Mortgage Loans (considering any Crossed Group as a single Mortgage Loan).
The table below shows each individual Mortgage Loan that is secured by two or more Mortgaged Properties.
Multi-Property Mortgage Loans
Mortgaged Property / Portfolio Names | Aggregate Cut-off | Approx. % of | ||
McCallum Courts and McCallum Glen | $19,143,750 | 2.8% | ||
Amsdell Self Storage - Cincinnati Portfolio | 14,150,000 | 2.0 | ||
MI, OH & GA Multifamily Portfolio | 13,050,000 | 1.9 | ||
Storage R Us Portfolio | 5,500,000 | 0.8 | ||
Ohio Retail Portfolio | 4,274,082 | 0.6 | ||
Sherwin Williams Portfolio | 2,257,039 | 0.3 | ||
Grand Total | $58,374,872 | 8.4% |
162 |
Six (6) groups of Mortgage Loans, set forth in the table below entitled “Related Borrower Loans”, collectively representing approximately 7.9% of the Initial Pool Balance, are not cross-collateralized but have borrower sponsors that are related to each other. No group of Mortgage Loans that (i) does not constitute a cross-collateralized group, and (ii) otherwise has borrower sponsors that are related to each other represents more than approximately 2.3% of the Initial Pool Balance. See “Risk Factors—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses” in addition to Annex A.
Related Borrower Loans (Other than Crossed Groups)
Mortgaged Property Name | Aggregate Cut-off | Approx. % of Initial | ||||||
Group 1 | ||||||||
Holiday Inn Express & Suites Wisconsin | $9,227,508 | 1.3 | % | |||||
Holiday Inn Express & Suites Traverse City | 7,033,173 | 1.0 | ||||||
Total for Group 1: | $16,260,681 | 2.3 | % | |||||
Group 2 | ||||||||
Northwood Oaks | $8,175,000 | 1.2 | % | |||||
Providence Plaza | 4,125,000 | 0.6 | ||||||
Total for Group 2: | $12,300,000 | 1.8 | % | |||||
Group 3 | ||||||||
Ohio Retail Portfolio | $4,274,082 | 0.6 | % | |||||
Walgreens Sarasota | 3,648,517 | 0.5 | ||||||
Sherwin Williams Portfolio | 2,257,039 | 0.3 | ||||||
27810 Chagrin Boulevard | 1,987,483 | 0.3 | ||||||
Total for Group 3: | $12,167,122 | 1.8 | % | |||||
Group 4 | ||||||||
Midway Self Storage | $2,142,606 | 0.3 | % | |||||
Acworth Self Storage | 2,092,778 | 0.3 | ||||||
Buford Self Storage | 847,077 | 0.1 | ||||||
Total for Group 4: | $5,082,461 | 0.7 | % | |||||
Group 5 | ||||||||
Maplewood MHC | $2,140,000 | 0.3 | % | |||||
Elkhart MHC | 1,314,409 | 0.2 | ||||||
Suncoast MHC | 1,050,000 | 0.2 | ||||||
Total for Group 5: | $4,504,409 | 0.6 | % | |||||
Group 6 | ||||||||
Parkside Apartments | $2,242,355 | 0.3 | % | |||||
Glen Cove Apartments | 1,990,925 | 0.3 | ||||||
Total for Group 6: | $4,233,280 | 0.6 | % |
Mortgage Loans with related borrowers are identified under “Related Group” on Annex A to this prospectus.
163 |
Geographic Concentrations
This table shows the states that have concentrations of Mortgaged Properties that secure 5.0% or more of the Initial Pool Balance:
Geographic Distribution(1)
State | Number of | Aggregate | Approx. % of |
New York | 4 | $131,500,000 | 18.9% |
Colorado | 2 | $74,700,000 | 10.8% |
Texas | 4 | $69,396,990 | 10.0% |
Illinois | 4 | $63,575,000 | 9.2% |
Virginia | 1 | $51,744,943 | 7.4% |
Michigan | 9 | $49,331,166 | 7.1% |
Ohio | 10 | $44,844,565 | 6.5% |
California | 2 | $38,568,136 | 5.6% |
Florida | 5 | $34,998,517 | 5.0% |
(1) | Because this table presents information relating to Mortgaged Properties and not the Mortgage Loans, the information for the Mortgage Loans secured by more than one Mortgaged Property is based on allocated loan amounts as stated in Annex A to this prospectus. |
Repayments by borrowers and the market value of the related Mortgaged Properties could be affected by economic conditions generally or specific to particular geographic areas or the regions of the United States, and concentrations of Mortgaged Properties in particular geographic areas may increase the risk that conditions in the real estate market where the Mortgaged Property is located, or other adverse economic or other developments or natural disasters (e.g., earthquakes, floods, forest fires, tornadoes or hurricanes, terrorist attacks or changes in governmental rules or fiscal policies) affecting a particular region of the country, could increase the frequency and severity of losses on Mortgage Loans secured by those Mortgaged Properties. For example:
· | Mortgaged Properties located in Texas, California, Florida, Arizona, Georgia and Nevada, among others, are more susceptible to certain hazards (such as earthquakes and wildfires) than properties in other parts of the country. |
· | Mortgaged Properties located in coastal states, which include Mortgaged Properties located in, for example, New York, Texas, Illinois, Michigan, Ohio, California, Florida, Maryland, South Carolina, Georgia and Massachusetts, among others, also may be more generally susceptible to floods or hurricanes than properties in other parts of the country. Hurricanes in the Northeast and Mid-Atlantic States and in the Gulf Coast region have resulted in severe property damage as a result of the winds and the associated flooding. The Mortgage Loans do not require flood insurance on the related Mortgaged Properties unless they are in a flood zone and flood insurance is available. We cannot assure you that any hurricane damage would be covered by insurance. |
· | Mortgaged Properties located in the states that stretch from Texas to Canada, with its core centered in northern Texas, as well as in the southern United States and particularly the northern and central parts of Mississippi, are prone to tornados. |
· | In addition, certain of the Mortgaged Properties are located in cities or states that are currently facing or may face a depressed real estate market, which is not due to any natural disaster but which may cause an overall decline in property values. |
Four (4)Mortgaged Properties, collectively securing approximately 6.8% of the Initial Pool Balance by allocated loan amount, are located in areas that are considered a high earthquake risk (seismic zones 3 or 4), and seismic reports were prepared with respect to these Mortgaged Properties, and based on those reports, no Mortgaged Property has a seismic expected loss greater than 16%.
164 |
Loans Underwritten Based on Projections of Future Income Resulting From Mortgaged Properties with Limited Prior Operating History
Five (5) of the Mortgaged Properties, identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, Estates at Westernaire, Okatie Self Storage, Jefferson MHC and Suncoast MHC, collectively securing approximately 12.6% of the Initial Pool Balance, were acquired 12 months or less prior to the Cut-off Date and, therefore, have no or limited prior operating history and/or lack historical financial figures and information.
One (1)of the Mortgaged Properties, identified on Annex A to this prospectus as Hampshire Tower Apartment, securing approximately 3.2% of the Initial Pool Balance, was constructed, substantially renovated, re-positioned or repurposed 12 months or less prior to the Cut-off Date and, therefore, has no or limited prior operating history and/or lacks historical financial figures and information.
Tenancies-in-Common
Certain borrowers may own a Mortgaged Property as tenants-in-common. In the case of each of the Mortgage Loans secured by the Mortgaged Property or portfolio of Mortgaged Properties identified on Annex A to this prospectus as McCallum Courts and McCallum Glen, Chesterfield Square, Lemoore Plaza, Fry’s at the Islands and 27810 Chagrin Boulevard, representing approximately 2.8%, 0.9%, 0.6%, 0.5% and 0.3%, respectively, of the Initial Pool Balance, the related borrowers are tenants-in-common, and in the case of the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as Ohio Retail Portfolio, representing approximately 0.6% of the Initial Pool Balance, two of the four related borrowers are tenants-in-common. However, with respect to each such Mortgage Loan, the related tenants-in-common have waived their respective right to partition.
See “Risk Factors—The Borrower’s Form of Entity May Cause Special Risks” and “—Tenancies-in-Common May Hinder Recovery”.
Condominium Interests
Four (4) of the Mortgage Loans secured in part by the Mortgaged Properties identified on Annex A to this prospectus as Austin Block 21, Hamsphire Tower Apartments, Chesterfield Square and Sherwin Williams-New Hudson, representing approximately 5.7%, 3.2%, 0.9% and 0.2%, respectively, of the Initial Pool Balance by allocated loan amount, are secured, in certain cases, in part, by the related borrower’s interest in one or more units in a condominium. With respect to such Mortgage Loans, the borrower generally controls the appointment and voting of the condominium board or the condominium owners cannot take actions or cause the condominium association to take actions that would affect the borrower’s unit without the borrower’s consent (other than as described below with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Sherwin Williams-New Hudson):
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, the Mortgaged Property consists of two condominium regimes, one of which consists of private residences. The borrower has a 55.2278% aggregate percentage interest in the common elements of the first condominium, and the remaining 44.7722% aggregate percentage interest in the common elements of the first condominium is owned entirely by the owners of the private residences. The borrower has a 61.2195% aggregate percentage interest in the common elements of the second condominium, and the remaining 38.7805% aggregate percentage interest in the common elements of the second condominium is owned entirely by the owners of the private residences. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hampshire Tower Apartments, representing approximately 3.2% of the Initial Pool Balance, the Mortgaged Property is part of a land condominium, which shares common facilities (a pool and tennis court) with an adjacent residential condominium building. The borrower is on the council of the land condominium Council of Unit Owners of Hampshire Towers Land Condominium, and has 50% of the voting rights with respect to the condominium. |
165 |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Chesterfield Square, representing approximately 0.9% of the Initial Pool Balance, the Mortgaged Property is subject to a condominium regime. The borrower owns 4 units, with the other 4 units improved with non-collateral retail uses. The borrower owns a minority ownership position (28.5%), but the board of directors is elected by number of units (not percentage of voting interest), and the borrower has the right to elect four of eight directors. |
· | With respect to the Mortgage Loan secured in part by the Mortgaged Property identified on Annex A to this prospectus as Sherwin Williams-New Hudson, representing approximately 0.2% of the Initial Pool Balance by allocated loan amount, such Mortgaged Property consists of the related borrower’s fee interest in one unit in a 14-unit condominium. The borrower does not control the related condominium association. |
Even if the borrower or its designated board members, either through control of the appointment and voting of sufficient members of the condominium board or by virtue of other provisions in the condominium documents, have consent rights over actions by the condominium associations or owners, we cannot assure you that the condominium board will not take actions that would materially adversely affect the borrower’s unit. See “Risk Factors—Lending on Condominium Units Creates Risks for Lenders That Are Not Present When Lending on Non-Condominiums” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Leasehold Interests
For purposes of this prospectus, an encumbered interest will be characterized as a “fee interest” and not a leasehold interest if (i) the borrower has a fee interest in all or substantially all of the Mortgaged Property (provided that if the borrower has a leasehold interest in any portion of the Mortgaged Property, and the fee interest in such portion is not also encumbered, then such portion is not, individually or in the aggregate, material to the use or operation of the Mortgaged Property), or (ii) the Mortgage Loan is secured by the borrower’s leasehold interest in the Mortgaged Property as well as the borrower’s (or other fee owner’s) overlapping fee interest in the related Mortgaged Property.
One (1) Mortgaged Property, identified on Annex A to this prospectus as Franklin Center, securing approximately 1.3% of the Initial Pool Balance, is subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien on (x) one or more leasehold interests in a portion of the related Mortgaged Property and (y) one or more fee interests in the remaining portion of the related Mortgaged Property.
In general, unless the related fee interest is also encumbered by the related Mortgage, each of the ground leases has a term that extends at least 20 years beyond the maturity date of the Mortgage Loan (taking into account all freely exercisable extension options) and, except as noted on Annex E, contains customary mortgagee protection provisions, including notice and cure rights and the right to enter into a new lease with the applicable ground lessor in the event a ground lease is rejected or terminated.
See “Risk Factors—Lending on Ground Leases Creates Risks for Lenders That Are Not Present When Lending on an Actual Ownership Interest in a Real Property”. See also Sponsor Representations and Warranties No. 34 (Ground Leases) on Annex E-1 to this prospectus and any related exceptions on Annex E-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex E-1 to this prospectus).
Condemnations
There may be Mortgaged Properties securing Mortgage Loans as to which there have been or are currently condemnations, takings and/or grant of easements affecting portions of such Mortgaged Properties, or property adjacent to such Mortgaged Properties, which, in general, would not and do not materially affect the use, value or operation of such Mortgaged Property.
Delinquency Information
As of the Cut-off Date, none of the Mortgage Loans will be 30 days or more delinquent and none of the Mortgage Loans have been 30 days or more delinquent since origination. A Mortgage Loan will be treated as 30
166 |
days delinquent if the scheduled payment for a due date is not received from the related borrower by the immediately following due date.
Environmental Considerations
An environmental report was prepared for each Mortgaged Property securing a Mortgage Loan no more than 12 months prior to the Cut-off Date. See Annex A to this prospectus for the date of the environmental report for each Mortgaged Property. The environmental reports were generally prepared pursuant to the American Society for Testing and Materials standard for a “Phase I” environmental site assessment (each, an “ESA”). In addition to the Phase I standards, some of the environmental reports will include additional research, such as limited sampling for asbestos containing material, lead based paint, radon or water damage with limited areas of potential or identified mold, depending upon the property use and/or age. Additionally, as needed pursuant to American Society for Testing and Materials standards, supplemental “Phase II” site investigations have been completed for some Mortgaged Properties to further evaluate certain environmental issues, including certain recognized environmental conditions (each, a “REC”). A Phase II investigation generally consists of sampling and/or testing.
The environmental reports may have revealed material adverse conditions or circumstances at a Mortgaged Property:
· | that were remediated or abated before the origination date of the related Mortgage Loan or are anticipated to be remediated or abated before the Closing Date; |
· | for which an operations and maintenance plan, abatement as part of routine maintenance or periodic monitoring of the Mortgaged Property or nearby properties will be in place or recommended; |
· | for which an escrow, guaranty or letter of credit for the remediation will have been established pursuant to the terms of the related Mortgage Loan; |
· | for which an environmental insurance policy will have been obtained from a third party insurer; |
· | for which the principal of the borrower or another financially responsible party will have provided an indemnity or will have been required to take, or will be liable for the failure to take, such actions, if any, with respect to such matters as will have been required by the applicable governmental authority or recommended by the environmental reports; |
· | for which such conditions or circumstances will have been investigated further and the environmental consultant has recommended no further action or remediation; |
· | as to which the borrower or other responsible party has obtained, or will be required to obtain post closing, a “no further action” letter or other evidence that governmental authorities would not be requiring further action or remediation; |
· | that would not require substantial cleanup, remedial action or other extraordinary response under environmental laws; or |
· | for which the related borrower has obtained or sought to obtain or agreed to seek a “case closed” or similar status for the issue from the applicable governmental agency. |
It was not uncommon for the environmental testing to reveal the presence of asbestos containing materials, lead based paint, mold and/or radon at any Mortgaged Property. Where these substances were present, the environmental consultant generally recommended, and the borrower was generally required to establish an operation and maintenance plan to address the issue or, in some cases involving asbestos containing materials and lead based paint, an abatement or removal program.
Other identified conditions could, for example, include leaks from surface level storage tanks, underground storage tanks (each, a “UST”), leaking underground storage tanks (each, a “LUST”), onsite dry cleaning facilities, gas stations, and on site spills. In such cases, 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
167 |
environmental reserve accounts. However, we cannot assure you that any environmental indemnity, insurance, letter of credit, guaranty or reserve amounts will be sufficient to remediate the environmental conditions or that all environmental conditions have been identified or that operation and maintenance plans will be put in place and/or followed.
Problems associated with mold may pose risks to the real property and may also be the basis for personal injury claims against a borrower. Although the Mortgaged Properties will be required to be inspected periodically, there is no set of generally accepted standards for the assessment of mold currently in place. If left unchecked, the growth of mold could result in the interruption of cash flow, litigation and remediation expenses which could adversely impact collections from a Mortgaged Property.
It is possible that the environmental reports and/or Phase II sampling did not reveal all environmental liabilities, or that there are material environmental liabilities of which we are not aware. Also, the environmental condition of the Mortgaged Properties in the future could be affected by the activities of tenants and occupants or by third parties unrelated to the borrowers. For further general discussion of the environmental matters that may affect the Mortgaged Properties, see “Risk Factors—Environmental Liabilities Will Adversely Affect the Value and Operation of the Contaminated Property and May Deter a Lender from Foreclosing” and “Certain Legal Aspects of the Mortgage Loans—Environmental Considerations”.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as The Armitage Collection, representing approximately 1.6% of the Initial Pool Balance,the Phase I ESA identifies as a REC for the Property: (1) a historic LUST located on the southern portion of the Mortgaged Property and associated with an historic garage that included a filling station, and (2) a historic LUST on the northern portion of the Mortgaged Property, which was enrolled in the Illinois Site Remediation Program in 2010. These historic LUSTs have not yet received closure from the Illinois Environmental Protection Agency. The parties identified as responsible for the open, historic LUSTs are not related to the related borrower. A $1,000,000 escrow was established for purposes of environmental protection during pursuit of closure for the two open, historic LUSTs. If closure is not achieved within five years, the escrow funds will be released to the related lender to be held and disbursed to the borrower for the borrower’s costs of obtaining closure.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Northwood Oaks, representing approximately 1.2% of the Initial Pool Balance, the related ESA reported that a 1997 subsurface investigation identified volatile organic compounds in soil samples in connection with prior on-site dry cleaning operations of a tenant that has since transitioned from on-site dry cleaning activities to operating a drop-off location. The related site was approved for the Florida Department of Environmental Protection’s (the “FDEP”) Drycleaning Solvent Cleanup Program (“DSCP”) in May 1997 and is reportedly awaiting assignment by the FDEP for investigation and possible remediation, which will require payment of a $1,000 deductible by the responsible party (which the FDEP has identified as the dry cleaning tenant) with the remainder of any clean-up costs to be the FDEP’s responsibility. The environmental consultant noted that a potential vapor encroachment condition may exist for on-site occupants, but recommended no further investigation based on the extent of the soil contamination, the reduction of contaminant concentrations over the last 18 years, the presence of a poured concrete floor immediately above the impacted soil, use of HVAC and the limited occupancy of the related space. The related Mortgage Loan documents provide for recourse to the related borrower and guarantor (i) for losses arising from the borrower’s failure to pay any applicable annual registration fees, deductibles or other fees, costs or expenses required by the FDEP or required to remain eligible for the FDEP’s DSCP and (ii) in the full amount of the related Mortgage Loan if the borrower fails to cooperate with the FDEP or to comply with any requirements of the FDEP’s DSCP with respect to such REC, but only to the extent such non-cooperation or noncompliance results in the borrower’s being removed from the FDEP’s DSCP. We cannot assure you that the Mortgaged Property will continue to participate in the FDEP, that the FDEP will complete any remediation that may be warranted, or that there will not be future circumstances that require any other actions.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Walgreens Madison, representing approximately 0.7% of the Initial Pool Balance, the Mortgaged Property is listed in the Wisconsin Department of Natural Resources (“WDNR”) Bureau of Remediation & Redevelopment Tracking System. WDNR granted closure of the case pursuant to a September 29, 2015 agreement pursuant to which the prior owner of the Mortgaged Property agreed (which agreement runs to successors and assigns) to maintain a cap/pavement barrier over the affected area of the Mortgaged Property. According to an environmental consulting firm the estimated cost to inspect, repair and maintain the pavement/cap every five years is approximately $20,000 over the term of the Mortgage Loan. The borrower
168 |
obtained an environmental insurance policy with Lloyd’s of London (Beazley), naming the lender as additional named insured, with a policy limit of $2 million per incident and in the aggregate, a deductible of $25,000, and a policy coverage period of ten years plus 30 days. The policy premium was paid in full.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Providence Plaza, representing approximately 0.6% of the Initial Pool Balance, the related ESA noted the presence of groundwater contamination at levels exceeding the FDEP’s groundwater cleanup target levels, which constitutes a REC. The ESA reported that dry cleaning solvent concentrations were identified in soil and groundwater at concentrations above the FDEP’s cleanup target levels during cleanup assessment and remediation activities conducted between 1999 and 2001 under the FDEP’s regulatory oversight after a dry cleaning tenant had reported a release of chlorinated solvents in 1997. Remediation activities were conducted in 2005 and 2006, and confirmatory soil sampling indicated that soil cleanup objectives had been achieved. As such, the environmental consultant reported that soil contamination and/or soil vapor intrusion concerns appear to have been addressed and are not expected to represent a significant environmental concern. However, to address groundwater contamination, remediation activities were implemented in March 2008, and a July 2014 post-active remediation monitoring report indicated the presence of groundwater contamination at levels exceeding the FDEP’s groundwater cleanup target levels. According to the environmental consultant, the dry cleaning site is considered part of the Dry Cleaning State Funded Program with the FDEP and that, as such, the state has accepted responsibility and all associated costs for cleanup. The environmental consultant noted that post-action remedial monitoring is expected to continue for approximately 3 to 5 years until groundwater contamination is below groundwater cleanup target levels and a no further action status can be issued. The environmental consultant concluded that no further investigation appears to be warranted other than as part of the post-active remediation monitoring. The related Mortgage Loan documents provide for full recourse to the related borrower and guarantor if the borrower fails to perform any post-active remediation monitoring which may be required by the FDEP or fails to pay any applicable annual registration fees, deductible or other fees, costs or expenses required by the FDEP or required to remain eligible with the FDEP’s DSCP. We cannot assure you that the Mortgaged Property will continue to participate in the FDEP, that the FDEP will complete any remediation that may be warranted, that the borrower will perform its required monitoring or that there will not be future circumstances that require any other actions.
With respect to the Mortgage Loan secured in part by the Mortgaged Property identified on Annex A to this prospectus as CubeSmart Self Storage - Taunton, representing approximately 0.5% of the Initial Pool Balance by allocated loan amount, the Phase I ESA identifies as a Controlled Recognized Environmental Condition (“CREC”) a historic release discovered in 2013 and reported to the Massachusetts Department of Environmental Protection (“MassDEP”). Investigations revealed that both soil and groundwater had been impacted by this historic release. Remediation was conducted and completed with residual impacts left in place. A permanent solution was prepared for the release and closure documentation was submitted to MassDEP on February 26, 2015. The permanent solution contains conditions including, among other things, an activity and use limitation (“AUL”) restricting significant alterations or changes in the use of the existing Mortgaged Property improvements or construction of other buildings on-site without the installation of either a venting system and vapor barrier or indoor air monitoring. The AUL also prohibits residential and institutional use of the Mortgaged Property. The AUL was amended in January 2016 to clarify that the existing office associated with the self storage is an acceptable use. Because the historic release has received closure, the Phase I ESA consultant determined that this matter did not require any additional investigation. However, the Phase I ESA consultant has recommended that the wells associated with the investigation and monitoring of the historic release be abandoned.
Litigation Considerations
Certain risks relating to litigation regarding the Mortgaged Properties or the borrowers are described in “Risk Factors—Litigation and Other Legal Proceedings May Adversely Affect a Borrower’s Ability to Repay Its Mortgage Loan”.
We cannot assure you that any current litigation matters relating to certain Mortgage Loans would not have an adverse effect on, or provide any indication of the future performance of the obligors or the non-recourse carveout guarantors under, the related Mortgage Loans.
169 |
Redevelopment, Expansion and Renovation
Certain of the Mortgaged Properties are properties which are currently undergoing or, in the future, are expected to undergo redevelopment, renovation or expansion or, with respect to hospitality properties, such properties are subject to property improvement plans (“PIPs”) required by the franchisors. Certain risks related to redevelopment, expansion and renovation or the obligation to execute PIPs at a Mortgaged Property are described in “Risk Factors—Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties”.
Below are descriptions of certain such Mortgaged Properties that are undergoing (or are required to undergo) redevelopment, expansion and/or renovation where the approximate estimated cost thereof is equal to or greater than $1,000,000, and certain of such Mortgaged Properties that are subject to PIPs.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Orrington Evanston, representing approximately 5.8% of the Initial Pool Balance, the Mortgaged Property is subject to a franchisor required PIP that obligates the borrower to replace the electronic lock system by September 2016. Additionally, at loan origination, the borrower reserved $3,750,000 with the lender related to repairs to the parking garage (including concrete repairs and mechanical, engineering and plumbing) (the “Garage Renovation”). Provided no event of default is continuing, on the monthly payment dates occurring in February 2016, March 2016, April 2016 and May 2016, the lender is required to transfer $1,000,000, $1,000,000, $1,000,000 and $750,000, respectively, into another account (the “Renovation Account”), from which the borrower may withdraw funds to be used by the borrower for completing the Garage Renovation. On each monthly payment date until the Garage Renovation is complete, the borrower is required to deposit all excess cash flow (after payment of reserve funds, debt service, pass through funds and operating expenses and any extraordinary expenses or capital expenses) into the Renovation Account, provided that the borrower’s obligation to make such deposits is suspended so long as funds on deposit in the Renovation Account or otherwise reserved with the lender related to the Garage Renovation are sufficient to pay the anticipated renovation costs. Upon completion of the Garage Renovation during the time frame specified below, and provided no event of default has occurred and is then continuing, the funds in the Renovation Account will be returned to the borrower. The borrower is required to complete the Garage Renovation by the earlier of (i) June 18, 2017, which date may be extended to December 31, 2017 and (ii) the date that the lender acquires title and has assumed possession and control of the Mortgaged Property through power of sale, foreclosure or deed-in-lieu of foreclosure.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, as of the end of 2015, funds totaling $3,441,616 have been deposited in the FF&E reserve account maintained by Starwood Hotels & Resorts Worldwide, Inc. to be used in part towards a PIP currently estimated to cost $4,200,000. Monthly deposits are required to be made into the FF&E reserve account maintained by Starwood Hotels & Resorts Worldwide, Inc. in accordance with the related Mortgage Loan documents. The related non-recourse carveout guarantor executed a completion guaranty in favor of the lender, guaranteeing the completion of the PIP.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hotel on Rivington, representing approximately 5.3% of the Initial Pool Balance, the Mortgaged Property is currently undergoing a PIP that is anticipated to be completed by May 2016. As part of the plan, the borrower has budgeted approximately $330,000 towards revamping the hotel’s façade ($160,000) and constructing a new stairwell leading from the lobby level to the guest registration area and lobby bar on the second floor ($50,000). The borrower has also recently entered into a lease with Rivington Hospitality Group, LLC, and as part of this lease, the tenant will spend $1,500,000 towards renovating the hotel’s restaurant and lobby bar.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the Initial Pool Balance, the largest tenant at the Mortgaged Property, J.M. Hollister, LLC (d/b/a Hollister Co.), operates on the ground and second floors; however, the store is currently closed due to water damage caused by a ruptured water pipe and coil malfunction that occurred in February 2016. All water-impacted surfaces have been demolished, and the tenant is in the process of interviewing general contractors to complete required work, which is the tenant’s responsibility. The repair work is estimated to cost in excess of $1.0 million.
170 |
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6%of the Initial Pool Balance, the lobby, entrance, and elevators are undergoing complete renovation costing approximately $10,600,000, and are estimated to be completed in May 2016. The Mortgaged Property is additionally being converted from using an oil to a natural gas heating system, and the conversion is expected to be completed by the end of 2016.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Troy Place Apartments, representing approximately 1.7% of the Initial Pool Balance, the related borrower is planning $1,700,000 in capital improvements including full renovation of the unit kitchens, baths, flooring, lighting, and the exterior and common areas of the building.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Staybridge Cleveland Mayfield, representing approximately 1.6% of the Initial Pool Balance, a $2,469,353 PIP was commenced at origination of the Mortgage Loan with the related borrower’s acquisition of the Mortgaged Property. At origination, $2,716,288 was reserved in connection with the PIP, representing 110% of the budgeted PIP amount.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Holiday Inn Express & Suites Wisconsin, representing approximately 1.3% of the Initial Pool Balance, $1,800,000 was held back at origination of the Mortgage Loan to address PIP improvements expected to commence during the Mortgaged Property’s off-season beginning in late 2016.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Garden Inn – Saint Charles, representing approximately 1.2% of the Initial Pool Balance, an approximate $1,600,000 PIP was commenced at origination of the Mortgage Loan in connection with the related borrower’s acquisition of the Mortgaged Property. At origination, $1,768,939 was reserved in connection with the PIP, representing 110% of the budgeted PIP amount.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Holiday Inn Express & Suites Traverse City, representing approximately 1.0% of the Initial Pool Balance, $400,000 was held back at origination of the Mortgage Loan to address PIP improvements to be completed by March 2018 per the related franchise agreement.
We cannot assure you that these above described renovations and build outs will not temporarily interfere with the use and operation of portions of the related Mortgaged Property and/or make the related Mortgaged Property less attractive to potential guests, patrons, customers and/or tenants. See “Significant Loan Summaries” in Annex B to this prospectus for additional information on the 10 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan).
Default History, Bankruptcy Issues and Other Proceedings
Defaults Refinancings, Discounted Pay-offs, Foreclosure or REO Property Purchases.
Two (2) of the Mortgage Loans, representing approximately 4.4% of the Initial Pool Balance, were refinancings in whole or in part of loans that were (or refinancings of temporary bridge loans that in turn refinanced loans that were) in default at the time of refinancing or otherwise involved discounted pay-offs or provided acquisition financing for the related borrower’s purchase of the related Mortgaged Property at a foreclosure sale or after becoming REO, as described below:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Deerfield Plaza, representing approximately 2.6% of the Initial Pool Balance, the Mortgage Loan refinanced a prior loan, which matured in October 2015. The prior loan was refinanced post maturity in December 2015. Other than charging late interest, no remedies were pursued by the prior servicer. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Estates at Westernaire, representing approximately 1.8% of the Initial Pool Balance, |
171 |
proceeds of such Mortgage Loan financed the acquisition of such Mortgaged Property after its having become REO. |
Borrowers, Principals or Affiliated Entities Were Parties toDefaults, Bankruptcy Proceedings, Criminal Proceedings, Foreclosure Proceedings, Deed-in-Lieu of Foreclosure Transactions and/or Mortgage Loan Workouts
Certain of the borrowers, principals of the borrowers and other entities under the control of such principals are or previously have been parties to loan defaults, bankruptcy proceedings, criminal proceedings, foreclosure proceedings, deed-in-lieu of foreclosure transactions and/or mortgage loan workouts (which may have included a discounted payoff), in addition to any bankruptcy related litigation issues discussed above in “—Litigation Considerations”, which in some cases may have involved a Mortgaged Property that secures a Mortgage Loan to be included in the Issuing Entity. For example, with respect to the 20 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan, and considering any related Mortgage Loans under common borrower sponsorship) taking into account any such material defaults, proceedings, transactions and/or mortgage loan workouts that have occurred within the last 15 years and of which we are aware:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6% of the Initial Pool Balance, the related borrower sponsor filed and then withdrew his petition for bankruptcy in 2001 in connection with a divorce settlement, and the bankruptcy proceeding was dismissed. In the 1970s, the related borrower sponsor settled with the government in a proceeding related to an alleged bribery of a mayor relating to the construction of a shopping center complex. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hampshire Tower Apartments, representing approximately 3.2% of the Initial Pool Balance, the related borrower sponsor entered into a deed-in-lieu of foreclosure with respect to a property (unrelated to the Mortgaged Property) in 2011 and owned a property (unrelated to the Mortgaged Property) that was involved in a workout in 2013. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Troy Place Apartments, representing approximately 1.7% of the Initial Pool Balance, two residential properties in Detroit owned by the related borrower sponsors and unrelated to the related Mortgaged Property underwent work-outs resulting in settlement agreements in 2013 and 2014, respectively. The related borrower sponsors also forfeited a third unrelated residential property in Detroit in a tax auction, after which a settlement agreement was entered in 2014. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Staybridge Cleveland Mayfield, representing approximately 1.6% of the Initial Pool Balance, two prior transactions involving the related guarantors involved bridge loans that were not refinanced at maturity. Additionally, one of the related borrower sponsors, Syndicated Equities, was involved in a CMBS loan originated in 2004 that was put into special servicing in 2014. |
There are likely other material defaults, proceedings, transactions and/or mortgage loan workouts involving certain of the borrowers, principals of the borrowers and other entities under the control of such principals that have (i) occurred prior to the last 15 years, (ii) occurred during the last 15 years with respect to Mortgage Loans that are not among the largest 20 Mortgage Loans, or (iii) otherwise occurred at any time and of which we are not aware.
We cannot assure you that there are no other bankruptcy proceedings, foreclosure proceedings, deed-in-lieu of foreclosure transactions and/or mortgage loan workout matters that involved one or more Mortgage Loans or Mortgaged Properties, and/or a guarantor, borrower, borrower sponsor or other party to a Mortgage Loan.
Certain risks relating to bankruptcy proceedings are described in “Risk Factors—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans”.
172 |
Tenant Issues
Tenant Concentrations
Mortgaged properties that are owner-occupied or leased to a single tenant, or a tenant that makes up a significant portion of the rental income, also are more susceptible to interruptions of cash flow if that tenant’s business operations are negatively impacted, if that tenant defaults or if that tenant fails to renew its lease. This is so because:
· | the financial effect of the absence of rental income may be severe; |
· | more time may be required to re-lease the space; and |
· | substantial capital costs may be incurred to make the space appropriate for replacement tenants. |
See Annex A to this prospectus for tenant lease expiration dates for the 5 largest tenants (based on net rentable square footage) at each retail, office and mixed use Mortgaged Property.
The Mortgaged Properties have single tenants as set forth below:
· | Eight (8) of the Mortgaged Properties, securing in whole or in part 5 Mortgage Loans, collectively representing approximately 2.7% of the Initial Pool Balance by allocated loan amount, are each leased to a single tenant. |
· | No Mortgaged Property leased to a single tenant secures a Mortgage Loan representing more than approximately 0.7% of the Initial Pool Balance. |
With respect to certain of these Mortgaged Properties that are leased to a single tenant, the related leases may expire prior to, or soon after, the maturity dates of the Mortgage Loans or the related tenant may have the right to terminate the lease prior to the maturity date of the Mortgage Loan. If the current tenant does not renew its lease on comparable economic terms to the expired lease, if a single tenant terminates its lease or if a suitable replacement tenant does not enter into a new lease on similar economic terms, there could be a negative impact on the payments on the related Mortgage Loans.
Identified in the table below is a tenant that is among the 5 largest tenants (based on net rentable square footage) at each of 2 or more Mortgaged Properties that collectively secure2.0% or more of the Initial Pool Balance by allocated loan amount.
Name of Tenant | Number of | Aggregate |
Dollar Tree | 3 | 3.6% |
In the event of a default by that tenant, if the related lease expires prior to the Mortgage Loan maturity date and the related tenant fails to renew its lease or if such tenant exercises an early termination option, there would likely be an interruption of rental payments under the lease and, accordingly, insufficient funds available to the borrower to pay the debt service on the loan. In certain cases where the tenant owns the improvements to the Mortgaged Property, the related borrower may be required to purchase such improvements in connection with the exercise of its remedies.
Lease Expirations and Terminations
Lease Expirations
See Annex A to this prospectus for tenant lease expiration dates for the 5 largest tenants (based on net rentable area leased) at each retail, office and mixed use Mortgaged Property. Even if none of the top 5 tenants
173 |
at a particular Mortgaged Property have leases that expire before, or shortly after, the maturity of the related Mortgage Loan, there may be a significant percentage of leases at a particular Mortgaged Property that expire in a single calendar year, a rolling 12-month period or prior to, or shortly after, the maturity of a Mortgage Loan. Furthermore, some of the Mortgaged Properties have significant leases or a significant concentration of leases that expire before, or shortly after, the maturity of the related Mortgage Loan. Identified below are certain lease expirations or concentrations of lease expirations with respect to the retail, office and mixed use Mortgaged Properties:
· | In certain cases, the lease of a single tenant, major tenant or anchor tenant at a multi-tenanted Mortgaged Property expires prior to the maturity date (or in the case of an ARD Loan, the Anticipated Repayment Date) of the related Mortgage Loan. For example, with respect to the Mortgage Loans secured, in whole or in part, by the Mortgaged Properties identified in the table below, each such Mortgaged Property is occupied by a single tenant under a lease which expires prior to, or in the same month of, the maturity date (or in the case of an ARD Loan, the Anticipated Repayment Date) of the related Mortgage Loan. |
Mortgaged Property Name | Approx. % of | Lease Expiration | Maturity Date |
Mattress Firm | 0.2% | 8/31/2024 | 11/6/2025 |
Olive Garden | 0.2% | 4/30/2019 | 11/6/2025 |
Advanced Auto Parts | 0.2% | 12/31/2020 | 11/6/2025 |
Sherwin Williams-Clinton Township | 0.2% | 11/30/2023 | 11/6/2025 |
Sherwin Williams-New Hudson | 0.2% | 12/31/2019 | 11/6/2025 |
· | With respect to the Mortgaged Properties identified in the table below, one or more tenant leases representing in the aggregate 50% or greater of the net rentable square footage at the related Mortgaged Property (excluding Mortgaged Properties leased to a single tenant) expire in a single calendar year that is prior to or the same year as the maturity date (or in the case of an ARD Loan, the Anticipated Repayment Date) of the related Mortgage Loan. |
Mortgaged Property Name | Approx. % of | Approximate | Calendar Year | Maturity Date |
Whitney Gray Building | 0.9% | 58.2% | 2019 | 11/1/2025 |
Providence Plaza | 0.6% | 69.7% | 2019 | 11/6/2025 |
(1) | Calculated based on a percentage of net rentable square footage of the related Mortgaged Property. |
· | There may be other Mortgaged Properties as to which leases representing at least 50% or greater of the net rentable square footage at the related Mortgaged Property expire over two or more calendar years prior to maturity of the related Mortgage Loan, which may be consecutive calendar years. |
· | In addition, with respect to certain Mortgaged Properties, one or more tenant leases representing in the aggregate 75% or greater of the net rentable square footage at the related Mortgaged Property (excluding Mortgaged Properties leased to a single tenant) expire over two consecutive calendar years that are prior to or the same year as the maturity date (or in the case of an ARD Loan, the Anticipated Repayment Date) of the related Mortgage Loan. |
· | Further, with respect to certain other Mortgaged Properties, there are leases that represent in the aggregate a material portion (but less than 50%) of the net rentable square footage at the related Mortgaged Property that expire in a single calendar year (or several calendar years) prior to, or shortly after, the maturity of the related Mortgage Loan. |
174 |
Lease Terminations
Certain Mortgage Loans have material lease early termination options. Leases often give tenants the right to terminate the related lease, abate or reduce the related rent, and/or exercise certain remedies against the related borrower for various reasons or upon various conditions, including
(i) if the borrower for the applicable Mortgaged Property allows uses at the Mortgaged Property in violation of use restrictions in current tenant leases,
(ii) if the borrower or any of its affiliates owns other properties within a certain radius of the Mortgaged Property and allows uses at those properties in violation of use restrictions,
(iii) if the borrower fails to provide a designated number of parking spaces,
(iv) if there is construction at the related Mortgaged Property or an adjacent property (whether or not such adjacent property is owned or controlled by the borrower or any of its affiliates) that may interfere with visibility of, access to or a tenant’s use of the Mortgaged Property or otherwise violate the terms of a tenant’s lease,
(v) upon casualty or condemnation with respect to all or a portion of the Mortgaged Property that renders such Mortgaged Property unsuitable for a tenant’s use or if the borrower fails to rebuild such Mortgaged Property within a certain time,
(vi) if a tenant’s use is not permitted by zoning or applicable law,
(vii) if the tenant is unable to exercise an expansion right,
(viii) if the borrower does not complete certain improvements to the property as contemplated in the lease,
(ix) if the borrower leases space at the Mortgaged Property or within a certain radius of the Mortgaged Property to a competitor,
(x) if the tenant fails to meet certain sales targets or other business objectives for a specified period of time,
(xi) if certain anchor or significant tenants at the subject property go dark or terminate their leases,
(xii) if the landlord violates the tenant’s exclusive use rights for a specified period of time,
(xiii) if the borrower defaults on any other obligations under the lease, or
(xiv) based upon contingencies other than those set forth in this “—Tenant Issues—Lease Expirations and Terminations” section.
We cannot assure you that all or any of the borrowers will comply with their lease covenants or such third parties will act in a manner required to avoid any termination and/or abatement rights of the related tenant.
Identified below are certain material termination rights or situations in which the tenant may no longer occupy its leased space or pay full (or any) rent.
175 |
Unilateral Lease Termination Rights
Certain of the tenant leases permit the related tenant to unilaterally terminate its lease (with respect to all or at least 20% of its leased net rentable square footage) prior to, or shortly after the maturity of the related Mortgage Loan, upon providing notice of such termination within a specified period prior to the termination date. For example, among the 5 largest tenants by net rentable square footage at the Mortgaged Properties securing the 10 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) by aggregate Cut-off Date Balance, or those Mortgaged Properties with a tenant that leases at least 20% of the net rentable square footage at the related Mortgaged Property (in each case excluding government tenants, which are described further below):
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, the second largest tenant, Weisbart Springer, LLP, representing approximately 2.9% of the aggregate square footage of the Mortgaged Property, has the one-time option to terminate its lease as of October 1, 2020 with six months’ notice and the payment of the unamortized cost of tenant improvement allowances and leasing commissions. |
Rights to Terminate Lease or Abate or Reduce Rent Triggered by Failure to Meet Business Objectives or Actions of Other Tenants
Certain of the tenant leases for the Mortgaged Properties permit the related tenant to terminate its lease and/or abate or reduce rent if the tenant fails to meet certain sales targets or other business objectives for a specified period of time. We cannot assure you that all or any of these tenants will meet the sales targets or business objectives required to avoid any termination and/or abatement rights.
Certain of the tenant leases for the Mortgaged Properties may permit affected tenants to terminate their leases and/or abate or reduce rent if another tenant at the subject Mortgaged Property or a tenant at an adjacent or nearby property terminates its lease or goes dark, or if a specified percentage of the Mortgaged Property is unoccupied.
In addition to termination options tied to certain triggers as set forth above that are common with respect to retail properties, certain tenant leases permit the related tenant to terminate its lease without any such triggers.
Certain of the tenant leases permit the related tenant to terminate its lease based upon contingencies other than those set forth above in this “—Tenant Issues—Rights to Terminate Lease or Abate or Reduce Rent Triggered by Failure to Meet Business Objectives or Actions of Other Tenants” subsection.
See “Significant Loan Summaries” in Annex B to this prospectus for more information on material lease termination options relating to the largest 15 Mortgage Loans.
Rights to Cease Operations (Go Dark) at the Leased Property
Certain of the tenant leases may permit a tenant to go dark at any time. For example, taking into account (i) the 5 largest tenants (based on net rentable square footage) at those Mortgaged Properties securing the largest 20 Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) by aggregate Cut-off Date Balance or (ii) cases where any Mortgaged Property is leased to a single tenant who has the option to go dark:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Deerfield Plaza, representing approximately 2.6% of the Initial Pool Balance, the largest tenant (LA Fitness, approximately 46.1% of the net rentable area) has the right, at any time, to cease operating their business conducted at the Mortgaged Property. Pursuant to the related Mortgage Loan documents, the tenant has no right to terminate its lease, and is required to continue paying rent. The borrower has the right to re-let the premises. |
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as Ohio Retail Portfolio, representing approximately 0.6% of the Initial Pool Balance, the following tenants have the right to go dark as follows: (A) Olive Garden, the largest |
176 |
tenant in the portfolio (and the sole tenant at the Mortgaged Property identified on Annex A to this prospectus as Olive Garden), representing approximately 36.4% of the net rentable square footage of the portfolio, has the right to go dark with a landlord right of recapture after 180 days, subject to certain notice periods and the tenant’s right to reopen for business by providing evidence that it is in the process of reopening for business; and (B) Mattress Firm, the third-largest tenant in the portfolio (and the sole tenant at the Mortgaged Property identified on Annex A to this prospectus as Mattress Firm), representing approximately 29.4% of the net rentable square footage of the portfolio, has the right to go dark at any time. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Walgreens Sarasota, representing approximately 0.5% of the Initial Pool Balance, Walgreens, the sole tenant, may go dark at any time. |
There may be other tenant leases, other than those disclosed above, that do not require the related tenant to continue to operate its space at the related Mortgaged Property, and therefore such tenants may also have the option to go dark at any time, but such right to go dark is not expressly provided for under the subject lease.
Termination Rights of Government Sponsored Tenants
Certain of the Mortgaged Properties may be leased in whole or in part by government sponsored tenants or by tenants with government contracts. Government sponsored tenants frequently have the right to cancel their leases at any time or after a specific time (in some cases after the delivery of notice) or for lack of appropriations. Tenants that are party to a government contract frequently have termination options related to termination or cessation of such government contract.
Other Tenant Termination Issues
In addition, anchor tenants at, and shadow anchor tenants with respect to, certain Mortgaged Properties may close or otherwise become vacant. We cannot assure you that any such anchor tenants would be replaced in a timely manner or without incurring material additional costs to the related borrower and resulting in adverse economic effects.
Rights to Sublease
Certain of the Mortgaged Properties may have tenants that sublet a portion of their space or have provided notice of their intent to sublet out a portion of their space in the future. For example, taking into account (i) the 5 largest tenants (based on net rentable square footage) at those Mortgaged Properties securing the 20 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) or (ii) cases where 10% or more of the aggregate net rentable area at a Mortgaged Property is sublet:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified in Annex A to this prospectus as Williams Mullen Center, representing 7.4% of the Initial Pool Balance, the largest tenant, Williams Mullen, subleases a portion of its space to each of three subtenants: Cherry Bekaert & Holland (10,482 rentable square feet), Oppenheimer (5,362 rentable square feet), and Divaris (5,532 rentable square feet). |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, the second largest tenant, Weisbart Springer, LLP, representing approximately 2.9% of the aggregate square footage of the Mortgaged Property, currently subleases 3,621 square feet to VertsKebap Inc. through the term of its lease. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the Initial Pool Balance, the largest tenant at the Mortgaged Property, Abercrombie & Fitch, representing approximately 60.8% of the net rentable square feet at such Mortgaged Property, had engaged a broker to sublet its space in full prior to the origination of such Mortgage Loan due, in part, to its 2015 annualized store sales totaling less than its aggregate annual rent at the related Mortgaged Property. Prior to the origination of the |
177 |
Mortgage Loan, such tenant terminated the broker on the related sublease assignment and the space was taken off the market; however, such tenant is permitted to sublet its leased space subject to certain conditions, including the related borrower’s consent (not to be unreasonably withheld). |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Lemoore Plaza, representing approximately 0.6% of the Initial Pool Balance, the largest tenant space, representing approximately 23.1% of the aggregate net rentable square footage, is subleased from JP Morgan Chase Bank, N.A. to Goodwill pursuant to a sublease that is co-terminous with the related primary lease. |
Tenants Not Yet in Occupancy or Paying Rent, Leases Under Negotiation and LOIs
Tenants under certain leases included in the Underwritten Net Cash Flow, Underwritten Net Operating Income and/or Occupancy may not be in physical occupancy, may not have commenced paying rent or may be in the process of negotiating such lease. For example, with respect to single tenant properties or tenants that are one of the top 5 tenants by net rentable square footage at a Mortgaged Property or tenants individually or in the aggregate representing more than 25% of the net rentable area at the Mortgaged Property, certain of such tenants have not taken possession or commenced paying rent or have outstanding rent as set forth below:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Park Place, representing approximately 2.9% of the Initial Pool Balance, the largest tenant, Infusion Software, representing approximately 50% of the net rentable area, currently occupies Buildings 5 and 6 at the related Mortgaged Property and has executed a lease and is anticipated to take occupancy and begin paying rent in January 2017 with respect to Building 4. The borrower under the related Mortgage Loan deposited $2,217,788 into a gap rent reserve account upon origination of the Mortgage Loan, which will be released to the borrower upon Infusion Software’s occupancy of the leased space and the payment of rent by Infusion Software. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Cottonwood Square Shopping Center, representing approximately 0.7% of the Initial Pool Balance, the fifth largest tenant, Adam Saeks, DDS, took occupancy on February 1, 2016 but is not scheduled to commence paying rent until May 1, 2016. |
In addition, in some cases, tenants at a Mortgaged Property may have signed a letter of intent but not executed a lease with respect to the related space. We cannot assure you that any such proposed tenant will sign a lease or take occupancy at the related Mortgaged Property.
In addition, the underwritten occupancy, Underwritten Net Cash Flow and Underwritten Net Operating Income of the Mortgaged Properties may reflect tenants, and rents from tenants, whose lease terms or renewal leases are under negotiation but not yet signed. In addition, certain of the Mortgage Loans may have tenants who are leasing their spaces on a month-to-month basis and have the right to terminate their leases on a monthly basis.
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Orrington Evanston, representing approximately 5.8% of the Initial Pool Balance, one of the tenants, Visual Eyes Chicago, Inc., currently occupying 8.3% of the retail net rentable square feet at the Mortgaged Property, is permitted to lease on a month-to-month basis. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Providence Plaza, representing approximately 0.6% of the Initial Pool Balance, two of the tenants, Fast Check Cashing and Deltona Latin Services, Inc., representing approximately 1.2% and 0.9%, respectively, of the net rentable square footage at such Mortgaged Property, lease their respective spaces on a month-to-month basis. |
In these cases we cannot assure you that these tenants will take occupancy, begin paying rent or execute these leases. If these tenants do not take occupancy of the leased space, begin paying rent or execute these leases, it could result in a higher vacancy rate and re-leasing costs that may adversely affect cash flow on the related Mortgage Loan.
178 |
Tenants in Financial Distress or Affiliated with a Parent or Related to a Chain That Is in Financial Distress or Closing Retail Locations
In addition, tenants under certain leases included in the Underwritten Net Cash Flow, Underwritten Net Operating Income and/or Occupancy may be in financial distress, may have filed for bankruptcy or may be part of a chain that is in financial distress as a whole, or the tenant’s parent company may have implemented or expressed an intent to implement a plan to consolidate or reorganize its operations, close a number of stores in the chain, reduce exposure, relocate stores or otherwise reorganize its business to cut costs. Furthermore, commercial tenants having multiple leases may experience adverse business conditions that result in their deciding to close under-performing stores.
For example, taking into account the 5 largest tenants (based on net rentable square footage) at the Mortgaged Properties or certain tenants at those Mortgaged Properties securing the 20 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) by aggregate Cut-off Date Balance:
· | On October 27, 2015, Walgreens Boots Alliance, Inc., which owns Walgreens, announced its intention to acquire Rite Aid Corporation. In connection with the acquisition, Walgreens Boots Alliance, Inc. also announced that it is willing to divest up to 1,000 stores in order to clear antitrust hurdles and gain regulatory approval of its deal to acquire Rite Aid Corporation. The acquisition is expected to close in the second half of 2016. In the case of the Mortgage Loans secured by the Mortgaged Properties identified on Annex A to this prospectus as Walgreens Madison, Walgreens West Bend and Walgreens Sarasota, representing approximately 0.7%, 0.6% and 0.5%, respectively, of the Initial Pool Balance, the sole tenant at each Mortgaged Property is a Walgreens store. Although Walgreens has not identified any particular store planned for closure, if the intended acquisition of Rite Aid Corporation were to occur, we cannot assure you that the Walgreens store at each Mortgaged Property will not be closed as part of the transaction, as a result of Walgreens’ store closure announcement or otherwise. |
Charitable Institutions / Not-For-Profit Tenants
Certain Mortgaged Properties may have tenants or sub-tenants that are charitable institutions or other not-for-profit tenant organizations that generally rely on contributions from individuals and government grants or other subsidies to pay rent on such space and other operating expenses. For example:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6% of the Initial Pool Balance, Visiting Nurse Services NY, Covenant House, Wallace Foundation and Amnesty International, representing 8.6%, 6.0%, 4.3% and 4.3%, respectively, of the net rentable area of the related Mortgaged Property, are not-for-profit organizations. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Triangle Shopping Center, representing approximately 1.5% of the Initial Pool Balance, the fifth largest tenant, Calvary Center, representing approximately 5.5% of the net rentable square footage at such Mortgaged Property, is a not-for-profit religious chapel that relies, in part, on donations to pay its rent at the Mortgaged Property. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Franklin Center, representing 1.3% of the Initial Pool Balance, the largest tenant, Area Agency on Aging 1-B, is a not-for-profit organization. Area Agency on Aging 1-B has the right to terminate its lease in the event it loses federal funding upon six months’ notice and payment of a termination fee. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Lemoore Plaza, representing approximately 0.6% of the Initial Pool Balance, Goodwill, which subleases the largest tenant space, representing approximately 23.1% of the net rentable square footage of such Mortgaged Property, is a not-for-profit entity. |
179 |
Tenants that are charitable institutions that generally rely on contributions from individuals and government grants or other subsidies to pay rent on such space and other operating expenses may default upon their respective leases should such contributions, grants or subsidies no longer be available.
See “Significant Loan Summaries” in Annex B to this prospectus for more information on other tenant matters relating to the largest 15 Mortgage Loans (considering any Crossed Group as a single Mortgage Loan).
See the footnotes to Annex A to this prospectus for further information regarding the 5 largest tenants by net rentable square footage at the Mortgaged Properties.
Purchase Options, Rights of First Offer and Rights of First Refusal
Below are certain purchase options, rights of first offer and rights of first refusal to purchase all or a portion of certain Mortgaged Properties:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, representing approximately 10.1% of the Initial Pool Balance, the sole tenant under the ground lease at the Mortgaged Property has the option to purchase the Mortgaged Property in the event of casualty affecting more than 25% of the Mortgaged Property or the tenant’s determination that a condemnation has affected substantially all of the Mortgaged Property. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as The Armitage Collection, representing 1.6% of the Initial Pool Balance, the tenant The Goddard School has a right of first offer to purchase the premises it occupies in the event the related borrower sells the tenant’s premises in a transaction for the sale of only the tenant’s premises. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Franklin Center, representing 1.3% of the Initial Pool Balance, the tenant Children’s Hospital of Michigan has a right of first refusal to purchase the tenant’s building. The right does not apply in the event that the related lender takes title to the Mortgaged Property by means of foreclosure or a deed-in-lieu of foreclosure, or to the subsequent first sale by the lender thereafter. |
· | With respect to the Mortgaged Property identified on Annex A to this prospectus as Walgreens West Bend, securing a Mortgage Loan representing approximately 0.6% of the Initial Pool Balance, the sole tenant, Walgreen Co., has a right of first refusal to purchase the entire Mortgaged Property if the borrower elects to sell the Mortgaged Property to a bona fide third party. Such right of first refusal has been subordinated to the Mortgage Loan, and will not apply to a successor borrower through a foreclosure, deed-in-lieu of foreclosure or any other enforcement action under the Mortgage Loan; provided, however, such right of first refusal will apply to subsequent purchasers of the leased premises. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Walgreens Sarasota, representing approximately 0.5% of the Initial Pool Balance, the sole tenant holds a right of first refusal to purchase such Mortgaged Property (or a portion thereof) in the event the related borrower receives a bona fide offer to purchase such Mortgaged Property (or a portion thereof). The sole tenant has agreed that such right of first refusal will not apply to a foreclosure, deed-in-lieu of foreclosure or other enforcement action under the related mortgage but will apply to subsequent purchases of the Mortgaged Property. |
Affiliated Leases and Master Leases
Certain of the Mortgaged Properties are leased in whole or in part by borrowers or borrower affiliates. Set forth below are examples of Mortgaged Properties at which at least 5.0% of (i) the gross income at the Mortgaged Property relates to leases between the borrower and an affiliate of the borrower or (ii) the net rentable area at the Mortgaged Property is leased to an affiliate of the borrower:
180 |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as West LA Office - 350 South Beverly Drive, representing approximately 5.0% of the Initial Pool Balance, 9.3% of the net rental square feet at such Mortgaged Property is subject to a master lease withJade Enterprises, LLC, an affiliate of the borrower sponsor. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Franklin Center, representing approximately 1.3% of the Initial Pool Balance, the third largest tenant, Etkin Equities, LLC, representing approximately 10.5% of the net rentable area at the Mortgaged Property, is an affiliate of the borrower. The tenant may terminate its lease if it is no longer the property manager for the building, with certain exceptions. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Jefferson MHC, representing approximately 0.2% of the Initial Pool Balance, the related borrower has entered into a master lease with one of its affiliates under which, pursuant to the related Mortgage Loan documents, up to 11 of the Mortgaged Property’s 100 pads may be leased. |
Other Mortgaged Properties may have tenants that are affiliated with the related borrower but those tenants do not represent more than 5.0% of the gross income or net rentable area of the related Mortgaged Property.
Other Tenant Issues
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Whitney Gray Building, representing approximately 0.9% of the Initial Pool Balance, the largest tenant, Jake’s Famous Crawfish, which leases approximately 16,600 square feet at the Mortgaged Property (representing approximately 58.0% of the net rentable square footage at such Mortgaged Property), also leases approximately 10,000 of additional square feet for storage and dish room purposes in an adjacent building (the “Adjacent Building Lease”) that is not located on the Mortgaged Property and is not owned by the related borrower and, as such, does not secure the related Mortgage Loan. The Adjacent Building Lease was amended in connection with the origination of the Mortgage Loan to provide the lender with certain notice and cure rights with respect to a tenant default. Additionally, the Mortgage Loan documents include: (i) an excess cash flow sweep upon the occurrence of certain Adjacent Building Lease-related events, including the tenant going dark, defaulting under the Adjacent Building Lease or failing to renew or extend the Adjacent Building Lease, and (ii) a recourse carveout for any losses incurred by the lender if the Adjacent Building Lease is terminated, modified, and/or amended without the lender’s prior written consent. However, there can be no assurance that the cash flow generated by the Mortgaged Property will be sufficient to cover the borrower’s obligations to the lender if the premises governed by the Adjacent Building Lease are no longer available for the tenant’s use.
Insurance Considerations
In the case of 37 Mortgaged Properties, which secure, in whole or in part, 28 Mortgage Loans, representing approximately 64.1% of the Initial Pool Balance by allocated loan amount, the related borrower maintains insurance under blanket policies.
Further, certain Mortgaged Properties may be insured, in whole or in part, by a sole or significant tenant. For example:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, representing approximately 10.1% of the Initial Pool Balance, the insurance required under the related Mortgage Loan documents may be provided by the related ground lessee at the related Mortgaged Property. |
· | With respect to the Mortgaged Property identified on Annex A to this prospectus as Walgreens West Bend, securing a Mortgage Loan representing approximately 0.6% of the Initial Pool Balance, the sole tenant, Walgreens, is permitted to provide any insurance required to be maintained by the borrower. The sole tenant is also permitted to self-insure, provided, among other things, the tenant maintains a “BBB” rating by Standard & Poor’s Ratings Services (or an equivalent rating by another rating agency) and the sole tenant satisfies the net worth requirements under its lease (which is $250 million). |
181 |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Walgreens Sarasota, representing approximately 0.5% of the Initial Pool Balance, the sole tenant, Walgreens, is required to insure (or self-insure) the Mortgaged Property pursuant to its lease, and the related borrower is permitted to rely on such insurance or self-insurance. |
In addition, with respect to certain Mortgage Loans, the insurable value of the related Mortgaged Property as of the origination date of the related Mortgage Loan was lower than the principal balance of the related Mortgage Loan.
See “Risk Factors—Risks Associated with Blanket Insurance Policies or Self-Insurance” and “—Earthquake, Flood and Other Insurance May Not be Available or Adequate”.
In addition, with respect to Mortgaged Properties that are part of condominium regimes, the insurance may be maintained by the condominium association rather than the related borrower.
Further, many Mortgage Loans contain limitations on the obligation to obtain terrorism insurance. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties”.
Zoning and Use Restrictions
Certain of the Mortgaged Properties may be legal non-conforming uses that may be restricted after certain events, such as casualties, at the Mortgaged Properties.
In addition, certain of the Mortgaged Properties are subject to restrictions that restrict the use of the Mortgaged Properties to their current use or some other specified use or have other zoning issues, as further described below:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the Initial Pool Balance, the related Mortgaged Property is designated a “landmark” by the New York City Landmarks Preservation Commission. As a result, any alterations that would otherwise require a permit to be obtained from the New York Department of Buildings (generally, major alterations that are not considered ordinary repairs) and plans to restore the building following a casualty or condemnation, must also be approved by the New York Landmarks Preservation Commission. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Whitney Gray Building, representing approximately 0.9% of the Initial Pool Balance, the building at the Mortgaged Property was placed on the National Register of Historic Places and designated as a historic landmark by the City of Portland, Oregon in 1982. As a result, any proposed alteration to the exterior historical elements of the building requires a historic resource review by the City of Portland (as outlined in Title 33 of the City of Portland Planning and Zoning Code) rather than in compliance with the general community design standards. |
In addition, certain of the Mortgaged Properties are subject to a temporary certificate of occupancy (the “TCO”). In such cases, the related Mortgage Loan documents require the related borrower to use commercially reasonable efforts to maintain the TCO, or cause the sponsor of the property to maintain the TCO, and to cause the TCO to be continuously renewed at all times until a permanent certificate of occupancy (“PCO”) is obtained for the related Mortgaged Property.
See “Risk Factors—Risks Related to Zoning Non-Compliance and Use Restrictions”. See also the Sponsor representation and warranty set forth in paragraph (24) (Local Law Compliance) on Annex E-1 to this prospectus and any related exceptions on Annex E-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex E-1 to this prospectus).
Appraised Value
The Appraised Values for certain of the Mortgaged Properties may state an “as stabilized”, “hypothetical market value” or “as-complete” appraised value (generally as an alternative to, or in addition to, an “as-is”
182 |
appraised value) for such Mortgaged Properties that assumes that certain events will occur with respect to the re-leasing, renovation or other repositioning of the Mortgaged Property. In addition, in the case of a portfolio of Mortgaged Properties, the appraisals may reflect a “portfolio premium” or “as-is bulk” appraised value based on the assumption that such portfolio of Mortgaged Properties will be sold as a collective whole. Such values may, to the extent indicated, be reflected elsewhere in this prospectus, on Annex A to this prospectus, and in Annex B to this prospectus. For such Appraised Values and other values on a property-by-property basis, see Annex A to this prospectus and the related footnotes. With respect to each Mortgaged Property, the Appraised Value set forth in this prospectus and on Annex A or Annex B to this prospectus is an “as-is” Appraised Value unless otherwise specified below, and is in each case as determined by an appraisal made not more than 6 months prior to the origination date of the related Mortgage Loan, as described under the column entitled Appraisal Date on Annex A to this prospectus.
In the case of the 3 Mortgage Loans identified under the definition of “Appraised Value” under “—Certain Calculations and Definitions” above, collectively representing 6.9% of the Initial Pool Balance, the Appraised Value set forth in this prospectus and on Annex A or Annex B to this prospectus is not the “as-is” Appraised Value, but is instead calculated on a “hypothetical market value”, “as-complete” or “portfolio premium” Appraised Value.
In addition, in the case of 8 Mortgage Loans, collectively representing 14.8% of the Initial Pool Balance, the Cut-off Date LTV Ratio was calculated subject to certain adjustments or was based on an adjusted Appraised Value, as described under the definition of “Cut-off Date LTV Ratio” under “—Certain Calculations and Definitions” above, as applicable.
Further, in the case of 12 Mortgage Loans, collectively representing 25.7% of the Initial Pool Balance, the Maturity Date LTV Ratio was calculated subject to certain adjustments or was based on an adjusted Appraised Value, as described under the definition of “LTV Ratio at Maturity” under “—Certain Calculations and Definitions” above, as applicable.
See “—Certain Calculations and Definitions” and “Risk Factors—Appraisals May Not Reflect Current or Future Market Value of Each Property”.
Non-Recourse Carveout Limitations
While the Mortgage Loans generally contain non-recourse carveouts for liabilities such as a result of fraud by the borrower, certain voluntary insolvency proceedings or other matters, certain of the Mortgage Loans do not contain such carveouts, contain limitations to such carveouts and/or do not provide for a non-recourse carveout guarantor. Certain other Mortgage Loans may have additional limitations to the non-recourse carveouts as described on Annex E-2 to this prospectus. See “Risk Factors—Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed”.
We cannot assure you that the net worth or liquidity of any non-recourse guarantor under any of the Mortgage Loans will be sufficient to satisfy any claims against that guarantor under its non-recourse guaranty. In most cases, the liquidity and net worth of a non-recourse guarantor under a Mortgage Loan will be less, and may be materially less, than the outstanding principal amount of that Mortgage Loan. In addition, there may be impediments and/or difficulties in enforcing some or all of the non-recourse carveout liability obligations of individual guarantors depending on, among other things, the domicile or citizenship of any such guarantor.
The non-recourse carveout provisions contained in certain of the Mortgage Loan documents may also limit the liability of the non-recourse carveout guarantor for certain monetary obligations or covenants related to the use and operation of the Mortgaged Property to the extent that there is sufficient cash flow generated by the Mortgaged Property and made available to the related borrower and/or non-recourse carveout guarantor to take or prevent such required action.
Real Estate and Other Tax Considerations
Below are descriptions of certain additional real estate and other tax matters relating to certain Mortgaged Properties. Certain risks relating to real estate taxes regarding the Mortgaged Properties or the borrowers are described in “Risk Factors—Increases in Real Estate Taxes May Reduce Available Funds”.
183 |
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Park Place, representing approximately 2.9% of the Initial Pool Balance, the related Mortgaged Property is encumbered by assessments relating to a bond financing development agreement with the city. The related borrower will make semi-annual assessment payments in connection with the bond financing development agreement until the bonds’ maturity in 2022.
See “Risk Factors—Increases in Real Estate Taxes May Reduce Available Funds”.
Certain Terms of the Mortgage Loans
Due Dates; Mortgage Rates; Calculations of Interest
Subject in some cases to a next business day convention, all of the Mortgage Loans have due dates upon which scheduled monthly payments of interest and/or principal are due under the related Mortgage Note (each such date, a “Due Date”) that occur as described in the following table with the indicated grace period.
Due Date | Default Grace Period Days | Number of Mortgage Loans | % of Initial Pool Balance | |||
1 | 5 | 3 | 3.1% | |||
6 | 0 | 51 | 96.9% | |||
Total | 54 | 100.0% |
As used in this prospectus, “grace period” is the number of days before a payment default is an event of default under the terms of each Mortgage Loan. See Annex A to this prospectus for information on the number of days before late payment charges are due under the Mortgage Loan. The information on Annex A to this prospectus regarding the number of days before a late payment charge is due is based on the express terms of the Mortgage Loans. Some jurisdictions may impose a statutorily longer period.
All of the Mortgage Loans are secured by first liens on fee simple and/or leasehold interests in the related Mortgaged Properties, subject to the permitted exceptions reflected in the related title insurance policy. All of the Mortgage Loans bear fixed interest rates.
All of the Mortgage Loans accrue interest on the basis of the actual number of days in a month, assuming a 360-day year (“Actual/360 Basis”).
Seven (7) of the Mortgage Loans, representing approximately 26.5% of the Initial Pool Balance, provide for monthly payments of interest-only until the related maturity date or Anticipated Repayment Date, as applicable (the “Interest Only Mortgage Loans”).
Each of the remaining 47 Mortgage Loans, representing approximately 73.5%, in the aggregate, of the Initial Pool Balance, provides for monthly payments of principal based on amortization schedules significantly longer than the remaining terms to maturity or Anticipated Repayment Date for such Mortgage Loans (those 47 Mortgage Loans, together with the Interest Only Mortgage Loans, the “Balloon Mortgage Loans”). Twenty-nine (29) of these 47 Mortgage Loans referenced in the preceding sentence, representing approximately 50.8%, in the aggregate, of the Initial Pool Balance, provide for monthly payments of interest-only for a period of 12 months to 60 months following the related origination date and then amortize for the remainder of their loan term. The remaining 18 of these 47 Mortgage Loans, representing approximately 22.7%, in the aggregate, of the Initial Pool Balance, amortize for their entire loan term.
Each Balloon Mortgage Loan will have a balloon payment due at its related maturity date or Anticipated Repayment Date, as applicable, unless prepaid prior thereto.
ARD Loans
An “ARD Loan” is a Mortgage Loan that provides that, after a certain date (an “Anticipated Repayment Date”), if the related borrower has not prepaid such Mortgage Loan in full, any principal outstanding on that date will accrue interest at an increased interest rate (the “Revised Rate”) rather than the original Mortgage Rate (the “Initial Rate”) for such Mortgage Loan. Annex A to this prospectus will set forth the Anticipated Repayment Date
184 |
and the Revised Rate for each ARD Loan (if any). “Excess Interest” with respect to each ARD Loan is the interest accrued at the related Revised Rate in respect of such ARD Loan in excess of the interest accrued at the related Initial Rate (and, to the extent permitted by applicable law and the related Mortgage Loan documents, any compound interest thereon).
After the related Anticipated Repayment Date, each ARD Loan further requires that all cash flow available from the related Mortgaged Property after payment of the monthly debt service payments required under the terms of the related Mortgage Loan documents, all escrows and other amounts then due and payable (other than Excess Interest) under the related Mortgage Loan documents and certain budgeted or non-budgeted expenses approved by the related lender be applied toward the payment of principal (without payment of any yield maintenance premium or other prepayment premium) on such ARD Loan. While interest at the Initial Rate continues to accrue and be payable on a current basis on each ARD Loan after the related Anticipated Repayment Date, the payment of Excess Interest will be deferred and will be required to be paid (if and to the extent permitted under applicable law and the related Mortgage Loan documents), only after the outstanding principal balance of such ARD Loan has been paid in full, at which time the Excess Interest, to the extent actually collected, will be paid to the holders of any certificates evidencing an interest in such Excess Interest (if applicable). Additionally, if there are any ARD Loans included in the Issuing Entity, an account was established in connection with the origination of each ARD Loan into which rents or other revenues from the related Mortgaged Property are required to be deposited, although the related borrower is entitled to receive remittances of funds daily unless an event of default or cash flow trigger is in effect or the related Anticipated Repayment Date has occurred.
The foregoing features, to the extent applicable, are designed to increase the likelihood that each ARD Loan will be prepaid by the related borrower on or about its related Anticipated Repayment Date. However, we cannot assure you that the ARD Loan will be prepaid on its Anticipated Repayment Date.
There are no ARD Loans included in the Issuing Entity and, accordingly, no Excess Interest is payable with respect to the Issuing Entity, no certificates will be issued that represent an interest in any Excess Interest and all references in this prospectus to ARD Loans, Anticipated Repayment Dates, Excess Interest and Excess Interest Distribution Account, should be disregarded.
Single-Purpose Entity Covenants
The terms of certain of the Mortgage Loans require that the borrowers be single-purpose entities and, in most cases, such borrowers’ organizational documents or the terms of the Mortgage Loans limit their activities to the ownership of only the related Mortgaged Property or Mortgaged Properties and limit the borrowers’ ability to incur additional indebtedness. Such provisions are designed to mitigate the possibility that the borrower’s financial condition would be adversely impacted by factors unrelated to the related Mortgaged Property and Mortgage Loan. That borrower may also have previously owned property other than the related Mortgaged Property or may be a so-called “recycled” single-purpose entity that previously had other business activities and liabilities. However, in many cases such borrowers are not required to observe all covenants and conditions which typically are required in order for such borrowers to be viewed under standard rating agency criteria as “special purpose entities.”
The organizational documents of a borrower or the direct or indirect managing partner or member of a borrower may also contain requirements that there be one or two independent directors, managers or trustees (depending on the entity form of such borrower) whose vote is required before the borrower files a voluntary bankruptcy or insolvency petition or otherwise institutes insolvency proceedings. Generally, but not always, the independent directors, managers or trustees may only be replaced with certain other independent successors. Although the requirement of having independent directors, managers or trustees is designed to mitigate the risk of a voluntary bankruptcy filing by a solvent borrower, a borrower could file for bankruptcy without obtaining the consent of its independent director(s) (and we cannot assure you that such bankruptcy would be dismissed as an unauthorized filing), and in any case the independent directors, managers or trustees may determine that a bankruptcy filing is an appropriate course of action to be taken by such borrower. Although the independent directors, managers or trustees generally owe no fiduciary duties to entities other than the borrower itself, such determination might take into account the interests and financial condition of such borrower’s parent entities and such parent entities’ other subsidiaries in addition to those of the borrower. Consequently, the financial distress of an affiliate of a borrower might increase the likelihood of a bankruptcy filing by a borrower. In any event, we cannot assure you that a borrower will not file for bankruptcy protection or that creditors of a borrower will not
185 |
initiate a bankruptcy or similar proceeding against such borrower or that if initiated, a bankruptcy case of the borrower could be dismissed. For example, there are certain Mortgage Loans for which there is no independent director, manager or trustee in place with respect to the related borrower.
In all cases, the terms of the borrowers’ organizational documents or the terms of the Mortgage Loans limit the borrower’s activities to the ownership of only the related Mortgaged Property or Mortgaged Properties and related activities, and limit the borrowers’ ability to incur additional indebtedness, other than certain trade debt, equipment financing and other unsecured debt relating to property operations, and other than subordinated debt permitted under the related Mortgage Loan documents. See“—Additional Indebtedness” below. Such provisions are designed to mitigate the possibility that the borrower’s financial condition would be adversely impacted by factors unrelated to the related Mortgaged Property and Mortgage Loan. However, we cannot assure you that such borrowers have in the past complied and will comply with such requirements, and in some cases unsecured debt exists and/or is allowed in the future.
See “Certain Legal Aspects of the Mortgage Loans—Bankruptcy Issues”.
Prepayment Protections and Certain Involuntary Prepayments
All of the Mortgage Loans have a degree of voluntary prepayment protection in the form of defeasance provisions, prepayment lockout provisions and/or yield maintenance provisions, as described below.
Additionally, certain Mortgage Loans may provide that in the event of the exercise of a purchase option by a tenant or the sale of real property or the release of a portion of the Mortgaged Property, that the related Mortgage Loans may be prepaid in part prior to the expiration of a prepayment/defeasance lockout provision. See “—Certain Terms of the Mortgage Loans—Partial Releases” below.
We cannot assure you that the obligation to pay any yield maintenance charge or prepayment premium will be enforceable. See “Risk Factors—Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable—Prepayment Premiums, Fees and Charges”.
In addition, certain of the Mortgage Loans permit the related borrower, after a total or partial casualty or partial condemnation, to prepay the remaining principal balance of the Mortgage Loan (after application of the related insurance proceeds or condemnation award to pay the principal balance of the Mortgage Loan) or prepay a release amount based on the allocated loan amount of the related property, and obtain the release of the related property. Generally, no yield maintenance charge will be required for prepayments in connection with a casualty or condemnation unless, in the case of most of the Mortgage Loans, an event of default has occurred and is continuing.
Certain of the Mortgage Loans are secured in part by letters of credit and/or cash reserves that in each such case:
· | will be released to the related borrower upon satisfaction by the related borrower of certain performance related conditions, which may include, in some cases, meeting debt service coverage ratio levels and/or satisfying leasing conditions; and |
· | if not so released, may, at the discretion of the lender, prior to loan maturity (or earlier loan default or loan acceleration), be drawn on and/or applied to prepay the subject Mortgage Loan if such performance related conditions are not satisfied within specified time periods. |
See “—Certain Terms of the Mortgage Loans—Escrows” below. Also, see Annex A to this prospectus and“Significant Loan Summaries” in Annex B to this prospectus for more information on reserves relating to the largest 15 Mortgage Loans.
Voluntary Prepayments
Five (5) Mortgage Loans, representing approximately 12.7% of the Initial Pool Balance, permit the related borrower, after a lockout period of 18 to 29 payments following the origination date, to prepay the Mortgage Loan (or Loan Combination, if applicable) in whole or in part (in certain cases in order to satisfy certain financial
186 |
covenants contained in the related Mortgage Loan documents or in connection with a partial release of a Mortgaged Property), in each case together with the payment of the greater of a yield maintenance charge and a prepayment premium of 1% of the prepaid amount if such prepayment occurs prior to the related open prepayment period. See Annex A to this prospectus for more information on the prepayment protections attributable to the Mortgage Loans on a loan-by-loan basis.
One (1) Mortgage Loan, representing approximately 2.8% of the Initial Pool Balance, permits the related borrower, after a lockout period of two years following the Closing Date, to either (a) substitute U.S. government securities as collateral and obtain a release of the related Mortgaged Property or (b) prepay the Mortgage Loan with the payment of the greater of a yield maintenance charge and a prepayment premium of 1% of the prepaid amount if such prepayment occurs prior to the related open prepayment period.
In addition to the above-referenced permitted partial prepayments, certain of the Mortgage Loans permit partial defeasance in connection with releases of individual Mortgaged Properties or portions of individual Mortgaged Properties, and certain of the Mortgage Loans that permit defeasance in whole permit partial release with the payment of a release price plus applicable yield maintenance. See “—Certain Terms of the Mortgage Loans—Partial Releases” below.
Notwithstanding the foregoing restrictions on prepayments, each Mortgage Loan generally permits voluntary prepayments without payment of a yield maintenance charge or any prepayment premium during a limited “open period” immediately prior to and including the maturity date or Anticipated Repayment Date, as applicable, for such Mortgage Loan, as follows:
Prepayment Open Periods
Open Periods | Number of | Approx. % of Initial Pool | ||
3 | 23 | 25.5% | ||
4 | 26 | 57.7 | ||
5 | 4 | 11.8 | ||
7 | 1 | 5.0 | ||
Total | 54 | 100.0% |
See “Risk Factors—Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable—Prepayment Premiums, Fees and Charges” and Annex A to this prospectus.
“Due-On-Sale” and “Due-On-Encumbrance” Provisions
The Mortgage Loans generally contain “due-on-sale” and “due-on-encumbrance” clauses, which in each case permit the holder of the Mortgage Loan to accelerate the maturity of the Mortgage Loan if the borrower sells or otherwise transfers or encumbers (subject to certain exceptions set forth in the related Mortgage Loan documents) the related Mortgaged Property or a controlling interest in the borrower without the consent of the mortgagee (which, in some cases, may not be unreasonably withheld). Many of the Mortgage Loans place certain restrictions (subject to certain exceptions set forth in the related Mortgage Loan documents) on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations. The terms of the mortgages generally permit, subject to certain limitations, affiliate, estate planning and family transfers, transfers at death, transfers of interest in a public company, the transfer or pledge of less than a controlling portion of the partnership, members’ or other equity interests in a borrower, the transfer or pledge of passive equity interests in a borrower (such as limited partnership interests and non-managing member interests in a limited liability company) and transfers to persons satisfying qualification criteria set forth in the related Mortgage Loan documents. Certain of the Mortgage Loans do not restrict the pledging of direct or indirect ownership interests in the related borrower, but do restrict the transfer of ownership interests in the related borrower by imposing a specific percentage, a control limitation or requiring the consent of the mortgagee to any such transfer. Generally, the Mortgage Loans do not prohibit transfers of non-controlling interests so long as no change of control results or, with respect to Mortgage Loans to tenant-in-common borrowers, transfers to new tenant-in-common borrowers. Certain of the Mortgage Loans do not prohibit
187 |
the pledge by direct or indirect owners of the related borrower of equity distributions that may be made from time to time by the borrower to its equity owners.
Additionally, certain of the Mortgage Loans provide that transfers of the Mortgaged Property are permitted if certain conditions are satisfied, which may include one or more of the following:
· | no event of default has occurred; |
· | the proposed transferee is creditworthy and has sufficient experience in the ownership and management of properties similar to the Mortgaged Property; |
· | a Rating Agency Confirmation has been obtained from each Rating Agency; |
· | the transferee has executed and delivered an assumption agreement evidencing its agreement to abide by the terms of the Mortgage Loan together with legal opinions and title insurance endorsements; and |
· | the assumption fee has been received (which assumption fee will be applied as described under“The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, but will in no event be paid to the Certificateholders); however, certain of the Mortgage Loans allow the borrower to sell or otherwise transfer the related Mortgaged Property a limited number of times without paying an assumption fee. |
Transfers resulting from the foreclosure of a pledge of the collateral for a mezzanine loan (if any) or other permitted pledge of borrower interest or a preferred equity investment (if any) will also result in a permitted transfer. See “—Additional Indebtedness” below.
The Pooling and Servicing Agreement will provide that the Master Servicer (with respect to non-Specially Serviced Loans and with the Special Servicer’s consent) and the Special Servicer (with respect to Specially Serviced Loans) will be required to determine, in a manner consistent with the Servicing Standard, whether to exercise any right the mortgagee may have under any such clause to accelerate payment of the related Serviced Loan upon, or to withhold its consent to, any transfer of interests in the borrower or the Mortgaged Property or further encumbrances of the related Mortgaged Property, subject to any approval rights of the applicable Directing Holder or its representative to any waiver of any such clause. See “Risk Factors—Some Provisions in the Mortgage Loans Underlying Your Offered Certificates May Be Challenged as Being Unenforceable—Due-on-Sale and Debt Acceleration Clauses” and “Certain Legal Aspects of the Mortgage Loans—Due-On-Sale and Due-On-Encumbrance Provisions”. The Depositor makes no representation as to the enforceability of any due-on-sale or due-on-encumbrance provision in any Mortgage Loan.
Notwithstanding the foregoing, without any other approval or consent, the Master Servicer (for non-Specially Serviced Loans) or the Special Servicer (for Specially Serviced Loans) may grant and process a borrower’s request for consent to subject the related Mortgaged Property to an immaterial easement, right of way or similar agreement for utilities, access, parking, public improvements or another purpose and may consent to subordination of the related Mortgage Loan to such easement, right of way or similar agreement.
Defeasance; Collateral Substitution
The terms of 48 of the Mortgage Loans (the “Defeasance Loans”), representing approximately 84.6% of the Initial Pool Balance, permit the applicable borrower at any time (provided, in most cases, that no event of default exists), after a lockout period of at least two years following the Closing Date (or, in the case of a Loan Combination, the earlier of (a) the second anniversary of the securitization of the last note included in such Loan Combination and (b) a specified date no earlier than three years from the date of origination of such Loan Combination) (the “Defeasance Lock Out Period”) and prior to the related open prepayment period described below, to obtain a release of a Mortgaged Property from the lien of the related Mortgage (a “Defeasance Option”) in connection with a defeasance. Certain of those Mortgage Loans also permit the related borrower to make certain voluntary prepayments or effect a partial defeasance in connection with partial releases as described under “—Certain Terms of the Mortgage Loans—Voluntary Prepayments” above and “—Certain Terms of the Mortgage Loans—Partial Releases” below.
188 |
Exercise of a Defeasance Option is also generally conditioned on, among other things, (a) the borrower providing the mortgagee with at least 30 days’ prior written notice of the date on which such defeasance will occur (such date, the “Release Date”), and (b) the borrower (A) paying on any Release Date (i) all accrued and unpaid interest on the principal balance of the Mortgage Loan (or Loan Combination, if applicable) up to and including the Release Date, (ii) all other sums (excluding scheduled interest or principal payments due following the Release Date), due under the Mortgage Loan (or Loan Combination, if applicable) and under all other related Mortgage Loan documents executed in connection with the Defeasance Option, (iii) an amount (the “Defeasance Deposit”) that will be sufficient to (x) purchase non-callable obligations of, or backed by the full faith and credit of, the United States of America or, in certain cases, other “government securities” (within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 and otherwise satisfying REMIC requirements for defeasance collateral), that provide payments (1) on or prior to, but as close as possible to, all successive scheduled due dates occurring during the period from the Release Date to the related maturity date (or to the first day of the open period for such Mortgage Loan (or Loan Combination, if applicable)) and (2) in amounts equal to the scheduled payments due on such due dates under the Mortgage Loan (or Loan Combination, if applicable), or under the defeased portion of the Mortgage Loan (or Loan Combination, if applicable) in the case of a partial defeasance, including in the case of a Balloon Mortgage Loan, the balloon payment, and (y) pay any costs and expenses incurred in connection with the purchase of such government securities, and (B) delivering a security agreement granting the Issuing Entity a first priority lien on the Defeasance Deposit and, in certain cases, the government securities purchased with the Defeasance Deposit and an opinion of counsel to such effect.
Pursuant to the terms of the Pooling and Servicing Agreement, the Master Servicer will be responsible for purchasing (or causing the purchase of) the government securities on behalf of the borrower at the borrower’s expense to the extent consistent with the related Mortgage Loan documents. Pursuant to the terms of the Pooling and Servicing Agreement, any amount in excess of the amount necessary to purchase such government securities will be returned to the borrower or other designated party, but in any event will not be assets of the Issuing Entity. Pursuant to the terms of the Pooling and Servicing Agreement, the Master Servicer may accept as defeasance collateral any “government security,” within the meaning of Treasury Regulations Section 1.860G-2(a)(8)(ii), notwithstanding any more restrictive requirements in the related Mortgage Loan documents;provided that the Master Servicer has received an opinion of counsel that acceptance of such defeasance collateral will not endanger the status of either Trust REMIC as a REMIC or result in the imposition of a tax upon either Trust REMIC or the Issuing Entity (including but not limited to the tax on “prohibited transactions” as defined in Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set forth in Section 860G(d) of the Code, but not including the tax on “net income from foreclosure property” as set forth in Section 860G(c) of the Code). Simultaneously with such actions, the related Mortgaged Property (or applicable portion of the Mortgaged Property, in the case of partial defeasance) will be released from the lien of the Mortgage Loan (or Loan Combination, if applicable) and the pledged government securities (together with any Mortgaged Property not released, in the case of a partial defeasance) will be substituted as the collateral securing the Mortgage Loan (or Loan Combination, if applicable).
For additional information on Mortgage Loans that permit partial defeasance, see “—Certain Terms of the Mortgage Loans—Partial Releases” below.
In general, if consistent with the related Mortgage Loan documents, a successor borrower established, designated or approved by the Master Servicer will assume the obligations of the related borrower exercising a Defeasance Option and the borrower will be relieved of its obligations under the Mortgage Loan. If a Mortgage Loan (or Loan Combination, if applicable) is partially defeased, if consistent with the related Mortgage Loan documents, generally the related promissory note will be split and only the defeased portion of the borrower’s obligations will be transferred to the successor borrower.
Partial Releases
The Mortgage Loansdescribed below permit the release of one or more of the Mortgaged Properties or a portion of a single Mortgaged Property in connection with a partial prepayment, partial defeasance, or for no consideration in the case of parcels that are vacant, non-income producing or were not taken into account in the underwriting of the Mortgage Loan, subject to the satisfaction of certain specified conditions.
189 |
Property Releases; Partial Prepayments
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as McCallum Courts and McCallum Glen, representing approximately 2.8% of the Initial Pool Balance, provided no event of default has occurred and is continuing under the related Mortgage Loan documents, the borrower has the one time right to obtain the release of any individual property (the “McCallum Release Parcel”) from the lien of the Mortgage Loan documents at any time after the date that is two years from the “startup day” of the REMIC trust, subject to the satisfaction of certain conditions set forth in the Mortgage Loan documents, including among others: (i) the McCallum Release Parcel will be conveyed to a person other than the borrower; (ii) the borrower will (a) partially prepay the debt in an amount equal to the greater of (1) 115% of the allocated loan amount with respect to the McCallum Release Parcel and (2) 90% of the net sales proceeds applicable to such McCallum Release Parcel, provided that (2) will not apply in the event that the debt yield with respect to the remaining individual property is greater than or equal to 12%, (b) pay any applicable interest shortfall, and (c) pay to lender the yield maintenance premium to the extent prepayment occurs at any time other than during the open prepayment period; (iii) the partial release is permitted under REMIC requirements then in effect; (iv) the lender receives rating agency confirmation; (v) the delivery of a REMIC opinion with respect to the partial release; (vi) the McCallum Release Parcel is subdivided from the remaining property and constitutes a separate tax parcel; (vii) if requested by the lender, the borrower will deliver to the lender one or more reciprocal easements permitting tenants at the remaining individual property to use and access any amenities and/or facilities shared between the individual properties; (viii) as of the date the lender receives notice from the borrower of the proposed partial release (the “Partial Release Notice Date”) and as of the date the partial release is consummated, after giving effect to the release of the lien of the Mortgage Loan documents encumbering the McCallum Release Parcel, (a) the debt service coverage ratio with respect to the remaining individual property will be greater than the greater of (1) the debt service coverage ratio of all individual properties encumbered by the Mortgage Loan documents immediately prior to the Partial Release Notice Date or the date the partial release is consummated, and (2) the debt service coverage ratio on the closing date of the Mortgage Loan, (b) the loan-to-value ratio with respect to the remaining individual property will be no greater than the lesser of (1) the loan-to-value ratio on the closing date of the Mortgage Loan, or (2) the loan-to-value ratio with respect to all of the individual properties immediately prior to the Partial Release Notice Date or the date the partial release is consummated, as applicable, and (c) the debt yield with respect to the remaining individual property will be equal to or greater than the greater of (1) the debt yield of all individual properties encumbered by the Mortgage Loan documents immediately prior to the Partial Release Notice Date or the date the partial release is consummated (as applicable) and (2) the debt yield on the closing date of the Mortgage Loan. |
Property Releases; Partial Defeasance
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, representing approximately 5.7% of the Initial Pool Balance, provided no event of default under the Mortgage Loan is then continuing, at any time on or after the first due date following the second anniversary of the Closing Date, the borrower may obtain the release of either the live music, entertainment and private event venue portion of the collateral (the “ACL Music Venue Component”) and/or the retail and office portion of the collateral (the “Retail/Office Component”) subject to the satisfaction of certain conditions as set forth in the Mortgage Loan documents, including among others: (i) partial defeasance of the Mortgage Loan in an amount equal to the greater of (a) 80% of the net sales proceeds from the sale of the applicable portion of the property being defeased, and (b) 115% of the allocated loan amount of the applicable portion of the property being defeased, which is (A) $37,000,000 for the ACL Music Venue Component or (B) $20,000,000 for the Retail/Office Component; (ii) after giving effect to the release, the debt service coverage ratio (as calculated under the Mortgage Loan documents) for the remaining Mortgaged Property for the 12-month period preceding the end of the most recent fiscal quarter is no less than the greater of (a) 1.51x and (b) the debt service coverage ratio immediately prior to the release; (iii) delivery of a REMIC opinion; and (iv) delivery of a rating agency confirmation with respect to such defeasance. |
190 |
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as McCallum Courts and McCallum Glen, representing approximately 2.8% of the Initial Pool Balance, provided no event of default has occurred and remains uncured under the related Mortgage Loan documents, at any time after two years from the “startup day” of the REMIC trust, the borrower will have the right to voluntarily defease a portion of the loan and obtain a release of the lien of the Mortgage Loan documents as to any individual property by providing the lender with certain non-callable government securities, upon satisfaction of certain conditions set forth in the Mortgage Loan documents, including among others: (i) delivery of a REMIC opinion; (ii) the partial defeasance event is permitted under REMIC requirements then in effect; (iii) delivery of rating agency confirmation; (iv) the individual property proposed to be released is subdivided from the remaining property and constitutes a separate tax parcel; (v) if requested by the lender, the borrower will deliver to the lender one or more reciprocal easements permitting tenants at the remaining individual property to use and access any amenities and/or facilities shared between the individual properties; and (vi) as of the date the lender receives notice of the partial defeasance (the “Partial Defeasance Notice Date”) and as of the date the partial defeasance event is consummated, after giving effect to the release of the lien encumbering the individual property proposed to be released, (a) the debt service coverage ratio with respect to the remaining individual property is greater than the greater of (1) the debt service coverage ratio of all individual properties encumbered by the Mortgage Loan documents immediately prior to the Partial Defeasance Notice Date or the date the partial defeasance event is consummated (as applicable) and (2) the debt service coverage ratio on the closing date of the Mortgage Loan, (b) the loan-to-value ratio with respect to the remaining individual property will be no greater than the lesser of (1) the loan-to-value ratio on the closing date of the Mortgage Loan, or (2) the loan-to-value ratio with respect to all of the individual properties immediately prior to the Partial Defeasance Notice Date or the date the partial defeasance event is consummated (as applicable), and (c) the debt yield with respect to the remaining individual property will be greater than the greater of (1) the debt yield of all individual properties immediately prior to the Partial Defeasance Notice Date or the date the partial defeasance event is consummated (as applicable), and (2) the debt yield on the closing date of the Mortgage Loan. |
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as MI, OH & GA Multifamily Portfolio, representing approximately 1.9% of the Initial Pool Balance, the related borrower may obtain the release of an individual Mortgaged Property after the expiration of the related lockout period,provided that, among other conditions contained in the related Mortgage Loan documents, (i) no event of default has occurred and is continuing, (ii) the borrower provides defeasance collateral with respect to the released property in an amount equal to the greater of (x) 115% of the allocated loan amount set forth in the related loan documents and (y) an amount such that after giving effect to such release, (a) the debt service coverage ratio for the remaining properties is no less than 1.30x and (b) the loan-to-value ratio for the remaining properties is no greater than 70.0% and (iii) delivery of an opinion of counsel for the borrower opining that any REMIC trust formed pursuant to a securitization including the Mortgage Loan will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of such defeasance. |
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as Storage R Us Portfolio, representing approximately 0.8% of the Initial Pool Balance, the related Mortgage Loan documents permit the borrower to obtain the release of any individual Mortgaged Property after the expiration of the lockout period, provided that, among other conditions, (i) the borrower makes a defeasance payment in an amount equal to 115% of the allocated loan amount with respect to the individual Mortgaged Property to be released, (ii) following such release, (A) the loan-to-value ratio of the remaining property is not greater than the lesser of (1) 70.0% or (2) the loan-to-value ratio immediately prior to such release and (B) the debt service coverage ratio immediately following the release is not less than the greater of (1) 1.35x or (2) the debt service coverage ratio immediately prior to such release, and (iii) an opinion of counsel that the Trust REMIC will not fail to maintain its status as a REMIC as a result of the release is delivered. |
Property Releases; Free Releases
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Hilton Orrington Evanston, representing approximately 5.8% of the Initial Pool Balance, |
191 |
the related Mortgage Loan documents permit the borrower to obtain the release of the air space above the parking garage from the lien of the mortgage in connection with the transfer to an affiliate of the borrower or an unaffiliated third party related to constructing a multifamily development with residential units and ancillary residential parking, provided that, among other conditions, following such release, the remaining Mortgaged Property satisfies the REMIC release requirements (including obtaining a REMIC opinion). |
· | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A to this prospectus as Park Place, representing approximately 2.9% of the Initial Pool Balance, provided no event of default has occurred and is continuing under the related Mortgage Loan documents, the borrower has the one time right to obtain the release of a portion of the property that is currently used as a parking lot (the “Release Parcel”) from the lien of the Mortgage Loan documents, subject to the satisfaction of certain conditions set forth in the Mortgage Loan documents, including among others: (i) the Release Parcel is conveyed to an affiliate of the borrower; (ii) the partial release is permitted under REMIC requirements then in effect; (iii) the delivery of a REMIC opinion with respect to the partial release; (iv) the delivery of a reciprocal easement agreement affecting the Release Parcel that provides the remaining property with access and use of an equal number of parking spaces in the parking garage as existed prior to the release; (v) the Release Parcel is subdivided from the remaining property and constitutes a separate tax parcel; and (vi) during construction of any improvements on the Release Parcel, the guarantor under the Mortgage Loan or an affiliate of such guarantor will provide the lender under the Mortgage Loan with a completion guaranty. |
Escrows
Fifty (50) Mortgage Loans, representing approximately 88.2% of the Initial Pool Balance, provide for monthly or upfront escrows to cover property taxes on the Mortgaged Properties.
Forty-eight (48) Mortgage Loans, representing approximately 85.5% of the Initial Pool Balance, provide for monthly or upfront escrows to cover ongoing replacements and capital repairs.
Twenty (20) Mortgage Loans, representing approximately 77.0% of that portion of the Initial Pool Balance secured by office, retail and mixed use properties, provide for upfront or monthly escrows for the full term or a portion of the term of the related Mortgage Loan to cover anticipated re-leasing costs, including tenant improvements and leasing commissions or other lease termination or occupancy issues. Such escrows are typically considered for office, retail and mixed use properties only.
Forty (40) Mortgage Loans, representing approximately 56.4% of the Initial Pool Balance, provide for monthly or upfront escrows to cover insurance premiums on the Mortgaged Properties.
Certain of the reserves described above permit the related borrower to post a letter of credit in lieu of maintaining cash reserves.
Many of the Mortgage Loans provide for other escrows and reserves, including, in certain cases, reserves for debt service, operating expenses, renovations or other property enhancements vacancies at the related Mortgaged Property and other shortfalls or reserves to be released under circumstances described in the related Mortgage Loan documents.
See Annex A to this prospectus and“Significant Loan Summaries” in Annex B to this prospectus for more information on reserves relating to the largest 15 Mortgage Loans.
192 |
Mortgaged Property Accounts
Lockbox Accounts.
The Mortgage Loan documents prescribe the manner in which the related borrowers are permitted to collect rents from tenants at each Mortgaged Property. The following table sets forth the types of lockbox accounts prescribed for the Mortgage Loans:
Lockbox Account Types
Lockbox Type | Number of Mortgage Loans | Aggregate Principal Balance | Approx. % of Initial Pool | ||||||
Springing Lockbox | 42 | $357,564,622 | 51.5 | % | |||||
Hard Lockbox | 9 | 275,244,943 | 39.6 | ||||||
Hard (Hotel, Office, Retail) / Soft (Music Venue) | 1 | 39,876,237 | 5.7 | ||||||
Soft Springing Lockbox | 2 | 22,040,924 | 3.2 | ||||||
Total: | 54 | $694,726,725 | 100.0 | % |
See “—Certain Calculations and Definitions” for a description of the lockbox types set forth in the table above. The lockbox accounts will not be assets of the Issuing Entity.
Additional Indebtedness
The Mortgage Loans generally prohibit borrowers from incurring any additional debt secured by their Mortgaged Property without the consent of the lender. However:
· | substantially all of the Mortgage Loans permit the related borrower to incur limited indebtedness in the ordinary course of business that is not secured by the related Mortgaged Property; |
· | the borrowers under certain of the Mortgage Loans have incurred and/or may incur in the future unsecured debt other than in the ordinary course of business; |
· | any borrower that is not required pursuant to the terms of its applicable Mortgage Loan documents to meet single-purpose entity criteria may not be restricted from incurring unsecured debt or mezzanine debt; |
· | the terms of certain Mortgage Loans permit the borrowers to post letters of credit and/or surety bonds for the benefit of the mortgagee under the Mortgage Loans, which may constitute a contingent reimbursement obligation of the related borrower or an affiliate. The issuing bank or surety will not typically agree to subordination and standstill protection benefiting the mortgagee; |
· | although the Mortgage Loans generally place certain restrictions on incurring mezzanine debt by the pledging of general partnership and managing member equity interests in a borrower, such as specific percentage or control limitations, the terms of the Mortgage Loan documents generally permit, subject to certain limitations, the pledge of the limited partnership or non-managing membership equity interests in a borrower or less than a controlling interest of any other equity interests in a borrower; and |
· | certain of the Mortgage Loans do not restrict the pledging of ownership interests in the borrower, but do restrict the transfer of ownership interests in a borrower by imposing limitations on transfer of control or a specific percentage of ownership interests. |
Existing Additional Secured Debt
As described under “—The Loan Combinations” below, each Split Mortgage Loan and its corresponding Companion Loan(s) are, in each case, together secured by the same Mortgage on the related Mortgaged Property or portfolio of Mortgaged Properties, and the rights of the holders of such Split Mortgage Loan and corresponding Companion Loan(s) are set forth in a Co-Lender Agreement. Also, see “Significant Loan
193 |
Summaries—Sheraton Denver Downtown Fee”, “—79 Madison Avenue”, “—Austin Block 21”, “—600 Broadway”, “—5 Penn Plaza” and“—Park Place” in Annex B to this prospectus.
Existing Mezzanine Debt
Mezzanine debt is debt that is incurred by the direct or indirect owner of equity in one or more borrowers and is secured by a pledge of the equity ownership interests in such borrowers. Because mezzanine debt is secured by the obligor’s direct or indirect equity interest in the related borrowers, such financing effectively reduces the obligor’s economic stake in the related Mortgaged Property. The existence of mezzanine debt may reduce cash flow on the borrower’s Mortgaged Property after the payment of debt service and may increase the likelihood that the owner of a borrower will permit the value or income producing potential of a Mortgaged Property to fall and may create a slightly greater risk that a borrower will default on the Mortgage Loan secured by a Mortgaged Property whose value or income is relatively weak.
As of the Cut-off Date, except as disclosed in the following table, each Sponsor has informed us that it is unaware of any existing mezzanine with respect to the Mortgage Loans it is selling to the Depositor:
Mortgaged Property Name | Mortgage Loan Cut-off Date Balance | Mezzanine Debt Cut-off Date Balance | Companion Loan Cut-off Date Balance | Cut-off Date Total Debt Balance | Cut-off Date Wtd. Avg. Total Debt Interest Rate(1) | Cut-off Date Mortgage Loan LTV Ratio | Cut-off Date Total Debt LTV(1) | Cut-off Date Mortgage Loan DSCR | Cut-off Date Total Debt DSCR(1) | |||||||||
5 Penn Plaza(2) | $25,000,000 | $40,000,000 | $235,000,000 | $300,000,000 | 4.97999% | 48.1% | 55.6% | 1.64x | 1.39x | |||||||||
(1) | Calculated taking into account the mezzanine debt and any related Pari Passu Companion Loan. |
(2) | The related mezzanine loan is initially being held by a third party that is not affiliated with the related Sponsor. |
The mezzanine loan related to the Mortgage Loan identified in the table above secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 3.6% of the Initial Pool Balance, is subject to an intercreditor agreement between the holder of the mezzanine loan and the lender under the Mortgage Loan that sets forth the relative priorities between the related Mortgage Loan and the related mezzanine loan. Each intercreditor agreement provides, among other things, generally that (a) all payments due under the related mezzanine loan are subordinate after an event of default under the related Mortgage Loan to any and all payments required to be made under the related Mortgage Loan (except for any payments from funds other than the Mortgaged Property or proceeds of any enforcement upon the mezzanine loan collateral and any mezzanine loan guarantees), (b) so long as there is no event of default under the related Mortgage Loan, the related mezzanine lender may accept payments on and prepayments of the related mezzanine loan;provided,however, that (x) prepayment of the mezzanine loan is not permitted prior to the prepayment in full of the Mortgage Loan and (y) prepayments of the related mezzanine loan will be permitted prior to prepayment of the Mortgage Loan provided that such prepayment is from a source of funds other than the respective Mortgaged Property, the Mortgage Loan borrower, the senior Mortgage Loan guarantor and/or other collateral for the Mortgage Loan, (c) the related mezzanine lender will have certain rights to receive notice of and cure defaults under the Mortgage Loan prior to any acceleration or enforcement of the Mortgage Loan, (d) the related mezzanine lender may amend or modify the related mezzanine loan in certain respects without the consent of the related Mortgage Loan lender, and the Mortgage Loan lender must obtain the mezzanine lender’s consent to amend or modify the Mortgage Loan in certain respects, (e) upon the occurrence of an event of default under the related mezzanine loan documents, the related mezzanine lender may foreclose upon the membership interests in the related Mortgage Loan borrower, which could result in a change of control with respect to the related Mortgage Loan borrower and a change in the management of the related Mortgaged Properties, (f) if the Mortgage Loan is accelerated or, in some cases, becomes specially serviced or if a monetary or material non-monetary default occurs and continues for a specified period of time under the Mortgage Loan or if the Mortgage Loan borrower becomes a debtor in a bankruptcy or if the related Mortgage Loan lender exercises any enforcement action under the related Mortgage Loan documents with respect to the related Mortgage Loan borrower or the related Mortgaged Properties, the related mezzanine lender has the right to purchase the Mortgage Loan, in whole but not in part, for a price generally equal to the outstanding principal balance of the Mortgage Loan, together with all accrued interest and other amounts due thereon, plus any advances made by the related Mortgage Loan lender or its servicer and any interest thereon plus, subject to certain limitations, any Liquidation Fees and Special Servicing Fees payable under the Pooling and Servicing Agreement, but generally
194 |
excluding any late charges, default interest, exit fees, special maintenance charges payable in connection with a prepayment or yield maintenance charges and prepayment premiums and (g) an event of default under the Mortgage Loan will trigger an event of default under the related mezzanine loan.
Generally, upon a default under a mezzanine loan described in the preceding paragraph, the holder of the mezzanine loan would be entitled to foreclose upon the equity in the related borrower, which has been pledged to secure payment of such debt. Although this transfer of equity may not trigger the due-on-sale clause under the related Mortgage Loan (as described under “—Certain Terms of the Mortgage Loans—’Due-On-Sale’ and ’Due-On-Encumbrance’ Provisions” above), it could cause a change in control of the borrower or a change in the management of the Mortgaged Property and/or cause the obligor under the mezzanine loan to file for bankruptcy, which could negatively affect the operation of the related Mortgaged Property and the related borrower’s ability to make payments on the related Mortgage Loan in a timely manner.
Permitted Mezzanine Debt
The Mortgage Loans generally place certain restrictions on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations as described under “—Certain Terms of the Mortgage Loans—’Due-On-Sale’ and ’Due-On-Encumbrance’ Provisions” above.
In addition, certain of the Mortgage Loans do not prohibit the pledge by direct or indirect owners of the related borrower of equity distributions that may be made from time to time by the borrower to its equity owners.
With respect to the Mortgage Loans listed in the following chart, the direct and indirect equity owners of the borrower are permitted to incur future mezzanine debt, subject to the satisfaction of conditions contained in the related Mortgage Loan documents, including, among other things, a combined maximum loan-to-value ratio, a combined minimum debt service coverage ratio and/or a combined minimum debt yield, as listed in the following chart:
Mortgaged Property Name | Mortgage Loan | Combined | Combined | Combined | Intercreditor | |||||
79 Madison Avenue | $40,000,000 | 70.0% | 1.40x | 9.0% | Y | |||||
McCallum Courts and McCallum Glen | $19,143,750 | 75.0% | 1.25x | 7.75% | Y | |||||
Staybridge Cleveland Mayfield | $11,200,000 | 80.0% | 2.15x | 13.75% | Y | |||||
Arizona Pavilion | $6,800,000 | 64.8% | 1.25x | N/A | Y | |||||
Storage R Us Portfolio | $5,500,000 | 70.0% | 1.52x | N/A | Y | |||||
Okatie Self Storage | $2,625,000 | 75.0% | 1.25x | 8.0% | Y |
Each of the Mortgage Loans listed above conditions the incurrence of future mezzanine debt on the execution of an intercreditor agreement between the holder of the related mezzanine loan and the related lender under the related Mortgage Loan that, in each case, sets forth the relative priorities between the related Mortgage Loan and the related mezzanine loan.
Preferred Equity and Preferred Return Arrangements
Further, borrowers under certain of the Mortgage Loans are permitted to issue preferred equity in such borrowers or in certain parent entities of such borrowers. Because preferred equity often provides for a higher rate of return to be paid to certain holders, preferred equity in some respects functions like mezzanine indebtedness, and reduces a principal’s economic stake in the related Mortgaged Property, reduces cash flow on the borrower’s Mortgaged Property after the payment of debt service and payments on the preferred equity and may increase the likelihood that the owner of a borrower will permit the value or income-producing potential of a Mortgaged Property to fall and may create a slightly greater risk that a borrower will default on the Mortgage Loan secured by a Mortgaged Property whose value or income is relatively weak.
Permitted Unsecured Debt
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Franklin Center, representing 1.3% of the Initial Pool Balance, the related borrower is permitted to
195 |
incur Member Loans. “Member Loans” are one or more loans to the related borrower from one or more members of the borrower that, in each case: (a) is fully subordinate to the Mortgage Loan, (b) is non-recourse to the borrower and any of its assets, including the Mortgaged Property, and amounts payable pursuant to such Member Loan are only permitted to the extent that net cash flow (including, without limitation, cash flow from capital contributions from the members of the borrower) is available after those payments required pursuant to the related Mortgage Loan documents, (c) has a holder that will, in a bankruptcy or similar proceeding involving the borrower, vote in favor of any plan of reorganization proposed by the related lender or in favor of which the lender has voted, and such person or entity will not vote in favor of any plan of reorganization in favor of which the lender has not voted, (d) has a holder that will not take any action to enforce any of its rights or remedies to collect all or a portion of such Member Loan until one year and one day after the Mortgage Loan has been satisfied in full pursuant to the terms of the Mortgage Loan documents, and (e) is evidenced by a promissory note stating that the lender is a third party beneficiary of such note and containing the provisions contained in (a)-(d) above.
There may be other Mortgage Loans that permit the related borrower to incur unsecured loans or indebtedness, including unsecured loans in the ordinary course of business without limitation on the amount of such indebtedness.
Certain risks relating to additional debt are described in “Risk Factors—Other Debt of the Borrower or Ability to Incur Other Financings Entails Risk”.
The Loan Combinations
General
Each of the following Split Mortgage Loans is part of a Loan Combination comprised of the subject Mortgage Loan which is included in the Issuing Entity, and one or more Pari Passu Companion Loan(s) and/or Subordinate Companion Loan(s) that are held outside the Issuing Entity, each of which is evidenced by a separate promissory note and all of which are secured by the same Mortgages encumbering the same Mortgaged Property or portfolio of Mortgaged Properties. Set forth in the chart below is certain information regarding each Split Mortgage Loan and its related Companion Loan(s).
Loan Combination Summary
Mortgaged Property Name | Mortgage Loan Seller | Mortgage Loan | Mortgage Loan as Approx. % of Initial | Aggregate Pari Passu Companion Loan | Holder(s) of | Mortgage Loan LTV Ratio(1) | Loan Combination LTV Ratio(1) | Mortgage Loan | Loan Combination |
Controlling Note | ||||||||||
Sheraton Denver Downtown Fee | CGMRC | $70,000,000 | 10.1% | $110,000,000 | CGCMT 2016-GC36 | 75.0% | 75.0% | 1.28x | 1.28x | N / Note A-1 / CGCMT 2016-GC36 | ||||||||||
79 Madison Avenue | CGMRC | $40,000,000 | 5.8% | $45,000,000 | CGCMT 2016-P3 | 44.7% | 44.7% | 1.52x | 1.52x | N / Note A-1 / CGCMT 2016-P3 | ||||||||||
Austin Block 21 | GSMC | $39,876,237 | 5.7% | $109,659,651 | CGCMT 2016-GC36 | 62.6% | 62.6% | 1.51x | 1.51x | N / Note A-1 / CGCMT 2016-GC36 | ||||||||||
600 Broadway | BNY Mellon | $30,000,000 | 4.3% | $90,000,000(2) | Various | 54.5% | 54.5% | 1.61x | 1.61x | N / Note A-4 / German American Capital Corporation | ||||||||||
5 Penn Plaza | CGMRC | $25,000,000 | 3.6% | $235,000,000(3) | Various | 48.1% | 48.1% | 1.64x | 1.64x | N / Note A-1 / CGCMT 2016-GC36 | ||||||||||
Park Place | CGMRC | $20,000,000 | 2.9% | $73,000,000(4) | Various | 66.4% | 66.4% | 1.44x | 1.44x | N / Note A-1 / CGCMT 2016-GC36 |
(1) | Calculated including the relatedpari passu Companion Loan(s), but excluding any related subordinate Companion Loans. There are no related subordinate Companion Loans. |
(2) | The 600 Broadway Loan Combination is comprised of the followingpari passu loans: (i) the 600 Broadway Mortgage Loan (which is treated herein as a single mortgage loan) that is evidenced by the non-controlling note A-2-2 (with an outstanding principal balance as of the Cut-off Date of $10,000,000, and which is currently held by The Bank of New York Mellon) and the non-controlling note A-6 (with an outstanding principal balance as of the Cut-off Date of $20,000,000, and which is currently held by German American Capital Corporation and is expected to be acquired by The Bank of New York Mellon contemporaneously with the closing of, and thereafter contributed by it into, this securitization transaction); (ii) the three 600 Broadway Pari Passu Companion Loans (which are expected to be treated as a single Companion Loan) that are evidenced by the non-controlling note A-1 (with an outstanding principal balance as of the Cut-off Date of $20,000,000), the non-controlling note A-2-1 (with an outstanding principal balance as of the Cut-off Date of $10,000,000) and the non-controlling note A-3 (with an outstanding principal balance as of the Cut-off Date of $20,000,000), respectively, each of which was contributed to the CGCMT 2016-P3 Securitization, and (iii) the three 600 Broadway Pari Passu Companion Loans (which are expected to be treated as a single Companion Loan) that are evidenced by the controlling note A-4 (with an outstanding principal balance as of the Cut-off Date of $20,000,000), the non-controlling note A-5-1 (with an outstanding principal balance as of the Cut-off Date of $10,000,000), and the non-controlling note A-5-2 (with an |
196 |
outstanding principal balance as of the Cut-off Date of $10,000,000), respectively, each of which is currently held by German American Capital Corporation and is expected to be contributed to the DBJPM 2016-C1 Securitization by German American Capital Corporation. Based on the publicly available preliminary prospectus for the DBJPM 2016-C1 Securitization, that securitization transaction is scheduled to close prior to this securitization transaction. |
(3) | The 5 Penn Plaza Loan Combination is comprised of the followingpari passu loans: (i) the 5 Penn Plaza Mortgage Loan that is evidenced by the non-controlling note A-2-II (with an outstanding principal balance as of the Cut-off Date of $25,000,000); (ii) the 5 Penn Plaza Pari Passu Companion Loan that is evidenced by the controlling note A-1 (with an outstanding principal balance as of the Cut-off Date of $115,000,000) and was contributed to the CGCMT 2016-GC36 Securitization; (iii) the 5 Penn Plaza Pari Passu Companion Loan that is evidenced by the non-controlling note A-2-I (with an outstanding principal balance as of the Cut-off Date of $42,000,000) and was contributed to the CGCMT 2016-P3 Securitization; and (iv) the 5 Penn Plaza Pari Passu Companion Loan that is evidenced by the non-controlling note A-3 (with an outstanding principal balance as of the Cut-off Date of $78,000,000) and was contributed to the JPMBB 2016-C1 Securitization. |
(4) | The Park Place Loan Combination is comprised of the followingpari passu loans: (i) the Park Place Mortgage Loan that is evidenced by the non-controlling note A-2-1 (with an outstanding principal balance as of the Cut-off Date of $20,000,000); (ii) the Park Place Pari Passu Companion Loan that is evidenced by the controlling note A-1 (with an outstanding principal balance as of the Cut-off Date of $50,000,000) and was contributed to the CGCMT 2016-GC36 Securitization; and (iii) the Park Place Pari Passu Companion Loan that is evidenced by the non-controlling note A-2-2 (with an outstanding principal balance as of the Cut-off Date of $23,000,000), is currently held by CGMRC and is expected to be contributed to one or more future commercial mortgage securitization transactions. |
Set forth in the bullets below is a summary of each Loan Combination, together with certain applicable definitions referred to in this prospectus:
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, which is evidenced by the non-controlling note A-2, has an outstanding principal balance as of the Cut-off Date of $70,000,000 and represents approximately 10.1% of the Initial Pool Balance (the “Sheraton Denver Downtown Fee Mortgage Loan”), the related Mortgaged Property also secures one (1) other loan that ispari passu in right of payment with the Sheraton Denver Downtown Fee Mortgage Loan (the “Sheraton Denver Downtown Fee Pari Passu Companion Loan” and, together with the Sheraton Denver Downtown Fee Mortgage Loan, the “Sheraton Denver Downtown Fee Loan Combination”). The Sheraton Denver Downtown Fee Pari Passu Companion Loan, which is evidenced by the controlling note A-1 and has a principal balance as of the Cut-off Date of approximately $110,000,000, was contributed to the commercial mortgage securitization transaction (the “CGCMT 2016-GC36 Securitization”) involving the issuance of the Citigroup Commercial Mortgage Trust 2016-GC36, Commercial Mortgage Pass-Through Certificates, Series 2016-GC36. The Sheraton Denver Downtown Fee Loan Combination is being serviced and administered pursuant to the pooling and servicing agreement for the CGCMT 2016-GC36 Securitization (the “CGCMT 2016-GC36 Pooling and Servicing Agreement”). |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 79 Madison Avenue, which is evidenced by the non-controlling note A-2, has an outstanding principal balance as of the Cut-off Date of $40,000,000 and represents approximately 5.8% of the Initial Pool Balance (the “79 Madison Avenue Mortgage Loan”), the related Mortgaged Property also secures one (1) other loan that ispari passu in right of payment with the 79 Madison Avenue Mortgage Loan (the “79 Madison Avenue Pari Passu Companion Loan” and, together with the 79 Madison Avenue Mortgage Loan, the “79 Madison Avenue Loan Combination”). The 79 Madison Avenue Pari Passu Companion Loan, which is evidenced by the controlling note A-1 and has a principal balance as of the Cut-off Date of approximately $45,000,000, was contributed to the commercial mortgage securitization transaction (the “CGCMT 2016-P3 Securitization”) involving the issuance of the Citigroup Commercial Mortgage Trust 2016-P3, Commercial Mortgage Pass-Through Certificates, Series 2016-P3. The 79 Madison Avenue Loan Combination is being serviced and administered pursuant to the pooling and servicing agreement for the CGCMT 2016-P3 Securitization (the “CGCMT 2016-P3 Pooling and Servicing Agreement”). |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Austin Block 21, which is evidenced by the non-controlling note A-2, has an outstanding principal balance as of the Cut-off Date of $39,876,237 and represents approximately 5.7% of the Initial Pool Balance (the “Austin Block 21 Mortgage Loan”), the related Mortgaged Property also secures one (1) other loan that ispari passu in right of payment with the Austin Block 21 Mortgage Loan (the “Austin Block 21 Pari Passu Companion Loan” and, together with the Austin Block 21 Mortgage Loan, the “Austin Block 21 Loan Combination”). The Austin Block 21 Pari Passu Companion Loan, which is evidenced by the controlling note A-1 and has a principal balance as of the Cut-off Date of approximately $109,659,651, was contributed to the CGCMT 2016-GC36 Securitization. The Austin Block 21 Loan Combination is being serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement. |
197 |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, which is evidenced by the non-controlling note A-2-2 and the non-controlling note A-6, has an outstanding principal balance as of the Cut-off Date of $30,000,000 and represents approximately 4.3% of the Initial Pool Balance (the “600 Broadway Mortgage Loan”), the related Mortgaged Property also secures six (6) other loans that arepari passu in right of payment with the 600 Broadway Mortgage Loan (each, a “600 Broadway Pari Passu Companion Loan” and, collectively, the “600 Broadway Pari Passu Companion Loans” and, together with the 600 Broadway Mortgage Loan, the “600 Broadway Loan Combination”). The 600 Broadway Pari Passu Companion Loans have an aggregate principal balance as of the Cut-off Date of $90,000,000. The 600 Broadway Pari Passu Companion Loans that are evidenced by the non-controlling notes A-1, A-2-1 and A-3 have an aggregate principal balance as of the Cut-off Date of approximately $50,000,000 and were contributed to the CGCMT 2016-P3 Securitization. The 600 Broadway Pari Passu Companion Loans that are evidenced by the controlling note A-4 (the “600 Broadway Controlling Pari Passu Companion Loan”) and the non-controlling notes A-5-1 and A-5-2 have an aggregate principal balance of $40,000,000 as of the Cut-off Date, are currently held by German American Capital Corporation, and are expected to be contributed to the commercial mortgage securitization transaction (the “DBJPM 2016-C1 Securitization”) involving the issuance of the DBJPM 2016-C1 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2016-C1. The 600 Broadway Loan Combination is currently being serviced and administered pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement until the securitization of the 600 Broadway Controlling Pari Passu Companion Loan, after which it is expected that the 600 Broadway Loan Combination will be serviced and administered pursuant to the pooling and servicing agreement for the securitization transaction to which the 600 Broadway Controlling Pari Passu Companion Loan is contributed (the “600 Broadway Pooling and Servicing Agreement”), which is expected to be the DBJPM 2016-C1 Securitization. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, which is evidenced by the non-controlling note A-2-II, has an outstanding principal balance as of the Cut-off Date of $25,000,000 and represents approximately 3.6% of the Initial Pool Balance (the “5 Penn Plaza Mortgage Loan”), the related Mortgaged Property also secures three (3) other loans that arepari passu in right of payment with the 5 Penn Plaza Mortgage Loan (each, a “5 Penn Plaza Pari Passu Companion Loan” and, collectively, the “5 Penn Plaza Pari Passu Companion Loans” and, together with the 5 Penn Plaza Mortgage Loan, the “5 Penn Plaza Loan Combination”). The 5 Penn Plaza Pari Passu Companion Loan that is evidenced by the controlling note A-1 has a principal balance as of the Cut-off Date of approximately $115,000,000 and was contributed to the CGCMT 2016-GC36 Securitization. The 5 Penn Plaza Pari Passu Companion Loan that is evidenced by the non-controlling note A-2-I has a principal balance as of the Cut-off Date of approximately $42,000,000 and was contributed to the CGCMT 2016-P3 Securitization. The 5 Penn Plaza Pari Passu Companion Loan that is evidenced by the non-controlling note A-3 has a principal balance as of the Cut-off Date of approximately $78,000,000 and was contributed to the commercial mortgage securitization transaction (the “JPMBB 2016-C1 Securitization”) involving the issuance of the JPMBB Commercial Mortgage Securities Trust 2016-C1, Commercial Mortgage Pass-Through Certificates, Series 2016-C1. The 5 Penn Plaza Loan Combination is being serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement. |
· | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Park Place, which is evidenced by the non-controlling note A-2-1, has an outstanding principal balance as of the Cut-off Date of $20,000,000 and represents approximately 2.9% of the Initial Pool Balance (the “Park Place Mortgage Loan”), the related Mortgaged Property also secures two (2) other loans that arepari passu in right of payment with the Park Place Mortgage Loan (each, a “Park Place Pari Passu Companion Loan” and, collectively, the “Park Place Pari Passu Companion Loans” and, together with the Park Place Mortgage Loan, the “Park Place Loan Combination”). The Park Place Pari Passu Companion Loan that is evidenced by the controlling note A-1 has a principal balance as of the Cut-off Date of approximately $50,000,000 and was contributed to the CGCMT 2016-GC36 Securitization. The Park Place Pari Passu Companion Loan that is evidenced by the non-controlling note A-2-2 has a principal balance as of the Cut-off Date of approximately $23,000,000, is currently held by CGMRC, and is expected to be contributed to one or more future commercial mortgage securitization transactions. The Park Place Loan Combination is being serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement. |
198 |
Each Split Mortgage Loan and its related Companion Loan(s) are cross-collateralized and cross-defaulted. Each Pari Passu Companion Loan ispari passu in right of payment with its related Split Mortgage Loan. Each Subordinate Companion Loan is subordinate in right of payment to the related Split Mortgage Loan. Only each Split Mortgage Loan is included in the Issuing Entity. No Companion Loan is an asset of the Issuing Entity.
The Outside Serviced Mortgage Loans will be serviced and administered pursuant to a pooling and servicing agreement, trust and servicing agreement and/or other servicing arrangement for the securitization of one or more related companion loans. The identity of, and certain other items of information regarding, the Outside Serviced Mortgage Loan(s) are set forth in the following table:
Outside Serviced Mortgage Loans Summary
Mortgaged | Mortgage | Outside Servicing Agreement | Mortgage Loan as Approx. % of Initial Pool Balance | Outside Servicer | Outside Special Servicer | Outside Trustee | Outside Certificate Administrator | Outside Custodian | Initial Outside | |||||||||
Sheraton Denver Downtown Fee | CGMRC | CGCMT 2016-GC36 | 10.1% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
79 Madison Avenue | CGMRC | CGCMT 2016-P3 | 5.8% | Wells Fargo Bank, National Association | C-III Asset Management LLC | Wilmington Trust, National Association | Citibank, N.A. | Citibank, N.A. | Raith Capital Partners, LLC | |||||||||
Austin Block 21 | GSMC | CGCMT 2016-GC36 | 5.7% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
600 Broadway | BNY Mellon | CGCMT 2016-P3(2) | 4.3% | Wells Fargo Bank, National Association(2) | C-III Asset Management LLC(2) | Wilmington Trust, National Association(2) | Citibank, N.A.(2) | Citibank, N.A.(2) | (2)(3) | |||||||||
5 Penn Plaza | CGMRC | CGCMT 2016-GC36 | 3.6% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
Park Place | CGMRC | CGCMT 2016-GC36 | 2.9% | KeyBank National Association | Wells Fargo Bank, National Association | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Eightfold Real Estate Capital Fund IV, L.P. | |||||||||
(1) | The related transaction documents may provide that the initial Outside Controlling Class Representative may either be the entity specified or an affiliate thereof. |
(2) | The 600 Broadway Mortgage Loan is currently being serviced and administered pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement until the securitization of the 600 Broadway Controlling Pari Passu Companion Loan. After the securitization of the 600 Broadway Controlling Pari Passu Companion Loan, the 600 Broadway Mortgage Loan will be serviced and administered pursuant to the pooling and servicing agreement governing the securitization of the 600 Broadway Controlling Pari Passu Companion Loan. The 600 Broadway Controlling Pari Passu Companion Loan is currently held by German American Capital Corporation, but is expected to be contributed to the DBJPM 2016-C1 Securitization prior to the closing date for this securitization transaction. It is expected that, pursuant to the 600 Broadway Pooling and Servicing Agreement, Wells Fargo Bank, National Association, will be the applicable master servicer, certificate administrator and custodian, Midland Loan Services, a Division of PNC Bank, National Association, will be the applicable special servicer, and Wilmington Trust, National Association, will be the applicable trustee. It is anticipated that Eightfold Real Estate Capital Fund IV, L.P. (or an affiliate thereof) will be the initial outside controlling class representative for the DBJPM 2016-C1 Securitization. |
(3) | The Outside Controlling Class Representative for the CGCMT 2016-P3 Securitization, Raith Capital Partners, LLC, will have certain consultation rights, but no control rights, with respect to certain major servicing matters relating to the 600 Broadway Loan Combination. |
In connection with each Loan Combination, the relative rights and obligations of the Trustee on behalf of the Issuing Entity and each related Companion Loan Holder are generally governed by a co-lender agreement, intercreditor agreement, agreement among noteholders or comparable agreement (each, a “Co-Lender Agreement”). Each Co-Lender Agreement provides, among other things, (i) that one of the holders will be the “controlling note holder” (the “Controlling Note Holder”) entitled to (a) approve or, in some cases, direct material servicing decisions involving the related Loan Combination, and (b) in some cases, replace the applicable special servicer with respect to such Loan Combination with or without cause; (ii) for the servicing and administration of the subject Loan Combination and any related Mortgaged Property; and (iii) that expenses, losses and shortfalls relating to the Loan Combination will be allocatedfirst to any related Subordinate Companion Loan (if any), andthen, on a pro rata basis to the holders of the subject Mortgage Loan and any related Pari Passu Companion Loan(s) (if any), in each case as more particularly described below in this “—The Loan Combinations” section.
Set forth below are certain terms and provisions of each Loan Combination and the related Co-Lender Agreement. For more information regarding the servicing of each of the Loan Combinations that will not be
199 |
serviced under the Pooling and Servicing Agreement but will be serviced and administered pursuant to the servicing arrangements for a related Companion Loan, see “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans”. Also, see “Significant Loan Summaries—Sheraton Denver Downtown Fee”,“—79 Madison Avenue”,“—Austin Block 21”,“—600 Broadway”,“—5 Penn Plaza” and“—Park Place” in Annex B to this prospectus.
The Sheraton Denver Downtown Fee Loan Combination
Servicing
The Sheraton Denver Downtown Fee Loan Combination and any related REO Property will be serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement, dated as of February 1, 2016, among Citigroup Commercial Mortgage Securities Inc., as depositor (the “CGCMT 2016-GC36 Depositor”), KeyBank National Association, as master servicer (the “CGCMT 2016-GC36 Master Servicer”), Wells Fargo Bank, National Association, as special servicer (the “CGCMT 2016-GC36 Special Servicer”), Pentalpha Surveillance LLC, as operating advisor (the “CGCMT 2016-GC36 Operating Advisor”) and as asset representations reviewer (the “CGCMT 2016-GC36 Asset Representations Reviewer”),Wells Fargo Bank, National Association, as certificate administrator (the “CGCMT 2016-GC36 Certificate Administrator”), and Wilmington Trust, National Association, as trustee (the “CGCMT 2016-GC36 Trustee”), by the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer, in the manner described under “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus, but subject to the terms of the related Co-Lender Agreement. In servicing the Sheraton Denver Downtown Fee Loan Combination, the servicing standard set forth in the CGCMT 2016-GC36 Pooling and Servicing Agreement will require the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer to take into account the interests of the CGCMT 2016-GC36 certificateholders and the Issuing Entity, as the holder of the Sheraton Denver Downtown Fee Mortgage Loan, as a collective whole.
Amounts payable to the Issuing Entity as holder of the Sheraton Denver Downtown Fee Mortgage Loan pursuant to the related Co-Lender Agreement will be included in the Available Funds for the related Distribution Date to the extent described in this prospectus.
Custody of the Mortgage File
Wells Fargo Bank, National Association, as custodian under the CGCMT 2016-GC36 Pooling and Servicing Agreement, is the initial custodian of the mortgage file related to the Sheraton Denver Downtown Fee Loan Combination (other than the promissory note evidencing the Sheraton Denver Downtown Fee Mortgage Loan).
Application of Payments
The related Co-Lender Agreement sets forth the respective rights of the holder of the Sheraton Denver Downtown Fee Mortgage Loan and the holder of the Sheraton Denver Downtown Fee Pari Passu Companion Loan with respect to distributions of funds received in respect of the Sheraton Denver Downtown Fee Loan Combination, and provides, in general, that:
· | the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan are of equal priority with each other and no portion of either of them will have priority or preference over any portion of the other or security therefor; |
· | all payments, proceeds and other recoveries on or in respect of the Sheraton Denver Downtown Fee Loan Combination or the related Mortgaged Property will be applied to the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan on a pro rata and pari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Certificate Administrator and the CGCMT 2016-GC36 Trustee) in accordance |
200 |
with the terms of the related Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement; and |
· | expenses, losses and shortfalls relating to the Sheraton Denver Downtown Fee Loan Combination will, in general, be allocated, on a pro rata and pari passu basis, to the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan. |
Notwithstanding the foregoing, if a P&I Advance is made with respect to the Sheraton Denver Downtown Fee Mortgage Loan, then that P&I Advance, together with interest thereon, may only be reimbursed out of future payments and collections on the Sheraton Denver Downtown Fee Mortgage Loan or, as and to the extent described under “The Pooling and Servicing Agreement—Advances” in this prospectus, on other Mortgage Loans, but not out of payments or other collections on the Sheraton Denver Downtown Fee Pari Passu Companion Loan. Similarly, P&I advances on the Sheraton Denver Downtown Fee Pari Passu Companion Loan are not reimbursable out of payments or other collections on the Sheraton Denver Downtown Fee Mortgage Loan.
Certain costs, losses, liabilities, claims and expenses (such as a pro rata share of a property protection advance) allocable to the Sheraton Denver Downtown Fee Mortgage Loan may be paid or reimbursed out of payments and other collections on the mortgage loans in the CGCMT 2016-GC36 Securitization, subject to the CGCMT 2016-GC36 issuing entity’s right to reimbursement from future payments and other collections on the Sheraton Denver Downtown Fee Mortgage Loan or from general collections on the Mortgage Pool.
Consultation and Control
Pursuant to the related Co-Lender Agreement, the controlling note holder with respect to the Sheraton Denver Downtown Fee Loan Combination, as of any date of determination, will be the CGCMT 2016-GC36 Trustee on behalf of the CGCMT 2016-GC36 issuing entity as holder of the Sheraton Denver Downtown Fee Pari Passu Companion Loan; provided, that, unless a control termination event exists under the CGCMT 2016-GC36 Pooling and Servicing Agreement or the Sheraton Denver Downtown Fee Loan Combination is an “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement, the related Outside Controlling Class Representative (the “CGCMT 2016-GC36 Controlling Class Representative”) will be entitled to exercise the rights of the controlling note holder with respect to the Sheraton Denver Downtown Fee Loan Combination. In its capacity as representative of the controlling note holder under the related Co-Lender Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise consent and/or consultation rights (which consent and/or consultation rights are substantially similar to, but not necessarily identical to, the rights of the Directing Holder set forth under “The Pooling and Servicing Agreement—Directing Holder” in this prospectus) with respect to the Sheraton Denver Downtown Fee Loan Combination, including consent and/or consultation rights regarding “major decisions” (as defined under the related Co-Lender Agreement) and approval rights regarding the implementation of any recommended actions outlined in an asset status report with respect to the Sheraton Denver Downtown Fee Loan Combination (which approval rights are substantially similar to, but not necessarily identical to, those rights described under “The Pooling and Servicing Agreement—Asset Status Reports” in this prospectus). Pursuant to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will have the same consent and/or consultation rights with respect to the Sheraton Denver Downtown Fee Loan Combination as it does, and for so long as it does, with respect to the other mortgage loans included in the CGCMT 2016-GC36 issuing entity (other than any “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement) that are serviced under the CGCMT 2016-GC36 Pooling and Servicing Agreement and do not have companion loans.
In addition, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity, as holder of the Sheraton Denver Downtown Fee Mortgage Loan (or its representative) will (i) have a right to receive copies of all notices, information and reports that the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, is required to provide to the CGCMT 2016-GC36 Controlling Class Representative (within the same time frame such notices, information and reports are or would have been required to be provided to the CGCMT 2016-GC36 Controlling Class Representative under the CGCMT 2016-GC36 Pooling and Servicing Agreement without regard to the occurrence thereunder of a control termination event or consultation termination event) with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the Sheraton Denver Downtown Fee LoanCombination or the implementation of any recommended action outlined in an asset status report relating to the Sheraton Denver Downtown Fee Loan Combination and (ii) have the right to be consulted on a strictly non-binding basis with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the Sheraton Denver Downtown Fee Loan
201 |
Combination or the implementation of any recommended action outlined in an asset status report relating to the Sheraton Denver Downtown Fee Loan Combination. The consultation rights of the Issuing Entity (or its representative) will expire 10 business days following the delivery thereto of written notice of the proposed action, together with copies of the notices, information and reports required to be provided to the CGCMT 2016-GC36 Controlling Class Representative, whether or not the Issuing Entity (or its representative) has responded within such period; provided, that if the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, proposes a new course of action that is materially different from the action previously proposed, the 10 business day consultation period will be deemed to begin anew. Notwithstanding the consultation rights described above, the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, is permitted to make a “major decision” (as defined under the related Co-Lender Agreement) or take any action set forth in the asset status report before the expiration of the aforementioned 10 business day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the Sheraton Denver Downtown Fee Loan Combination. Neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer will be obligated at any time to follow or take any alternative actions recommended by the Issuing Entity (or its representative).
The CGCMT 2016-GC36 Pooling and Servicing Agreement provides that neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer may take or refrain from taking any action pursuant to instructions from the Issuing Entity (or its representative) that would cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, to violate applicable law, the terms of the Sheraton Denver Downtown Fee Loan Combination, the related Co-Lender Agreement, the CGCMT 2016-GC36 Pooling and Servicing Agreement, including the servicing standard under the CGCMT 2016-GC36 Pooling and Servicing Agreement, or the REMIC provisions or that would (i) expose the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Depositor, a mortgage loan seller with respect to the CGCMT 2016-GC36 Securitization, the CGCMT 2016-GC36 issuing entity, the CGCMT 2016-GC36 Trustee, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Asset Representations Reviewer, the CGCMT 2016-GC36 Certificate Administrator or their respective affiliates, officers, directors, employees or agents to any claim, suit or liability, (ii) materially expand the scope of the CGCMT 2016-GC36 Master Servicer’s or the CGCMT 2016-GC36 Special Servicer’s responsibilities, or (iii) cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer to act, or fail to act, in a manner that is not in the best interests of the CGCMT 2016-GC36 certificateholders.
In addition to the consultation rights of the Issuing Entity (or its representative) described above, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity (or its representative) will have the right to attend annual meetings (which may be held telephonically or in person, at the discretion of the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable) with the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, in which servicing issues related to the Sheraton Denver Downtown Fee Loan Combination are discussed.
See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Application of Penalty Charges
The related Co-Lender Agreement provides that penalty charges paid on the Sheraton Denver Downtown Fee Loan Combination will first be used to reduce, on a pro rata basis, the amounts payable on each of the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan by the amount necessary to pay the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Trustee or the CGCMT 2016-GC36 Special Servicer for any interest accrued on any property protection advances and reimbursement of any property protection advances in accordance with the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, second, be used to reduce the respective amounts payable on each of the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan by the amount necessary to pay the Master Servicer, the Trustee, the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Trustee, for any interest accrued on any P&I Advance (or analogous P&I advance made pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement) made with respect to such loan by such party (if and as specified in the Pooling and Servicing Agreement or the CGCMT
202 |
2016-GC36 Pooling and Servicing Agreement, as applicable), third, be used to reduce, on a pro rata basis, the amounts payable on each of the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan by the amount necessary to pay additional trust fund expenses (other than special servicing fees, unpaid workout fees and liquidation fees, each as payable under the CGCMT 2016-GC36 Pooling and Servicing Agreement) incurred with respect to the Sheraton Denver Downtown Fee Loan Combination (as specified in the CGCMT 2016-GC36 Pooling and Servicing Agreement) and, finally, in the case of the remaining amount of penalty charges allocable to the Sheraton Denver Downtown Fee Mortgage Loan and the Sheraton Denver Downtown Fee Pari Passu Companion Loan, be paid to the CGCMT 2016-GC36 Master Servicer and/or the CGCMT 2016-GC36 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement.
Sale of Defaulted Loan Combination
Pursuant to the terms of the related Co-Lender Agreement, if the Sheraton Denver Downtown Fee Loan Combination becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement, and if the CGCMT 2016-GC36 Special Servicer determines to sell the Sheraton Denver Downtown Fee Pari Passu Companion Loan in accordance with the CGCMT 2016-GC36 Pooling and Servicing Agreement, then the CGCMT 2016-GC36 Special Servicer will be required to sell the Sheraton Denver Downtown Fee Pari Passu Companion Loan together with the Sheraton Denver Downtown Fee Mortgage Loan as a single whole loan in accordance with the procedures set forth under the CGCMT 2016-GC36 Pooling and Servicing Agreement. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Notwithstanding the foregoing, the CGCMT 2016-GC36 Special Servicer will not be permitted to sell the Sheraton Denver Downtown Fee Loan Combination if it becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement without the written consent of the Issuing Entity (or its representative), as holder of the Sheraton Denver Downtown Fee Mortgage Loan (provided that such consent is not required if the Issuing Entity is the related borrower or an affiliate of the related borrower), unless the CGCMT 2016-GC36 Special Servicer has delivered to the Issuing Entity (or its representative): (a) at least 15 business days’ prior written notice of any decision to attempt to sell the Sheraton Denver Downtown Fee Loan Combination; (b) at least 10 days prior to the proposed sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the CGCMT 2016-GC36 Special Servicer in connection with any such proposed sale; (c) at least 10 days prior to the proposed sale date, a copy of the most recent appraisal for the Sheraton Denver Downtown Fee Loan Combination, and any documents in the servicing file reasonably requested by the Issuing Entity (or its representative) that are material to the price of the Sheraton Denver Downtown Fee Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the CGCMT 2016-GC36 Controlling Class Representative) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer in connection with the proposed sale; provided, that the Issuing Entity (or its representative) may waive any of the delivery or timing requirements set forth in this sentence. Subject to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, each of the Issuing Entity (or its representative) and the holder of the Sheraton Denver Downtown Fee Pari Passu Companion Loan (or its representative) will be permitted to submit an offer at any sale of the Sheraton Denver Downtown Fee Loan Combination unless such person is the related borrower or an agent or affiliate of the related borrower.
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus.
Special Servicer Appointment Rights
Pursuant to the related Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement, the controlling note holder with respect to the Sheraton Denver Downtown Fee Loan Combination (which, as of any date of determination, will be the CGCMT 2016-GC36 Trustee on behalf of the CGCMT 2016-GC36 issuing entity as holder of the Sheraton Denver Downtown Fee Pari Passu Companion Loan, or its representative which, prior to a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement, will be the CGCMT 2016-GC36 Controlling Class Representative) will have the right, at any time, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the Sheraton
203 |
Denver Downtown Fee Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative). Accordingly, the CGCMT 2016-GC36 Controlling Class Representative (prior to a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement and provided that the Sheraton Denver Downtown Fee Loan Combination is not an “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement), and the applicable CGCMT 2016-GC36 certificateholders with the requisite percentage of voting rights (after a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement) will have the right, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the Sheraton Denver Downtown Fee Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative). The Issuing Entity (or its representative) will be permitted to direct the CGCMT 2016-GC36 Trustee to terminate the CGCMT 2016-GC36 Special Servicer (solely with respect to the Sheraton Denver Downtown Fee Loan Combination) upon a servicer termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement with respect to the CGCMT 2016-GC36 Special Servicer that affects the Issuing Entity as the holder of the Sheraton Denver Downtown Fee Mortgage Loan.
The 79 Madison Avenue Loan Combination
Servicing
The 79 Madison Avenue Loan Combination and any related REO Property are being serviced and administered pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement, dated as of April 1, 2016, among Citigroup Commercial Mortgage Securities Inc., as depositor (the “CGCMT 2016-P3 Depositor”), Wells Fargo Bank, National Association, as master servicer (the “CGCMT 2016-P3 Master Servicer”), C-III Asset Management LLC, as special servicer (the “CGCMT 2016-P3 Special Servicer”), Park Bridge Lender Services LLC, as operating advisor (the “CGCMT 2016-P3 Operating Advisor”) and as asset representations reviewer (the “CGCMT 2016-P3 Asset Representations Reviewer”), Citibank, N.A., as certificate administrator (the “CGCMT 2016-P3 Certificate Administrator”), and Wilmington Trust, National Association, as trustee (the “CGCMT 2016-P3 Trustee”), by the CGCMT 2016-P3 Master Servicer and the CGCMT 2016-P3 Special Servicer, in the manner described under “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans—Servicing of the 79 Madison Avenue Mortgage Loan” in this prospectus, but subject to the terms of the related Co-Lender Agreement. In servicing the 79 Madison Avenue Loan Combination, the servicing standard set forth in the CGCMT 2016-P3 Pooling and Servicing Agreement will require the CGCMT 2016-P3 Master Servicer and the CGCMT 2016-P3 Special Servicer to take into account the interests of the CGCMT 2016-P3 certificateholders and the Issuing Entity, as the holder of the 79 Madison Avenue Mortgage Loan, as a collective whole.
Amounts payable to the Issuing Entity as holder of the 79 Madison Avenue Mortgage Loan pursuant to the related Co-Lender Agreement will be included in the Available Funds for the related Distribution Date to the extent described in this prospectus.
Custody of the Mortgage File
Citibank, N.A., as custodian under the CGCMT 2016-P3 Pooling and Servicing Agreement, is the initial custodian of the mortgage file related to the 79 Madison Avenue Loan Combination (other than the promissory note evidencing the 79 Madison Avenue Mortgage Loan).
Application of Payments
The related Co-Lender Agreement sets forth the respective rights of the holder of the 79 Madison Avenue Mortgage Loan and the holder of the 79 Madison Avenue Pari Passu Companion Loan with respect to distributions of funds received in respect of the 79 Madison Avenue Loan Combination, and provides, in general, that:
· | the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan are of equal priority with each other and no portion of either of them will have priority or preference over any portion of the other or security therefor; |
204 |
· | all payments, proceeds and other recoveries on or in respect of the 79 Madison Avenue Loan Combination or the related Mortgaged Property will be applied to the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan on a pro rata and pari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the CGCMT 2016-P3 Master Servicer, the CGCMT 2016-P3 Special Servicer, the CGCMT 2016-P3 Operating Advisor, the CGCMT 2016-P3 Certificate Administrator and the CGCMT 2016-P3 Trustee) in accordance with the terms of the related Co-Lender Agreement and the CGCMT 2016-P3 Pooling and Servicing Agreement; and |
· | expenses, losses and shortfalls relating to the 79 Madison Avenue Loan Combination will, in general, be allocated, on a pro rata and pari passu basis, to the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan. |
Notwithstanding the foregoing, if a P&I Advance is made with respect to the 79 Madison Avenue Mortgage Loan, then that P&I Advance, together with interest thereon, may only be reimbursed out of future payments and collections on the 79 Madison Avenue Mortgage Loan or, as and to the extent described under “The Pooling and Servicing Agreement—Advances” in this prospectus, on other Mortgage Loans, but not out of payments or other collections on the 79 Madison Avenue Pari Passu Companion Loan. Similarly, P&I advances on the 79 Madison Avenue Pari Passu Companion Loan are not reimbursable out of payments or other collections on the 79 Madison Avenue Mortgage Loan.
Certain costs, losses, liabilities, claims and expenses (such as a pro rata share of a property protection advance) allocable to the 79 Madison Avenue Mortgage Loan may be paid or reimbursed out of payments and other collections on the mortgage loans in the CGCMT 2016-P3 Securitization, subject to the CGCMT 2016-P3 issuing entity’s right to reimbursement from future payments and other collections on the 79 Madison Avenue Mortgage Loan or from general collections on the Mortgage Pool.
Consultation and Control
Pursuant to the related Co-Lender Agreement, the controlling note holder with respect to the 79 Madison Avenue Loan Combination, as of any date of determination, will be the CGCMT 2016-P3 Trustee on behalf of the CGCMT 2016-P3 issuing entity as holder of the 79 Madison Avenue Pari Passu Companion Loan; provided, that, unless a control termination event exists under the CGCMT 2016-P3 Pooling and Servicing Agreement or the 79 Madison Avenue Loan Combination is an “excluded mortgage loan” under the CGCMT 2016-P3 Pooling and Servicing Agreement, the related Outside Controlling Class Representative (the “CGCMT 2016-P3 Controlling Class Representative”) will be entitled to exercise the rights of the controlling note holder with respect to the 79 Madison Avenue Loan Combination. In its capacity as representative of the controlling note holder under the related Co-Lender Agreement, the CGCMT 2016-P3 Controlling Class Representative will be entitled to exercise consent and/or consultation rights (which consent and/or consultation rights are substantially similar to, but not necessarily identical to, the rights of the Directing Holder set forth under “The Pooling and Servicing Agreement—Directing Holder” in this prospectus) with respect to the 79 Madison Avenue Loan Combination, including consent and/or consultation rights regarding “major decisions” (as defined under the related Co-Lender Agreement) and approval rights regarding the implementation of any recommended actions outlined in an asset status report with respect to the 79 Madison Avenue Loan Combination (which approval rights are substantially similar to, but not necessarily identical to, those rights described under “The Pooling and Servicing Agreement—Asset Status Reports”in this prospectus). Pursuant to the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement, the CGCMT 2016-P3 Controlling Class Representative will have the same consent and/or consultation rights with respect to the 79 Madison Avenue Loan Combination as it does, and for so long as it does, with respect to the other mortgage loans included in the CGCMT 2016-P3 issuing entity (other than any “excluded mortgage loan” under the CGCMT 2016-P3 Pooling and Servicing Agreement) that are serviced under the CGCMT 2016-P3 Pooling and Servicing Agreement and do not have companion loans.
In addition, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity, as holder of the 79 Madison Avenue Mortgage Loan (or its representative) will (i) have a right to receive copies of all notices, information and reports that the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable, is required to provide to the CGCMT 2016-P3 Controlling Class Representative (within the same time frame such notices, information and reports are or would have been required to be provided to the CGCMT 2016-P3 Controlling Class Representative under the CGCMT 2016-P3 Pooling and Servicing Agreement without regard to the occurrence thereunder of a control termination event or consultation termination event) with respect to any
205 |
“major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the 79 Madison Avenue Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the 79 Madison Avenue Loan Combination and (ii) have the right to be consulted on a strictly non-binding basis with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the 79 Madison Avenue Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the 79 Madison Avenue Loan Combination. The consultation rights of the Issuing Entity (or its representative) will expire 10 business days following the delivery thereto of written notice of the proposed action, together with copies of the notices, information and reports required to be provided to the CGCMT 2016-P3 Controlling Class Representative, whether or not the Issuing Entity (or its representative) has responded within such period; provided, that if the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable, proposes a new course of action that is materially different from the action previously proposed, the 10 business day consultation period will be deemed to begin anew. Notwithstanding the consultation rights described above, the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable, is permitted to make a “major decision” (as defined under the related Co-Lender Agreement) or take any action set forth in the asset status report before the expiration of the aforementioned 10 business day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the 79 Madison Avenue Loan Combination. Neither the CGCMT 2016-P3 Master Servicer nor the CGCMT 2016-P3 Special Servicer will be obligated at any time to follow or take any alternative actions recommended by the Issuing Entity (or its representative).
The CGCMT 2016-P3 Pooling and Servicing Agreement provides that neither the CGCMT 2016-P3 Master Servicer nor the CGCMT 2016-P3 Special Servicer may take or refrain from taking any action pursuant to instructions from the Issuing Entity (or its representative) that would cause the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable, to violate applicable law, the terms of the 79 Madison Avenue Loan Combination, the related Co-Lender Agreement, the CGCMT 2016-P3 Pooling and Servicing Agreement, including the servicing standard under the CGCMT 2016-P3 Pooling and Servicing Agreement, or the REMIC provisions or that would (i) expose the CGCMT 2016-P3 Master Servicer, the CGCMT 2016-P3 Special Servicer, the CGCMT 2016-P3 Depositor, a mortgage loan seller with respect to the CGCMT 2016-P3 Securitization, the CGCMT 2016-P3 issuing entity, the CGCMT 2016-P3 Trustee, the CGCMT 2016-P3 Operating Advisor, the CGCMT 2016-P3 Asset Representations Reviewer, the CGCMT 2016-P3 Certificate Administrator or their respective affiliates, officers, directors, employees or agents to any claim, suit or liability, (ii) materially expand the scope of the CGCMT 2016-P3 Master Servicer’s or the CGCMT 2016-P3 Special Servicer’s responsibilities, or (iii) cause the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer to act, or fail to act, in a manner that is not in the best interests of the CGCMT 2016-P3 certificateholders.
In addition to the consultation rights of the Issuing Entity (or its representative) described above, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity (or its representative) will have the right to attend annual meetings (which may be held telephonically or in person, at the discretion of the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable) with the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer, as applicable, in which servicing issues related to the 79 Madison Avenue Loan Combination are discussed.
See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the 79 Madison Avenue Mortgage Loan” in this prospectus.
Application of Penalty Charges
The related Co-Lender Agreement provides that penalty charges paid on the 79 Madison Avenue Loan Combination will first be used to reduce, on a pro rata basis, the amounts payable on each of the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan by the amount necessary to pay the CGCMT 2016-P3 Master Servicer, the CGCMT 2016-P3 Trustee or the CGCMT 2016-P3 Special Servicer for any interest accrued on any property protection advances and reimbursement of any property protection advances in accordance with the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement; second, be used to reduce the respective amounts payable on each of the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan by the amount necessary to pay the Master Servicer, the Trustee, the CGCMT 2016-P3 Master Servicer and the CGCMT 2016-P3 Trustee, for any interest accrued on any P&I Advance (or analogous P&I advance made pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement) made with respect to such loan by such party (if and as specified in the Pooling and Servicing
206 |
Agreement or the CGCMT 2016-P3 Pooling and Servicing Agreement, as applicable); third, be used to reduce, on a pro rata basis, the amounts payable on each of the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan by the amount necessary to pay additional trust fund expenses (other than special servicing fees, unpaid workout fees and liquidation fees, each as payable under the CGCMT 2016-P3 Pooling and Servicing Agreement) incurred with respect to the 79 Madison Avenue Loan Combination (as specified in the CGCMT 2016-P3 Pooling and Servicing Agreement); and, finally, (i) in the case of the remaining amount of penalty charges allocable to the 79 Madison Avenue Mortgage Loan, be paid to the CGCMT 2016-P3 Master Servicer and/or the CGCMT 2016-P3 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-P3 Pooling and Servicing Agreement and (ii) in the case of the remaining amount of penalty charges allocable to the 79 Madison Avenue Pari Passu Companion Loan, be paid, (x) prior to the securitization of such 79 Madison Avenue Pari Passu Companion Loan, to the related Companion Loan Holder and (y) following the securitization of such 79 Madison Avenue Pari Passu Companion Loan, be paid to the CGCMT 2016-P3 Master Servicer and/or the CGCMT 2016-P3 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-P3 Pooling and Servicing Agreement.
Sale of Defaulted Loan Combination
Pursuant to the terms of the related Co-Lender Agreement, if the 79 Madison Avenue Loan Combination becomes a defaulted mortgage loan under the CGCMT 2016-P3 Pooling and Servicing Agreement, and if the CGCMT 2016-P3 Special Servicer determines to sell the 79 Madison Avenue Pari Passu Companion Loan in accordance with the CGCMT 2016-P3 Pooling and Servicing Agreement, then the CGCMT 2016-P3 Special Servicer will be required to sell the 79 Madison Avenue Pari Passu Companion Loan together with the 79 Madison Avenue Mortgage Loan as a single whole loan in accordance with the procedures set forth under the CGCMT 2016-P3 Pooling and Servicing Agreement. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the 79 Madison Avenue Mortgage Loan” in this prospectus.
Notwithstanding the foregoing, the CGCMT 2016-P3 Special Servicer will not be permitted to sell the 79 Madison Avenue Loan Combination if it becomes a defaulted mortgage loan under the CGCMT 2016-P3 Pooling and Servicing Agreement without the written consent of the Issuing Entity (or its representative), as holder of the 79 Madison Avenue Mortgage Loan (provided that such consent is not required if the Issuing Entity is the related borrower or an affiliate of the related borrower), unless the CGCMT 2016-P3 Special Servicer has delivered to the Issuing Entity (or its representative): (a) at least 15 business days’ prior written notice of any decision to attempt to sell the 79 Madison Avenue Loan Combination; (b) at least 10 days prior to the proposed sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the CGCMT 2016-P3 Special Servicer in connection with any such proposed sale; (c) at least 10 days prior to the proposed sale date, a copy of the most recent appraisal for the 79 Madison Avenue Loan Combination, and any documents in the servicing file reasonably requested by the Issuing Entity (or its representative) that are material to the price of the 79 Madison Avenue Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the CGCMT 2016-P3 Controlling Class Representative) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the CGCMT 2016-P3 Master Servicer or the CGCMT 2016-P3 Special Servicer in connection with the proposed sale; provided, that the Issuing Entity (or its representative) may waive any of the delivery or timing requirements set forth in this sentence. Subject to the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement, each of the Issuing Entity (or its representative) and the holder of the 79 Madison Avenue Pari Passu Companion Loan (or its representative) will be permitted to submit an offer at any sale of the 79 Madison Avenue Loan Combination unless such person is the related borrower or an agent or affiliate of the related borrower.
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus.
Special Servicer Appointment Rights
Pursuant to the related Co-Lender Agreement and the CGCMT 2016-P3 Pooling and Servicing Agreement, the controlling note holder with respect to the 79 Madison Avenue Loan Combination (which, as of any date of determination, will be the CGCMT 2016-P3 Trustee on behalf of the CGCMT 2016-P3 issuing entity as holder of the 79 Madison Avenue Pari Passu Companion Loan, or its representative which, prior to a control termination event under the CGCMT 2016-P3 Pooling and Servicing Agreement will be the CGCMT 2016-P3 Controlling Class Representative) will have the right, at any time, with or without cause, to replace the CGCMT 2016-P3
207 |
Special Servicer then acting with respect to the 79 Madison Avenue Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative). Accordingly, the CGCMT 2016-P3 Controlling Class Representative (prior to a control termination event under the CGCMT 2016-P3 Pooling and Servicing Agreement and provided that the 79 Madison Avenue Loan Combination is not an “excluded mortgage loan” under the CGCMT 2016-P3 Pooling and Servicing Agreement), and the applicable CGCMT 2016-P3 certificateholders with the requisite percentage of voting rights (after a control termination event under the CGCMT 2016-P3 Pooling and Servicing Agreement) will have the right, with or without cause, to replace the CGCMT 2016-P3 Special Servicer then acting with respect to the 79 Madison Avenue Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative). The Issuing Entity (or its representative) will be permitted to direct the CGCMT 2016-P3 Trustee to terminate the CGCMT 2016-P3 Special Servicer (solely with respect to the 79 Madison Avenue Loan Combination) upon a servicer termination event under the CGCMT 2016-P3 Pooling and Servicing Agreement with respect to the CGCMT 2016-P3 Special Servicer that affects the Issuing Entity as the holder of the 79 Madison Avenue Mortgage Loan.
The Austin Block 21 Loan Combination
Servicing
The Austin Block 21 Loan Combination is being serviced in accordance with the CGCMT 2016-GC36 Pooling and Servicing Agreement, dated as of February 1, 2016, among Citigroup Commercial Mortgage Securities Inc., as depositor, KeyBank National Association, as master servicer, Wells Fargo Bank, National Association, as special servicer, Wilmington Trust, National Association, as trustee, Wells Fargo Bank, National Association, as certificate administrator, and Pentalpha Surveillance LLC, as operating advisor and as asset representations reviewer, which is separate from the Pooling and Servicing Agreement under which your Certificates are issued as described below, by the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer, and subject to the servicing standard provided for in the CGCMT 2016-GC36 Pooling and Servicing Agreement, which standard is substantially similar to, but not necessarily identical to, the Servicing Standard provided for in the Pooling and Servicing Agreement. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Amounts payable to the Issuing Entity as holder of the Mortgage Loan that is part of the Austin Block 21 Loan Combination pursuant to the related Co-Lender Agreement will be included in the Available Funds for the related Distribution Date to the extent described in this prospectus.
Application of Payments
The Co-Lender Agreement with respect to the Austin Block 21 Loan Combination sets forth the respective rights of the holder of the related Mortgage Loan and the related Companion Loan Holder with respect to distributions of funds received in respect of the Austin Block 21 Loan Combination, and provides, in general, that:
· | the Mortgage Loan and the related Companion Loan are of equal priority with each other and no portion of either of them will have priority or preference over any portion of the other or security therefor; |
· | all payments, proceeds and other recoveries on or in respect of the Austin Block 21 Loan Combination or the related Mortgaged Property will be applied to the related Mortgage Loan and the related Companion Loan on apro rata andpari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Certificate Administrator and the CGCMT 2016-GC36 Trustee) in accordance with the terms of such Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement; and |
· | expenses, losses and shortfalls relating to the Austin Block 21 Loan Combination will be allocated, on apro rata andpari passu basis, to the related Mortgage Loan and the related Companion Loan. |
208 |
Notwithstanding the foregoing, if a P&I Advance is made with respect to the Mortgage Loan that is part of the Austin Block 21 Loan Combination, then that P&I Advance, together with interest on that P&I Advance, may only be reimbursed out of future payments and collections on the Austin Block 21 Mortgage Loan or, as and to the extent described under “The Pooling and Servicing Agreement—Advances” in this prospectus, on other Mortgage Loans, but not out of payments or other collections on the related Companion Loan.
Certain costs and expenses (such as apro rata share of a property advance) allocable to the Austin Block 21 Mortgage Loan may be paid or reimbursed out of payments and other collections on the mortgage loans in the CGCMT 2016-GC36 Securitization, subject to the CGCMT 2016-GC36 issuing entity’s right to reimbursement from future payments and other collections on the Austin Block 21 Mortgage Loan.
Consultation and Control
Pursuant to the related Co-Lender Agreement, the directing holder with respect to the Austin Block 21 Loan Combination, as of any date of determination, will be the CGCMT 2016-GC36 Trustee as holder of the related Companion Loan that is evidenced by the controlling note A-1; provided that, unless a control termination event exists under the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise the rights of the directing holder with respect to the Austin Block 21 Loan Combination. In its capacity as representative of the directing holder under the related Co-Lender Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise all of the rights of the CGCMT 2016-GC36 Controlling Class Representative (which rights are substantially similar to, but not necessarily identical to the rights of the Controlling Class Representative set forth under “The Pooling and Servicing Agreement—Directing Holder” in this prospectus) with respect to the Austin Block 21 Loan Combination, and the implementation of any recommended actions outlined in an asset status report with respect to the Austin Block 21 Loan Combination will require the approval of the CGCMT 2016-GC36 Controlling Class Representative (which approval rights are substantially similar to, but not necessarily identical to, those rights described in this prospectus under “The Pooling and Servicing Agreement—Directing Holder” and “—Asset Status Reports”). Pursuant to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will have the same consent and/or consultation rights with respect to the Austin Block 21 Loan Combination as it does, and for so long as it does, with respect to the other mortgage loans included in the CGCMT 2016-GC36 issuing entity.
In addition, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity as holder of the related Outside Serviced Mortgage Loan will (i) have a right to receive copies of all notices, information and reports that the CGCMT 2016-GC36 Master Servicer or CGCMT 2016-GC36 Special Servicer, as applicable, is required to provide to the CGCMT 2016-GC36 Controlling Class Representative (within the same time frame such notices, information and reports are or would have been required to be provided to the CGCMT 2016-GC36 Controlling Class Representative under the CGCMT 2016-GC36 Pooling and Servicing Agreement without regard to the occurrence of a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement or consultation termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement) with respect to any CGCMT 2016-GC36 “major decisions” (as defined under the related Co-Lender Agreement and which are substantially similar to, but not necessarily identical to, the Major Decisions defined below under “The Pooling and Servicing Agreement—Directing Holder”) to be taken with respect to the Austin Block 21 Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the Austin Block 21 Loan Combination and (ii) have the right to be consulted on a strictly non-binding basis with respect to any CGCMT 2016-GC36 “major decisions” to be taken with respect to the Austin Block 21 Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the Austin Block 21 Loan Combination. The consultation right of the Issuing Entity will be exercised by the Controlling Class Representative (for so long as no Control Termination Event has occurred and is continuing) but will not be exercised by the Operating Advisor if a Control Termination Event has occurred and is continuing. This right to consult will expire 10 business days following the delivery of notice and information relating to the matter subject to consultation whether or not the Controlling Class Representative has responded within such period; provided that if the CGCMT 2016-GC36 Master Servicer (or CGCMT 2016-GC36 Special Servicer, as applicable) proposes a new course of action that is materially different from the actions previously proposed, the 10 business-day consultation period will be deemed to begin anew. Notwithstanding the consultation rights described above, the CGCMT 2016-GC36 Master Servicer or CGCMT 2016-GC36 Special Servicer, as applicable, is permitted to take any material action or any action set forth in the asset status report before the expiration of the aforementioned 10 business-day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the related Companion Loan and such Outside Serviced Mortgage Loan. Neither
209 |
the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer will be obligated at any time to follow or take any alternative actions recommended by the Controlling Class Representative.
Neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer may follow any advice or consultation provided by the Controlling Class Representative (for so long as a Control Termination Event has not occurred) on behalf of the Issuing Entity, as holder of the related Outside Serviced Mortgage Loan that would require or cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, to violate any applicable law, including the REMIC provisions, be inconsistent with the servicing standard under the CGCMT 2016-GC36 Pooling and Servicing Agreement, require or cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, to violate provisions of the applicable Co-Lender Agreement or the CGCMT 2016-GC36 Pooling and Servicing Agreement, require or cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, to violate the terms of the Austin Block 21 Loan Combination, or materially expand the scope of any of the CGCMT 2016-GC36 Master Servicer’s or the CGCMT 2016-GC36 Special Servicer’s, as applicable, responsibilities under the applicable Co-Lender Agreement.
In addition to the consultation rights of the Controlling Class Representative (if no Control Termination Event has occurred or is continuing) the Controlling Class Representative on behalf of the Issuing Entity, as holder of the related Outside Serviced Mortgage Loan described above, will have the right to attend (in-person or telephonic) annual meetings with the CGCMT 2016-GC36 Master Servicer or CGCMT 2016-GC36 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the CGCMT 2016-GC36 Master Servicer or CGCMT 2016-GC36 Special Servicer, as applicable, for the purpose of discussing servicing issues related to the Austin Block 21 Loan Combination. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans” in this prospectus.
Application of Penalty Charges
The related Co-Lender Agreement provides that penalty charges paid on the Austin Block 21 Loan Combination must first, be used to reduce, on apro rata basis, the amounts payable on each of the related Outside Serviced Mortgage Loan and the related Companion Loan by the amount necessary to reimburse the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Trustee or the CGCMT 2016-GC36 Special Servicer for any interest accrued on any property advances and reimbursement of any property advances in accordance with the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, second, be used to reduce the respective amounts payable on each of the related Outside Serviced Mortgage Loan and the related Companion Loan by the amount necessary to pay the Master Servicer, the Trustee, the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Trustee, for any interest accrued on any P&I Advance (or analogous P&I advance made pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement) made with respect to such loan by such party (if and as specified in the Pooling and Servicing Agreement or the CGCMT 2016-GC36 Pooling and Servicing Agreement), third, be used to reduce, on a pro rata basis, the amounts payable on each of the related Outside Serviced Mortgage Loan and the related Companion Loan by the amount necessary to pay additional trust fund expenses (other than CGCMT 2016-GC36 special servicing fees, unpaid CGCMT 2016-GC36 workout fees and CGCMT 2016-GC36 liquidation fees, each as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement) incurred with respect to the Austin Block 21 Loan Combination (as specified in the CGCMT 2016-GC36 Pooling and Servicing Agreement) and, finally, in the case of the remaining amount of penalty charges allocable to the related Outside Serviced Mortgage Loan and the related Companion Loan, be paid to the CGCMT 2016-GC36 Master Servicer and/or the CGCMT 2016-GC36 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement.
Sale of Defaulted Loan Combination
Pursuant to the terms of the related Co-Lender Agreement, if the Austin Block 21 Loan Combination becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement, and if the CGCMT 2016-GC36 Special Servicer determines to sell the related Companion Loan that has become a defaulted mortgage loan in accordance with the CGCMT 2016-GC36 Pooling and Servicing Agreement, then the CGCMT 2016-GC36 Special Servicer will be required to sell the related Outside Serviced Mortgage Loan together with such Companion Loan as one whole loan. In connection with any such sale, the CGCMT 2016-GC36 Special Servicer will be required to follow procedures substantially similar to, but not necessarily identical to those procedures set forth below under “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—
210 |
Sale of Defaulted Mortgage Loans and REO Properties”, and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus.
Notwithstanding the foregoing, the CGCMT 2016-GC36 Special Servicer will not be permitted to sell the Austin Block 21 Loan Combination if it becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement, without the written consent of the Issuing Entity (or its representative), as holder of the related Outside Serviced Mortgage Loan, or any subsequent holder of the Outside Serviced Mortgage Loan (provided that such consent is not required if such holder is the borrower or an affiliate of the borrower), unless the CGCMT 2016-GC36 Special Servicer has delivered to such holder (or its representatives): (a) at least 15 business days’ prior written notice of any decision to attempt to sell the Austin Block 21 Loan Combination; (b) at least 10 days prior to the permitted sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the CGCMT 2016-GC36 Special Servicer in connection with any such proposed sale; (c) at least 10 days prior to the proposed sale date, a copy of the most recent appraisal for the Austin Block 21 Loan Combination, and any documents in the servicing file reasonably requested by such Outside Serviced Mortgage Loan holder that are material to the price of the Austin Block 21 Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the CGCMT 2016-GC36 Controlling Class Representative) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer in connection with the proposed sale; provided that the Issuing Entity (or its representative), as holder of the related Outside Serviced Mortgage Loan, and any subsequent holder may waive any of the delivery or timing requirements set forth in this sentence. The Issuing Entity, as holder of the related Outside Serviced Mortgage Loan, will be permitted to submit an offer at any sale of the Austin Block 21 Loan Combination.
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus.
Special Servicer Appointment Rights
Pursuant to the related Co-Lender Agreement, the directing holder with respect to the Austin Block 21 Loan Combination (which, as of any date of determination, will be the CGCMT 2016-GC36 Trustee as holder of the related Companion Loan, or its representative) will have the right, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the Austin Block 21 Loan Combination and appoint a replacement special servicer without the consent of the Issuing Entity (or its representative). The CGCMT 2016-GC36 Controlling Class Representative, as representative of the CGCMT 2016-GC36 directing holder (prior to a CGCMT 2016-GC36 control termination event), and the applicable CGCMT 2016-GC36 certificateholders with the requisite percentage of voting rights (after a CGCMT 2016-GC36 control termination event) will have the right, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the Austin Block 21 Loan Combination and appoint a replacement special servicer, upon similar circumstances as those described under “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause” and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus.
The 600 Broadway Loan Combination
Servicing
The 600 Broadway Loan Combination and any related REO Property (i) is currently being serviced and administered by the related master servicer and, if necessary, the related special servicer, pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement, in the manner substantially similar to the manner described in respect of the Pooling and Servicing Agreement for this securitization transaction under “The Pooling and Servicing Agreement” in this prospectus, but subject to the terms of the 600 Broadway Co-Lender Agreement, and (ii) on and after the date on which the 600 Broadway Controlling Pari Passu Companion Loan is contributed to a securitization transaction (the “600 Broadway Companion Loan Securitization Date”), is expected to be serviced and administered by the related master servicer and the related special servicer under the 600 Broadway Pooling and Servicing Agreement (which is expected to be the pooling and servicing agreement governing the DBJPM 2016-C1 Securitization) but subject to the 600 Broadway Co-Lender Agreement.
Prior to the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination will be serviced in the manner substantially similar to the manner described under “The Pooling and Servicing
211 |
Agreement”. On and after the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination will be serviced in the manner described under “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus, but subject to the terms of the 600 Broadway Co-Lender Agreement. The servicing standard set forth in the CGCMT 2016-P3 Pooling and Servicing Agreement requires the related master servicer and the related special servicer to take into account the interests of each of the holders of certificates issued under the CGCMT 2016-P3 Pooling and Servicing Agreement, the remaining Companion Loan Holders and the Issuing Entity (as the holder of the 600 Broadway Mortgage Loan) as a collective whole. The servicing standard set forth in the 600 Broadway Pooling and Servicing Agreement is expected to require the related servicer and the related special servicer to take into account the interests of each of the holders of certificates issued under the 600 Broadway Pooling and Servicing Agreement (the “600 Broadway Certificateholders”), the remaining Companion Loan Holders and the Issuing Entity (as the holder of the 600 Broadway Mortgage Loan) as a collective whole. Amounts payable to the Issuing Entity as holder of the 600 Broadway Mortgage Loan pursuant to the 600 Broadway Co-Lender Agreement will be distributed net of certain fees and expenses on the 600 Broadway Mortgage Loan as set forth in the 600 Broadway Co-Lender Agreement and will be included in the Available Funds for the related Distribution Date to the extent described in this prospectus.
If any of the 600 Broadway Mortgage Loan or a 600 Broadway Pari Passu Companion Loan becomes specially serviced prior to the 600 Broadway Companion Loan Securitization Date, the related special servicer will be required to service and administer the 600 Broadway Loan Combination and any related REO property and will be entitled to all rights and compensation earned with respect to such Loan Combination as set forth in the CGCMT 2016-P3 Pooling and Servicing Agreement. Prior to the 600 Broadway Companion Loan Securitization Date, no other special servicer will be entitled to any such compensation or have such rights and obligations. After the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination will no longer be serviced pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement but will be serviced by the related servicer and related special servicer pursuant to the 600 Broadway Pooling and Servicing Agreement. If the 600 Broadway Loan Combination is being specially serviced when the 600 Broadway Companion Loan Securitization Date occurs, the related special servicer will be entitled to compensation for the period during which it acted as special servicer with respect to such Loan Combination, as well as all surviving indemnity and other rights in respect of such special servicing role in accordance with the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement.
Application of Payments
The 600 Broadway Co-Lender Agreement sets forth the respective rights of the holder of the 600 Broadway Mortgage Loan and the holder of the 600 Broadway Pari Passu Companion Loans with respect to distributions of funds received in respect of the 600 Broadway Loan Combination, and provides, in general, that:
· | the 600 Broadway Mortgage Loan and the 600 Broadway Pari Passu Companion Loans are of equal priority with each other and no portion of any of them will have priority or preference over any portion of the other or security therefor; |
· | all payments, proceeds and other recoveries on or in respect of the 600 Broadway Loan Combination or the related Mortgaged Property will be applied to the 600 Broadway Mortgage Loan and the 600 Broadway Pari Passu Companion Loans on a pro rata and pari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment of amounts for required reserves or escrows required by the related Mortgage Loan documents and payment and reimbursement rights of the applicable master servicer, the applicable special servicer, the applicable operating advisor, the applicable certificate administrator, the applicable depositor and the applicable trustee) in accordance with the terms of the 600 Broadway Co-Lender Agreement and either the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement, as applicable; and |
· | costs, fees, expenses, losses and shortfalls relating to the 600 Broadway Loan Combination will be allocated, on a pro rata and pari passu basis, to the 600 Broadway Mortgage Loan and the 600 Broadway Pari Passu Companion Loans in accordance with the terms of the 600 Broadway Co-Lender Agreement. |
212 |
Notwithstanding the foregoing, if a P&I Advance is made with respect to the 600 Broadway Mortgage Loan, then that P&I Advance, together with interest thereon, may only be reimbursed out of future payments and collections on the 600 Broadway Mortgage Loan or, as and to the extent described under “The Pooling and Servicing Agreement—Advances” in this prospectus, on other Mortgage Loans, but not out of payments or other collections on the 600 Broadway Pari Passu Companion Loans.
Consultation and Control
Pursuant to the 600 Broadway Co-Lender Agreement, the directing holder with respect to the 600 Broadway Loan Combination (the “600 Broadway Directing Holder”), as of any date of determination, will be the holder of the 600 Broadway Controlling Pari Passu Companion Loan, which prior to the 600 Broadway Companion Loan Securitization Date is (and is expected to remain) German American Capital Corporation, and which, on and after the 600 Broadway Companion Loan Securitization Date will be the trustee under the 600 Broadway Pooling and Servicing Agreement;provided that, unless a control termination event (or analogous event) exists under the 600 Broadway Pooling and Servicing Agreement, the “controlling class representative” (or analogous term) thereunder (the “600 Broadway Controlling Class Representative”) will be entitled to exercise the rights of the 600 Broadway Directing Holder. The 600 Broadway Directing Holder will be entitled to exercise consent and/or consultation rights (which consent and/or consultation rights are generally similar to, but not necessarily identical to, the rights of the Directing Holder set forth under “The Pooling and Servicing Agreement—Directing Holder” in this prospectus) with respect to the 600 Broadway Loan Combination and the implementation of any recommended actions outlined in an asset status report with respect to the 600 Broadway Loan Combination will require the approval of the 600 Broadway Directing Holder. It is expected that, while the 600 Broadway Controlling Class Representative is the 600 Broadway Directing Holder, the 600 Broadway Controlling Class Representative’s consent and/or consultation rights with respect to the 600 Broadway Loan Combination will be the same as its rights with respect to the other mortgage loans included in the related securitization trust.
In addition, pursuant to the terms of the 600 Broadway Co-Lender Agreement, the Issuing Entity, as holder of the 600 Broadway Mortgage Loan (or its representative which, until a Consultation Termination Event occurs or unless the 600 Broadway Loan Combination is an Excluded Mortgage Loan, will be the Controlling Class Representative) will (i) have a right to receive copies of all notices, information and reports that the related master servicer or the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement, as applicable (prior to the 600 Broadway Companion Loan Securitization Date), or the related servicer or the related special servicer, as applicable (on and after the 600 Broadway Companion Loan Securitization Date), is required to provide to the 600 Broadway Directing Holder (within the same time frame such notices, information and reports are or would have been required to be provided to the 600 Broadway Directing Holder under the CGCMT 2016-P3 Pooling and Servicing Agreement (prior to the 600 Broadway Companion Loan Securitization Date) or the 600 Broadway Pooling and Servicing Agreement (on and after the 600 Broadway Companion Loan Securitization Date) without regard to the occurrence thereunder of a consultation termination event) with respect to any “major actions” (as defined under the 600 Broadway Co-Lender Agreement) to be taken with respect to the 600 Broadway Loan Combination or the implementation of any recommended actions outlined in an asset status report relating to the 600 Broadway Loan Combination and (ii) have the right to be consulted on a strictly non-binding basis with respect to any “major action” (as defined under the 600 Broadway Co-Lender Agreement) to be taken with respect to the 600 Broadway Loan Combination or the implementation of any recommended actions outlined in an asset status report relating to the 600 Broadway Loan Combination. The consultation right of the Issuing Entity (or its representative) will expire 10 business days following the delivery of notice and information relating to the matter subject to consultation whether or not the Issuing Entity (or its representative) has responded within such period;provided that if the related master servicer or the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement, as applicable (with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement prior to the 600 Broadway Companion Loan Securitization Date), or the related servicer or the related special servicer with respect to the 600 Broadway Pooling and Servicing Agreement, as applicable (on and after the 600 Broadway Companion Loan Securitization Date), proposes a new course of action that is materially different from the action previously proposed, the 10 business-day consultation period will be deemed to begin anew. Notwithstanding the Issuing Entity’s (or its representative’s) consultation rights described above, the related master servicer or the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement, as applicable (with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement prior to the 600 Broadway Companion Loan Securitization Date), or the related servicer or the related special servicer with respect to the 600 Broadway Pooling and Servicing Agreement, as applicable (on and after the 600 Broadway Companion Loan Securitization Date), is permitted to take any major action or any action set forth in the asset status report before the expiration of the aforementioned 10 business-day period if it
213 |
determines, in accordance with the applicable servicing standard, that immediate action with respect to such decision is necessary to protect the interests of the holders of the 600 Broadway Loan Combination. Neither the related master servicer or the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement, as applicable (with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement prior to the 600 Broadway Companion Loan Securitization Date), or the related servicer or the related special servicer with respect to the 600 Broadway Pooling and Servicing Agreement, as applicable (on and after the 600 Broadway Companion Loan Securitization Date) will be obligated at any time to follow or take any alternative actions recommended by the Issuing Entity (or its representative).
Neither the related master servicer or the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement (prior to the 600 Broadway Companion Loan Securitization Date), nor the related servicer or the related special servicer with respect to the 600 Broadway Pooling and Servicing Agreement (on and after the 600 Broadway Companion Loan Securitization Date) may take or refrain from taking any action based on advice or consultation provided by the Issuing Entity (or its representative) that would cause such master servicer or special servicer, as applicable, to violate the terms of the 600 Broadway Loan Combination, applicable law, the CGCMT 2016-P3 Pooling and Servicing Agreement (prior to the 600 Broadway Companion Loan Securitization Date), the 600 Broadway Pooling and Servicing Agreement (on and after the 600 Broadway Companion Loan Securitization Date), the 600 Broadway Co-Lender Agreement, the REMIC provisions or such master servicer’s or special servicer’s obligation to act in accordance with the applicable servicing standard.
In addition to the consultation rights of the Issuing Entity (or its representative) described above, pursuant to the terms of the 600 Broadway Co-Lender Agreement, the Issuing Entity (or its representative) will have the right to annual conference calls with the related master servicer or the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement (prior to the 600 Broadway Companion Loan Securitization Date), or the related servicer or the related special servicer with respect to the 600 Broadway Pooling and Servicing Agreement (on and after the 600 Broadway Companion Loan Securitization Date), upon reasonable notice and at times reasonably acceptable to such master servicer or special servicer, as applicable, in which servicing issues related to the 600 Broadway Loan Combination are discussed. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the 600 Broadway Mortgage Loan” in this prospectus.
Application of Penalty Charges
The 600 Broadway Co-Lender Agreement provides that penalty charges paid on the 600 Broadway Loan Combination may be used (i) to reduce the amounts payable on each of the 600 Broadway Mortgage Loan and the 600 Broadway Pari Passu Companion Loans by the amount necessary to pay the related master servicer, the related trustee or the related special servicer for any interest accrued on any property protection advances and for reimbursement of any property protection advances in accordance with the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement (prior to the 600 Broadway Companion Loan Securitization Date) or to pay the related servicer, the related trustee or the related special servicer for any interest accrued on any property protection advances and for reimbursement of any property protection advances in accordance with the terms of the 600 Broadway Pooling and Servicing Agreement (on and after the 600 Broadway Companion Loan Securitization Date), (ii) to reduce the respective amounts payable on each of the 600 Broadway Mortgage Loan and the 600 Broadway Pari Passu Companion Loans by the amount necessary to pay the Master Servicer or the Trustee, the related servicer or related trustee under the 600 Broadway Pooling and Servicing Agreement and each related servicer or related trustee under any pooling and servicing (or similar) agreement related to the securitization of any of the other 600 Broadway Pari Passu Companion Loans for any interest accrued on any P&I Advance (or analogous P&I advance made pursuant to the 600 Broadway Pooling and Servicing Agreement or other pooling and servicing agreement related to any of the 600 Broadway Pari Passu Companion Loans) made with respect to such loan by such party (if and as specified in the CGCMT 2016-P3 Pooling and Servicing Agreement, the 600 Broadway Pooling and Servicing Agreement or such other related pooling and servicing agreement, as applicable), (iii) to pay certain other expenses incurred with respect to the Mortgage Loan and, finally, (iv) in the case of the remaining amount of penalty charges allocable to the 600 Broadway Mortgage Loan, be paid (x) prior to the 600 Broadway Companion Loan Securitization Date, to the related master servicer and/or the related special servicer as additional servicing compensation as provided in the CGCMT 2016-P3 Pooling and Servicing Agreement, and (y) on and after the 600 Broadway Companion Loan Securitization Date, to the related servicer and/or the related special servicer as additional servicing compensation as provided in the 600 Broadway Pooling and Servicing Agreement;provided,however, that for so long as any 600 Broadway Companion Loan is not included in a securitization, any penalty charges allocated to any such 600 Broadway Companion Loan not in a
214 |
securitization that are not applied pursuant to clauses (i)-(iii) above must be remitted to the related Companion Loan Holder and may not be paid to the related master servicer or the related special servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement, or the related servicer or related special servicer under the 600 Broadway Pooling and Servicing Agreement without the express consent of such Companion Loan Holder.
Sale of Defaulted Loan Combination
Pursuant to the terms of the 600 Broadway Co-Lender Agreement, if the related 600 Broadway Pari Passu Companion Loan becomes a “defaulted mortgage loan” (or analogous term) under the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Controlling Pari Passu Companion Loan becomes a “defaulted mortgage loan” (or analogous term) under the 600 Broadway Pooling and Servicing Agreement, as applicable (depending on the agreement under which it is then being serviced at such time), and if the related special servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement or the related special servicer under the 600 Broadway Pooling and Servicing Agreement, as applicable, determines to sell the related 600 Broadway Pari Passu Companion Loan or the 600 Broadway Controlling Pari Passu Companion Loan, as applicable, in accordance with the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement, as applicable, then the related special servicer will be required to sell the entirety of the 600 Broadway Loan Combination as one whole loan in accordance with the procedures generally consistent with those set forth under “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus.
Notwithstanding the foregoing, the related special servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement or the related special servicer under the 600 Broadway Pooling and Servicing Agreement, as applicable, will not be permitted to sell the 600 Broadway Loan Combination if it becomes a “defaulted mortgage loan” as defined in the 600 Broadway Co-Lender Agreement, without the written consent of the Issuing Entity (or its representative) unless the related special servicer with respect to the CGCMT 2016-P3 Pooling and Servicing Agreement or the related special servicer under the 600 Broadway Pooling and Servicing Agreement, as applicable, has delivered to such holder (or its representative): (a) at least 15 business days’ prior written notice of any decision to attempt to sell the 600 Broadway Loan Combination; (b) at least 10 days prior to the proposed sale date, a copy of each bid package (together with any amendments to such bid packages) received by the related special servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement or the related special servicer under the 600 Broadway Pooling and Servicing Agreement, as applicable, in connection with any such proposed sale; (c) at least 10 days prior to the proposed sale date, a copy of the most recent appraisal for the 600 Broadway Loan Combination, and any documents in the servicing file reasonably requested by the Issuing Entity (or its representative); and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the 600 Broadway Directing Holder) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the related master servicer or the related special servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement, or the related servicer or the related special servicer under the 600 Broadway Pooling and Servicing Agreement, as applicable, in connection with the proposed sale;provided that the Issuing Entity (or its representative) may waive any of the delivery or timing requirements set forth in this sentence. The Issuing Entity (or its representative) and the 600 Broadway Directing Holder will be permitted to submit an offer at any sale of the 600 Broadway Loan Combination.
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans”.
Special Servicer Appointment Rights
Pursuant to the 600 Broadway Co-Lender Agreement, the 600 Broadway Directing Holder will have the right, with or without cause, to replace the special servicer then acting with respect to the 600 Broadway Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative), as described under “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the 600 Broadway Mortgage Loan” in this prospectus.
215 |
The 5 Penn Plaza Loan Combination
Servicing
The 5 Penn Plaza Loan Combination and any related REO Property will be serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement, dated as of February 1, 2016, among Citigroup Commercial Mortgage Securities Inc., as depositor, KeyBank National Association, as master servicer, Wells Fargo Bank, National Association, as special servicer, Pentalpha Surveillance LLC, as operating advisor and as asset representations reviewer, Wells Fargo Bank, National Association, as certificate administrator, and Wilmington Trust, National Association, as trustee, by the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer, in the manner described under “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus, but subject to the terms of the related Co-Lender Agreement. In servicing the 5 Penn Plaza Loan Combination, the servicing standard set forth in the CGCMT 2016-GC36 Pooling and Servicing Agreement will require the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer to take into account the interests of the CGCMT 2016-GC36 certificateholders, the Issuing Entity, as holder of the 5 Penn Plaza Mortgage Loan, and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3, as a collective whole.
Amounts payable to the Issuing Entity as holder of the 5 Penn Plaza Mortgage Loan pursuant to the related Co-Lender Agreement will be included in the Available Funds for the related Distribution Date to the extent described in this prospectus.
Custody of the Mortgage File
Wells Fargo Bank, National Association, as custodian under the CGCMT 2016-GC36 Pooling and Servicing Agreement, is the initial custodian of the mortgage file related to the 5 Penn Plaza Loan Combination (other than the promissory notes evidencing the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans not included in the CGCMT 2016-GC36 Securitization).
Application of Payments
The related Co-Lender Agreement sets forth the respective rights of the holder of the 5 Penn Plaza Mortgage Loan and the holders of the 5 Penn Plaza Pari Passu Companion Loans with respect to distributions of funds received in respect of the 5 Penn Plaza Loan Combination, and provides, in general, that:
· | the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans are of equal priority with each other and no portion of any of them will have priority or preference over any portion of the others or security therefor; |
· | all payments, proceeds and other recoveries on or in respect of the 5 Penn Plaza Loan Combination or the related Mortgaged Property will be applied to the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans on a pro rata and pari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Certificate Administrator and the CGCMT 2016-GC36 Trustee) in accordance with the terms of the related Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement; and |
· | expenses, losses and shortfalls relating to the 5 Penn Plaza Loan Combination will, in general, be allocated, on a pro rata and pari passu basis, to the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans. |
Notwithstanding the foregoing, if a P&I Advance is made with respect to the 5 Penn Plaza Mortgage Loan, then that P&I Advance, together with interest thereon, may only be reimbursed out of future payments and collections on the 5 Penn Plaza Mortgage Loan or, as and to the extent described under “The Pooling and
216 |
Servicing Agreement—Advances” in this prospectus, on other Mortgage Loans, but not out of payments or other collections on the 5 Penn Plaza Pari Passu Companion Loans. Similarly, P&I advances on the 5 Penn Plaza Pari Passu Companion Loans are not reimbursable out of payments or other collections on the 5 Penn Plaza Mortgage Loan.
Certain costs, losses, liabilities, claims and expenses (such as a pro rata share of a property protection advance) allocable to the 5 Penn Plaza Mortgage Loan may be paid or reimbursed out of payments and other collections on the mortgage loans in the CGCMT 2016-GC36 Securitization, subject to the CGCMT 2016-GC36 issuing entity’s right to reimbursement from future payments and other collections on the 5 Penn Plaza Mortgage Loan or from general collections on the Mortgage Pool.
Consultation and Control
Pursuant to the related Co-Lender Agreement, the controlling note holder with respect to the 5 Penn Plaza Loan Combination, as of any date of determination, will be the CGCMT 2016-GC36 Trustee on behalf of the CGCMT 2016-GC36 issuing entity as holder of the controlling 5 Penn Plaza Pari Passu Companion Loan; provided, that, unless a control termination event exists under the CGCMT 2016-GC36 Pooling and Servicing Agreement or the 5 Penn Plaza Loan Combination is an “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise the rights of the controlling note holder with respect to the 5 Penn Plaza Loan Combination. In its capacity as representative of the controlling note holder under the related Co-Lender Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise consent and/or consultation rights (which consent and/or consultation rights are substantially similar to, but not necessarily identical to, the rights of the Directing Holder set forth under “The Pooling and Servicing Agreement—Directing Holder” in this prospectus) with respect to the 5 Penn Plaza Loan Combination, including consent and/or consultation rights regarding “major decisions” (as defined under the related Co-Lender Agreement) and approval rights regarding the implementation of any recommended actions outlined in an asset status report with respect to the 5 Penn Plaza Loan Combination (which approval rights are substantially similar to, but not necessarily identical to, those rights described under “The Pooling and Servicing Agreement—Asset Status Reports” in this prospectus). Pursuant to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will have the same consent and/or consultation rights with respect to the 5 Penn Plaza Loan Combination as it does, and for so long as it does, with respect to the other mortgage loans included in the CGCMT 2016-GC36 issuing entity (other than any “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement) that are serviced under the CGCMT 2016-GC36 Pooling and Servicing Agreement and do not have companion loans.
In addition, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity, as holder of the 5 Penn Plaza Mortgage Loan (or its representative) and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) will (i) have a right to receive copies of all notices, information and reports that the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, is required to provide to the CGCMT 2016-GC36 Controlling Class Representative (within the same time frame such notices, information and reports are or would have been required to be provided to the CGCMT 2016-GC36 Controlling Class Representative under the CGCMT 2016-GC36 Pooling and Servicing Agreement without regard to the occurrence thereunder of a control termination event or consultation termination event) with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the 5 Penn Plaza Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the 5 Penn Plaza Loan Combination and (ii) have the right to be consulted on a strictly non-binding basis with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the 5 Penn Plaza Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the 5 Penn Plaza Loan Combination. The consultation rights of the Issuing Entity (or its representative) and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) will, in each case, expire 10 business days following the delivery thereto of written notice of the proposed action, together with copies of the notices, information and reports required to be provided to the CGCMT 2016-GC36 Controlling Class Representative, whether or not the Issuing Entity (or its representative) or such Companion Loan Holders (or their representatives), as applicable, have responded within such period; provided, that if the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, proposes a new course of action that is materially different from the action previously proposed, the 10 business day consultation period will be deemed to begin anew. Notwithstanding the consultation rights
217 |
described above, the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, is permitted to make a “major decision” (as defined under the related Co-Lender Agreement) or take any action set forth in the asset status report before the expiration of the aforementioned 10 business day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the 5 Penn Plaza Loan Combination. Neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer will be obligated at any time to follow or take any alternative actions recommended by the Issuing Entity (or its representative) or the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives).
The CGCMT 2016-GC36 Pooling and Servicing Agreement provides that neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer may take or refrain from taking any action pursuant to instructions from the Issuing Entity (or its representative) or the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) that would cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, to violate applicable law, the terms of the 5 Penn Plaza Loan Combination, the related Co-Lender Agreement, the CGCMT 2016-GC36 Pooling and Servicing Agreement, including the servicing standard under the CGCMT 2016-GC36 Pooling and Servicing Agreement, or the REMIC provisions or that would (i) expose the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Depositor, a mortgage loan seller with respect to the CGCMT 2016-GC36 Securitization, the CGCMT 2016-GC36 issuing entity, the CGCMT 2016-GC36 Trustee, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Asset Representations Reviewer, the CGCMT 2016-GC36 Certificate Administrator or their respective affiliates, officers, directors, employees or agents to any claim, suit or liability, (ii) materially expand the scope of the CGCMT 2016-GC36 Master Servicer’s or the CGCMT 2016-GC36 Special Servicer’s responsibilities, or (iii) cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer to act, or fail to act, in a manner that is not in the best interests of the CGCMT 2016-GC36 certificateholders.
In addition to the consultation rights of the Issuing Entity (or its representative) and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) described above, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity (or its representative) and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) will have the right to attend annual meetings (which may be held telephonically or in person, at the discretion of the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable) with the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, in which servicing issues related to the 5 Penn Plaza Loan Combination are discussed.
See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Application of Penalty Charges
The related Co-Lender Agreement provides that penalty charges paid on the 5 Penn Plaza Loan Combination will first be used to reduce, on a pro rata basis, the amounts payable on each of the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans by the amount necessary to pay the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Trustee or the CGCMT 2016-GC36 Special Servicer for any interest accrued on any property protection advances and reimbursement of any property protection advances in accordance with the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, second, be used to reduce the respective amounts payable on each of the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans by the amount necessary to pay the Master Servicer, the Trustee, the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Trustee and the master servicer and trustee for any securitization of either of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3, for any interest accrued on any P&I Advance (or analogous P&I advance made pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement or any document governing any securitization of either of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3) made with respect to such loan by such party (if and as specified in the Pooling and Servicing Agreement, the CGCMT 2016-GC36 Pooling and Servicing Agreement or any document governing any securitization of either of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3, as applicable),
218 |
third, be used to reduce, on a pro rata basis, the amounts payable on each of the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans by the amount necessary to pay additional trust fund expenses (other than special servicing fees, unpaid workout fees and liquidation fees, each as payable under the CGCMT 2016-GC36 Pooling and Servicing Agreement) incurred with respect to the 5 Penn Plaza Loan Combination (as specified in the CGCMT 2016-GC36 Pooling and Servicing Agreement) and, finally, (i) in the case of the remaining amount of penalty charges allocable to the 5 Penn Plaza Mortgage Loan and the 5 Penn Plaza Pari Passu Companion Loans evidenced by the controlling note A-1 and non-controlling A-3, be paid to the CGCMT 2016-GC36 Master Servicer and/or the CGCMT 2016-GC36 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement and (ii) in the case of the remaining amount of penalty charges allocable to the 5 Penn Plaza Pari Passu Companion Loan evidenced by the non-controlling note A-2-I, be paid, (x) prior to the securitization of such 5 Penn Plaza Pari Passu Companion Loan, to the related Companion Loan Holder and (y) following the securitization of such 5 Penn Plaza Pari Passu Companion Loan, to the CGCMT 2016-GC36 Master Servicer and/or the CGCMT 2016-GC36 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement.
Sale of Defaulted Loan Combination
Pursuant to the terms of the related Co-Lender Agreement, if the 5 Penn Plaza Loan Combination becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement, and if the CGCMT 2016-GC36 Special Servicer determines to sell the controlling 5 Penn Plaza Pari Passu Companion Loan in accordance with the CGCMT 2016-GC36 Pooling and Servicing Agreement, then the CGCMT 2016-GC36 Special Servicer will be required to sell all of the 5 Penn Plaza Pari Passu Companion Loans together with the 5 Penn Plaza Mortgage Loan as a single whole loan in accordance with the procedures set forth under the CGCMT 2016-GC36 Pooling and Servicing Agreement. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Notwithstanding the foregoing, the CGCMT 2016-GC36 Special Servicer will not be permitted to sell the 5 Penn Plaza Loan Combination if it becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement without the written consent of each of the Issuing Entity (or its representative), as holder of the 5 Penn Plaza Mortgage Loan, and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) (provided that such consent is not required from the Issuing Entity or any such Companion Loan Holder (or their representatives), as applicable, if such person is the related borrower or an affiliate of the related borrower), unless the CGCMT 2016-GC36 Special Servicer has delivered to the Issuing Entity (or its representative) and each such Companion Loan Holder (or its representative): (a) at least 15 business days’ prior written notice of any decision to attempt to sell the 5 Penn Plaza Loan Combination; (b) at least 10 days prior to the proposed sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the CGCMT 2016-GC36 Special Servicer in connection with any such proposed sale; (c) at least 10 days prior to the proposed sale date, a copy of the most recent appraisal for the 5 Penn Plaza Loan Combination, and any documents in the servicing file reasonably requested by the Issuing Entity (or its representative) or such Companion Loan Holder (or its representative), as applicable, that are material to the price of the 5 Penn Plaza Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the CGCMT 2016-GC36 Controlling Class Representative) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer in connection with the proposed sale; provided, that each of the Issuing Entity (or its representative) or the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) may waive as to itself any of the delivery or timing requirements set forth in this sentence. Subject to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, each of the Issuing Entity (or its representative) and the holders of the 5 Penn Plaza Pari Passu Companion Loans (or their representatives) will be permitted to submit an offer at any sale of the 5 Penn Plaza Loan Combination unless such person is the related borrower or an agent or affiliate of the related borrower.
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus.
219 |
Special Servicer Appointment Rights
Pursuant to the related Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement, the controlling note holder with respect to the 5 Penn Plaza Loan Combination (which, as of any date of determination, will be the CGCMT 2016-GC36 Trustee on behalf of the CGCMT 2016-GC36 issuing entity as holder of the controlling 5 Penn Plaza Pari Passu Companion Loan, or its representative which, prior to a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement, will be the CGCMT 2016-GC36 Controlling Class Representative) will have the right, at any time, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the 5 Penn Plaza Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative) or the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives). Accordingly, the CGCMT 2016-GC36 Controlling Class Representative (prior to a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement and provided that the 5 Penn Plaza Loan Combination is not an “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement), and the applicable CGCMT 2016-GC36 certificateholders with the requisite percentage of voting rights (after a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement) will have the right, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the 5 Penn Plaza Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative) or the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives). Each of the Issuing Entity (or its representative) and the holders of the 5 Penn Plaza Pari Passu Companion Loans evidenced by the non-controlling notes A-2-I and A-3 (or their representatives) will be permitted to direct the CGCMT 2016-GC36 Trustee to terminate the CGCMT 2016-GC36 Special Servicer (solely with respect to the 5 Penn Plaza Loan Combination) upon a servicer termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement with respect to the CGCMT 2016-GC36 Special Servicer that affects the Issuing Entity (as the holder of the 5 Penn Plaza Mortgage Loan) or such Companion Loan Holders, as applicable.
The Park Place Loan Combination
Servicing
The Park Place Loan Combination and any related REO Property will be serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement, dated as of February 1, 2016, among Citigroup Commercial Mortgage Securities Inc., as depositor, KeyBank National Association, as master servicer, Wells Fargo Bank, National Association, as special servicer, Pentalpha Surveillance LLC, as operating advisor and as asset representations reviewer, Wells Fargo Bank, National Association., as certificate administrator, and Wilmington Trust, National Association, as trustee, by the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer, in the manner described under “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus, but subject to the terms of the related Co-Lender Agreement. In servicing the Park Place Loan Combination, the servicing standard set forth in the CGCMT 2016-GC36 Pooling and Servicing Agreement will require the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer to take into account the interests of the CGCMT 2016-GC36 certificateholders, the Issuing Entity, as holder of the Park Place Mortgage Loan, and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 ,as a collective whole.
Amounts payable to the Issuing Entity as holder of the Park Place Mortgage Loan pursuant to the related Co-Lender Agreement will be included in the Available Funds for the related Distribution Date to the extent described in this prospectus.
Custody of the Mortgage File
Wells Fargo Bank, National Association, as custodian under the CGCMT 2016-GC36 Pooling and Servicing Agreement, is the initial custodian of the mortgage file related to the Park Place Loan Combination (other than the promissory notes evidencing the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loan not included in the CGCMT 2016-GC36 Securitization).
220 |
Application of Payments
The related Co-Lender Agreement sets forth the respective rights of the holder of the Park Place Mortgage Loan and the holders of the Park Place Pari Passu Companion Loans with respect to distributions of funds received in respect of the Park Place Loan Combination, and provides, in general, that:
· | the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loans are of equal priority with each other and no portion of any of them will have priority or preference over any portion of the others or security therefor; |
· | all payments, proceeds and other recoveries on or in respect of the Park Place Loan Combination or the related Mortgaged Property will be applied to the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loans on a pro rata and pari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Certificate Administrator and the CGCMT 2016-GC36 Trustee) in accordance with the terms of the related Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement; and |
· | expenses, losses and shortfalls relating to the Park Place Loan Combination will, in general, be allocated, on a pro rata and pari passu basis, to the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loans. |
Notwithstanding the foregoing, if a P&I Advance is made with respect to the Park Place Mortgage Loan, then that P&I Advance, together with interest thereon, may only be reimbursed out of future payments and collections on the Park Place Mortgage Loan or, as and to the extent described under “The Pooling and Servicing Agreement—Advances” in this prospectus, on other Mortgage Loans, but not out of payments or other collections on the Park Place Pari Passu Companion Loans. Similarly, P&I advances on the Park Place Pari Passu Companion Loans are not reimbursable out of payments or other collections on the Park Place Mortgage Loan.
Certain costs, losses, liabilities, claims and expenses (such as a pro rata share of a property protection advance) allocable to the Park Place Mortgage Loan may be paid or reimbursed out of payments and other collections on the mortgage loans in the CGCMT 2016-GC36 Securitization, subject to the CGCMT 2016-GC36 issuing entity’s right to reimbursement from future payments and other collections on the Park Place Mortgage Loan or from general collections on the Mortgage Pool.
Consultation and Control
Pursuant to the related Co-Lender Agreement, the controlling note holder with respect to the Park Place Loan Combination, as of any date of determination, will be the CGCMT 2016-GC36 Trustee on behalf of the CGCMT 2016-GC36 issuing entity as holder of the controlling Park Place Pari Passu Companion Loan; provided, that, unless a control termination event exists under the CGCMT 2016-GC36 Pooling and Servicing Agreement or the Park Place Loan Combination is an “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise the rights of the controlling note holder with respect to the Park Place Loan Combination. In its capacity as representative of the controlling note holder under the related Co-Lender Agreement, the CGCMT 2016-GC36 Controlling Class Representative will be entitled to exercise consent and/or consultation rights (which consent and/or consultation rights are substantially similar to, but not necessarily identical to, the rights of the Directing Holder set forth under “The Pooling and Servicing Agreement—Directing Holder” in this prospectus) with respect to the Park Place Loan Combination, including consent and/or consultation rights regarding “major decisions” (as defined under the related Co-Lender Agreement) and approval rights regarding the implementation of any recommended actions outlined in an asset status report with respect to the Park Place Loan Combination (which approval rights are substantially similar to, but not necessarily identical to, those rights described under “The Pooling and Servicing Agreement—Asset Status Reports” in this prospectus). Pursuant to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, the CGCMT 2016-GC36 Controlling Class Representative will have the same consent and/or consultation rights with respect to the Park Place Loan Combination as it does, and for so long as it does, with respect to the other mortgage loans included in the CGCMT 2016-GC36 issuing entity (other than any “excluded mortgage loan” under the CGCMT 2016-GC36
221 |
Pooling and Servicing Agreement) that are serviced under the CGCMT 2016-GC36 Pooling and Servicing Agreement and do not have companion loans.
In addition, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity, as holder of the Park Place Mortgage Loan (or its representative) and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) will (i) have a right to receive copies of all notices, information and reports that the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, is required to provide to the CGCMT 2016-GC36 Controlling Class Representative (within the same time frame such notices, information and reports are or would have been required to be provided to the CGCMT 2016-GC36 Controlling Class Representative under the CGCMT 2016-GC36 Pooling and Servicing Agreement without regard to the occurrence thereunder of a control termination event or consultation termination event) with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the Park Place Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the Park Place Loan Combination and (ii) have the right to be consulted on a strictly non-binding basis with respect to any “major decisions” (as defined under the related Co-Lender Agreement) to be taken with respect to the Park Place Loan Combination or the implementation of any recommended action outlined in an asset status report relating to the Park Place Loan Combination. The consultation rights of the Issuing Entity (or its representative) and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) will, in each case, expire 10 business days following the delivery thereto of written notice of the proposed action, together with copies of the notices, information and reports required to be provided to the CGCMT 2016-GC36 Controlling Class Representative, whether or not the Issuing Entity (or its representative) or such Companion Loan Holder (or its representative), as applicable, has responded within such period; provided, that if the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, proposes a new course of action that is materially different from the action previously proposed, the 10 business day consultation period will be deemed to begin anew. Notwithstanding the consultation rights described above, the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, is permitted to make a “major decision” (as defined under the related Co-Lender Agreement) or take any action set forth in the asset status report before the expiration of the aforementioned 10 business day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the Park Place Loan Combination. Neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer will be obligated at any time to follow or take any alternative actions recommended by the Issuing Entity (or its representative) or the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative).
The CGCMT 2016-GC36 Pooling and Servicing Agreement provides that neither the CGCMT 2016-GC36 Master Servicer nor the CGCMT 2016-GC36 Special Servicer may take or refrain from taking any action pursuant to instructions from the Issuing Entity (or its representative) or the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) that would cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, to violate applicable law, the terms of the Park Place Loan Combination, the related Co-Lender Agreement, the CGCMT 2016-GC36 Pooling and Servicing Agreement, including the servicing standard under the CGCMT 2016-GC36 Pooling and Servicing Agreement, or the REMIC provisions or that would (i) expose the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Depositor, a mortgage loan seller with respect to the CGCMT 2016-GC36 Securitization, the CGCMT 2016-GC36 issuing entity, the CGCMT 2016-GC36 Trustee, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Asset Representations Reviewer, the CGCMT 2016-GC36 Certificate Administrator or their respective affiliates, officers, directors, employees or agents to any claim, suit or liability, (ii) materially expand the scope of the CGCMT 2016-GC36 Master Servicer’s or the CGCMT 2016-GC36 Special Servicer’s responsibilities, or (iii) cause the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer to act, or fail to act, in a manner that is not in the best interests of the CGCMT 2016-GC36 certificateholders.
In addition to the consultation rights of the Issuing Entity (or its representative) and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) described above, pursuant to the terms of the related Co-Lender Agreement, the Issuing Entity (or its representative) and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) will have the right to attend annual meetings (which may be held telephonically or in person, at the discretion of the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable) with the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the CGCMT 2016-GC36 Master Servicer or the CGCMT
222 |
2016-GC36 Special Servicer, as applicable, in which servicing issues related to the Park Place Loan Combination are discussed.
See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Application of Penalty Charges
The related Co-Lender Agreement provides that penalty charges paid on the Park Place Loan Combination will first be used to reduce, on a pro rata basis, the amounts payable on each of the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loans by the amount necessary to pay the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Trustee or the CGCMT 2016-GC36 Special Servicer for any interest accrued on any property protection advances and reimbursement of any property protection advances in accordance with the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement; second, be used to reduce the respective amounts payable on each of the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loans by the amount necessary to pay the Master Servicer, the Trustee, the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Trustee and the master servicer and trustee for any securitization of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2, for any interest accrued on any P&I Advance (or analogous P&I advance made pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement or the document governing any securitization of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2) made with respect to such loan by such party (if and as specified in the Pooling and Servicing Agreement, the CGCMT 2016-GC36 Pooling and Servicing Agreement or the document governing any securitization of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2, as applicable); third, be used to reduce, on a pro rata basis, the amounts payable on each of the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loans by the amount necessary to pay additional trust fund expenses (other than special servicing fees, unpaid workout fees and liquidation fees, each as payable under the CGCMT 2016-GC36 Pooling and Servicing Agreement) incurred with respect to the Park Place Loan Combination (as specified in the CGCMT 2016-GC36 Pooling and Servicing Agreement); and, finally, (i) in the case of the remaining amount of penalty charges allocable to the Park Place Mortgage Loan and the Park Place Pari Passu Companion Loan evidenced by the controlling note A-1, be paid to the CGCMT 2016-GC36 Master Servicer and/or the CGCMT 2016-GC36 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement and (ii) in the case of the remaining amount of penalty charges allocable to the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2, be paid, (x) prior to the securitization of such Park Place Pari Passu Companion Loan, to the related Companion Loan Holder and (y) following the securitization of such Park Place Pari Passu Companion Loan, to the CGCMT 2016-GC36 Master Servicer and/or the CGCMT 2016-GC36 Special Servicer as additional servicing compensation as provided in the CGCMT 2016-GC36 Pooling and Servicing Agreement.
Sale of Defaulted Loan Combination
Pursuant to the terms of the related Co-Lender Agreement, if the Park Place Loan Combination becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement, and if the CGCMT 2016-GC36 Special Servicer determines to sell the controlling Park Place Pari Passu Companion Loan in accordance with the CGCMT 2016-GC36 Pooling and Servicing Agreement, then the CGCMT 2016-GC36 Special Servicer will be required to sell all of the Park Place Pari Passu Companion Loans together with the Park Place Mortgage Loan as one whole loan in accordance with the procedures set forth under the CGCMT 2016-GC36 Pooling and Servicing Agreement. See “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans—Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan” in this prospectus.
Notwithstanding the foregoing, the CGCMT 2016-GC36 Special Servicer will not be permitted to sell the Park Place Loan Combination if it becomes a defaulted mortgage loan under the CGCMT 2016-GC36 Pooling and Servicing Agreement without the written consent of each of the Issuing Entity (or its representative), as holder of the Park Place Mortgage Loan, and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) (provided that such consent is not required from the Issuing Entity or such Companion Loan Holder, as applicable, if such person is the related borrower or an affiliate of the related borrower), unless the CGCMT 2016-GC36 Special Servicer has delivered to the Issuing Entity (or its representative) and each such Companion Loan Holder (or its representative): (a) at least 15 business days’ prior
223 |
written notice of any decision to attempt to sell the Park Place Loan Combination; (b) at least 10 days prior to the proposed sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the CGCMT 2016-GC36 Special Servicer in connection with any such proposed sale; (c) at least 10 days prior to the proposed sale date, a copy of the most recent appraisal for the Park Place Loan Combination, and any documents in the servicing file reasonably requested by the Issuing Entity (or its representative) or such Companion Loan Holder (or its representative), as applicable, that are material to the price of the Park Place Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the CGCMT 2016-GC36 Controlling Class Representative) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 Special Servicer in connection with the proposed sale; provided, that each of the Issuing Entity (or its representative) or the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) may waive as to itself any of the delivery or timing requirements set forth in this sentence. Subject to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement, each of the Issuing Entity (or its representative) and the holders of the Park Place Pari Passu Companion Loans (or their representatives) will be permitted to submit an offer at any sale of the Park Place Loan Combination unless such person is the related borrower or an agent or affiliate of the related borrower.
See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus.
Special Servicer Appointment Rights
Pursuant to the related Co-Lender Agreement and the CGCMT 2016-GC36 Pooling and Servicing Agreement, the controlling note holder with respect to the Park Place Loan Combination (which, as of any date of determination, will be the CGCMT 2016-GC36 Trustee on behalf of the CGCMT 2016-GC36 issuing entity as holder of the controlling Park Place Pari Passu Companion Loan, or its representative which, prior to a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement, will be the CGCMT 2016-GC36 Controlling Class Representative) will have the right, at any time, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the Park Place Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative) or the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative). Accordingly, the CGCMT 2016-GC36 Controlling Class Representative (prior to a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement and provided that the Park Place Loan Combination is not an “excluded mortgage loan” under the CGCMT 2016-GC36 Pooling and Servicing Agreement), and the applicable CGCMT 2016-GC36 certificateholders with the requisite percentage of voting rights (after a control termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement) will have the right, with or without cause, to replace the CGCMT 2016-GC36 Special Servicer then acting with respect to the Park Place Loan Combination and appoint a replacement special servicer in lieu thereof without the consent of the Issuing Entity (or its representative) or the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative). Each of the Issuing Entity (or its representative) and the holder of the Park Place Pari Passu Companion Loan evidenced by the non-controlling note A-2-2 (or its representative) will be permitted to direct the CGCMT 2016-GC36 Trustee to terminate the CGCMT 2016-GC36 Special Servicer (solely with respect to the Park Place Loan Combination) upon a servicer termination event under the CGCMT 2016-GC36 Pooling and Servicing Agreement with respect to the CGCMT 2016-GC36 Special Servicer that affects the Issuing Entity (as the holder of the Park Place Mortgage Loan) or such Companion Loan Holder, as applicable.
Significant Obligor
The Mortgaged Property identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, securing a Mortgage Loan representing approximately 10.1% of the Initial Pool Balance, is a “significant obligor” as such term is used in Items 1101 and 1112 of Regulation AB, with respect to this offering. See “Significant Loan Summaries—Sheraton Denver Downtown Fee” in Annex B to this prospectus.
“Regulation AB” means subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100–229.1125 under the Securities Act of 1933, as amended (the “Securities Act”), as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the SEC or by the staff of the SEC, or as may be provided by the SEC or its staff from time to time.
224 |
Additional Mortgage Loan Information
Each of the tables presented in Annex B and Annex C to this prospectus sets forth selected characteristics of the pool of Mortgage Loans as of the Cut-off Date, if applicable. For a detailed presentation of certain additional characteristics of the Mortgage Loans and the Mortgaged Properties on an individual basis, see Annex A to this prospectus. For certain additional information regarding the 15 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) in the pool of Mortgage Loans, see “Significant Loan Summaries” in Annex B to this prospectus.
The description in this prospectus, including Annex A, B and C, of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as expected to be constituted at the close of business on the Cut-off Date, as adjusted for the scheduled principal payments due on the Mortgage Loans on or before the Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan may be removed from the Mortgage Pool if the Depositor deems such removal necessary or appropriate or if it is prepaid. This may cause the range of Mortgage Rates and maturities as well as the other characteristics of the Mortgage Loans to vary from those described in this prospectus.
A Current Report on Form 8-K (“Form 8-K”) will be available to purchasers of the Offered Certificates and will be filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), together with the Pooling and Servicing Agreement, with the Securities and Exchange Commission (the “SEC”) on or prior to the date of the filing of the final prospectus.
225 |
Transaction Parties
The Sponsors and the Mortgage Loan Sellers
Citigroup Global Markets Realty Corp., Rialto Mortgage Finance, LLC, The Bank of New York Mellon, KGS-Alpha Real Estate Capital Markets, LLC, Goldman Sachs Mortgage Company and RAIT Funding, LLC are the Sponsors of this securitization transaction and, accordingly, are referred to as the “Sponsors”.
Citigroup Global Markets Realty Corp.
General
Citigroup Global Markets Realty Corp. (“CGMRC”) is a Sponsor. CGMRC is a New York corporation organized in 1979 and is a wholly-owned subsidiary of Citicorp Banking Corporation, a Delaware corporation, which is in turn a wholly-owned subsidiary of Citigroup Inc., a Delaware corporation. CGMRC maintains its principal office at 388 Greenwich Street, New York, New York 10013, Attention: Mortgage Finance Group. Its facsimile number is (212) 723-8604. CGMRC is an affiliate of Citigroup Commercial Mortgage Securities Inc. (the Depositor), Citigroup Global Markets Inc. (one of the underwriters), and Citibank, N.A. (the Certificate Administrator, Certificate Registrar and paying agent). CGMRC makes, and purchases from lenders, commercial and multifamily mortgage loans primarily for the purpose of securitizing them in commercial mortgage-backed securities (“CMBS”) transactions. CGMRC also purchases and finances residential mortgage loans, consumer receivables and other financial assets.
Neither CGMRC nor any of its affiliates will insure or guarantee distributions on the Certificates. The Certificateholders will have no rights or remedies against CGMRC for any losses or other claims in connection with the Certificates or the Mortgage Loans except in respect of the repurchase and substitution obligations for material document defects or material breaches of the representations and warranties made by CGMRC in the related Mortgage Loan Purchase Agreement as described under “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions.”
CGMRC’s Commercial Mortgage Origination and Securitization Program
CGMRC, directly or through correspondents or affiliates, originates multifamily and commercial mortgage loans throughout the United States and abroad. CGMRC has been engaged in the origination of multifamily and commercial mortgage loans for securitization since 1996 and has been involved in the securitization of residential mortgage loans since 1987. The multifamily and commercial mortgage loans originated by CGMRC include both fixed rate loans and floating rate loans. Most of the multifamily and commercial mortgage loans included by CGMRC in commercial mortgage securitizations sponsored by CGMRC have been originated, directly or through correspondents, by CGMRC or an affiliate. CGMRC securitized approximately $1.25 billion, $1.49 billion, $2.60 billion, $4.27 billion, $7.02 billion, $6.35 billion, $1.08 billion, $0, $517 million, $1.25 billion, $1.73 billion, $4.75 billion, $5.23 billion and $6.19 billion of multifamily and commercial mortgage loans in public and private offerings during the calendar years 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 and 2015, respectively.
In addition, in the normal course of its business, CGMRC may also acquire multifamily and commercial mortgage loans from various third-party originators. These mortgage loans may have been originated using underwriting guidelines not established by CGMRC.
CGMRC has also sponsored, in private placement transactions, multifamily and commercial mortgage loans which it either originated or acquired from third-party originators that underwrote them to their own underwriting criteria.
In connection with the commercial mortgage securitization transactions in which it participates, CGMRC generally transfers the subject mortgage assets to a depositor, who then transfers those mortgage assets to the issuing entity for the related securitization. In return for the transfer of the subject mortgage assets by the
226 |
depositor to the issuing entity, the issuing entity issues commercial mortgage pass-through certificates that are in whole or in part backed by, and supported by the cash flows generated by, those mortgage assets.
CGMRC generally works with rating agencies, unaffiliated mortgage loan sellers, servicers, affiliates and underwriters in structuring a securitization transaction. CGMRC will generally act as a sponsor, originator or mortgage loan seller in the commercial mortgage securitization transactions in which it participates. In such transactions there may be a co-sponsor and/or other mortgage loan sellers and originators. Generally CGMRC and/or the related depositor contract with other entities to service the multifamily and commercial mortgage loans following their transfer into a trust fund for a series of certificates.
Review of CGMRC Mortgage Loans
General
In connection with the preparation of this prospectus, CGMRC conducted a review of the Mortgage Loans that it is selling to the Depositor. The review was conducted as set forth below and was conducted with respect to each of the CGMRC Mortgage Loans. No sampling procedures were used in the review process.
Database
First, CGMRC created a database of information (the “CGMRC Securitization Database”) obtained in connection with the origination of the CGMRC Mortgage Loans, including:
· | certain information from the CGMRC Mortgage Loan documents; |
· | certain information from the rent rolls and operating statements for, and certain leases relating to, the related Mortgaged Properties (in each case to the extent applicable); |
· | insurance information for the related Mortgaged Properties; |
· | information from third party reports such as the appraisals, environmental and property condition reports, seismic reports, zoning reports and other zoning information; |
· | bankruptcy searches with respect to the related borrowers; and |
· | certain information and other search results obtained by the CGMRC deal team for each of the CGMRC Mortgage Loans during the underwriting process. |
CGMRC also included in the CGMRC Securitization Database certain updates to such information received by the CGMRC securitization team after origination, such as information from the interim servicer regarding loan payment status and current escrows, updated rent rolls and leasing activity information provided pursuant to the Mortgage Loan documents, and information otherwise brought to the attention of the CGMRC securitization team. Such updates were not intended to be, and do not serve as, a re-underwriting of any Mortgage Loan.
Using the information in the CGMRC Securitization Database, CGMRC created a Microsoft Excel file (the “CGMRC Data File”) and provided that file to the Depositor for the inclusion in this prospectus (particularly in Annexes A, B and C to this prospectus) of information regarding the CGMRC Mortgage Loans.
Data Comparison and Recalculation
CGMRC(or the Depositor on its behalf) engaged a third-party accounting firm to perform certain data comparison and recalculation procedures designed by CGMRC, relating to information in this prospectus regarding the CGMRC Mortgage Loans. These procedures included:
· | comparing the information in the CGMRC Data File against various source documents provided by CGMRC that are described above under “—Database”; |
227 |
· | comparing numerical information regarding the CGMRC Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the CGMRC Data File; and |
· | recalculating certain percentages, ratios and other formulae relating to the CGMRC Mortgage Loans disclosed in this prospectus. |
Legal Review
CGMRC also reviewed and responded to a Due Diligence Questionnaire (as defined below) relating to the CGMRC Mortgage Loans, which questionnaire was prepared by the Depositor’s legal counsel for use in eliciting information relating to the CGMRC Mortgage Loans and including such information in this prospectus to the extent material.
Although the Due Diligence Questionnaire may be revised from time to time, it typically contains various questions regarding the CGMRC Mortgage Loans, the related Mortgaged Properties, the related borrowers, sponsors and tenants, and any related additional debt. For example, the due diligence questionnaire (a “Due Diligence Questionnaire”) may seek to elicit, among other things, the following information:
· | whether any mortgage loans were originated by third party originators and the names of such originators, and whether such mortgage loans were underwritten or re-underwritten in accordance with CGMRC’s (or the applicable mortgage loan seller’s) criteria; |
· | whether any mortgage loans are not first liens, or have a loan-to-value ratio greater than 80%; |
· | whether any mortgage loans are 30 days or more delinquent with respect to any monthly debt service payment as of the cut-off date or have been 30 days or more delinquent at any time during the 12-month period immediately preceding the cut-off date; |
· | a description of any material issues with respect to any of the mortgage loans; |
· | whether any mortgage loans permit, or have existing, mezzanine debt, additional debt secured by the related mortgaged properties or other material debt, and the material terms and conditions for such debt; |
· | whether any mortgaged properties have additional debt that is included in another securitization transaction and information related to such other securitization transaction; |
· | whether intercreditor agreements, subordination and standstill agreements or similar agreements are in place with respect to secured debt, mezzanine debt or additional debt and the terms of such agreements; |
· | a list of any mortgage loans that are interest-only for their entire term or a portion of their term; |
· | a list of mortgage loans that permit prepayment or defeasance (in whole or in part), or provide for yield maintenance, and the types of prepayment lock-out provisions and prepayment charges that apply; |
· | whether any mortgage loans permit the release of all or a portion of the related mortgaged properties, and the material terms of any partial release, substitution and condemnation/casualty provisions; |
· | a list of mortgage loans that are cross-collateralized or secured by multiple properties, or that have related borrowers with other mortgage loans in the subject securitization; |
· | whether any mortgage loans have a right of first refusal or right of first offer or similar options, in favor of a tenant or any other party; |
228 |
· | whether there are post-close escrows or earn-out reserves that could be used to pay down the mortgage loan, or whether there are escrows or holdbacks that have not been fully funded; |
· | information regarding lockbox arrangements, grace periods, interest accrual and amortization provisions, non-recourse carveouts, and any other material provisions with respect to the mortgage loan; |
· | whether the borrower or sponsor of any related borrower has been subject to bankruptcy proceedings, or has a past or present material criminal charge or record; |
· | whether any borrower is not a special purpose entity; |
· | whether any borrowers or sponsors of related borrowers have been subject to litigation or similar proceedings and the material terms thereof; |
· | whether any borrower under a mortgage loan is affiliated with a borrower under another Mortgage Loan to be included in the issuing entity; |
· | whether any of the mortgage loans is a leasehold mortgage, the terms of the related ground lease, and whether the term of the related ground lease extends at least 20 years beyond the stated loan maturity; |
· | a list of any related Mortgaged Properties for which a single tenant occupies over 20% of such property, and whether there are any significant lease rollovers at a particular Mortgaged Property; |
· | a list of any significant tenant concentrations or material tenant issues, e.g., dark tenants, subsidized tenants, government or student tenants, or Section 8 tenants, etc.; |
· | a description of any material leasing issues at the related Mortgaged Properties; |
· | whether any related Mortgaged Properties are subject to condemnation proceedings or litigation; |
· | a list of related Mortgaged Properties for which a Phase I environmental site assessment has not been completed, or for which a Phase II was performed, and whether any environmental site assessment reveals any material adverse environmental condition or circumstance at any related Mortgaged Property except for those which will be remediated by the cut-off date; |
· | whether there is any terrorism, earthquake, tornado, flood, fire or hurricane damage with respect to any of the related Mortgaged Properties, or whether there are any zoning issues at the Mortgaged Properties; |
· | a list of Mortgaged Properties for which an engineering inspection has not been completed and whether any property inspection revealed material issues; and/or |
· | general information regarding property type, condition, use, plans for renovation, etc. |
CGMRC also provided to origination counsel the Sponsor representations and warranties attached as Annex E-1 to this prospectus and requested that origination counsel identify exceptions to such representations and warranties. CGMRC compiled and reviewed the draft exceptions received from origination counsel, engaged separate counsel to review the exceptions, revised the exceptions and provided them to the Depositor for inclusion on Annex E-2 to this prospectus. In addition, for each CGMRC Mortgage Loan originated by CGMRC or its affiliates, CGMRC prepared and delivered to its securitization counsel for review an asset summary, which summary includes important loan terms and certain property level information obtained during the origination process. The loan terms included in each asset summary may include, without limitation, the principal amount, the interest rate, the loan term, the interest calculation method, the due date, any applicable interest-only period, any applicable amortization period, a summary of any prepayment and/or defeasance provisions, a summary of any lockbox and/or cash management provisions, a summary of any release provisions, and a summary of any
229 |
requirement for the related borrower to fund up-front and/or on-going reserves. The property level information obtained during the origination process included in each asset summary may include, without limitation, a description of the related Mortgaged Property (including property type, ownership structure, use, location, size, renovations, age and physical attributes), information relating to the commercial real estate market in which the Mortgaged Property is located, information relating to the related borrower and sponsor of the related borrower, an underwriter’s assessment of strengths and risks of the loan transaction, tenant analysis, and summaries of third party reports such as appraisal, environmental and property condition reports.
For each CGMRC Mortgage Loan, if any, purchased by CGMRC or its affiliates from a third-party originator of such Mortgage Loan, CGMRC reviewed the purchase agreement and related representations and warranties, and exceptions to those representations and warranties, made by the seller of such CGMRC Mortgage Loan to CGMRC or its affiliates, reviewed certain provisions of the related Mortgage Loan documents and third party reports concerning the related Mortgaged Property provided by the originator of such Mortgage Loan, prepared exceptions to the representations and warranties in the Mortgage Loan Purchase Agreement based upon such review, and provided them to the Depositor for inclusion on Annex E-2 to this prospectus. With respect to any CGMRC Mortgage Loan that is purchased by CGMRC or its affiliates from a third party originator, the representations and warranties made by the third party originator in the related purchase agreement between CGMRC or its affiliates, on the one hand, and the third party originator, on the other hand, are solely for the benefit of CGMRC or its affiliates. The rights, if any, that CGMRC or its affiliates may have under such purchase agreement upon a breach of such representations and warranties made by the third party originator will not be assigned to the trustee, and the certificateholders and the trustee will not have any recourse against the third party originator in connection with any breach of the representations and warranties made by such third party originator. As described above under “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions”, the substitution or repurchase obligation of CGMRC, as mortgage loan seller, with respect to the CGMRC Mortgage Loans under the related Mortgage Loan Purchase Agreement constitutes the sole remedy available to the Certificateholders and the Trustee for any uncured material breach of any CGMRC’s representations and warranties regarding the CGMRC Mortgage Loans, including any CGMRC Mortgage Loan that is purchased by CGMRC or its affiliates from a third party originator.
In addition, with respect to each CGMRC Mortgage Loan, CGMRC reviewed, and in certain cases requested that its counsel review, certain Mortgage Loan document provisions as necessary for disclosure of such provisions in this prospectus, such as property release provisions and other provisions specifically disclosed in this prospectus.
Certain Updates
Furthermore, CGMRC requested the borrowers under the CGMRC Mortgage Loans (or the borrowers’ respective counsel) for updates on any significant pending litigation that existed at origination. Moreover, if CGMRC became aware of a significant natural disaster in the vicinity of a Mortgaged Property relating to a CGMRC Mortgage Loan, CGMRC requested information on the property status from the related borrower in order to confirm whether any material damage to the property had occurred.
Large Loan Summaries
Finally, CGMRC prepared, and reviewed with originating counsel and/or securitization counsel, the loan summaries for those of the CGMRC Mortgage Loans included in the 10 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) in the mortgage pool, and the abbreviated loan summaries for those of the CGMRC Mortgage Loans included in the next 5 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) in the Mortgage Pool, which loan summaries and abbreviated loan summaries are incorporated in the “Significant Loan Summaries” in Annex B to this prospectus.
Findings and Conclusions
Based on the foregoing review procedures, CGMRC found and concluded that the disclosure regarding the CGMRC Mortgage Loans in this prospectus is accurate in all material respects. CGMRC also found and concluded that the CGMRC Mortgage Loans were originated in accordance with CGMRC’s origination procedures and underwriting criteria, except for any material deviations described under “—The Originators—Citigroup Global Markets Realty Corp. and Pillar Multifamily, LLC—Exceptions to Underwriting Criteria” in this prospectus. CGMRC attributes to itself all findings and conclusions resulting from the foregoing review procedures.
230 |
Repurchase Requests
CGMRC most recently filed a Form ABS-15G pursuant to Rule 15Ga-1 under the Exchange Act on February 16, 2016. CGMRC’s Central Index Key is 0001541001. With respect to the period from and including April 1, 2013 to and including March 31, 2016, CGMRC does not have any activity to report as required by Rule 15Ga-1 under the Exchange Act with respect to repurchase or replacement requests in connection with breaches of representations and warranties made by it as a sponsor of commercial mortgage securitizations.
Retained Interests in This Securitization
Neither CGMRC nor any of its affiliates will retain on the Closing Date any Certificates issued by the Issuing Entity or any other economic interest in this securitization, except that an affiliate of CGMRC intends to purchase the Class R certificates on the Closing Date. However, CGMRC or its affiliates may own in the future certain other classes of Certificates. Any such party will have the right to dispose of any such Certificates at any time.
Rialto Mortgage Finance, LLC
General
Rialto Mortgage Finance, LLC, a Delaware limited liability company formed in April 2013 (“Rialto”), a Sponsor and an Originator, is wholly-owned by Rialto Capital Management, LLC, a Delaware limited liability company that was formed in January 2009. The executive offices of Rialto are located at 600 Madison Avenue, 12th Floor, New York, New York 10022.
Goldman Sachs Bank USA, an affiliate of GSMC, provides warehouse financing to an affiliate of Rialto through a repurchase facility. Seven (7) of the Mortgage Loans that Rialto will transfer to the Depositor, with an aggregate principal balance of approximately $78,625,000 as of the Cut-off Date and representing approximately 11.3% of the Initial Pool Balance, are subject to that repurchase facility. Proceeds received by Rialto in connection with the contribution of Mortgage Loans to this securitization transaction will be applied, among other things, to reacquire the financed Mortgage Loans and make payments to Goldman Sachs Bank USA as the repurchase agreement counterparty.
Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and Outside Special Servicer, provides warehouse financing to an affiliate of Rialto through a repurchase facility. One (1) of the Mortgage Loans that Rialto will transfer to the Depositor, with a principal balance of approximately $22,000,000 as of the Cut-off Date and representing approximately 3.2% of the Initial Pool Balance, is subject to that repurchase facility. Proceeds received by Rialto in connection with the contribution of Mortgage Loans to this securitization transaction will be applied, among other things, to reacquire the financed Mortgage Loan and make payments to Wells Fargo Bank, as the repurchase agreement counterparty.
Rialto’s Securitization Program
As a Sponsor, Rialto originates and acquires commercial real estate mortgage loans with a general focus on stabilized income-producing properties. All of the Mortgage Loans being sold to the Depositor by Rialto (the “Rialto Mortgage Loans”) were originated by Rialto. This is the twenty-eighth commercial real estate debt investment securitization to which Rialto is contributing commercial real estate debt investments. The commercial real estate debt investments originated and acquired by Rialto may include mortgage loans, mezzanine loans, B notes, participation interests, rake bonds, subordinate mortgage loans and preferred equity investments. Rialto securitized approximately $712 million, $1.49 billion and $2.41 billion of multifamily and commercial mortgage loans in public and private offerings during the calendar years 2013, 2014 and 2015, respectively.
Neither Rialto nor any of its affiliates will insure or guarantee distributions on the Certificates. The Certificateholders will have no rights or remedies against Rialto for any losses or other claims in connection with the Certificates or the Mortgage Loans except in respect of the repurchase and substitution obligations for material document defects or material breaches of representations and warranties made by Rialto in the applicable Mortgage Loan Purchase Agreement as described under “Description of the Mortgage Pool—Cures, Repurchases and Substitutions” in this prospectus.
231 |
Review of Rialto Mortgage Loans
Overview
Rialto has conducted a review of each of the Rialto Mortgage Loans. This review was performed by a team comprised of real estate and securitization professionals who are employees of Rialto or one or more of its affiliates (the “Rialto Review Team”). The review procedures described below were employed with respect to the Rialto Mortgage Loans. No sampling procedures were used in the review process. Rialto is the Sponsor with respect to nine (9) Mortgage Loans.
Set forth below is a discussion of certain current general guidelines of Rialto generally applicable with respect to Rialto’s underwriting analysis of multifamily and commercial real estate properties which serve as the direct or indirect source of repayment for commercial real estate debt originated by Rialto. All or a portion of the underwriting guidelines described below may not be applied exactly as described below at the time a particular asset is originated by Rialto.
Database
To prepare for securitization, members of the Rialto Review Team reviewed a database of loan-level and property-level information relating to the Rialto Mortgage Loans. The database was compiled from, among other sources, the related Mortgage Loan documents, appraisals, environmental assessment reports, property condition reports, zoning reports, insurance review summaries, borrower-supplied information (including, but not limited to, rent rolls, leases, operating statements and budgets) and information collected by the Rialto Review Team during the underwriting process. Prior to securitization of the Rialto Mortgage Loans, the Rialto Review Team may have updated the information in the database with respect to the Rialto Mortgage Loans based on updates provided by the related servicer which may include information relating to loan payment status and escrows, updated operating statements, rent rolls and leasing activity, and information otherwise brought to the attention of the Rialto Review Team, to the extent such updates were provided to, and deemed material by, the Rialto Review Team. Such updates, if any, were not intended to be, and do not serve as, a re-underwriting of the Rialto Mortgage Loans.
A data tape (the “Rialto Data Tape”) containing detailed information regarding the Rialto Mortgage Loans was created from the information in the database referred to in the prior paragraph. The Rialto Data Tape was used to provide the numerical information regarding the Rialto Mortgage Loans in this prospectus.
Data Comparison and Recalculation
Rialto engaged a third-party accounting firm to perform certain data comparison and recalculation procedures designed by Rialto, relating to information in this prospectus regarding the Rialto Mortgage Loans. These procedures included:
· | comparing the information in the Rialto Data Tape against various source documents provided by Rialto; |
· | comparing numerical information regarding the Rialto Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the information contained in the Rialto Data Tape; and |
· | recalculating certain percentages, ratios and other formulae relating to the Rialto Mortgage Loans disclosed in this prospectus. |
Legal Review
Rialto engaged legal counsel to conduct certain legal reviews of the Rialto Mortgage Loans for disclosure in this prospectus. In anticipation of the securitization described in this prospectus, Rialto’s origination counsel reviewed a form of securitization representations and warranties at origination and, if applicable, identified exceptions to those representations and warranties. Rialto’s origination and underwriting staff also performed a review of the representations and warranties.
232 |
Legal counsel was also engaged in connection with this securitization transaction to assist in the review of the Rialto Mortgage Loans. Such assistance included, among other things, (i) a review of certain of Rialto’s asset summary reports, (ii) the review of the representation and warranties and exception reports referred to above relating to the Rialto Mortgage Loans prepared by origination counsel, (iii) the review of, and assistance in the completion by the Rialto Review Team of, a Due Diligence Questionnaire relating to the Rialto Mortgage Loans and (iv) the review of certain provisions in loan documents with respect to certain of the Rialto Mortgage Loans.
Other Review Procedures
The Rialto Review Team, with the assistance of counsel engaged in connection with this securitization transaction, also reviewed each Rialto Mortgage Loan to determine whether it materially deviated from the underwriting guidelines set forth under “—The Originators—Rialto Mortgage Finance, LLC—Rialto’s Underwriting Standards and Loan Analysis” below.
Findings and Conclusions
Based on the foregoing review procedures, Rialto determined that the disclosure regarding the Rialto Mortgage Loans in this prospectus is accurate in all material respects. Rialto also determined that the Rialto Mortgage Loans were not originated with any material exceptions from Rialto’s underwriting guidelines and procedures. Rialto attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Review Procedures in the Event of a Mortgage Loan Substitution
Rialto will perform a review of any Rialto Mortgage Loan that it elects to substitute for a Rialto Mortgage Loan in the pool in connection with a Material Breach or a Material Document Defect. Rialto, and if appropriate its legal counsel, will review the Mortgage Loan documents and servicing history of the substitute mortgage loan to confirm it meets each of the criteria required under the terms of the related Mortgage Loan Purchase Agreement and the Pooling and Servicing Agreement (the “Qualification Criteria”). Rialto will engage a third party accounting firm to compare the Qualification Criteria against the underlying source documentation to verify the accuracy of the review by Rialto and to confirm any numerical and/or statistical information to be disclosed in any required filings under the Exchange Act. Legal counsel will also be engaged by Rialto to render any tax opinion required in connection with the substitution.
Repurchase Requests
Rialto most recently filed a Form ABS-15G on February 3, 2016. Rialto’s Central Index Key number is 0001592182. With respect to the period from and including January 1, 2013 to and including December 31, 2015, Rialto does not have any activity to report as required by Rule 15Ga-1 under the Exchange Act with respect to repurchase or replacement requests in connection with breaches of representations and warranties made by it as a sponsor of commercial mortgage securitizations.
Retained Interests in This Securitization
Neither Rialto nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization.
The Bank of New York Mellon
General
The Bank of New York Mellon (“BNY Mellon”) is an FDIC-insured, New York banking corporation and a member of the Federal Reserve System. It is subject to supervision and regulation by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the New York State Department of Financial Services. BNY Mellon offers a wide range of banking services to its customers, both domestically and internationally. BNY Mellon is a wholly-owned bank subsidiary of The Bank of New York Mellon Corporation, a Delaware corporation whose principal office is located in New York, New York. Additional information, including the most recent annual report on Form 10-K for the year ended December 31, 2015, of The Bank of New York Mellon Corporation, and additional annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
233 |
on Form 8-K and amendments to such reports may be obtained without charge at BNY Mellon’s website at www.bnymellon.com or at the SEC’s website at www.sec.gov, as soon as reasonably practicable after filed with or furnished to the SEC pursuant to Section 13(a) of the U.S. Securities Exchange Act of 1934, as amended. None of the documents that The Bank of New York Mellon Corporation files with the SEC or any of the information on, or accessible through, the SEC’s website or BNY Mellon’s website, is part of, or incorporated by reference into, this prospectus.
Pursuant to certain interim servicing agreements between BNY Mellon, on the one hand, and Wells Fargo Bank, NationalAssociation, on the other hand, Wells Fargo Bank, National Association acts as interim servicer with respect to certain mortgage loans, including, prior to their inclusion in the Issuing Entity, all of the Mortgage Loans (with an aggregate principal balance of approximately $92,759,029 as of the Cut-off Date and representing approximately 13.4% of the Initial Pool Balance) to be contributed to this securitization by BNY Mellon.
BNY Mellon’s Commercial Mortgage Securitization Program
BNY Mellon underwrites and originates mortgage loans secured by commercial or multifamily properties throughout the United States. BNY Mellon has originated commercial and multifamily mortgage loans for over 100 years, and has been engaged in originating commercial and multifamily mortgage loans specifically for inclusion in commercial mortgaged-backed securitization (“CMBS”) transactions since 2014. In its capacity as a “sponsor”, BNY Mellon originates, co-originates or acquires mortgage loans and, together with other sponsors, participates in CMBS transactions by transferring such mortgage loans to an unaffiliated third-party depositor, which then transfers the mortgage loans to the issuing entity. As of April 1, 2016, BNY Mellon had securitized approximately $800 million of commercial mortgage loans for inclusion in CMBS transactions.
BNY Mellon’s commercial mortgage loans that are originated for sale into CMBS transactions are generally fixed-rate and secured by retail, office, multifamily, industrial, mixed use, and hospitality properties.
Neither BNY Mellon nor any of its affiliates acts as a servicer of the commercial mortgage loans it securitizes. Instead, BNY Mellon generally sells the right to be appointed servicer of its securitized loans to third party servicers. Servicing responsibilities are typically transferred from the third party interim servicer to the master servicer of the securitization trust at the closing of the securitization. In some instances, the interim servicer may retain primary servicing.
Review of BNY Mellon Mortgage Loans
Overview
BNY Mellon, in its capacity as the Sponsor of the BNY Mellon mortgage loans (the “BNY Mellon Mortgage Loans”), has conducted a review of the BNY Mellon Mortgage Loans in connection with the securitization described in this prospectus. The review of the BNY Mellon Mortgage Loans was performed by a deal team comprised of real estate and securitization professionals who are employees of BNY Mellon (each a “BNY Member” as defined below) and also includes professionals who are employees of IH Capital, LLC (with whom BNY Mellon has an exclusive consulting agreement under which IH Capital, LLC provides mortgage sourcing, securitization and related services to BNY Mellon to assist in BNY Mellon’s origination of commercial mortgage loans), and / or one or more of BNY Mellon’s affiliates (collectively, the “BNY Mellon Deal Team”). Notwithstanding the possible presence of persons that are not employees of BNY Mellon on the BNY Mellon Deal Team with respect to any particular mortgage loan, the BNY Mellon Deal team with respect to each mortgage loan includes at least one BNY Mellon employee (each a “BNY Member”), and all credit review and loan and credit approval decisions ultimately made by the BNY Mellon Deal Team with respect to any mortgage loan must be approved by the applicable BNY Member. The review procedures described below were employed with respect to all of the BNY Mellon Mortgage Loans, except that certain review procedures were only relevant to the large loan disclosures in this prospectus, as further described below. No sampling procedures were used in the review process.
Database
To prepare for securitization, the BNY Member and other members of the BNY Mellon Deal Team updated BNY Mellon’s internal origination database of loan-level and property-level information relating to each BNY Mellon Mortgage Loan. The database was compiled from, among other sources, the related mortgage loan
234 |
documents, third party appraisals (as well as environmental reports, engineering assessments and seismic reports, if applicable), zoning reports, evidence of insurance coverage or summaries of the same prepared by an outside insurance consultant, borrower supplied information (including, but not limited to, rent rolls, leases, operating statements and budgets) and information collected by BNY Mellon, during the underwriting process. After origination or acquisition of each BNY Mellon Mortgage Loan, BNY Mellon updated the information in the database with respect to such BNY Mellon Mortgage Loan based on updates provided by the third party interim servicer relating to loan payment status and escrows, updated operating statements, rent rolls and leasing activity, and information otherwise brought to the attention of, or known by, the BNY Member and other members of the BNY Mellon Deal Team.
A data tape (the “BNY Mellon Data Tape”) containing detailed information regarding each BNY Mellon Mortgage Loan was created from the information in the database referred to in the prior paragraph. The BNY Mellon Data Tape was used by BNY Mellon to provide the numerical information regarding the BNY Mellon Mortgage Loans in this prospectus.
Data Comparison and Recalculation
BNY Mellon engaged a third party accounting firm to perform certain data comparison and recalculation procedures designed by BNY Mellon relating to information in this prospectus regarding the BNY Mellon Mortgage Loans. These procedures included:
· | comparing the information in the BNY Mellon Data Tape against various source documents provided by BNY Mellon; |
· | comparing numerical information regarding the BNY Mellon Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the BNY Mellon Data Tape; and |
· | recalculating certain percentages, ratios, formulae and other information relating to the BNY Mellon Mortgage Loans disclosed in this prospectus. |
Legal Review
BNY Mellon engaged law firms involved in the origination and securitization of its mortgage loans to conduct certain legal reviews of the BNY Mellon Mortgage Loans for disclosure in the prospectus. In anticipation of the securitization of each BNY Mellon Mortgage Loan, origination counsel prepared a loan and property summary that sets forth salient loan terms and summarizes material deviations from material provisions of BNY Mellon’s standard form loan documents. In addition, origination counsel for each BNY Mellon Mortgage Loan reviewed BNY Mellon’s representations and warranties set forth on Annex E-1 to this prospectus and, if applicable, identified exceptions to those representations and warranties.
Securitization counsel was also engaged to assist in the review of the BNY Mellon Mortgage Loans. Such assistance included, among other things, a review of (i) an asset summary report for each BNY Mellon Mortgage Loan, (ii) due diligence questionnaires completed by origination counsel and members of the BNY Mellon Deal Team and (iii) exceptions to representations and warranties compiled by origination counsel.
Origination counsel and/or securitization counsel also assisted in the preparation of the risk factors and mortgage loan summaries for the BNY Mortgage Loans set forth in Annex A-3 to this prospectus, based on their respective reviews of pertinent sections of the related Mortgage Loan documents.
Other Review Procedures
In connection with the origination of each BNY Mellon Mortgage Loan, the BNY Member and other members of the BNY Mellon Deal Team, together with the related origination counsel, conducted a search with respect to each borrower principal under the related BNY Mellon Mortgage Loan to determine whether it had filed for bankruptcy. With respect to any material pending litigation that existed at the origination of any BNY Mellon Mortgage Loan relating to any borrower principal or Mortgaged Property, updates were requested from the related borrower, origination counsel and/or borrower’s litigation counsel. If the BNY Member or any other member of the BNY Mellon Deal Team became aware of a significant natural disaster in the vicinity of any Mortgaged Property
235 |
securing a BNY Mellon Mortgage Loan, updated status information was obtained with respect to the related Mortgaged Property from the related borrower to confirm no material damage to the Mortgaged Property.
With respect to the BNY Mellon Mortgage Loans originated by BNY Mellon, the BNY Member consulted with each member of the BNY Mellon Deal Team and the applicable BNY Mellon Mortgage Loan origination team to confirm that the BNY Mellon Mortgage Loans were originated or acquired in compliance with the origination and underwriting criteria described below under “The Originators—The Bank of New York Mellon—BNY Mellon’s Underwriting Standards” as well as to identify any material deviations from those origination and underwriting criteria. See“The Originators—The Bank of New York Mellon—Exceptions to Underwriting Criteria” below.
Findings and Conclusions
Based on the foregoing review procedures, BNY Mellon determined that the disclosure regarding the BNY Mellon Mortgage Loans in this prospectus is accurate in all material respects. BNY Mellon also determined that the BNY Mellon Mortgage Loans were originated in accordance with BNY Mellon’s origination procedures and underwriting criteria, except as disclosed under“—The Originators—The Bank of New York Mellon—Exceptions to Underwriting Criteria” below. BNY Mellon attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Review Procedures in the Event of a Mortgage Loan Substitution
BNY Mellon will perform a review of any mortgage loan that it elects to substitute for a Mortgage Loan in the pool in connection with a material breach of a representation or warranty or a Material Document Defect. BNY Mellon, and if appropriate its legal counsel, will review the mortgage loan documents and servicing history of the substitute mortgage loan to confirm it meets each of the criteria required under the terms of the related Mortgage Loan Purchase Agreement and the Pooling and Servicing Agreement (the “Qualification Criteria”). BNY Mellon will engage a third party accounting firm to compare the Qualification Criteria against the underlying source documentation to verify the accuracy of the review by BNY Mellon and to confirm any numerical and/or statistical information to be disclosed in any required filings under the Exchange Act. Legal counsel will also be engaged by BNY Mellon to render any tax opinion required in connection with the substitution.
Compliance with Rule 15Ga-1 under the Exchange Act.
BNY Mellon most recently filed a Form ABS-15G on February 9, 2016. BNY Mellon’s “Central Index Key” number is 0001497973. With respect to the period from and including January 1, 2013 to and including December 31, 2015, BNY Mellon has no demand, repurchase or replacement history to report as required by Rule 15Ga-1 under the Exchange Act in connection with breaches of representations and warranties made by it as a sponsor of commercial mortgage securitizations.
Retained Interests in This Securitization
Neither BNY Mellon nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization.
KGS-Alpha Real Estate Capital Markets, LLC
General
KGS-Alpha Real Estate Capital Markets, LLC, a Delaware limited liability company formed on August 29, 2013 (“KGS”), a Sponsor and an Originator, is wholly-owned by KGS Holdings, L.P., a Delaware limited partnership that was formed on June 4, 2010. KGS originates commercial real estate mortgage loans for the purpose of securitizing them in CMBS transactions. The executive offices of KGS are located at 601 Lexington Avenue, 44th Floor, New York, New York 10022.
Citibank, N.A., the Certificate Administrator and an affiliate of the Depositor, CGMRC and Citigroup Global Markets Inc., provides warehouse financing to an affiliate of KGS through a repurchase facility. Fourteen (14) of the KGS Mortgage Loans, with an aggregate principal balance of approximately $70,243,922 as of the Cut-off Date and representing approximately 10.1% of the Initial Pool Balance, are subject to that repurchase facility. Proceeds received by KGS in connection with the sale of the KGS Mortgage Loans to the Depositor will be
236 |
applied, among other things, to reacquire the financed KGS Mortgage Loans and make payments to Citibank, N.A., as the repurchase agreement counterparty.
KGS’ Commercial Mortgage Securitization Program
KGS originates commercial real estate mortgage loans with a general focus on stabilized, income-producing properties. All of the KGS Mortgage Loans being sold to the Depositor by KGS were originated by KGS. This is the sixth commercial mortgage securitization to which KGS is contributing commercial mortgage loans as an originator and the fourth commercial mortgage securitization in which KGS is a sponsor. The Mortgage Loans originated by KGS for securitization are secured by commercial, multifamily or manufactured housing properties. Neither KGS nor its affiliates act as master servicer of the commercial mortgage loans it contributes to securitizations. KGS may, from time to time, provide other types of financing including, but not limited to, bridge loans, mezzanine loans or subordinate mortgage loans. As of the Cut-off Date, the total original principal amount of commercial mortgage loans securitized by KGS is approximately $118,960,500, and the total original principal amount of such mortgage loans with respect to which KGS was a sponsor in the related securitization is approximately $53,358,000.
Neither KGS nor any of its affiliates will insure or guarantee distributions on the Certificates. The Certificateholders will have no rights or remedies against KGS for any losses or other claims in connection with the Certificates or the Mortgage Loans except in respect of the repurchase and substitution obligations for material document defects or material breaches of representations and warranties made by KGS in the applicable Mortgage Loan Purchase Agreement as described under “Description of the Mortgage Pool—Cures, Repurchases and Substitutions” in this prospectus.
Review of KGS Mortgage Loans
Overview
KGS has conducted a review of each of the KGS Mortgage Loans in connection with the securitization described in this prospectus. This review of the KGS Mortgage Loans was performed by a team comprised of real estate and securitization professionals who are employees of KGS and/or its affiliates (the “KGS Review Team”). The review procedures described below were employed with respect to all of the KGS Mortgage Loans. No sampling procedures were used in the review process. KGS is the Sponsor with respect to eighteen (18) Mortgage Loans, which are identified on Annex A to this prospectus.
Set forth below is a discussion of certain current general guidelines of KGS applicable with respect to KGS’s underwriting analysis of multifamily, manufactured housing and commercial real estate properties. All or a portion of the underwriting guidelines described below may not be applied exactly as described below at the time a particular asset is originated by KGS. See “—The Originators—KGS-Alpha Real Estate Capital Markets, LLC—Exceptions to Underwriting Criteria” in this prospectus.
Database
To prepare for securitization, members of the KGS Review Team created and reviewed a database of loan-level and property-level information relating to the KGS Mortgage Loans. The database was compiled from, among other sources, the related Mortgage Loan documents, appraisals, environmental assessment reports, property condition reports, zoning reports, insurance review summaries, borrower-supplied information (including, but not limited to, rent rolls, leases, operating statements and budgets) and information collected by the KGS Review Team during the underwriting process. Prior to securitization of the KGS Mortgage Loans, the KGS Review Team may have updated the information in the database with respect to the KGS Mortgage Loans based on updates provided by the related servicer. Updates may include information relating to loan payment status and escrows, updated operating statements, rent rolls and leasing activity, and information otherwise brought to the attention of the KGS Review Team, to the extent such updates were provided to, and deemed material by, the KGS Review Team. Such updates, if any, were not intended to be, and do not serve as, a re-underwriting of the KGS Mortgage Loans.
A data tape (the “KGS Data Tape”) containing detailed information regarding the KGS Mortgage Loans was created from the information in the database referred to in the prior paragraph. The KGS Data Tape was used to provide the numerical information regarding the KGS Mortgage Loans in this prospectus.
237 |
Data Comparison and Recalculation
KGS engaged a third-party accounting firm to perform certain data comparison and recalculation procedures designed by KGS, relating to information in this prospectus regarding the KGS Mortgage Loans. These procedures included:
· | comparing the information in the KGS Data Tape against various source documents provided by KGS; |
· | comparing numerical information regarding the KGS Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the information contained in the KGS Data Tape; and |
· | recalculating certain percentages, ratios and other formulas relating to the KGS Mortgage Loans disclosed in this prospectus. |
Legal Review
KGS engaged legal counsel to conduct certain legal reviews of the KGS Mortgage Loans for disclosure in this prospectus. In anticipation of the securitization described in this prospectus, KGS’s origination counsel reviewed a form of securitization representations and warranties at origination and, if applicable, identified exceptions to those representations and warranties based on the review of the materials described in the following paragraph. Certain members of the KGS Review Team also performed a review of the representations and warranties.
Legal counsel was also engaged in connection with this securitization transaction to assist in the review of the KGS Mortgage Loans. Such assistance included, among other things (i) the review of the representations and warranties and any exceptions thereto relating to the KGS Mortgage Loans prepared by origination counsel, (ii) the review of, and assistance in the completion by the KGS Review Team of, a Due Diligence Questionnaire relating to the KGS Mortgage Loans and (iii) the review of certain provisions in the loan documents and post-closing summaries for certain KGS Mortgage Loans.
Other Review Procedures
The KGS Review Team, with the assistance of counsel engaged in connection with this securitization transaction, also generally reviewed each KGS Mortgage Loan to determine whether it materially deviated from the underwriting guidelines set forth under “—The Originators—KGS-Alpha Real Estate Capital Markets, LLC—Overview” below.
Findings and Conclusions
Based on the foregoing review procedures, KGS determined that the disclosure regarding the KGS Mortgage Loans in this prospectus is accurate in all material respects. Except as described in “—The Originators—KGS-Alpha Real Estate Capital Markets, LLC—Exceptions to Underwriting Criteria” below, KGS has determined that the KGS Mortgage Loans were not originated with any material exceptions from KGS’s underwriting guidelines and procedures. KGS attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Review Procedures in the Event of a Mortgage Loan Substitution
KGS will perform a review of any mortgage loan that it elects to substitute for a KGS Mortgage Loan in the pool in connection with a Material Breach or a Material Document Defect. KGS, and if appropriate its legal counsel, will review the mortgage loan documents and servicing history of the substitute mortgage loan to confirm it meets each of the criteria required under the terms of the related Mortgage Loan Purchase Agreement and the Pooling and Servicing Agreement (the “Qualification Criteria”). KGS will engage a third party accounting firm to compare the Qualification Criteria against the underlying source documentation to verify the accuracy of the review by KGS and to confirm any numerical and/or statistical information to be disclosed in any required filings under the Exchange Act. Legal counsel will also be engaged by KGS to render any tax opinion required in connection with the substitution.
238 |
Repurchase Requests
KGS Holdings files reports on Form ABS-15G on behalf of KGS and most recently filed a Form ABS-15G on February 3, 2016. KGS Holdings’ Central Index Key is 0001499542. KGS is a wholly-owned subsidiary of KGS Holdings and does not have its own Central Index Key. KGS and KGS Holdings have no demand, repurchase or replacement history to report as required by Rule 15Ga-1 under the Exchange Act.
Legal Proceedings
KGS is currently not subject to any material legal proceedings, the ultimate resolution of which would have a material adverse effect on its business or would be material to Certificateholders.
Retained Interests in This Securitization
Neither KGS nor any of its affiliates will retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization.
Goldman Sachs Mortgage Company
General
Goldman Sachs Mortgage Company (“GSMC”) is a Sponsor. GSMC is a New York limited partnership. GSMC was formed in 1984. Its general partner is Goldman Sachs Real Estate Funding Corp. and its limited partner is Goldman Sachs Bank USA. GSMC’s executive offices are located at 200 West Street, New York, New York 10282, telephone number (212) 902-1000. GSMC is an affiliate of Goldman, Sachs & Co., one of the underwriters.
GSMC’s Commercial Mortgage Securitization Program
As a sponsor, GSMC originates and acquires fixed- and floating-rate commercial mortgage loans and either by itself or together with other sponsors or mortgage loan sellers, organizes and initiates the public and/or private securitization of such commercial mortgage loans by transferring the commercial mortgage loans to a securitization depositor, including GS Commercial Securities Corporation II or another entity that acts in a similar capacity. In coordination with its affiliates, GS Commercial Real Estate LP and other unaffiliated underwriters, GSMC works with rating agencies, investors, unaffiliated mortgage loan sellers and servicers in structuring the securitization transaction.
From the beginning of its participation in commercial mortgage securitization programs in 1996 through December 31, 2015, GSMC originated or acquired approximately 2,517 fixed and floating rate commercial and multifamily mortgage loans with an aggregate original principal balance of approximately $86.7 billion. As of December 31, 2015, GSMC had acted as a sponsor and mortgage loan seller on 117 fixed and floating-rate commercial mortgage-backed securitization transactions. GSMC securitized approximately $2.165 billion, $4.636 billion, $6.586 billion, $5.098 billion and $6.284 billion of commercial mortgage loans in public and private offerings in calendar years 2011, 2012, 2013, 2014 and 2015, respectively.
Neither GSMC nor any of its affiliates will insure or guarantee distributions on the Certificates. The Certificateholders will have no rights or remedies against GSMC for any losses or other claims in connection with the Certificates or the Mortgage Loans except in respect of the repurchase and substitution obligations for material document defects or the material breaches of representations and warranties made by GSMC in the related Mortgage Loan Purchase Agreement as described under “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions.”
Review of GSMC Mortgage Loans
Overview
GSMC, in its capacity as the Sponsor of the GSMC Mortgage Loans, has conducted a review of the GSMC Mortgage Loans in connection with the securitization described in this prospectus. The review of the GSMC
239 |
Mortgage Loans was performed by a deal team comprised of real estate and securitization professionals who are employees of one or more of GSMC’s affiliates (the “GSMC Deal Team”). The review procedures described below were employed with respect to all of the GSMC Mortgage Loans, except that certain review procedures only were relevant to the large loan disclosures in this prospectus, as further described below. No sampling procedures were used in the review process.
Database
To prepare for securitization, members of the GSMC Deal Team created a database of loan-level and property-level information relating to each GSMC Mortgage Loan. The database was compiled from, among other sources, the related Mortgage Loan documents, Third Party Reports, zoning reports, insurance policies, borrower supplied information (including, but not limited to, rent rolls, leases, operating statements and budgets) and information collected by the Goldman Originator during the underwriting process. After origination of each GSMC Mortgage Loan, the GSMC Deal Team updated the information in the database with respect to the GSMC Mortgage Loan based on updates provided by the related servicer relating to loan payment status and escrows, updated operating statements, rent rolls and leasing activity, and information otherwise brought to the attention of the GSMC Deal Team.
A data tape (the “GSMC Data Tape”) containing detailed information regarding each GSMC Mortgage Loan was created from the information in the database referred to in the prior paragraph. The GSMC Data Tape was used by the GSMC Deal Team to provide certain numerical information regarding the GSMC Mortgage Loans in this prospectus.
Data Comparison and Recalculation
GSMC engaged a third-party accounting firm to perform certain data comparison and recalculation procedures designed by GSMC, relating to information in this prospectus regarding the GSMC Mortgage Loans. These procedures included:
· | comparing certain information in the GSMC Data Tape against various source documents provided by GSMC that are described above under “—Database”; |
· | comparing numerical information regarding the GSMC Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the GSMC Data Tape; and |
· | recalculating certain percentages, ratios and other formulae relating to the GSMC Mortgage Loans disclosed in this prospectus. |
Legal Review
GSMC engaged various law firms to conduct certain legal reviews of the GSMC Mortgage Loans for disclosure in this prospectus. In anticipation of the securitization of each GSMC Mortgage Loan, origination counsel prepared a loan and property summary that sets forth salient loan terms and summarizes material deviations from GSMC’s standard form loan documents. In addition, origination counsel for each GSMC Mortgage Loan reviewed GSMC’s representations and warranties set forth on Annex E-1 to this prospectus and, if applicable, identified exceptions to those representations and warranties.
Securitization counsel was also engaged to assist in the review of the GSMC Mortgage Loans. Such assistance included, among other things, (i) a review of sections of the loan agreement relating to certain GSMC Mortgage Loans marked against the standard form document, (ii) a review of the loan and property summaries referred to above relating to the GSMC Mortgage Loans prepared by origination counsel and (iii) a review of a Due Diligence Questionnaire completed by the GSMC Deal Team. Securitization counsel also reviewed the property release provisions, if any, for each GSMC Mortgage Loan with multiple Mortgaged Properties for compliance with the REMIC provisions of the Code. In addition, for each GSMC Mortgage Loan originated by GSMC or its affiliates, GSMC prepared and delivered to its securitization counsel for review an asset summary, which summary includes important loan terms and certain property level information obtained during the origination process.
240 |
Origination counsel or securitization counsel also assisted in the preparation of the Mortgage Loan summaries set forth under “Significant Loan Summaries—Austin Block 21” in Annex B to this prospectus, based on their respective reviews of pertinent sections of the related Mortgage Loan documents. The applicable borrowers and borrowers’ counsel reviewed these Mortgage Loan summaries as well.
Other Review Procedures
With respect to any pending litigation that existed at the origination of any GSMC Mortgage Loan, GSMC requested updates from the related borrower, origination counsel and/or borrower’s litigation counsel. GSMC conducted a search with respect to each borrower under a GSMC Mortgage Loan to determine whether it filed for bankruptcy after origination of the GSMC Mortgage Loan. If GSMC became aware of a significant natural disaster in the vicinity of any Mortgaged Property securing a GSMC Mortgage Loan, GSMC obtained information on the status of the Mortgaged Property from the related borrower to confirm no material damage to the Mortgaged Property.
The GSMC Deal Team also consulted with the Goldman Originator to confirm that the GSMC Mortgage Loans were originated in compliance with the origination and underwriting criteria described below under “—The Originators—The Goldman Originator—Origination and Underwriting Process”, as well as to identify any material deviations from those origination and underwriting criteria. See “—The Originators—The Goldman Originator—Exceptions to Underwriting Criteria” below.
Findings and Conclusions
Based on the foregoing review procedures, GSMC determined that the disclosure regarding the GSMC Mortgage Loans in this prospectus is accurate in all material respects. GSMC also determined that the GSMC Mortgage Loans were originated in accordance with the Goldman Originator’s origination procedures and underwriting criteria, except as described under “—The Originators—The Goldman Originator—Exceptions to Underwriting Criteria” below. GSMC attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Repurchase Requests
GSMC most recently filed a Form ABS-15G on February 12, 2016. GSMC’s Central Index Key is 0001541502. With respect to the period from and including January 1, 2012 to and including December 31, 2015, GSMC has the following activity to report as required by Rule 15Ga-1 under the Exchange Act, with respect to repurchase or replacement requests in connection with breaches of representations and warranties made by it as a sponsor of commercial mortgage securitizations.
% of principal balance
(a)
| Check if Registered
(b)
| Name of Originator
(c)
| Total Assets in ABS by Originator | Assets That Were Subject of Demand | Assets That Were Repurchased or Replaced | Assets Pending Repurchase or Replacement (due to expired cure period) | Demand in Dispute | Demand Withdrawn | Demand Rejected | ||||||||||||||
#
(d)
| $
(e)
| % of principal balance
(f)
| #
(g)
| $
(h)
| % of principal balance
(i)
| #
(j)
| $
(k)
| % of principal balance
(l)
| #
(m)
| $
(n)
| % of principal balance
(o)
| #
(p)
| $
(q)
| % of principal balance
(r)
| #
(s)
| $
(t)
| % of principal balance
(u)
| #
(v)
| $
(w)
| % of principal balance
(x)
| |||
Asset Class: Commercial Mortgage Backed Securities | |||||||||||||||||||||||
GS Mortgage Securities Trust 2014-GC24 (CIK 0001617957) | X | Cantor Commercial Real Estate Lending, L.P. | 14 | 177,606,169 | 16.53 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
Citigroup Global Markets Realty Corp. | 25 | 397,577,416 | 37.01 | 0 | $0 | 0.00% | 0 | $0 | 0.00% | 0 | $0 | 0.00% | 0 | $0 | 0.00% | 0 | $0 | 0.00% | 0 | $0 | 0.00% | ||
Goldman Sachs Mortgage Company | 14 | 294,635,235 | 27.42 | 1 | 12,590,055 | 1.17 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 1 | 12,590,055 | 1.17 | 1 | 12,590,055 | 1.17 | 0 | 0 | 0.00 | ||
Starwood Mortgage Capital LLC | 22 | 204,532,050 | 19.04 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | ||
Total by Issuing Entity | 75 | 1,074,350,869 | 100% | 1 | 12,590,055 | 1.17 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 1 | 12,590,055 | 1.17 | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
Retained Interests in This Securitization
Neither GSMC nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization.
241 |
RAIT Funding, LLC
General
RAIT Funding, LLC, a Delaware limited liability company (“RAIT”), is an operating subsidiary of RAIT Financial Trust (“RFT”), a vertically integrated and internally managed real estate investment trust that originates and services commercial real estate loans, manages and advises on commercial real estate-related assets and acquires commercial real estate assets. RFT is currently headquartered at 2929 Arch Street, 17th Floor, Philadelphia, Pennsylvania 19104, and also has offices in New York, New York, Charlotte, North Carolina and Chicago, Illinois.
Citibank, N.A., the Certificate Administrator and an affiliate of the Depositor, CGMRC (a Sponsor and an Originator) and Citigroup Global Markets Inc. (one of the underwriters), provides warehouse financing to an affiliate of RAIT through a repurchase facility. However, none of the Mortgage Loans that RAIT will transfer to the Depositor are subject to that repurchase facility. See “Transaction Parties—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties—Warehouse Financing Arrangements”.
RAIT’s Securitization Program
RFT, through its operating subsidiaries, RAIT and RAIT Partnership, L.P., a Delaware limited partnership (“RAIT Partnership”), originates commercial mortgage loans, mezzanine loans, other loans and preferred equity interests that are collateralized by office buildings, retail shopping centers, multifamily apartment complexes and other properties located throughout the United States of America. RAIT’s commercial mortgage securitization program generally provides fixed rate mortgage loans having maturities between five and ten years. Additionally, RAIT Partnership provides bridge/transitional loans, mezzanine loans and preferred equity structures.
RAIT, RAIT Partnership and their affiliates directly or indirectly have contributed loans to fixed and floating rate commercial mortgage-backed securitization transactions. RAIT and its affiliates, acting as sponsor and mortgage loan seller, securitized approximately $60,831,868, $96,296,175, $539,944,126, $834,020,321 and $994,239,554 of multifamily and commercial mortgage loans in public and private offerings in calendar years 2011, 2012, 2013, 2014 and 2015, respectively. Key members of the RAIT management team were officers at JP Morgan Chase and Wachovia Bank and have been involved in the commercial mortgage securitization business since 1997.
RAIT and its affiliates generally act either as originator, mortgage loan seller and/or sponsor in the commercial mortgage securitizations in which they participate. In such securitizations, there may be co-sponsors and/or other mortgage loan sellers or originators. In such securitizations, the mortgage loans originated by RAIT or one of its affiliates are generally sold to a depositor, which in turn transfers such loans to an issuing entity, which issues commercial mortgage pass-through certificates or similar securities that are in whole or part backed by the cash flows from such mortgage loans. All of the Mortgage Loans to be sold by RAIT to the Depositor in connection with this securitization were originated by RAIT.
Neither RAIT nor any of its affiliates or subsidiaries will insure or guarantee distributions on the Certificates. The Certificateholders will have no rights or remedies against RAIT or any of its affiliates or subsidiaries for any losses or other claims in connection with the Certificates or the Mortgage Loans, except with respect to the repurchase and substitution obligations for material document defects or the material breaches of representations and warranties made by RAIT in the related Mortgage Loan Purchase Agreement, as described under “Description of the Mortgage Pool—Cures, Repurchases and Substitutions” in this prospectus.
Review of RAIT Mortgage Loans
Overview
RAIT has conducted a review of the RAIT Mortgage Loans in connection with the securitization described in this prospectus. The review of the RAIT Mortgage Loans was performed by a team comprised of real estate and securitization professionals who are employees of RFT or one or more of its affiliates (the “RAIT Securitization Team”). The review procedures described below were employed with respect to all of the RAIT Mortgage Loans. No sampling procedures were used in the review process.
242 |
Database
To prepare for securitization, members of the RAIT Securitization Team created a database of loan-level and property-level information relating to each RAIT Mortgage Loan. The database was compiled from, among other sources, the related RAIT Mortgage Loan documents, appraisals, environmental assessment reports, property condition reports, seismic studies, zoning reports, insurance review summaries, borrower-supplied information (including, but not limited to, rent rolls, leases, operating statements and budgets) and information collected by the RAIT Securitization Team during the underwriting process. After origination of each RAIT Mortgage Loan, the RAIT Securitization Team updated the information in the database with respect to such RAIT Mortgage Loan based on updates from RAIT Partnership’s servicing group, or, with respect to any RAIT Mortgage Loan being serviced by a third-party servicer, based on updates from such third-party servicer, regarding loan payment status and escrows, updated operating statements, rent rolls and leasing activity, and information otherwise brought to the attention of the RAIT Securitization Team.
A data tape containing detailed information regarding each RAIT Mortgage Loan (the “RAIT Data Tape”) was created from the information in the database referred to in the prior paragraph. The RAIT Data Tape was used to provide the numerical information regarding the RAIT Mortgage Loans in this prospectus.
Data Comparison and Recalculation
RAIT engaged a third-party accounting firm to perform certain data comparison and recalculation procedures, the nature, extent and timing of which were designed by RAIT, relating to information in this prospectus regarding the RAIT Mortgage Loans. These procedures included:
· | comparing the information in the RAIT Data Tape against various source documents provided by RAIT that are described above under“—Database”; |
· | comparing numerical information regarding the RAIT Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the RAIT Data Tape; and |
· | recalculating certain percentages, ratios and other formulae relating to the RAIT Mortgage Loans disclosed in this prospectus. |
Legal Review
RAIT engaged various law firms to conduct certain legal reviews of the RAIT Mortgage Loans for disclosure in this prospectus. In anticipation of the securitization of each RAIT Mortgage Loan, origination counsel reviewed a form of securitization representations and warranties at origination and, if applicable, identified exceptions to those representations and warranties. In addition, origination counsel for the RAIT Mortgage Loans completed due diligence questionnaires with respect to the RAIT Mortgage Loans. RFT’s underwriting staff and in-house legal team performed a similar review of representations and warranties, and completed due diligence questionnaires. Outside legal counsel was also engaged in connection with this securitization to assist in the review of the RAIT Mortgage Loans. Such assistance included, among other things, (i) a review of RAIT’s asset summary reports for each RAIT Mortgage Loan, (ii) a review of a compilation of the exception reports to the representations and warranties referred to above relating to the RAIT Mortgage Loans, and (iii) a review of a compilation of the due diligence questionnaires relating to the RAIT Mortgage Loans.
Other Review Procedures
With respect to any material pending litigation related to the RAIT Mortgage Loans and of which RFT was aware at the origination of any RAIT Mortgage Loan, RFT requested updates from the related borrower, origination counsel and/or borrower’s litigation counsel.
Findings and Conclusions
Based on the foregoing review procedures, RAIT determined that the disclosure regarding the RAIT Mortgage Loans in this prospectus is accurate in all material respects. RAIT also determined that the RAIT Mortgage Loans
243 |
were originated in accordance with RAIT’s origination procedures and underwriting criteria. RAIT attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Repurchase Requests
RAIT files reports on Form ABS-15G, and most recently filed a Form ABS-15G on February 16, 2016. RAIT’s Central Index Key is 0001587045. RAIT Partnership, an affiliate of RAIT, files reports on Form ABS-15G, and most recently filed a Form ABS-15G onFebruary 16, 2016. RAIT Partnership’s Central Index Key is 0001175134. With respect to the period from and including January 1, 2013 to and including December 31, 2015, RAIT and RAIT Partnership have no demand, repurchase or replacement history to report as required by Rule 15Ga-1 under the Exchange Act.
Retained Interests in This Securitization
Neither RAIT nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization.
Compensation of the Sponsors
In connection with the offering and sale of the Certificates contemplated by this prospectus, the Sponsors (including affiliates of the Sponsors) will be compensated for the sale of their respective Mortgage Loans in an amount equal to the excess, if any, of:
(a) the sum of any proceeds received from the sale of the Certificates to investors and the sale of servicing rights to Wells Fargo Bank, National Association for the master servicing of the Mortgage Loans and primary servicing of certain of the Serviced Loans, over
(b) the sum of the costs and expense of originating or acquiring the Mortgage Loans and the costs and expenses related to the issuance, offering and sale of the Certificates as described in this prospectus.
The mortgage servicing rights were sold to the Master Servicer for a price based on the value of the Servicing Fee to be paid to the Master Servicer with respect to each Mortgage Loan and the value of the right to earn income on investments on amounts held by the Master Servicer with respect to the Mortgage Loans. The Master Servicer will also purchase the primary servicing rights for any Serviced Companion Loan.
The Originators
Citigroup Global Markets Realty Corp., Rialto Mortgage Finance, LLC, The Bank of New York Mellon, KGS-Alpha Real Estate Capital Markets, LLC, Goldman Sachs Mortgage Company, Pillar Multifamily, LLC and RAIT Funding, LLC are referred to in this prospectus as the “Originators”.
The information set forth in this prospectus concerning the Originators and their underwriting standards has been provided by the Originators.
Citigroup Global Markets Realty Corp. and Pillar Multifamily, LLC
Overview
CGMRC’s commercial mortgage loans are primarily originated in accordance with the procedures and underwriting criteria described below. The Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as Williams Mullen Center, representing approximately 7.4% of the Initial Pool Balance, while originated by Pillar Multifamily, LLC, was re-underwritten by CGMRC in accordance with the underwriting criteria described below prior to CGMRC’s acquisition of that Mortgage Loan from an affiliate of Pillar Multifamily, LLC. However, variations from the procedures and criteria described below may be implemented as a result of various conditions including each loan’s specific terms, the quality or location of the underlying real estate, the property’s tenancy profile, the background or financial strength of the borrower/sponsor or any other pertinent information deemed material by CGMRC. Therefore, this general description of CGMRC’s origination
244 |
procedures and underwriting criteria is not intended as a representation that every commercial mortgage loan originated by it or on its behalf complies entirely with all criteria set forth below.
Process
The credit underwriting process for each CGMRC loan is performed by a deal team comprised of real estate professionals which typically includes an originator, an underwriter, a commercial closer and a third party due diligence provider operating under the review of CGMRC. This team conducts a thorough review of the related mortgaged property,which in most cases includes an examination of the following information, to the extent both applicable and available: historical operating statements, rent rolls, tenant leases, current and historical real estate tax information, insurance policies and/or schedules, and third party reports pertaining to appraisal/valuation, zoning, environmental status and physical condition/seismic condition/engineering (see “—Escrow Requirements”, “—Title Insurance Policy”, “—Property Insurance”, “—Third Party Reports—Appraisal”, “—Third Party Reports—Environmental Report” and “—Third Party Reports—Property Condition Report” below). In some cases (such as a property having a limited operating history or having been recently acquired by its current owner), historical operating statements may not be available. Rent rolls would not be examined for certain property types, such as hospitality properties or single tenant properties, and tenant leases would not be examined for certain property types, such as hospitality, self storage, multifamily and manufactured housing community properties.
A member of the CGMRC deal team or one of its agents performs an inspection of the property as well as a review of the surrounding marketenvironment, including demand generators and competing properties (if any), in order to confirm tenancy information, assess the physical quality of the collateral, determine visibility and access characteristics, and evaluate the property’s competitiveness within its market.
The CGMRC deal team or one of its agents also performs a detailed review of the financial status, credit history, credit references andbackground of the borrower and certain key principals using financial statements, income tax returns, credit reports, criminal/background investigations, and specific searches for judgments, liens, bankruptcy and pending litigation. Circumstances may also warrant an examination of the financial strength and credit of key tenants as well as other factors that may impact the tenants’ ongoing occupancy or ability to pay rent.
After the compilation and review of alldocumentation and other relevant considerations, the deal team finalizes its detailed underwriting analysis of the property’s cash flow in accordance with CGMRC’s property-specific, cash flow underwriting guidelines. Determinations are also made regarding the implementation of appropriate loan terms to structure around risks, resulting in features such as ongoing escrows or up-front reserves, letters of credit, lockboxes/cash management agreements or guarantees. A complete credit committee package is prepared to summarize all of the above referenced information.
Credit Approval
All commercial mortgage loans must be presented to one or more credit committees that include senior real estateprofessionals among others. After a review of the credit committee package and a discussion of the loan, the committee may approve the loan as recommended or request additional due diligence, modify the terms, or reject the loan entirely.
Debt Service Coverage and LTV Requirements
CGMRC’s underwriting standards generally require a minimum debt service coverage ratio (DSCR) of 1.20x and a maximum loan-to-value ratio (LTV) of 80%. However these thresholds are guidelines and exceptions arepermitted under the guidelines on the merits of each individual loan, such as reserves, letters of credit and/or guarantees and CGMRC’s assessment of the property’s future prospects. Property and loan information is not updated for securitization unless CGMRC determines that information in its possession has become stale.
Certain properties may also be encumbered by subordinatedebt secured by such property and/or mezzanine debt secured by direct or indirect ownership interests in the borrower and when such mezzanine or subordinate debt is taken into account, may result in aggregate debt that does not conform to the aforementioned DSCR and LTV parameters.
245 |
Amortization Requirements
While CGMRC’s underwriting guidelines generally permit a maximum amortization period of 30 years, certain loans may provide for interest-only payments through maturity or for a portion of the loan term. If the loan entails only a partial interest-onlyperiod, the monthly debt service, annual debt service and DSCR set forth in this prospectus and Annex A to this prospectus reflect a calculation on the future (larger) amortizing loan payment. See “Description of the Mortgage Pool” in this prospectus.
Escrow Requirements
CGMRC may require borrowers to fund escrows for taxes, insurance, capital expenditures and replacement reserves. In addition, CGMRC may identify certain risks that warrant additional escrows or holdbacks for items to be released to the borrower upon the satisfaction of certain conditions. Such escrows or holdbacks may cover tenant improvements/leasing commissions, deferred maintenance, environmental remediation or unfunded obligations, among otherthings. Springing escrows may also be structured for identified risks such as specific rollover exposure, to be triggered upon the non-renewal of one or more key tenants. In some cases, the borrower may be allowed to post a letter of credit or guaranty in lieu of a cash reserve, or provide periodic evidence of timely payment of a typical escrow item. Escrows are evaluated on a case-by-case basis and are not required for all CGMRC commercial mortgage loans.
Generally, CGMRC requiresescrows as follows:
· | Taxes—An initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are typically required to satisfy all taxes and assessments, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if there is an institutional sponsor or the sponsor is a high net worth individual or (ii) if and to the extent that a single or major tenant (which may be a ground tenant) at the related mortgaged property is required to pay taxes directly. |
· | Insurance—An initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are typically required to pay all insurance premiums, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related borrower maintains a blanket insurance policy, (ii) if and to the extent that a single or major tenant (which may be a ground tenant) at the related mortgaged property is obligated to maintain the insurance or is permitted to self-insure, or (iii) if and to the extent that another third party unrelated to the borrower (such as a condominium board, if applicable) is obligated to maintain the insurance. |
· | Replacement Reserves—Replacement reserves are generally calculated in accordance with the expected useful life of the components of the mortgaged property during the term of the mortgage loan. Annual replacement reserves are generally underwritten to the suggested replacement reserve amount from an independent, third-party property condition or engineering report, or to certain minimum requirements depending on the property type, except that such escrows are not required in certain circumstances, including, but not limited to, if and to the extent that a single or major tenant (which may be a ground tenant) at the related mortgaged property is responsible for all repairs and maintenance, including those required with respect to the roof and structure of the improvements. |
· | Tenant Improvement / Leasing Commissions—In the case of retail, office and industrial properties, a tenant improvement / leasing commission reserve may be required to be funded either at loan origination and/or during the term of the mortgage loan to cover anticipated leasing commissions or tenant improvement costs that might be associated with re-leasing certain space involving major tenants, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the tenant’s lease extends beyond the loan term or (ii) if the rent for the space in question is considered below market. |
· | Deferred Maintenance—A deferred maintenance reserve may be required to be funded at loan origination in an amount equal to 125% of the estimated cost of material immediate repairs or replacements identified in the property condition report, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the sponsor of the borrower delivers a |
246 |
guarantee to complete the immediate repairs in a specified amount of time, (ii) if the deferred maintenance amount does not materially impact the related mortgaged property’s function, performance or value or (iii) if a single or major tenant (which may be a ground tenant) at the related mortgaged property is responsible for the repairs. |
· | Environmental Remediation—An environmental remediation reserve may be required to be funded at loan origination in an amount equal to 100% to 125% of the estimated remediation cost identified in the environmental report, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the sponsor of the borrower delivers a guarantee wherein it agrees to take responsibility and pay for the identified environmental issues, (ii) if environmental insurance is obtained or already in place or (iii) if a third party unrelated to the borrower is identified as the responsible party. |
For a description of the escrows collected with respect to the CGMRC Mortgage Loans, please see Annex A to this prospectus.
Title Insurance Policy
The borrower is required to provide, and CGMRC or its counsel typically will review, a title insurance policy for each property. The provisions of the title insurance policy are required to comply with the Sponsor representation and warranty set forth in paragraph(6) on Annex E-1 to this prospectus without any exceptions that CGMRC deems material.
Property Insurance
CGMRC requires the borrower to provide, or authorizes the borrower to rely on a tenant or other third party to obtain, insurance policies meeting the requirements set forth in the Sponsor representations and warranties in paragraphs(16) and (29) on Annex E-1 to this prospectus without any exceptions that CGMRC deems material (other than with respect to deductibles and allowing a tenant to self-insure).
Third Party Reports
In addition to or as part of applicable origination guidelines or reviews described above, in the course of originating the CGMRC Mortgage Loans, CGMRC generally considered the results of third party reports as described below. In many instances, however, one or more provisions of the guidelines were waived or modified in light of the circumstances of the relevant loan or property.
Appraisal
CGMRC obtains an appraisal meeting the requirements described in the Sponsor representation and warranty set forth in paragraph(41) on Annex E-1 to this prospectus without any exceptions that CGMRC deems material. In addition, the appraisal (or a separate letter) includes a statement by the appraiser that the guidelines in Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, were followed in preparing the appraisal.
Environmental Report
CGMRC generally obtains a Phase I site assessment or an update of a previously obtained site assessment for each mortgaged property prepared by an environmental firm approved by CGMRC. CGMRC or its designated agent typically reviews the Phase I site assessment to verify the presence or absence of potential adverse environmental conditions. In cases in which the Phase I site assessment identifies any such conditions, CGMRC generally requires that the condition be addressed in a manner that complies with the Sponsor representation and warranty set forth in paragraph(40) on Annex E-1 to this prospectus without any exceptions that CGMRC deems material.
247 |
Property Condition Report
CGMRC generally obtains a current property condition report (a “PCR”) for each mortgaged property prepared by a structural engineering firm approved by CGMRC. CGMRC or an agent typically reviews the PCR to determine the physical condition of the property and to determine the anticipated costs of necessary repair, replacement and major maintenance or capital expenditure over the term of the mortgage loan. In cases in which the PCR identifies an immediate need for material repairs or replacements with an anticipated cost that is over a certain minimum threshold or percentage of loan balance, CGMRC often requires that funds be put in escrow at the time of origination of the mortgage loan to complete such repairs or replacements or obtains a guarantee from a sponsor of the borrower in lieu of reserves. See “—Escrow Requirements”above.
Servicing
Interim servicing for all CGMRC loans prior to securitization is typically performed by a nationally recognized rated third party interim servicer. In addition, primary servicing is occasionally retained by certain qualified mortgage brokerage firms under established sub-servicing agreements with CGMRC, which firms may continue primary servicing certain loans following the securitization closing date. Otherwise, servicing responsibilities are transferred from the interim servicer to the master servicer of the securitization trust (and a primary servicer when applicable) at closing of the securitization. From time to time, the interim servicer may retain primary servicing.
Co-Originations
From time to time, CGMRC originates mortgage loans together with other financial institutions. The resulting mortgage loans are evidenced by two or more promissory notes, at least one of which will reflect CGMRC as the payee. CGMRC has in the past and may in the future deposit such promissory notes for which it is named as payee with one or more securitization trusts, while its co-originators have in the past and may in the future deposit such promissory notes for which they are named payee into other securitization trusts. The CGMRC Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 5 Penn Plaza, representing approximately 9.9% of the Initial Pool Balance, was co-originated with Barclays Bank PLC. The 5 Penn Plaza Mortgage Loan was co-originated in accordance with the underwriting guidelines described above.
Exceptions to Underwriting Criteria
None of the CGMRC Mortgage Loans have exceptions to the related underwriting criteria.
Rialto Mortgage Finance, LLC
Rialto’s Underwriting Standards and Loan Analysis
Overview
Rialto is the Sponsor with respect to nine (9) Mortgage Loans. Rialto or an affiliate originated each of the Rialto Mortgage Loans being deposited into the securitization described in this prospectus. Generally, Rialto performed an underwriting analysis with respect to each Mortgage Loan applicant and the related Mortgaged Property.
Set forth below is a discussion of certain current general guidelines of Rialto generally applicable with respect to Rialto’s underwriting analysis of multifamily and commercial real estate properties which serve as the direct or indirect source of repayment for commercial real estate debt originated by Rialto. All or a portion of the underwriting guidelines described below may not be applied exactly as described below at the time a particular asset is originated by Rialto.
Process and Loan Analysis
The underwriting process for each Rialto Mortgage Loan is performed by a transaction team comprised of real estate professionals that typically includes a loan originator and an underwriter subject to oversight by the members of the management team of Rialto. This team conducts a review of the related real property, which typically includes an examination of some or all of the following information, among other things, to the extent
248 |
applicable and available: historical operating statements, rent rolls, certain tenant leases, real estate tax information, insurance policies and/or schedules and third party reports pertaining to appraisal, physical condition and environmental status. Each applicable report is reviewed for acceptability by Rialto or a third-party reviewer. The results of these reviews are incorporated into Rialto’s underwriting analysis. In some cases, certain of these documents may not be required or may not be reviewed due to the nature of the related real property. For instance, historical operating statements may not be available with respect to real property with limited operating history or that has been recently acquired by its current owner. In addition, rent rolls would not be examined for certain property types (e.g., hospitality properties), and executed tenant leases would not be examined for certain property types (e.g., hospitality, self-storage, multifamily and manufactured housing community properties) although the forms of leases would typically be reviewed for certain of these property types.
Rialto also performs an underwriting analysis with respect to the borrower under each asset it originates. The underwriting analysis of the borrower may include a review of third-party credit reports and reports resulting from judgment, lien or bankruptcy searches. Borrowers are generally required to be single purpose entities (although exceptions may be made from time to time on a case-by-case basis) and, in some cases, other structural requirements may be imposed on the borrower which are intended to reduce the likelihood of the borrower becoming involved in a bankruptcy proceeding; however, there can be no assurance that any of these structural requirements will prevent a particular borrower from becoming involved in a bankruptcy proceeding.
After the compilation and review of all applicable documentation and other relevant considerations, the transaction team finalizes its detailed underwriting analysis of the real property’s cash flow in a manner generally consistent with Rialto’s underwriting guidelines. Determinations are also made regarding the implementation of appropriate transaction terms to address certain risks, which may result in the recommendation of certain additional structural features. A credit committee memorandum is prepared which summarizes the above referenced information and which is circulated to the credit committee for review.
Credit Approval
All assets originated by Rialto must be approved by one or more specified internal committees. After a review of the credit committee package and a discussion of the asset, a committee may approve a transaction as recommended, request additional due diligence, modify the transaction terms or decline a transaction entirely.
Debt Service Coverage Ratio
In connection with the origination of an asset, Rialto will analyze whether cash flow expected to be derived from the related real property will be sufficient to make the required payments under that transaction over its expected term, taking into account, among other things, revenues and expenses for, and other debt currently secured directly or indirectly by, or that in the future may be secured directly or indirectly by, the related real property. The debt service coverage ratio is an important measure of the likelihood of default on a particular asset. In general, the debt service coverage ratio at any given time is the ratio of—
· | the amount of income, net of expenses and required reserves, derived or expected to be derived from the related real property for a given period, to |
· | the scheduled payments of principal and interest during that given period on the subject asset and any other loans that are secured by liens of senior or equal priority on, or otherwise have a senior or equal entitlement to be repaid from the income generated by, the related real 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 real property. Accordingly, based on such subjective assumptions and analysis, there can be no assurance that the underwriting analysis of any particular asset 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 particular asset, Rialto may utilize net cash flow that was calculated based on assumptions regarding projected rental income, expenses and/or occupancy. There is no assurance that such assumptions made with respect to any asset or the related real property will, in fact, be consistent with actual property performance.
249 |
Generally, the debt service coverage ratio for assets originated by Rialto, calculated as described above, will be subject to a minimum standard at origination (generally equal to or greater than 1.20x); however, exceptions may be made when consideration is given to circumstances particular to the asset, the related real property, the associated loan-to-value ratio (as described below), reserves or other factors. For example, Rialto may originate an asset with a debt service coverage ratio below the minimum standard at origination based on, among other things, the amortization features of the overall debt structure, the type of tenants and leases at the related real property, the taking of additional collateral such as reserves, letters of credit and/or guarantees, the profile of the borrower and its owners, Rialto’s judgment of improved property and/or market performance in the future and/or other relevant factors.
Loan-to-Value Ratio
Rialto also looks at the loan-to-value ratio of a prospective investment related to multifamily or commercial real estate 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 an asset related to multifamily or commercial real estate at any given time is the ratio, expressed as a percentage, of:
· | the then outstanding principal balance of the asset and any other loans that are secured (directly or indirectly) by liens of senior or equal priority on the related real property, to |
· | the estimated value of the related real 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 assets originated by Rialto, calculated as described above, will be subject to a maximum standard at origination (generally less than or equal to 80%); however, exceptions may be made when consideration is given to circumstances particular to the asset, the related real property, debt service coverage, reserves or other factors. For example, Rialto may originate a multifamily or commercial real estate loan with a loan-to-value ratio above the maximum standard at origination based on, among other things, the amortization features of the overall debt structure, the type of tenants and leases at the related real property, the taking of additional collateral such as reserves, letters of credit and/or guarantees, the profile of the borrower and its owners, Rialto’s judgment of improved property and/or market performance in the future and/or other relevant factors.
Additional Debt
When underwriting an asset, Rialto will take into account whether the related 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 asset. It is possible that Rialto 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 for investment or future sale.
The debt service coverage ratios at origination described above under “—Debt Service Coverage Ratio” and the loan-to-value ratios at origination described above under “—Loan-to-Value Ratio” may be significantly below the minimum standard and/or significantly above the maximum standard, respectively, when calculated taking into account the existence of additional debt secured directly or indirectly by equity interests in the related borrower.
Assessments of Property Condition
As part of the origination and underwriting process, Rialto will analyze the condition of the real property for a prospective asset. To aid in that analysis, Rialto may, subject to certain exceptions, inspect or retain a third party to inspect the property which, depending on the property type, such inspections generally include an evaluation of one or more of the following: functionality, design, attractiveness, visibility and accessibility of the property as well as proximity to major thoroughfares, transportation centers, employment sources, retail areas, educational facilities and recreational areas and generally assess the submarket in which the property is located, which may include evaluating competitive or comparable properties and will in most cases obtain the property reports described below.
250 |
Appraisal Report
Rialto will in most cases obtain an appraisal or an update of an existing appraisal from an independent appraiser that is state certified, belonging to the Appraisal Institute, a membership association of professional real estate appraisers, or an otherwise qualified appraiser. The appraisal reports are conducted in accordance with the Uniform Standards of Professional Appraisal Practices and the appraisal report (or a separate letter accompanying the report) will include a statement by the appraiser that the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, were followed in preparing the appraisal report.
Environmental Report
Rialto requires that an environmental consultant prepare a Phase I environmental report or that an update of a prior environmental report, a transaction screen or a desktop review is prepared with respect to the real property related to the asset. Alternatively, Rialto may forego an environmental report in limited circumstances, such as when it has obtained the benefits of an environmental insurance policy or an environmental guarantee. Depending on the findings of the initial environmental report, Rialto may require additional record searches or environmental testing, such as a Phase II environmental report with respect to the subject real property. In certain cases where an environmental report discloses the existence of, or potential for, adverse environmental conditions, including as a result of the activities of identified tenants, adjacent property owners or previous owners of the subject real property, the related borrower may be required to establish operations and maintenance plans, monitor the real property, abate or remediate the condition and/or provide additional security such as letters of credit, reserves or environmental insurance policies.
Engineering Report
Rialto generally requires that an engineering firm inspect the real property related to the asset to assess and prepare a report regarding the structure, exterior walls, roofing, interior structure, mechanical systems and/or electrical systems. In some cases, engineering reports are based on, and limited to, information available through visual inspection. Rialto will consider the engineering report in connection with determining whether to address any recommended repairs, corrections or replacements in connection with origination and whether any identified deferred maintenance should be addressed in connection with origination. In some cases, Rialto uses conclusions in the engineering reports in connection with making a determination about the necessity for escrows related to repairs and the continued maintenance of the real property.
Seismic Report
If the real property related to an asset consists of improvements located in seismic zones 3 or 4, Rialto generally requires a seismic report from an engineering firm to establish the probable maximum or bounded loss for the improvements at the property as a result of an earthquake. Generally, if a seismic report concludes that the related real property is estimated to have a probable maximum loss or scenario expected loss in excess of 20%, Rialto may require retrofitting of the improvements or that the borrower obtain earthquake insurance if available at a commercially reasonable price.
Zoning and Building Code Compliance
In connection with the origination of an asset related to multifamily or commercial real estate, Rialto will generally obtain one or more of the following to 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: zoning reports, 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. In cases where the real property constitutes a legal nonconforming use or structure, Rialto may require an endorsement to the title insurance policy and/or the acquisition of law and ordinance insurance with respect to the particular non-conformity unless it determines that: (i) the non-conformity should not have a material adverse effect on the ability of the borrower to rebuild, (ii) the real property, if permitted to be repaired or restored in conformity with current law, would in Rialto’s judgment constitute adequate security, (iii) any major casualty that would prevent rebuilding has a sufficiently remote likelihood of occurring, (iv) a variance or other similar change in applicable zoning restrictions is potentially available, or the applicable governing entity is unlikely to enforce the related limitations, (v) casualty insurance
251 |
proceeds together with the value of any additional collateral are expected to be available in an amount estimated by Rialto to be sufficient to pay off all relevant indebtedness in full, and/or (vi) a cash reserve, a letter of credit or an agreement imposing recourse liability from a principal of the borrower is provided to cover losses.
Escrow Requirements
Based on its analysis of the related real property, the borrower and the principals of the borrower, Rialto may require a borrower to fund various escrows for taxes, insurance, capital expenses, replacement reserves, re-tenanting reserves, environmental remediation and/or other matters. Rialto conducts a case-by-case analysis to determine the need for a particular escrow or reserve. Consequently, the underlying documents for some assets do not contain provisions requiring the establishment of escrows and reserves, or only require the establishment of escrows and reserves in limited amounts and/or circumstances. Furthermore, where escrows or reserves are required, Rialto 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 periodic evidence that the items for which the escrow or reserve would have been established are being paid or addressed. In some cases, Rialto may determine that establishing an escrow or reserve is not warranted given the amounts that would be involved and Rialto’s evaluation of the ability of the real 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, Rialto may originate or acquire, and may have originated or acquired, real estate related loans and other investments that vary from, or do not comply with, Rialto’s underwriting guidelines as described in this prospectus and/or such underwriting guidelines may not have been in place or may have been in place in a modified version at the time Rialto or its affiliates originated or acquired certain assets. In addition, in some cases, Rialto may not have strictly applied these underwriting guidelines as the result of a case-by-case permitted exception based upon other compensating factors.
Servicing
Interim servicing for Rialto Mortgage Loans prior to securitization is performed by a nationally recognized rated third party interim servicer. In addition, primary servicing is occasionally retained by certain qualified mortgage brokerage firms under established sub-servicing agreements with Rialto, which firms may continue primary servicing certain loans following the securitization closing date. Otherwise, servicing responsibilities are transferred from the interim servicer to the master servicer of the securitization trust (and a primary servicer when applicable) on the securitization Closing Date. From time to time, the interim servicer may retain primary servicing.
Exceptions to Underwriting Criteria
Rialto’s Mortgage Loans were not originated with any exceptions to Rialto’s underwriting criteria described above.
The Bank of New York Mellon
BNY Mellon’s Underwriting Standards
General
BNY Mellon’s commercial mortgage loans are generally originated in accordance with the underwriting criteria described below; however, variations from these guidelines may be implemented as a result of various conditions, including each mortgage loan’s specific terms, the quality or location of the underlying real estate, the property’s tenancy profile, the background or financial strength of the borrower/loan sponsor, or any other pertinent information deemed material by BNY Mellon. Therefore, this general description of BNY Mellon’s underwriting standards is not intended as a representation that every BNY Mellon mortgage loan complies entirely with all criteria set forth below. For a description of any material exceptions to the underwriting guidelines in this prospectus, if any, see “—Exceptions to Underwriting Criteria” below.
The credit underwriting process for each BNY Mellon mortgage loan is performed by the BNY Member with the support of other members of the BNY Mellon Deal Team and, in some cases, third party due diligence
252 |
providers. BNY Mellon’s credit underwriting process and any related third party due diligence provider’s work product with respect to any particular mortgage loan is ultimately subject to oversight, review and approval by the related BNY Member. The BNY Member and other members of the BNY Mellon Deal Team are required to conduct a thorough review of the related mortgaged property, which typically includes an examination of historical operating statements, rent rolls, tenant leases, current and historical real estate tax information, insurance policies and/or schedules, and third-party reports pertaining to appraisal/valuation, zoning, environmental status and physical condition/seismic/engineering.
Property Analysis
The BNY Member and other members of the BNY Mellon Deal Team perform, or cause 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. BNY Mellon assesses the submarket in which the property is located to evaluate competitive or comparable properties as well as market trends. In addition, BNY Mellon evaluates the property’s age, physical condition, operating history, lease and tenant mix, and management.
Cash Flow Analysis
The BNY Member and other members of BNY Mellon Deal Team perform a detailed review of the financial status, credit history and background of the borrower and certain key principals through financial statements, income tax returns, credit reports, criminal/background investigations, and specific searches for judgments, liens, bankruptcy and pending litigation. Circumstances may also warrant an examination of the financial strength and credit of key tenants as well as other factors that may impact the tenants’ ongoing occupancy or ability to pay rent. Determinations are also made regarding the implementation of appropriate loan terms to structure in a manner to mitigate risks, resulting in features such as ongoing escrows or upfront reserves, letters of credit, lockboxes/cash management or guarantees.
Debt Service Coverage Ratio and Loan-to-Value Ratio
BNY Mellon’s underwriting includes a calculation of the debt service coverage ratio and the loan-to-value ratio in connection with the origination of a mortgage loan. BNY Mellon’s underwriting standards generally require a minimum debt service coverage ratio of 1.25x and maximum loan-to-value ratio of 80%.
The debt service coverage ratio will generally be calculated based on the underwritten net cash flow from the property in question as determined by the BNY Mellon Deal Team and ultimately approved by the BNY Member and payments on the mortgage loan based on actual principal and/or interest due on the loan. However, underwritten net cash flow is often a highly subjective number based on a variety of assumptions regarding, and adjustments to, revenues and expenses with respect to the related real property collateral. For example, when calculating the debt service coverage ratio for a commercial or multifamily mortgage loan, BNY Mellon may utilize annual net cash flow that was calculated based on assumptions regarding projected future rental income, expenses and/or occupancy. There is no assurance that the foregoing assumptions made with respect to any prospective commercial or multifamily mortgage loan will, in fact, be consistent with actual property performance. In addition, with respect to certain mortgage loans originated by BNY Mellon, there may exist subordinate mortgage debt, mezzanine debt or preferred equity. Such mortgage loans may have a lower debt service coverage ratio and/or a higher loan-to-value ratio if such subordinate, mezzanine debt or preferred equity 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 loan-to-value ratio, in general, is the ratio, expressed as a percentage, of the then-outstanding principal balance of the mortgage loan divided by the estimated value of the related property based on an appraisal.
Appraisal
For each mortgaged property, BNY Mellon obtains a current (within 6 months of the origination date of the mortgage loan) full narrative appraisal conforming at least to the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). The appraisal is based on the current use of the Mortgaged Property and must include an estimate of the then-current market value of the property “as-is” in its then-current
253 |
condition although in certain cases, BNY Mellon may also obtain a value on an “as-stabilized” basis reflecting factors specific to the related mortgage loan. BNY Mellon 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
BNY Mellon evaluates the borrower and its principals with respect to credit history and prior experience as an owner and operator of commercial real estate properties. The evaluation will generally include obtaining and reviewing a credit report or other reliable indication of the borrower’s financial capacity; obtaining and verifying credit references and/or business and trade references; and obtaining and reviewing certifications provided by the borrower as to prior real estate experience and current contingent liabilities. Finally, although the mortgage loans generally are non-recourse in nature, in the case of certain mortgage loans, the borrower and certain principals of the borrower may be required to assume legal responsibility for liabilities as a result of, among other things, fraud, misrepresentation, misappropriation or conversion of funds and breach of environmental or hazardous materials requirements. The BNY Member, in collaboration with other members of the BNY Mellon Deal Team, 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
BNY Mellon will require a Phase I environmental assessment with respect to the real property collateral for a prospective commercial or multifamily mortgage loan. However, when circumstances warrant, BNY Mellon may utilize an update of a prior environmental assessment, a transaction screen or a desktop review. Alternatively, BNY Mellon 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. An environmental assessment conducted at any particular real property collateral will not necessarily uncover all potential environmental issues. In some instances, BNY Mellon will engage an independent third party to review an environmental assessment and provide a summary of its findings. Depending on the findings of the initial environmental assessment, BNY Mellon may require additional record searches or environmental testing, such as a Phase II environmental assessment with respect to the real property collateral.
Engineering Assessment
In connection with the origination process, BNY Mellon will require 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, BNY Mellon will determine the appropriate response to any recommended repairs, corrections or replacements and any identified deferred maintenance.
Title Insurance Policy
The borrower is required to provide, and the BNY Member and others on the BNY Mellon Deal Team review, a title insurance policy for each mortgaged property. The title insurance policy must meet the following requirements: (a) the policy must be written by a title insurer licensed to do business in the jurisdiction where the mortgaged property is located; (b) the policy must be in an amount equal to the original principal balance of the mortgage loan; (c) the protection and benefits must run to the mortgagee and its successors and assigns; (d) the policy should be written on a standard policy form of the American Land Title Association or equivalent policy promulgated in the jurisdiction where the mortgaged property is located; and (e) the legal description of the mortgaged property in the title policy must conform to that shown on the survey of the mortgaged property, where a survey has been required.
Property Insurance
The borrower is required to provide, and the BNY Member and others on the BNY Mellon Deal Team review, certificates of required insurance with respect to the mortgaged property. Such insurance may include: (1) commercial general liability insurance for bodily injury or death and property damage; (2) a fire and extended perils insurance policy providing “special” form coverage including coverage against loss or damage by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion; (3) if applicable, boiler and
254 |
machinery coverage; (4) if the mortgaged property is located in a flood hazard area, flood insurance; and (5) such other coverage as BNY Mellon may require based on the specific characteristics of the mortgaged property.
Seismic Report
A seismic report is required for all properties located in seismic zones 3 or 4.
Zoning and Building Code Compliance
In connection with the origination of a commercial or multifamily mortgage loan, BNY Mellon will examine whether the use and occupancy of the related real property collateral is in material compliance with zoning, land-use, building rules, regulations and orders then applicable to that property. Evidence of this compliance may be in the form of one or more of the following: a zoning report, legal opinions, surveys, recorded documents, temporary or permanent certificates of occupancy, letters from government officials or agencies, title insurance endorsements, engineering or consulting reports and/or representations by the related borrower.
Escrow Requirements
BNY Mellon requires certain borrowers to fund various escrows for taxes, insurance, capital expenses and replacement reserves, which reserves in many instances will be limited to certain capped amounts. In addition, BNY Mellon may identify certain risks that warrant additional escrows or holdbacks for items such as leasing-related matters, deferred maintenance, environmental remediation or unfunded obligations, which escrows or holdbacks would be released upon satisfaction of the applicable conditions. Springing escrows may also be structured for identified risks such as specific rollover exposure, to be triggered upon the non-renewal of one or more key tenants. Escrows are evaluated on a case-by-case basis and are not required for all commercial mortgage loans originated by BNY Mellon. The typical required escrows for mortgage loans originated by BNY Mellon are as follows:
· | Taxes—Typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are required to provide BNY Mellon with sufficient funds to satisfy all taxes and assessments. BNY Mellon may waive this escrow requirement under appropriate circumstances including, but not limited to, (i) where there is institutional sponsorship or a high net worth individual, or (ii) where a tenant is required to pay the taxes directly. |
· | Insurance—If the property is insured under an individual policy (i.e., the property is not covered by a blanket policy), typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are required to provide the lender with sufficient funds to pay all insurance premiums. BNY Mellon may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where an investment grade tenant is responsible for paying all insurance premiums, (ii) where there is institutional sponsorship or a high net worth individual, or (iii) where a property is covered by a blanket insurance policy maintained by the borrower or loan sponsor. |
· | Replacement Reserves— Replacement reserves are generally calculated in accordance with the expected useful life of the components of the property during the term of the mortgage loan plus two years. BNY Mellon relies on information provided by an independent engineer to make this determination. BNY Mellon may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where there is institutional sponsorship or a high net worth individual, or (ii) where an investment grade tenant is responsible for replacements under the terms of its lease. |
· | Completion Repair/Environmental Remediation— Typically, a completion repair or remediation reserve is required where an environmental or engineering report suggests that such reserve is necessary. Upon funding of the applicable mortgage loan, BNY Mellon generally requires that at least 100% - 125% of the estimated costs of repairs or replacements be reserved and generally requires that repairs or replacements be completed within a year after the funding of the applicable mortgage loan. BNY Mellon may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where a secured creditor insurance policy or borrower insurance policy is in place, |
255 |
(ii) where an investment grade party has agreed to take responsibility, and pay, for any required repair or remediation or (iii) recommended costs do not exceed a de minimis amount. |
· | Furniture, Fixtures and Equipment—A reserve for furniture, fixtures and equipment expenses may be required to be funded during the term of the mortgage loan based on the suggested reserve amount from an independent, third-party property condition or engineering report, or based on certain minimum requirements depending on the property type. |
· | Tenant Improvement/Lease Commissions— In most cases, various tenants have lease expirations within the mortgage loan term. To mitigate this risk, special reserves may be required to be funded either at closing of the mortgage loan and/or during the mortgage loan term to cover certain anticipated leasing commission, free rent periods or tenant improvement costs which might be associated with re-leasing the space occupied by such tenants. BNY Mellon may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where no material leases expire within the mortgage loan term, or the lease roll is not concentrated, (ii) where tenant improvement costs are the responsibility of tenants, (iii) where rents at the mortgaged property are considered to be sufficiently below market, or (iv) where there is institutional sponsorship or a high net worth individual. |
Notwithstanding the foregoing discussion under this caption “—BNY Mellon’s Underwriting Standards”, one or more of the BNY Mellon Mortgage Loans may vary from, or may not fully comply with, BNY Mellon’s underwriting guidelines described above. In addition, in the case of one or more of the Mortgage Loans contributed to this securitization by BNY Mellon, BNY Mellon may not have strictly applied these underwriting guidelines as the result of a case-by-case permitted exception based upon other compensating or mitigating factors. See “—Exceptions to Underwriting Criteria” below.
Co-Originations
From time to time, BNY Mellon originates mortgage loans together with other financial institutions. The resulting mortgage loans are evidenced by two or more promissory notes, at least one of which will reflect BNY Mellon as the payee. BNY Mellon has in the past and may in the future deposit such promissory notes for which it is named as payee with one or more securitization trusts, while its co-originators have in the past and may in the future deposit such promissory notes for which they are named payee into other securitization trusts. The BNY Mellon Mortgage Loan secured by the Mortgaged Property identified on Annex A to this prospectus as 600 Broadway, representing approximately 4.3% of the Initial Pool Balance, was co-originated with German American Capital Corporation. Such 600 Broadway Mortgage Loan was co-originated in accordance with the underwriting guidelines described above.
Exceptions to Underwriting Criteria
The BNY Mellon Mortgage Loans were originated or, if acquired, re-underwritten in accordance with the applicable underwriting guidelines set forth above.
KGS-Alpha Real Estate Capital Markets, LLC
Overview
KGS is the Sponsor with respect to the KGS Mortgage Loans. KGS originated each of the KGS Mortgage Loans being deposited into the securitization described in this prospectus. Generally, KGS performed an underwriting analysis with respect to each KGS Mortgage Loan applicant and the related Mortgaged Property.
Notwithstanding the discussion below, given the unique nature of commercial, multifamily and manufactured housing properties, the underwriting 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, the property type, current use, size, location, market conditions, reserve requirements, additional collateral, tenant quality and lease terms, borrower identity, sponsorship, performance history and/or other factors. Therefore, this general description of KGS’s underwriting criteria is not intended as a representation that every commercial mortgage loan originated by KGS complies entirely with all procedures and
256 |
criteria set forth below. For a description of any material exceptions to the underwriting guidelines in this prospectus, see “—Exceptions to Underwriting Criteria” below.
If a mortgage loan exhibits one or more variances from the general underwriting procedures described below, such variances may be considered acceptable under certain circumstances, including but not limited to the following circumstances: (i) if the property achieves a low loan-to-value ratio; (ii) if the property achieves a high debt service coverage ratio; (iii) the quality of the property location; (iv) certain favorable market characteristics; (v) experienced sponsor(s)/guarantor(s) with financial wherewithal; (vi) additional springing reserves; (vii) cash flow sweeps; or (viii) elements of recourse included in the mortgage loan. For a description of any material exceptions to the underwriting guidelines in this prospectus, see “—Exceptions to Underwriting Criteria” below.
Loan Analysis
Generally, both a credit analysis and a collateral analysis is conducted with respect to each mortgage loan. The credit analysis of the borrower generally includes a review of third-party credit reports, certifications provided by the borrower with respect to prior real estate experience and current contingent liabilities and/or judgment, lien, bankruptcy and pending litigation searches. The collateral analysis generally includes a review of the historical property operating statements, rent rolls and certain significant tenant leases, in each case to the extent available and applicable. The credit underwriting also generally includes a review of third party appraisals, as well as environmental reports, engineering assessments, zoning reports and seismic reports, if applicable and obtained. Generally, a site inspection is completed by a member of the KGS team to assess the tenancy of the property and to ascertain the overall quality, functionality and competitiveness of the property, including its neighborhood and market, accessibility and visibility. The submarket in which the property is located is assessed to evaluate competitive or comparable properties as well as market trends. Unless otherwise specified in this prospectus, all financial, occupancy and other information contained in this prospectus is based on such information and we cannot assure you that such financial, occupancy and other information remains accurate.
Loan Approval
All mortgage loans originated by KGS require approval by a loan credit committee, which includes senior risk management executives of KGS. The committee may approve a mortgage loan as recommended, request additional due diligence prior to approval, approve it subject to modifications of the loan terms, or decline a mortgage loan transaction.
Debt Service Coverage Ratio and Loan-to-Value Ratio
Generally, the debt service coverage ratio for mortgage loans originated by KGS that is calculated based on values determined at the origination of the mortgage loan will be equal to or greater than 1.20x and the loan-to-value ratio for mortgage loans originated by KGS that is calculated based on values determined at the origination of the mortgage loan will be equal to or less than 80%. Notwithstanding the foregoing, exceptions may be made when consideration is given to circumstances particular to the mortgage loan, the related property, reserves or other factors. For example, KGS may originate a mortgage loan with a debt service coverage ratio below 1.20x or a loan-to-value ratio greater than 80% based on, among other factors, the location of the property, 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 property, the posting of additional collateral such as reserves, letters of credit and/or guarantees, KGS’s judgment of acceptable property and/or market performance, and/or other relevant factors. Additionally, mortgage loans originated by KGS may have a lower debt service coverage ratio and a higher loan-to-value ratio if any permitted subordinate or mezzanine debt is taken into account.
Additional Debt and Amortization
Certain mortgage loans originated by KGS may include, or may permit in the future, (i) subordinate debt secured by the related property and/or (ii) mezzanine debt secured by direct or indirect ownership interests in the borrower, and/or (iii) additional unsecured subordinate debt. It is possible that KGS or an affiliate of KGS may be the lender on any such additional debt. Also, certain mortgage loans may provide for payments of interest only, with no principal paydowns or amortization prior to maturity, or for an interest only period during a portion of the mortgage loan term.
257 |
Assessments of Property Condition
As part of the underwriting process, the property assessments and reports described below are typically obtained:
Appraisals
Independent appraisals or an update of an independent appraisal is required in connection with the origination of each mortgage loan. KGS requires that the appraiser comply with and abide by Title XI of the Financial Institution Reform, Recovery and Enforcement Act of 1989 and the Uniform Standards of Professional Appraisal Practice. The appraisal is based on the current use of the mortgaged property and must include an estimate of the then-current market value of the property “as-is” in its then-current condition, although in certain cases, KGS may also obtain a value on an “as-stabilized” basis reflecting leases that have been executed but for which the related tenants have not yet commenced paying rent. KGS calculates the loan-to-value ratio based on the values set forth in the appraisal.
Environmental Assessment
Phase I environmental assessments that conform to the American Society for Testing and Materials (ASTM) Standard E 1527-13 entitled, “Standard Practices for Environmental Site Assessment: Phase I Environmental Site Assessment Process”, as may be amended from time to time, are performed on all properties. However, when circumstances warrant, an update of a prior environmental assessment, a transaction screen or a desktop review may be utilized. Nevertheless, an environmental assessment conducted at any particular real property collateral will not necessarily cover all potential environmental issues. In cases in which the assessment or update identified conditions that would require clean-up, remedial action or another response, KGS may require any of the following: additional environmental testing, such as a Phase II environmental assessment with respect to the subject real property collateral; that the borrower deposit reserves or post a letter of credit in an amount sufficient to complete any required remediation; an environmental or pollution liability insurance policy; remedial or other action from the borrower (including the establishment of any operations and maintenance plans recommended by the assessment); and/or a guaranty from the sponsor of the borrower.
Property Condition Assessments
Inspections or updates of previously conducted inspections are conducted by independent licensed engineers, architects or other consultants for all properties in connection with the origination of a mortgage loan. The exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements located at a property are inspected. The resulting reports on some of the properties may indicate a variety of deferred maintenance items and recommended capital expenditures. In some instances, repairs or maintenance are required to be completed before closing or within a certain period of time after origination (generally not more than 12 months from the origination date) and/or cash reserves are established to fund the deferred maintenance or replacement items.
Seismic Report
Generally, a seismic report is required for all properties located in seismic zones 3 or 4.
Zoning and Building Code Compliance
With respect to each mortgage loan, KGS will generally consider 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 such property. Evidence of this compliance may be in the form of one or more of the following: zoning reports; surveys; recorded documents; temporary or permanent certificates of occupancy; letters from government officials or agencies; title insurance endorsements; engineering or consulting reports; legal opinions; and/or representations by the related borrower. In some cases, a mortgaged property may constitute a legal non-conforming use or structure. In such cases, KGS may require an endorsement to the title insurance policy and/or the acquisition of law and ordinance coverage in the casualty insurance policy with respect to the particular non-conformity unless it determines that: (i) the non-conformity should not have a material adverse effect on the ability of the borrower to rebuild; (ii) the real property, if permitted to be repaired or restored in conformity with current law, would in KGS’s judgment constitute adequate security; (iii) casualty insurance
258 |
proceeds together with the value of any additional collateral are expected to be available in an amount estimated by KGS to be sufficient to pay off all relevant indebtedness in full; and/or (iv) a cash reserve, a letter of credit or an agreement imposing recourse liability from the sponsor of the borrower is provided to cover losses.
Escrow Requirements
KGS typically requires most borrowers to fund various escrows for taxes and insurance, immediate repairs, replacement reserves and, if applicable, tenant improvements and leasing commissions. Depending on the details of the loan transaction and the results of underwriting and due diligence review, additional reserves may be required. The following is a brief description of the reserves typically required by KGS:
· | Taxes—typically, an initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are required to provide KGS with sufficient funds to satisfy all taxes and assessments, except (i) where there is an institutional sponsor or high net worth individual sponsor, (ii) if the tenant at a single tenant property or an investment grade or creditworthy tenant is required to pay taxes directly or (iii) where there is a low loan-to-value ratio or the mortgaged property meets a certain threshold debt service coverage ratio. |
· | Insurance—if the property is insured under an individual policy (i.e., the property is not covered by a blanket policy), typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are required to provide KGS with sufficient funds to pay all insurance premiums, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related borrower maintains a blanket insurance policy, (ii) if the tenant at a single tenant property or an investment grade or creditworthy tenant is responsible for paying insurance premiums or self-insuring or (iii) where there is a low loan-to-value ratio or the mortgaged property meets a certain threshold debt service coverage ratio. |
· | Replacement Reserves—replacement reserves are generally calculated in accordance with the expected useful life of the components of the property during the term of the mortgage loan, except that such escrows are not required in certain circumstances, including, but not limited to (i) if the tenant at a single tenant property or an investment grade or creditworthy tenant is responsible for all repairs and maintenance or if a third party such as a franchisor, management company or association is collecting reserves for such purpose or (ii) where there is a low loan-to-value ratio or the mortgaged property meets a certain threshold debt service coverage ratio. |
· | Immediate Repairs / Environmental Remediation—typically, an immediate repair or remediation reserve is required where an environmental or engineering report suggests that such reserve is necessary. Upon funding of the applicable mortgage loan, KGS generally requires that at least 110% of the estimated costs of repairs be reserved and generally requires that repairs be completed within a year after the funding of the applicable mortgage loan, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the sponsor of the borrower delivers a guarantee with respect to such matter, (ii) if the estimated cost of such repair or remediation does not materially impact the property’s function, performance or value, (iii) if the related mortgaged property is a single tenant property for which the tenant is responsible for such repair or remediation or (iv) in the case of environmental remediation, insurance is obtained or already in place. |
· | Tenant Improvement / Leasing Commissions—in most cases, various tenants have lease expirations within the loan term. To mitigate this risk, special reserves may be required to be funded either at closing of the mortgage loan and/or during the related loan term to cover certain anticipated leasing commissions or tenant improvement costs which might be associated with re-leasing the space occupied by such tenants, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related mortgaged property is a single tenant property (or is substantially leased to a single tenant) and the related tenant’s lease extends beyond the loan term, (ii) where rent at the related mortgaged property is considered below market or (iii) where there is a low loan-to-value ratio or the mortgaged property meets a certain threshold debt service coverage ratio. |
259 |
Furthermore, KGS 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 the sponsor of the borrower or periodic evidence that the items for which the escrow or reserve would have been established are being paid or addressed. In some cases, KGS may determine that establishing an escrow or reserve is not warranted given the amounts that would be involved and KGS’s evaluation of the cash flow generated by the property and/or the ability of 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. Occasionally, KGS will implement a cap on the total dollar amount that is required to be collected into a reserve account. In certain cases, KGS has structured springing reserves for certain identified risks. This practice is utilized based upon KGS’s evaluation of the cash flow generated by the property and/or the ability of the borrower or a holder of direct or indirect ownership interests in the borrower to fund expenses at the property.
Title Insurance Policy
The borrower is required to provide, and KGS’s origination counsel will review, a title insurance policy for each property. The title insurance policies provided typically must meet the following requirements: (i) the title insurance policy is written by a title insurer licensed to do business in the jurisdiction where the mortgaged property is located, (ii) the title insurance policy is in an amount at least equal to the original principal balance of the mortgage loan, (iii) the title insurance policy’s protection and benefits run to the mortgagee and its successors and assigns, (iv) the title insurance policy is written on an American Land Title Association form or equivalent policy promulgated in the jurisdiction where the mortgaged property is located (to the extent available), and (v) if a survey was prepared, the legal description of the mortgaged property in the title policy conforms to that shown on the survey.
Property Insurance
KGS typically requires the borrower to provide one or more of the following insurance policies: (i) commercial general liability insurance for bodily injury or death and property damage; (ii) an “All Risk of Physical Loss” policy; (iii) if applicable, boiler and machinery coverage; and (iv) if the mortgaged property is located in a special flood hazard area where mandatory flood insurance purchase requirements apply, flood insurance. In some cases, a tenant is responsible for maintaining insurance and, subject to the satisfaction of rating conditions or net worth criteria, such tenant is permitted to self-insure against the risks.
Servicing
Interim servicing for all loans originated by KGS prior to securitization is typically performed by Wells Fargo Bank, National Association. However, there are circumstances when KGS uses a servicer other than Wells Fargo Bank, National Association. Generally, servicing responsibilities are transferred from the interim servicer to the master servicer of the securitization trust at the closing of the securitization. From time to time, the interim servicer may retain primary servicing.
Exceptions to Underwriting Criteria
None of KGS’s Mortgage Loans were originated with any exceptions to KGS’s underwriting criteria described above.
The Goldman Originator
Overview
GSMC, an Originator, is affiliated with Goldman, Sachs & Co., one of the underwriters. GSMC is referred to as the “Goldman Originator” in this prospectus.
The primary business of the Goldman Originator is the underwriting and origination, either by itself or together with another originator, of mortgage loans secured by commercial or multifamily properties. The commercial mortgage loans originated by the Goldman Originator include both fixed and floating rate commercial mortgage loans and such commercial mortgage loans are often included in both public and private securitizations.
260 |
Fixed Rate Commercial Mortgage Loans(1)
Year | Total Goldman Originator | Total Goldman Originator | ||
2015 | $6.2 billion | $6.0 billion | ||
2014 | $2.9 billion | $3.1 billion | ||
2013 | $5.0 billion | $5.3 billion | ||
2012 | $5.6 billion | $4.6 billion | ||
2011 | $2.3 billion | $2.2 billion | ||
2010 | $1.6 billion | $1.1 billion | ||
2009 | $400 million | $400 million |
Floating Rate Commercial Mortgage Loans(1)
Year | Total Goldman Originator | Total Goldman Originator | ||||
2015 | $2.0 billion | $261 million | ||||
2014 | $3.2 billion | $2.0 billion | ||||
2013 | $777 million | $1.3 billion | ||||
2012 | $1.9 billion | $0 | ||||
2011 | $140 million | $0 | ||||
2010 | $0 | $0 | ||||
2009 | $40 million | $0 |
(1) Represents origination for the Goldman Originator and affiliates of the Goldman Originator originating commercial mortgage loans.
Origination and Underwriting Process
The Goldman Originator’s commercial mortgage loans are primarily originated in accordance with the origination procedures and underwriting criteria described below. However, variations from these procedures and criteria may occur as a result of various conditions including each loan’s specific terms, the quality or location of the underlying real estate, the property’s tenancy profile, the background or financial strength of the borrower/sponsor, or any other pertinent information deemed material by the Goldman Originator. Therefore, this general description of the Goldman Originator’s origination procedures and underwriting criteria is not intended as a representation that every commercial mortgage loan originated by it complies entirely with all procedures and criteria set forth below. For important information about the circumstances that have affected the underwriting of a GSMC Mortgage Loan in the mortgage pool, see “—Exceptions to Underwriting Criteria” below and “Exceptions to Sponsor Representations and Warranties” in Annex E-2 to this prospectus.
The underwriting process for each mortgage loan originated by the Goldman Originator is performed by an origination team comprised of real estate professionals which typically includes an originator, analyst, loan officer and commercial closer. This team conducts a review of the related mortgaged property, which typically includes an examination of historical operating statements (if available), rent rolls, certain tenant leases, current and historical real estate tax information, insurance policies and/or schedules, and third-party reports pertaining to appraisal/valuation, zoning, environmental status and physical condition/seismic/engineering. In certain cases, the Goldman Originator may engage an independent third party due diligence provider, pursuant to a program of specified procedures, to assist in the underwriting and preparation of analyses required by such procedures, subject to the oversight and ultimate review and approval by the Goldman Originator origination team.
A member of the Goldman Originator origination team performs or engages a third party to perform an inspection of the property in order to assess the physical quality of the collateral, confirm tenancy, and determine visibility and accessibility of the property as well as proximity to major thoroughfares, transportation centers, employment sources, retail areas, educational facilities and recreational areas. Such site inspections are also generally used to assess the submarket in which the property is located and to evaluate the property’s competitiveness within its market.
The Goldman Originator origination team also performs a review of the financial status, credit history and background of the borrower and certain key principals of the borrower. Among the items generally reviewed are financial statements, independent credit reports, criminal/background investigations, and specific searches in select jurisdictions for judgments, liens, bankruptcy and pending litigation.
261 |
After the compilation and review of all documentation and other relevant considerations, the origination team finalizes its underwriting analysis of the property’s cash flow in accordance with the property specific cash flow underwriting guidelines of the Goldman Originator. Determinations are also made regarding the implementation of appropriate loan terms to structure around risks, resulting in features such as ongoing escrows or up front reserves, letters of credit, lockboxes/cash management agreements or guarantees. A complete credit committee package is prepared to summarize all of the above referenced information.
All commercial mortgage loans must be presented to one or more credit committees which consist of senior real estate professionals, among others. After a review of the credit committee package and a discussion of the loan, the committee may approve the loan as recommended or request additional due diligence, modify the terms, or reject the loan entirely.
The Goldman Originator’s underwriting guidelines generally require that a mortgage loan have, at origination, a minimum debt service coverage ratio of 1.20x and maximum loan-to-value ratio of 80%. However, these thresholds are guidelines and exceptions may be made on the merits of each individual loan taking into account such factors as reserves, letters of credit and/or guarantees, the Goldman Originator’s judgment of the property and/or market performance in the future.
Certain properties may also be encumbered by, or otherwise support payments on, subordinate debt and/or mezzanine debt secured by direct or indirect ownership interests in the borrower. It is possible that the Goldman Originator or an affiliate will be a lender on that additional debt, and may either sell such debt to an unaffiliated third party or hold it in inventory. When such additional debt is taken into account, the aggregate debt may not conform to the aforementioned debt service coverage ratio and loan-to-value ratio parameters.
The Goldman Originator may require borrowers to fund various escrows for taxes, insurance, capital expenses and replacement reserves. In addition, the Goldman Originator may identify certain risks that warrant additional escrows or holdbacks for items such as leasing-related matters, deferred maintenance, environmental remediation or unfunded obligations, which escrows or holdbacks would be released upon satisfaction of the applicable conditions. Springing escrows may also be structured for identified risks such as specific rollover exposure, to be triggered upon the non-renewal of one or more key tenants. In some cases, the borrower may be allowed to post a letter of credit or guaranty in lieu of a cash reserve, or provide periodic evidence of timely payment of a typical escrow item. Escrows are evaluated on a case-by-case basis and are not required for all commercial mortgage loans originated by the Goldman Originator.
Generally, the required escrows for GSMC Mortgage Loans are as follows:
· | Taxes—An initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are typically required to satisfy all taxes and assessments, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if there is an institutional or high net-worth individual property sponsor or (ii) if the related mortgaged property is a single tenant property in which the related tenant is required to pay taxes directly. |
· | Insurance—An initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are typically required to pay all insurance premiums, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related borrower maintains a blanket insurance policy or (ii) if the related mortgaged property is a single tenant property and the related tenant is required to obtain insurance directly or self-insures. |
· | Replacement Reserves—Replacement reserves are generally calculated in accordance with the expected useful life of the components of the property during the term of the mortgage loan. Annual replacement reserves are generally underwritten to the suggested replacement reserve amount from an independent, third-party property condition or engineering report, or to certain minimum requirements by property type, except that such escrows are not required in certain circumstances, including, but not limited to, if the related mortgaged property is a single tenant property and the related tenant is responsible for all repairs and maintenance, including those required with respect to the roof and improvement structure. |
262 |
· | Tenant Improvement / Leasing Commissions—Tenant improvement / leasing commission reserves may be required to be funded either at loan origination and/or during the related mortgage loan term to cover certain anticipated leasing commissions or tenant improvement costs which might be associated with re-leasing the space, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related mortgaged property is a single tenant property and the related tenant’s lease extends beyond the loan term or (ii) where rent at the related mortgaged property is considered below market. |
· | Deferred Maintenance—A deferred maintenance reserve may be required to be funded at loan origination in an amount equal to 100% to 125% of the estimated cost of material immediate repairs or replacements identified in the property condition or engineering report, except that such escrows are not required in certain circumstances, including, but not limited to, (i) the sponsor of the borrower delivers a guarantee to complete the immediate repairs in a specified amount of time, (ii) the deferred maintenance amount does not materially impact the function, performance or value of the property or (iii) if the related mortgaged property is a single tenant property the tenant is responsible for the repairs. |
· | Environmental Remediation—An environmental remediation reserve may be required at loan origination in an amount equal to 100% to 125% of the estimated remediation cost identified in the environmental report, except that such escrows are not required in certain circumstances, including, but not limited to, (i) the sponsor of the borrower delivers a guarantee agreeing to take responsibility and pay for the identified environmental issues or (ii) environmental insurance is obtained or already in place. |
For a description of the escrows collected with respect to the GSMC Mortgage Loans, please see Annex A to this prospectus.
The Goldman Originator and its origination counsel will generally examine whether the use and occupancy of the 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, zoning reports and/or representations by the related borrower. In some cases, a mortgaged property may constitute a legal non-conforming use or structure. In such cases, the Goldman Originator may require an endorsement to the title insurance policy and/or the acquisition of law and ordinance coverage in the casualty insurance policy with respect to the particular non-conformity unless it determines that: (i) the non-conformity should not have a material adverse effect on the ability of the borrower to rebuild; or (ii) if the improvements are rebuilt in accordance with currently applicable law, the value and performance of the property would be acceptable; or (iii) any major casualty that would prevent rebuilding has a sufficiently remote likelihood of occurring; or (iv) a cash reserve, a letter of credit or an agreement imposing recourse liability from a principal of the borrower is provided to cover losses.
The borrower is required to provide, and the Goldman Originator or its origination counsel typically will review, a title insurance policy for each property. The title insurance policies provided typically must meet the following requirements: (i) written by a title insurer licensed to do business in the jurisdiction where the mortgaged property is located, (ii) in an amount at least equal to the original principal balance of the mortgage loan, (iii) protection and benefits run to the mortgagee and its successors and assigns, (iv) written on an American Land Title Association form or equivalent policy promulgated in the jurisdiction where the mortgaged property is located and (v) if a survey was prepared, the legal description of the mortgaged property in the title policy conforms to that shown on the survey.
Except in certain instances where credit rated tenants are required to obtain insurance or may self-insure, the Goldman Originator typically requires that the related mortgaged property be insured by a hazard insurance policy with a customary deductible and in an amount at least equal to the lesser (x) of the outstanding principal balance of the mortgage loan and (y) 100% of the full insurable replacement cost of the improvements located on the property. If applicable, the policy contains appropriate endorsements to avoid the application of coinsurance and does not permit reduction in insurance proceeds for depreciation, except that the policy may permit a deduction for depreciation in connection with a cash settlement after a casualty if the insurance proceeds are not being applied to rebuild or repair the damaged improvements.
263 |
Flood insurance, if available, must be in effect for any mortgaged property that at the time of origination included material improvements in any area identified in the Federal Register by the Federal Emergency Management Agency as a special flood hazard area. The flood insurance policy must meet the requirements of the then-current guidelines of the Federal Insurance Administration, be provided by a generally acceptable insurance carrier and be in an amount representing coverage not less than the least of: (i) the outstanding principal balance of the mortgage loan, (ii) the full insurable value of the property and (iii) the maximum amount of insurance available under the National Flood Insurance Act of 1968, except in some cases where self-insurance is permitted.
The standard form of hazard insurance policy typically covers physical damage or destruction of the improvements on the mortgaged property caused by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion. The policies may contain some conditions and exclusions to coverage, including exclusions related to acts of terrorism. Generally, each of the mortgage loans requires that the related property have coverage for terrorism or terrorist acts, if such coverage is available at commercially reasonable rates. In some cases, there is a cap on the amount that the related borrower will be required to expend on terrorism insurance.
Each mortgage typically also requires the borrower to maintain comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the property in an amount customarily required by institutional lenders.
Each mortgage typically further requires the related borrower to maintain business interruption or rent loss insurance in an amount not less than 100% of the projected rental income from the related property for not less than twelve months.
Although properties are typically not insured for earthquake risk, a borrower will be required to obtain earthquake insurance if the seismic report indicates that the probable maximum loss (“PML”) or scenario expected loss (“SEL”) is greater than 20%.
In the course of originating its Mortgage Loans, the Goldman Originator generally considered the results of third party reports as described below:
· | Appraisal—The Goldman Originator obtains an appraisal or an update of an existing appraisal for each mortgaged property prepared by an appraisal firm approved in accordance with the Goldman Originator’s internal documented appraisal policy. The Goldman Originator origination team and a third party consultant engaged by the Goldman Originator typically reviews the appraisal. All appraisals are conducted by an independent appraiser that is state certified, an appraiser belonging to the Appraisal Institute, a member association of professional real estate appraisers, or an otherwise qualified appraiser. All appraisals are conducted in accordance with the Uniform Standards of Professional Appraisal Practices. In addition, the appraisal report (or a separate letter) includes a statement by the appraiser that the guidelines in Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, were followed in preparing the appraisal. |
· | Environmental Report—The Goldman Originator obtains a Phase I site assessment or an update of a previously obtained site assessment for each mortgaged property prepared by an environmental firm approved by the Goldman Originator. In certain cases, the borrower may have obtained the Phase I site assessment, and the assessment is then re-addressed to the Goldman Originator. The Goldman Originator origination team and a third party environmental consultant engaged by the Goldman Originator or the borrower typically reviews the Phase I site assessment to verify the presence or absence of potential adverse environmental conditions. Furthermore, an environmental assessment conducted at any particular real property collateral will not necessarily cover all potential environmental issues. 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 the Goldman Originator or the environmental consultant believes that such an analysis is warranted under the circumstances. In cases in which the Phase I site assessment identifies any potential adverse environmental conditions and no third party is identified as responsible for such condition, or the condition has not otherwise been satisfactorily mitigated, the Goldman Originator generally requires additional environmental testing, such as a Phase II environmental assessment on the related mortgaged property, an environmental insurance policy, the borrower to conduct remediation |
264 |
activities or to establish an operations and maintenance plan, or to place funds in escrow to be used to address any required remediation. |
· | Physical Condition Report—The Goldman Originator obtains a physical condition report (“PCR”) or an update of a previously obtained PCR for each mortgaged property prepared by a structural engineering firm approved by the Goldman Originator to assess the structure, exterior walls, roofing, interior structure and/or mechanical and electrical systems. In certain cases, the borrower may have obtained the PCR, and the PCR is then re-addressed to the Goldman Originator. The Goldman Originator and a third party structural consultant engaged by the Goldman Originator or the borrower typically reviews the PCR to determine the physical condition of the property, and to determine the anticipated costs of necessary repair, replacement and major maintenance or capital expenditure over the term of the mortgage loan. In cases in which the PCR identifies an immediate need for material repairs or replacements with an anticipated cost that is over a certain minimum threshold or percentage of loan balance, the Goldman Originator generally requires that funds be put in escrow at the time of origination of the mortgage loan to complete such repairs or replacements or obtains a guarantee from a sponsor of the borrower in lieu of reserves. |
· | Seismic—The Goldman Originator generally obtains a seismic report or an update of a previously obtained seismic report for all mortgaged properties located in seismic zone 3 or 4 to assess PML or SEL for the related mortgaged property. In certain cases, the borrower may have obtained the seismic report and the seismic report is then re-addressed to the Goldman Originator. |
Exceptions to Underwriting Criteria
None of the GSMC Mortgage Loans have exceptions to the related underwriting criteria.
Servicing
Interim servicing for some of the loans originated by the Goldman Originator prior to securitization is typically performed by an interim servicer that is unaffiliated with the Goldman Originator. Additionally, primary servicing may occasionally be retained by certain qualified mortgage brokerage firms under established sub-servicing agreements with the Goldman Originator, which may be retained post-securitization including the applicable fees. Otherwise, servicing responsibilities are transferred from the unaffiliated interim servicer to the master servicer of the securitization trust (and a primary servicer when applicable) at closing of the securitization.
RAIT Funding, LLC
Overview
RAIT originates commercial mortgage loans from its headquarters in Philadelphia. All mortgage loans must be approved by RFT’s management investment committee, as described under “—Loan Approval” below. Set forth below is a discussion of certain general underwriting guidelines with respect to mortgage loans originated by RAIT (or in certain cases, an affiliate) for securitization.
Notwithstanding the discussion below, given the unique nature of commercial 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 loan and related property, including, among others, the property type, current use, size, location, market conditions, reserve requirements, additional collateral, tenant quality and lease terms, borrower identity, sponsorship, performance history and/or other factors. If a mortgage loan exhibits any one or more of the following characteristics, variances from general underwriting/origination procedures described below may, in some instances, be considered acceptable under the circumstances indicated: (i) low loan-to-value ratio; (ii) high debt service coverage ratio; (iii) experienced sponsor(s)/guarantor(s) with financial wherewithal; (iv) additional springing reserves; (v) cash flow sweeps; and (vi) elements of recourse included in the mortgage loan. Consequently, this general description of RAIT’s origination procedures and underwriting criteria is not intended as a representation that every commercial mortgage loan originated by it complies entirely with all procedures and criteria set forth below. For important information about the circumstances that have affected the underwriting of Mortgage Loans in the mortgage pool originated by RAIT or such affiliate, see the “Risk Factors” section of this prospectus, the other subsections of this
265 |
“Transaction Parties—The Sponsors” section and “Annex E-2—Exceptions to Sponsor Representations and Warranties” in this prospectus.
Loan Analysis
Generally, RAIT performs both a credit analysis and collateral analysis with respect to a loan applicant and the real estate that will secure a mortgage loan. In general, the analysis of a borrower includes a review of anti-money laundering or OFAC checks, as well as background checks, and the analysis of its loan sponsor includes a review of anti-money laundering and background checks, third-party credit reports, bankruptcy and lien searches, general banking references and commercial mortgage related references. In general, the analysis of the collateral includes a site visit and a review of the property’s historical operating statements (if available), independent market research, an appraisal with an emphasis on rental and sales comparables, engineering and environmental reports, the property’s historic and current occupancy, financial strengths of certain significant tenants, the duration and terms of tenant leases and the use of the property. Each report is reviewed for acceptability by a real estate finance loan underwriter. The borrower’s and property manager’s experience and presence in the subject market are also reviewed. Consideration is also given to anticipated changes in cash flow that may result from changes in lease terms or market considerations. Other factors that are considered in the origination of a commercial mortgage loan include current operations, occupancy and tenant base.
Borrowers are generally required to be single-purpose entities although they are generally not required to be structured to limit the possibility of becoming insolvent or bankrupt unless the loan has a principal balance of greater than $20 million, in which case additional limitations including the requirement that the borrower have at least one independent director are required.
Loan Approval
All mortgage loans originated by RAIT or such affiliate must be approved by a management investment committee of RFT. After a review of the credit memorandum and related materials and a discussion about the potential mortgage loan, the management investment committee may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline to originate a mortgage loan.
Debt Service Coverage Ratio and Loan-to-Value Ratio
RAIT’s underwriting standards generally mandate minimum debt service coverage ratios and maximum loan-to-value ratios. The debt service coverage ratio is based upon the underwritten net cash flow and is given particular importance. A loan-to-value ratio is generally based upon the appraiser’s determination of value. However, notwithstanding such guidelines, in certain circumstances the actual debt service coverage ratios, loan-to-value ratios and amortization periods for the mortgage loans originated by RAIT or such affiliate may vary from these guidelines.
In addition, with respect to certain mortgage loans originated by RAIT or such affiliate, there may exist subordinate debt secured by the related property and/or mezzanine debt secured by direct or indirect ownership interests in the related borrower. Such mortgage loans may have a lower debt service coverage ratio and/or a higher loan-to-value ratio if such subordinate and/or mezzanine debt is taken into account.
Additional Debt
When underwriting a mortgage loan, RAIT takes into account whether the related real property and, if applicable, any direct or indirect equity interest in a related borrower are encumbered by additional debt and analyzes the likely effect of that additional debt on repayment of the subject mortgage loan. The debt service coverage ratios at origination may be significantly lower, and the loan-to-value ratios at origination may be significantly higher, if the existence of additional debt is taken into account.
266 |
Assessments of Property Condition
As part of the underwriting process, the following assessments and reports are generally obtained:
· | Appraisal —The real property related to the mortgage loan is required to be appraised by a state certified appraiser, an appraiser belonging to the Appraisal Institute, a membership association of professional real estate appraisers, or an otherwise qualified appraiser, who will prepare an appraisal report after completing certain diligence. The appraisal report may utilize one or more approaches to value, such as: (i) cost approach, (ii) sales comparison approach and/or (iii) income capitalization approach. In addition, RAIT will generally require that those appraisal reports be conducted in accordance with the Uniform Standards of Professional Appraisal Practices developed by The Appraisal Foundation and the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. There can be no assurance that another person would not have arrived at a different valuation, even if such person used the same general approach to, and the same method of valuing, the real property. Moreover, such appraisal reports generally seek to establish the amount a typically motivated buyer would pay a typically motivated seller, which amount could be significantly higher than the amount obtained from the sale of real property, particularly under a distress or liquidation sale. |
· | Environmental Report—A Phase I environmental assessment is required to be prepared by an environmental consultant with respect to the real property securing the prospective mortgage loan. However, when circumstances warrant, RAIT may utilize an update of a prior environmental report, a transaction screen or a desktop review. Alternatively, RAIT might forego an environmental report in limited circumstances, such as when it has obtained the benefits of an environmental insurance policy or an environmental guarantee. Depending on the findings of the initial Phase I environmental assessment, any of the following may be required: additional record searches or environmental testing, such as a Phase II environmental assessment on the subject real property; an environmental insurance policy; cash reserves or an indemnity for any recommended remediation action and/or the implementation of operations and maintenance plans. In addition, all borrowers are required to provide customary environmental representations, warranties and covenants relating to the existence and use of hazardous substances on the subject real property. There can be no assurance that an environmental assessment conducted at any particular real property will necessarily cover all potential environmental issues. |
· | Engineering Report— An engineering firm is required to inspect the real property securing the mortgage loan to assess and prepare a report regarding the structure, exterior walls, roofing, interior structure, mechanical systems and/or electrical systems. It is important to note that such engineering reports are often based on, and limited to, information available through visual inspection and that any such inspection will not necessarily reveal all potential issues. RAIT will generally consider the engineering report in connection with determining the relevant terms of a transaction intended to address any recommended repairs, corrections or replacements and any escrows for identified deferred and/or continuing maintenance. |
· | Seismic Report—If the real property securing a mortgage loan consists of improvements located in California or in seismic zones 3 or 4, a seismic report is required to be obtained from an engineering firm to establish the probable maximum or bounded loss for the improvements at the property as a result of an earthquake. Generally, if a seismic report concludes that the related real property is estimated to have a probable maximum loss (“PML”) or scenario expected loss (“SEL”) of greater than twenty percent (20.0%), the borrower may be required to retrofit the improvements at the related property or to obtain earthquake insurance if available at a commercially reasonable price. It should be noted, however, that because the seismic reports may not necessarily have used the same assumptions in assessing PML or SEL, it is possible that some of the real properties that were considered unlikely to experience a PML or SEL of greater than twenty percent (20.0%) might have been the subject of a higher estimate had different assumptions been used. |
267 |
Zoning and Building Code Compliance
In connection with the origination of a multifamily or commercial mortgage loan, RAIT generally considers whether the use and occupancy of the related 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: zoning reports; 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.
Title Insurance
The borrower is required to provide, and RAIT or its origination counsel typically will review, a title insurance policy for each property. Typically, the title insurance policies provided must meet the following requirements: (i) written by a title insurer licensed to do business in the jurisdiction where the mortgaged property is located, (ii) in an amount at least equal to the maximum principal balance of the mortgage loan, (iii) protection and benefits run to the mortgagee and its successors and assigns, (iv) written on an American Land Title Association form or equivalent policy promulgated in the jurisdiction where the mortgaged property is located and (v) if a survey was prepared, the legal description of the mortgaged property in the title policy conforms to that shown on the survey.
Casualty and Other Insurance
Except in certain instances where sole or significant tenants (which may include ground tenants) are permitted to obtain insurance or self-insure, or where another third party unrelated to the applicable borrower is permitted to obtain insurance, or the subject mortgaged property is covered by a blanket policy (which may have been obtained by an affiliate of the related borrower), RAIT typically requires that the related real property be insured by a hazard insurance policy, comprehensive general liability insurance, business interruption insurance, and, if any portion of the improvements is at any time located in an area identified in the Federal Register by the Federal Emergency Management Agency and/or by the Secretary of Housing and Urban Development or any successor to any of the foregoing as an area having special flood hazards, flood insurance.
Escrow Requirements
Generally, borrowers are required to fund, either at loan origination or from property cash flow during the loan term, various escrows for taxes and/or insurance, capital expenses, replacement/repair reserves, and tenantimprovements and leasing commissions. Although a case-by-case analysis is conducted to determine the need for a particular escrow or reserve, such required escrows for mortgage loans originated by RAIT or such affiliate are generally as follows:
· | Taxes—Typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are required to provide the lender with sufficient funds to satisfy all taxes and assessments. RAIT may waive this escrow requirement under appropriate circumstances including, but not limited to, where a tenant is required to pay the taxes directly. |
· | Insurance—If the property is insured under an individual policy (i.e., the property is not covered by a blanket policy), typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are required to provide the lender with sufficient funds to pay all insurance premiums. The originator may waive this escrow requirement under appropriate circumstances, including, but not limited to, where a property is covered by a blanket insurance policy maintained by the borrower or sponsor, or where a tenant is required to insure the property (which tenant insurance may include self-insurance by the tenant). |
· | Replacement Reserves—Replacement reserves are generally calculated in accordance with the expected useful life of the components of the property during the term of the mortgage loan plus two years. The originator relies on information provided by an independent engineer to make this determination. The originator may waive this escrow requirement under appropriate circumstances, including, but not limited to, where a tenant is responsible for replacements under the terms of its lease. |
268 |
· | Completion Repair/Environmental Remediation—Typically, a completion repair or remediation reserve is required where an environmental or engineering report suggests that such reserve is necessary. Upon funding of the applicable mortgage loan, the originator generally requires that at least 110% to 125% of the estimated costs of repairs or replacements be reserved and generally requires that repairs or replacements be completed within a year after the funding of the applicable mortgage loan. The originator may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where an investment grade party has agreed to take responsibility, and pay, for any required repair or remediation or (ii) the amount recommended is de minimis. |
· | Tenant Improvement/Lease Commissions—In most cases, various tenants have lease expirations within the mortgage loan term. To mitigate this risk, special reserves may be required to be funded either at closing of the mortgage loan and/or during the mortgage loan term to cover certain anticipated leasing commissions or tenant improvement costs which might be associated with re-leasing the space occupied by such tenants. The originator may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where rents at the mortgaged property are considered to be sufficiently below market, (ii) where no material leases expire within the mortgage loan term, or the lease roll is not concentrated or (iii) where there is a low loan-to-value ratio (i.e., 65% or less). |
For a description of the escrows collected with respect to the RAIT Mortgage Loans, please see Annex A to this prospectus.
Servicing
Except as stated below, interim servicing for all loans originated by RAIT or such affiliate prior to securitization is typically performed by RAIT Partnership. RFT, the parent company of RAIT Partnership, is rated on Standard & Poor’s Ratings Services Select Servicer List as a U.S. Commercial Mortgage Primary and Special Servicer and is also a rated Commercial Mortgage Primary and Special Servicer by Morningstar Credit Ratings, LLC. Interim servicing for certain loans originated by RAIT and its affiliates is generally performed by Grandbridge Real Estate Capital LLC or NorthMarq Capital, LLC.
Generally, servicing responsibilities are transferred from the interim servicer to the master servicer of the securitization trust at the closing of the securitization. From time to time, the interim servicer may retain primary servicing after closing of the securitization.
Exceptions to Underwriting Criteria
None of the RAIT Mortgage Loans were originated with any exceptions to the related underwriting criteria.
The Depositor
Citigroup Commercial Mortgage Securities Inc. is the depositor with respect to the Issuing Entity (in such capacity, the “Depositor”). The Depositor is a special purpose corporation incorporated in the State of Delaware on July 17, 2003 for the purpose of engaging in the business of, among other things, acquiring and depositing mortgage loans in trusts in exchange for certificates evidencing interest in such trusts and selling or otherwise distributing such certificates, in addition to other related activities. The principal executive offices of the Depositor are located at 390 Greenwich Street, New York, New York 10013. The telephone number is (212) 816-5343.
The Depositor is an indirect, wholly-owned subsidiary of Citigroup Global Markets Holdings Inc., an affiliate of CGMRC, a Sponsor and an Originator, an affiliate of Citibank, N.A., the Certificate Administrator, Certificate Registrar and paying agent, and an affiliate of Citigroup Global Markets Inc., one of the underwriters.
Since the Depositor’s incorporation in 2003, it has been engaged in the securitization of commercial and multifamily mortgage loans and in acting as depositor of one or more trusts formed to issue commercial mortgage pass-through certificates that are secured by or represent interests in, pools of mortgage loans. The Depositor generally acquires the commercial and multifamily mortgage loans from CGMRC or another of its affiliates or from another seller of commercial and multifamily mortgage loans, in each case in privately negotiated transactions.
269 |
The Depositor does not have, nor is it expected in the future to have, any significant assets and is not engaged in activities unrelated to the securitization of mortgage loans. The Depositor will not have any business operations other than securitizing mortgage loans and related activities.
On the Closing Date, the Depositor will acquire the Mortgage Loans from each Mortgage Loan Seller and will simultaneously transfer them, without recourse, to the Trustee for the benefit of the Certificateholders. After establishing the Issuing Entity, the Depositor will have minimal ongoing duties with respect to the Certificates and the Mortgage Loans. The Depositor’s ongoing duties will include: (i) appointing a successor Trustee or Certificate Administrator in the event of the removal of the Trustee or Certificate Administrator, (ii) paying any ongoing fees (such as surveillance fees) of the Rating Agencies, (iii) promptly delivering to the Custodian any document that comes into the Depositor’s possession that constitutes part of the Mortgage File or servicing file for any Mortgage Loan, (iv) upon discovery of a breach of any of the representations and warranties of the Master Servicer, the Special Servicer or the Operating Advisor which materially and adversely affects the interests of the Certificateholders, giving prompt written notice of such breach to the affected parties, (v) providing information in its possession with respect to the Certificates to the Certificate Administrator to the extent necessary to perform REMIC tax administration, (vi) indemnifying the Issuing Entity, the Trustee, the Certificate Administrator, the Operating Advisor, the Asset Representations Reviewer, the Master Servicer and the Special Servicer for any loss, liability or reasonable expense (including, without limitation, reasonable attorneys’ fees and expenses) incurred by such parties arising (a) from the Depositor’s willful misconduct, bad faith, fraud and/or negligence in the performance of its duties contained in the Pooling and Servicing Agreement or by reason of negligent disregard of its obligations and duties under the Pooling and Servicing Agreement, or (b) as a result of the breach by the Depositor of any of its obligations or duties under the Pooling and Servicing Agreement, (vii) signing any annual report on Form 10-K, including the required certification in Form 10-K under the Sarbanes-Oxley Act of 2002, and any distribution reports on Form 10-D and Current Reports on Form 8-K required to be filed by the Issuing Entity and (viii) mailing the notice of a succession of the Trustee or the Certificate Administrator to all Certificateholders.
Neither the Depositor nor any of its affiliates will insure or guarantee distributions on the Certificates.
The Issuing Entity
The Issuing Entity, Citigroup Commercial Mortgage Trust 2016-GC37, is a New York common law trust that will be formed on the Closing Date pursuant to the Pooling and Servicing Agreement. The only activities that the Issuing Entity may perform are those set forth in the Pooling and Servicing Agreement, which are generally limited to owning and administering the Mortgage Loans and any REO Property, disposing of Defaulted Mortgage Loans and REO Property, issuing the Certificates, making distributions, providing reports to certificateholders and other activities described in this prospectus. Accordingly, the Issuing Entity may not issue securities other than the Certificates, or invest in securities, other than investing of funds in the Collection Account and other accounts maintained under the Pooling and Servicing Agreement in certain short-term high-quality investments. The Issuing Entity may not lend or borrow money, except that the Master Servicer and the Trustee may make advances of delinquent monthly debt service payments to the Issuing Entity, and the Master Servicer, the Special Servicer and the Trustee may make servicing advances, to the Issuing Entity, but in each case only to the extent it deems such advances to be recoverable from the related Mortgage Loan; such advances are intended to provide liquidity, rather than credit support. The Pooling and Servicing Agreement may be amended as set forth under “The Pooling and Servicing Agreement—Amendment”. The Issuing Entity administers the Mortgage Loans through the Trustee, the Certificate Administrator, the Master Servicer, the Special Servicer and the Operating Advisor, except that any Outside Serviced Mortgage Loan is being serviced and administered pursuant to the Outside Servicing Agreement. A discussion of the duties of the Trustee, the Certificate Administrator, the Master Servicer, the Special Servicer and the Operating Advisor, including any discretionary activities performed by each of them, is set forth under “—The Trustee,” “—The Certificate Administrator,” “—Servicers—The Master Servicer”, “—Servicers—The Special Servicer,” “—Servicers—The Outside Servicers and the Outside Special Servicers,” “—The Operating Advisor,” “Description of the Certificates”and“The Pooling and Servicing Agreement”.
The only assets of the Issuing Entity other than the Mortgage Loans and any REO Properties (and, with respect to a Loan Combination, solely the Issuing Entity’s interest in any REO property acquired with respect to such Loan Combination pursuant to the Pooling and Servicing Agreement or the Outside Servicing Agreement, as applicable) are the Distribution Account and other accounts maintained pursuant to the Pooling and Servicing Agreement and the short-term investments in which funds in the Distribution Account and other accounts are invested. The Issuing Entity has no present liabilities, but has potential liability relating to ownership of the
270 |
Mortgage Loans and any REO Properties (and, with respect to a Loan Combination, solely the Issuing Entity’s interest in any REO property acquired with respect to such Loan Combination pursuant to the Pooling and Servicing Agreement or the Outside Servicing Agreement, as applicable), and the other activities described in this prospectus, and indemnity obligations to the Depositor, the Trustee, the Certificate Administrator, the Master Servicer, the Special Servicer and the Operating Advisor and various related persons. The fiscal year of the Issuing Entity is the calendar year. The Issuing Entity has no executive officers or board of directors and acts through the Trustee, the Certificate Administrator, the Master Servicer and the Special Servicer.
The Depositor will be contributing the Mortgage Loans to the Issuing Entity. The Depositor will be purchasing the Mortgage Loans from the Sponsors, as described under“The Mortgage Loan Purchase Agreements—Sale of Mortgage Loans; Mortgage File Delivery” and “—Cures, Repurchases and Substitutions”.
Since the Issuing Entity is a common law trust, it may not be eligible for relief under the federal bankruptcy laws, unless it can be characterized as a “business trust” for purposes of the federal bankruptcy laws. Bankruptcy courts look at various considerations in making this determination, so it is not possible to predict with any certainty whether or not the trust would be characterized as a “business trust”.
The Trustee
Deutsche Bank Trust Company Americas (“DBTCA”), a New York banking corporation, will act as trustee (in such capacity, the “Trustee”) and custodian on behalf of the Trustee (in such capacity, the “Custodian”) under the Pooling and Servicing Agreement.
DBTCA is a New York banking corporation with its offices located at 1761 East St. Andrew Place, Santa Ana, California 92705-4934, Attention: Trust Administration—CGCMT 2016-GC37, and its telephone number is (714) 247-6000.
DBTCA and its affiliates have provided corporate trust services since 1991. DBTCA and its affiliates have previously been appointed to the role of trustee for over 1,900 mortgage-backed transactions and have significant experience in this area.
DBTCA will also act as custodian of the mortgage files for the Mortgage Loans pursuant to the Pooling and Servicing Agreement. DBTCA and its affiliates have performed this custodial role in numerous mortgage-backed transactions since 1991. DBTCA will maintain the mortgage files in secure, fire-resistant facilities. DBTCA will not physically segregate the mortgage files for the Mortgage Loans from other mortgage files in DBTCA’s custody but will keep them in shared facilities. However, DBTCA’s proprietary document tracking system will show the location within DBTCA’s facilities of each mortgage file and will show that the Mortgage Loan documents are held on behalf of the Issuing Entity.
In its capacity as trustee on commercial mortgage securitizations, DBTCA is generally required to make an advance if the related master servicer or special servicer fails to make a required advance. In the past three years, DBTCA, in its capacity as trustee, has not been required to make an advance on a domestic CMBS transaction.
On June 18, 2014, a group of investors, including funds managed by Blackrock Advisors, LLC, PIMCO-Advisors, L.P., and others, filed a derivative action against DBTCA and Deutsche Bank National Trust Company (“DBNTC”) in New York State Supreme Court purportedly on behalf of and for the benefit of 544 private-label RMBS trusts asserting claims for alleged violations of the U.S. Trust Indenture Act of 1939 (“TIA”), breach of contract, breach of fiduciary duty and negligence based on DBNTC and DBTCA’s alleged failure to perform their duties as trustees for the trusts. Plaintiffs subsequently dismissed their state court complaint and filed a derivative and class action complaint in the U.S. District Court for the Southern District of New York on behalf of and for the benefit of 564 private-label RMBS trusts, which substantially overlapped with the trusts at issue in the state court action. The complaint alleges that the trusts at issue have suffered total realized collateral losses of U.S. $89.4 billion, but the complaint does not include a demand for money damages in a sum certain. DBNTC and DBTCA filed a motion to dismiss, and on January 19, 2016, the court partially granted the motion on procedural grounds: as to the 500 trusts that are governed by pooling and servicing agreements, the court declined to exercise jurisdiction. The court did not rule on substantive defenses asserted in the motion to dismiss as to the 64 trusts formed under indentures for which it retained jurisdiction. Instead, the court ordered plaintiffs to file an amended complaint as to those indenture trusts. On February 23, 2016, plaintiffs filed an amended complaint as to 62 of the
271 |
64 indenture trusts included in the original U.S. District Court complaint. DBNTC and DBTCA will have an opportunity to file new defensive motions with respect to this amended complaint.
On March 25, 2016, plaintiffs filed a new state court complaint in California against DBTCA as to 513 trusts governed by pooling and servicing agreements, most of which had been dismissed from the U.S. District Court action. Plaintiffs removed 19 of the original 500 and have added 32 new trusts. DBTCA serves as trustee on only one of these 513 trusts.
On December 30, 2015, IKB International, S.A. and IKB Deutsche Industriebank A.G. filed a Summons With Notice in New York state court naming as defendants DBNTC and DBTCA, as trustees of 37 RMBS trusts (the “IKB Action”). The claims in the IKB Action appear to be substantively similar to the SDNY Action. The IKB Action is not styled as a putative class action, but may attempt to bring derivative claims on behalf of the named RMBS Trusts. DBTCA intends to vigorously defend the IKB Action.
DBTCA has no pending legal proceedings (including, based on DBTCA’s present evaluation, the litigation disclosed in the foregoing paragraphs) that would materially affect its ability to perform its duties as Trustee under the Pooling and Servicing Agreement for this transaction.
The foregoing information set forth under this “—The Trustee” heading has been provided by DBTCA.
The responsibilities of the Trustee are set forth in the Pooling and Servicing Agreement. A discussion of the role of the Trustee and its continuing duties, including: (1) any actions required by the Trustee, including whether notices are required to investors, rating agencies or other third parties, upon an event of default, potential event of default (and how defined) or other breach of a transaction covenant and any required percentage of a class or classes of asset-backed securities that is needed to require the Trustee to take action, (2) limitations on the Trustee’s liability under the transaction agreements regarding the asset-backed securities transaction, (3) any indemnification provisions that entitle the Trustee to be indemnified from the cash flow that otherwise would be used to pay the asset-backed securities, and (4) any contractual provisions or understandings regarding the Trustee’s removal, replacement or resignation, as well as how the expenses associated with changing from one Trustee to another Trustee will be paid, is set forth in this prospectus under “The Pooling and Servicing Agreement”.
For a description of any material affiliations, relationships and related transactions between the Trustee and the other transaction parties, see“—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”below.
The Trustee will only be liable under the Pooling and Servicing Agreement to the extent of the obligations specifically imposed by the Pooling and Servicing Agreement. For further information regarding the duties, responsibilities, rights and obligations of the Trustee under the Pooling and Servicing Agreement, including those related to indemnification, see “The Pooling and Servicing Agreement—Limitation on Liability; Indemnification”. Certain terms of the Pooling and Servicing Agreement regarding the Trustee’s removal, replacement or resignation are described under “The Pooling and Servicing Agreement—Qualification, Resignation and Removal of the Trustee and the Certificate Administrator”.
The Certificate Administrator
Citibank, N.A., a national banking association (“Citibank”), will act as the certificate administrator (in such capacity, the “Certificate Administrator”) under the Pooling and Servicing Agreement. The Certificate Administrator will also be the REMIC administrator and the 17g-5 Information Provider under the Pooling and Servicing Agreement. The corporate trust office of Citibank responsible for administration of the issuing entity is located at 388 Greenwich Street, 14th Floor, New York, New York 10013, Attention: Global Transaction Services – CGCMT 2016-GC37 and the office for certificate transfer services is located at 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey 07310, Attention: Global Transaction Services – CGCMT 2016-GC37.
Citibank is a wholly owned subsidiary of Citigroup Inc., a Delaware corporation. Citibank performs as certificate administrator through the Agency and Trust line of business, which is part of the Global Transaction Services division. Citibank has primary corporate trust offices located in both New York and London. Citibank is a leading provider of corporate trust services offering a full range of agency, fiduciary, tender and exchange, depositary and escrow services. As of the end of the fourth quarter of 2015, Citibank’s Agency and Trust group
272 |
managed in excess of $5.1 trillion in fixed income and equity investments on behalf of approximately 2,500 corporations worldwide. Since 1987, Citibank’s Agency and Trust group has provided trustee services for asset-backed securities containing pool assets consisting of airplane leases, auto loans and leases, boat loans, commercial loans, commodities, credit cards, durable goods, equipment leases, foreign securities, funding agreement backed note programs, truck loans, utilities, student loans and commercial and residential mortgages. As of the end of the fourth quarter of 2015, Citibank acted as trustee, certificate administrator and/or paying agent for approximately 67 transactions backed by commercial mortgages with an aggregate principal balance of approximately $70.1 billion. The depositor, the underwriters, the initial purchasers, the master servicer, the special servicer, the trustee, the custodian the operating advisor and the asset representations reviewer may maintain banking and other commercial relationships with Citibank and its affiliates.
Under the terms of the Pooling and Servicing Agreement, Citibank is responsible for securities administration, which includes pool performance calculations, distribution calculations and the preparation of monthly distribution reports. An analyst will also be responsible for the timely delivery of reports to the administration unit for processing all cash flow items. As Certificate Administrator, Citibank is also responsible for the preparation and filing of all Trust REMIC tax returns and Grantor Trust tax returns on behalf of the issuing entity. In the past three years, Citibank has not made material changes to the policies and procedures of its securities administration services for commercial mortgage-backed securities.
There have been no material changes to Citibank’s policies or procedures with respect to its commercial mortgage-backed trustee or securities administration function other than changes required by applicable laws. In the past three years, Citibank has not materially defaulted in its trustee or securities administration obligations under any pooling and servicing agreement or caused an early amortization or other performance triggering event because of the performance by Citibank as trustee or securities administrator with respect to commercial mortgage-backed securities.
Citibank is acting as Certificate Administrator of this CMBS transaction. In the ordinary course of business, Citibank is involved in a number of legal proceedings, including in connection with its role as trustee of certain residential mortgage-backed securities (“RMBS”) transactions. On June 18, 2014 a civil action was filed against Citibank in the Supreme Court of the State of New York by a group of investors in 48 private-label RMBS trusts for which Citibank serves or did serve as trustee, asserting claims for purported violations of the Trust Indenture Act of 1939, breach of contract, breach of fiduciary duty and negligence based on Citibank’s alleged failure to perform its duties as trustee for the 48 RMBS trusts. On November 24, 2014, plaintiffs sought leave to withdraw this action. On the same day, a smaller subset of similar plaintiff investors in 27 private-label RMBS trusts for which Citibank allegedly serves or did serve as trustee filed a new civil action against Citibank in the Southern District of New York asserting similar claims as the prior action filed in state court. In January 2015, the court closed plaintiff’s original state court action. Citibank’s motion to dismiss the federal complaint was fully briefed as of May 13, 2015. On September 8, 2015, the federal court dismissed all claims as to 24 of the 27 trusts and allowed certain of the claims to proceed as to the other three trusts. That case, involving the three remaining trusts, is pending.
On November 24, 2015, the same investors that brought the federal case brought a new civil action in the Supreme Court of the State of New York related to 25 private-label RMBS trusts for which Citibank allegedly serves or did serve as trustee. This case includes the 24 trusts previously dismissed in the federal action, and one additional trust. The investors assert claims for breach of contract, breach of fiduciary duty, breach of duty to avoid conflicts of interest, and violation of New York’s Streit Act. Citibank filed a motion to dismiss this case on February 26, 2016.
On August 19, 2015, the Federal Deposit Insurance Corporation (“FDIC”) as receiver for a financial institution filed a civil action against Citibank in the Southern District of New York. This action related to one private-label RMBS trust for which Citibank formerly served as trustee. FDIC asserts claims for breach of contract, violation of the Streit Act, and violation of the Trust Indenture Act of 1939. Citibank is jointly briefing a motion to dismiss with The Bank of New York Mellon and U.S. Bank, entities that have also been sued by FDIC in their capacity as trustee, and whose cases are all in front of Judge Carter. Defendants’ joint motion to dismiss was fully briefed as of March 22, 2016.
There can be no assurances as to the outcome of litigation or the possible impact of litigation on the trustee or the RMBS trusts. However, Citibank denies liability and continues to vigorously defend against these litigations. Furthermore, neither the above-disclosed litigations nor any other pending legal proceeding involving
273 |
Citibank will materially affect Citibank’s ability to perform its duties as Certificate Administrator under the Pooling and Servicing Agreement for this CMBS transaction.
Neither Citibank nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization, except that Citibank or one of its affiliates intends to purchase the Class R certificates. Citibank or its affiliates may, from time to time after the sale of the Certificates to investors on the Closing Date, acquire additional Certificates pursuant to secondary market transactions. Any such party will have the right to dispose of any such Certificates at any time.
The foregoing information set forth under this “—The Certificate Administrator”heading has been provided by Citibank.
For a description of any material affiliations, relationships and related transactions between the Certificate Administrator and the other transaction parties, see “—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
The Certificate Administrator will only be liable under the Pooling and Servicing Agreement to the extent of the obligations specifically imposed by the Pooling and Servicing Agreement. For further information regarding the duties, responsibilities, rights and obligations of the Certificate Administrator under the Pooling and Servicing Agreement, including those related to indemnification, see “The Pooling and Servicing Agreement—Limitation on Liability; Indemnification”. Certain terms of the Pooling and Servicing Agreement regarding the Certificate Administrator’s removal, replacement or resignation are described under “The Pooling and Servicing Agreement—Qualification, Resignation and Removal of the Trustee and the Certificate Administrator”.
Servicers
General
Each of the Master Servicer (directly or through one or more sub-servicers (which includes the primary servicers)) and the Special Servicer will be required to service and administer the Serviced Loans for which it is responsible as described under “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans”.
The MasterServicer
Wells Fargo Bank, National Association (“Wells Fargo Bank”) will act as the master servicer for all of the Mortgage Loans to be deposited into the Issuing Entity (in such capacity, the “Master Servicer”). Wells Fargo Bank is a national banking association organized under the laws of the United States of America, and is a wholly-owned direct and indirect subsidiary of Wells Fargo & Company. Wells Fargo Bank is also (i) the special servicer, certificate administrator and custodian under the CGCMT 2016-GC36 Pooling and Servicing Agreement, pursuant to which the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination are serviced, (ii) the master servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement, pursuant to which the 79 Madison Avenue Loan Combination is being serviced and, prior to the securitization of the 600 Broadway Controlling Pari Passu Companion Loan, pursuant to which the 600 Broadway Loan Combination is being serviced, and (iii) expected to be the master servicer, certificate administrator and custodian under the 600 Broadway Pooling and Servicing Agreement, pursuant to which the 600 Broadway Loan Combination is expected to be serviced after the securitization of the 600 Broadway Controlling Pari Passu Companion Loan. On December 31, 2008, Wells Fargo & Company acquired Wachovia Corporation, the owner of Wachovia Bank, National Association (“Wachovia”), and Wachovia Corporation merged with and into Wells Fargo & Company. On March 20, 2010, Wachovia merged with and into Wells Fargo Bank. Like Wells Fargo Bank, Wachovia acted as master servicer and special servicer of securitized commercial and multifamily mortgage loans and, following the merger of the holding companies, Wells Fargo Bank and Wachovia integrated their two servicing platforms under a senior management team that is a combination of both legacy Wells Fargo Bank managers and legacy Wachovia managers.
The principal west coast commercial mortgage master servicing and special servicing offices of Wells Fargo Bank are located at MAC A0227-020, 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing and special servicing offices of Wells Fargo Bank are located at MAC D1086, 550 South Tryon Street, Charlotte, North Carolina 28202.
274 |
Wells Fargo Bank has been master servicing securitized commercial and multifamily mortgage loans in excess of ten years. Wells Fargo Bank’s primary servicing system runs on McCracken Financial Solutions software, Strategy CS. Wells Fargo Bank reports to trustees and certificate administrators in the CREFC® format. The following table sets forth information about Wells Fargo Bank’s portfolio of master or primary serviced commercial and multifamily mortgage loans (including loans in securitization transactions and loans owned by other investors) as of the dates indicated:
Commercial and | As of | As of | As of | As of | ||||
By Approximate Number: | 33,354 | 33,590 | 32,701 | 32,343 | ||||
By Approximate Aggregate Unpaid Principal Balance (in billions): | $434.37 | $474.38 | $501.54 | $507.88 |
Within this portfolio, as of March 31, 2016, are approximately 23,601 commercial and multifamily mortgage loans with an unpaid principal balance of approximately $405.5 billion related to commercial mortgage-backed securities or commercial real estate collateralized debt obligation securities. In addition to servicing loans related to commercial mortgage-backed securities and commercial real estate collateralized debt obligation securities, Wells Fargo Bank also services whole loans for itself and a variety of investors. The properties securing loans in Wells Fargo Bank’s servicing portfolio, as of March 31, 2016, were located in all 50 states, the District of Columbia, Guam, Mexico, the Bahamas, the Virgin Islands and Puerto Rico and include retail, office, multifamily, industrial, hotel and other types of income-producing properties.
In its master servicing and primary servicing activities, Wells Fargo Bank utilizes a mortgage-servicing technology platform with multiple capabilities and reporting functions. This platform allows Wells Fargo Bank to process mortgage servicing activities including, but not limited to: (i) performing account maintenance; (ii) tracking borrower communications; (iii) tracking real estate tax escrows and payments, insurance escrows and payments, replacement reserve escrows and operating statement data and rent rolls; (iv) entering and updating transaction data; and (v) generating various reports.
The following table sets forth information regarding principal and interest advances and servicing advances made by Wells Fargo Bank, as master servicer, on commercial and multifamily mortgage loans included in commercial mortgage-backed securitizations. The information set forth below is the average amount of such advances outstanding over the periods indicated (expressed as a dollar amount and as a percentage of Wells Fargo Bank’s portfolio, as of the end of each such period, of master serviced commercial and multifamily mortgage loans included in commercial mortgage-backed securitizations).
Period | Approximate Securitized | Approximate | Approximate | |||
Calendar Year 2013 | $ 346,011,017,466 | $ 2,158,219,403 | 0.62% | |||
Calendar Year 2014 | $ 377,947,659,331 | $ 1,750,352,607 | 0.46% | |||
Calendar Year 2015 | $ 401,673,056,650 | $ 1,600,995,208 | 0.40% | |||
YTD Q1 2016 | $ 395,092,114,230 | $ 662,618,517 | 0.17% |
* | “UPB” means unpaid principal balance, “P&I” means principal and interest advances and “PPA” means property protection advances. |
Wells Fargo Bank has acted as a special servicer of securitized commercial and multifamily mortgage loans in excess of five years. Wells Fargo Bank’s special servicing system includes McCracken Financial Solutions Corp.’s Strategy CS software.
275 |
The table below sets forth information about Wells Fargo Bank’s portfolio of specially serviced commercial and multifamily mortgage loans as of the dates indicated:
CMBS Pools | As of 12/31/2013 | As of 12/31/2014 | As of 12/31/2015 | As of 3/31/2016 | ||||
By Approximate Number | 91 | 111 | 123 | 135 | ||||
Named Specially Serviced Portfolio By Approximate Aggregate Unpaid Principal Balance (in billions)(1) | $58.7 | $67.2 | $85.1 | $96.8 | ||||
Actively Specially Serviced Portfolio By Approximate Aggregate Unpaid Principal Balance (2) | $1,047,414,628 | $520,064,655 | $181,704,308 | $66,337,636 |
(1) | Includes all loans in Wells Fargo Bank’s portfolio for which Wells Fargo Bank is the named special servicer, regardless of whether such loans are, as of the specified date, specially-serviced loans. |
(2) | Includes only those loans in the portfolio that, as of the specified date, are specially-serviced loans. |
The properties securing loans in Wells Fargo Bank’s special servicing portfolio may include retail, office, multifamily, industrial, hospitality and other types of income-producing property. As a result, such properties, depending on their location and/or other specific circumstances, may compete with the Mortgaged Properties for tenants, purchasers, financing and so forth.
Wells Fargo Bank has developed strategies and procedures as special servicer for working with borrowers on problem loans (caused by delinquencies, bankruptcies or other breaches of the underlying loan documents) to maximize the value from the assets for the benefit of certificateholders. Wells Fargo Bank’s strategies and procedures vary on a case by case basis, and include, but are not limited to, liquidation of the underlying collateral, note sales, discounted payoffs, and borrower negotiation or workout in accordance with the applicable servicing standard, the underlying loan documents and applicable law, rule and regulation
Wells Fargo Bank is rated by Fitch Ratings, Inc. (“Fitch”), Standard & Poor’s Ratings Services (“S&P”) and Morningstar as a primary servicer, a master servicer and a special servicer of commercial mortgage loans. Wells Fargo Bank’s servicer ratings by each of these agencies are outlined below:
Fitch | S&P | Morningstar | ||||
Primary Servicer: | CPS1- | Strong | MOR CS1 | |||
Master Servicer: | CMS1- | Strong | MOR CS1 | |||
Special Servicer: | CSS2 | Above Average | MOR CS2 |
The long-term issuer ratings of Wells Fargo Bank are rated “AA-” by S&P, “Aa2” by Moody’s Investors Service, Inc. (“Moody’s”) and “AA” by Fitch. The short-term issuer ratings of Wells Fargo Bank are rated “A-1+” by S&P, “P-1” by Moody’s and “F1+” by Fitch.
Wells Fargo Bank has developed policies, procedures and controls relating to its servicing functions to maintain compliance with applicable servicing agreements and servicing standards, including procedures for handling delinquent loans during the period prior to the occurrence of a special servicing transfer event. Wells Fargo Bank’s master servicing and special servicing policies and procedures are updated periodically to keep pace with the changes in the commercial mortgage-backed securities industry and have been generally consistent for the last three years in all material respects. The only significant changes in Wells Fargo Bank’s policies and procedures have come in response to changes in federal or state law or investor requirements, such as updates issued by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation.
276 |
Wells Fargo Bank may perform any of its obligations under the Pooling and Servicing Agreement through one or more third-party vendors, affiliates or subsidiaries. Notwithstanding the foregoing, the Master Servicer will remain responsible for its duties thereunder. Wells Fargo Bank may engage third-party vendors to provide technology or process efficiencies. Wells Fargo Bank monitors its third-party vendors in compliance with its internal procedures and applicable law. Wells Fargo Bank has entered into contracts with third-party vendors for the following functions:
· | provision of Strategy and Strategy CS software; |
· | tracking and reporting of flood zone changes; |
· | abstracting of leasing consent requirements contained in loan documents; |
· | legal representation; |
· | assembly of data regarding buyer and seller (borrower) with respect to proposed loan assumptions and preparation of loan assumption package for review by Wells Fargo Bank; |
· | performance of property inspections; |
· | performance of tax parcel searches based on property legal description, monitoring and reporting of delinquent taxes, and collection and payment of taxes; and |
· | Uniform Commercial Code searches and filings. |
Wells Fargo Bank may also enter into agreements with certain firms to act as a primary servicer and to provide cashiering or non-cashiering sub-servicing on the Mortgage Loans. Wells Fargo Bank monitors and reviews the performance of sub-servicers appointed by it. Generally, all amounts received by Wells Fargo Bank on the Mortgage Loans will initially be deposited into a common clearing account with collections on other mortgage loans serviced by Wells Fargo Bank and will then be allocated and transferred to the appropriate account as described in this prospectus. On the day any amount is to be disbursed by Wells Fargo Bank, that amount is transferred to a common disbursement account prior to disbursement.
Wells Fargo Bank will not have primary responsibility for custody services of original documents evidencing the Mortgage Loans. On occasion, Wells Fargo Bank may have custody of certain of such documents as are necessary for enforcement actions involving the Mortgage Loans or otherwise. To the extent Wells Fargo Bank performs custodial functions as a servicer, documents will be maintained in a manner consistent with the Servicing Standard.
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 or special servicer, and also provides borrowers with access to current and historical loan and property information for these transactions.
Wells Fargo & Company files reports with the SEC as required under the Exchange Act. Such reports include information regarding Wells Fargo Bank and may be obtained at the website maintained by the SEC at www.sec.gov.
There are no legal proceedings pending against Wells Fargo Bank, or to which any property of Wells Fargo Bank is subject, that are material to the Certificateholders, nor does Wells Fargo Bank have actual knowledge of any proceedings of this type contemplated by governmental authorities.
The Master Servicer will enter into one or more agreements with the Mortgage Loan Sellers to purchase the master servicing rights to the related Mortgage Loans and the primary servicing rights with respect to certain of the related Mortgage Loans (other than any Outside Serviced Mortgage Loan) and/or the right to be appointed as the Master Servicer or primary servicer, as the case may be, with respect to such Mortgage Loans.
277 |
Pursuant to an interim servicing agreement between Wells Fargo Bank and CGMRC, a Sponsor and an Originator, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned from time to time by CGMRC, which may include, prior to their inclusion in the Issuing Entity, some or all of the CGMRC Mortgage Loans.
Pursuant to an interim servicing agreement between Wells Fargo Bank and GSMC, a Sponsor and an Originator, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned from time to time by GSMC, which may include, prior to their inclusion in the Issuing Entity, some or all of the GSMC Mortgage Loans.
Wells Fargo Bank is the purchaser under a repurchase agreement with Rialto, or with a wholly-owned subsidiary or affiliate of Rialto, for the purpose of providing short term warehousing of mortgage loans originated or acquired by Rialto. Pursuant to an interim servicing agreement between Wells Fargo Bank and Rialto, a Sponsor and an Originator, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned from time to time by Rialto, which may include, prior to their inclusion in the Issuing Entity, some or all of the Rialto Mortgage Loans.
Pursuant to an interim servicing agreement between Wells Fargo Bank and KGS, a Sponsor and an Originator, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned from time to time by KGS, which may include, prior to their inclusion in the Issuing Entity, some or all of the KGS Mortgage Loans.
Pursuant to an interim servicing agreement between Wells Fargo Bank and BNY Mellon, a Sponsor and an Originator, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned from time to time by BNY Mellon, which may include, prior to their inclusion in the Issuing Entity, some or all of the BNY Mellon Mortgage Loans.
Pursuant to the terms of the Pooling and Servicing Agreement, Wells Fargo Bank will be entitled to retain a portion of the Servicing Fee equal to the amount by which the Servicing Fee exceeds the sum of (1) the fee payable to any initial subservicer as a primary servicing fee and (ii) a master servicing fee at a per annum rate of 0.00250% with respect to each Mortgage Loan notwithstanding any termination or resignation of Wells Fargo Bank as Master Servicer. In addition, Wells Fargo Bank will have the right to assign and transfer its rights to receive that retained portion of its Servicing Fee to another party.
Neither Wells Fargo Bank nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization other than as set forth above, except that Wells Fargo Bank intends to purchase $50,000,000 principal balance of the Class A-4 Certificates for investment. Wells Fargo Bank or its affiliates may, from time to time after the initial sale of the Certificates to investors on the Closing Date, acquire additional Certificates pursuant to secondary market transactions. Any such party will have the right to dispose of any Certificates, whether acquired on or after the Closing Date, at any time.
Wells Fargo Bank, in its capacity as Master Servicer, expects to enter into a primary servicing agreement with Berkadia pursuant to which Berkadia is expected to act as primary servicer with respect to certain CGMRC Mortgage Loans.
The foregoing information regarding Wells Fargo Bank under the heading “—Servicers—The Master Servicer” has been provided by Wells Fargo Bank.
The Master Servicer will have various duties under the Pooling and Servicing Agreement. Certain duties and obligations of the Master Servicer are described under “The Pooling and Servicing Agreement—General” and “—Enforcement of Due-On-Sale and Due-On-Encumbrance Clauses”. The Master Servicer’s ability to waive or modify any terms, fees, penalties or payments on the Mortgage Loans (other than the Outside Serviced Mortgage Loan), and the effect of that ability on the potential cash flows from such Mortgage Loans, are described under “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Modifications, Waivers and Amendments”. The Master Servicer’s obligations as the servicer to make advances, and the interest or other fees charged for those advances and the terms of the Master Servicer’s recovery of those advances, are described under “The Pooling and Servicing Agreement—Advances”.
278 |
The Master Servicer will not have primary responsibility for custody services of original documents evidencing the Mortgage Loans or the Serviced Companion Loans. On occasion, the Master Servicer may have custody of certain of such documents as are necessary for enforcement actions involving the Mortgage Loans or the Serviced Companion Loans or otherwise. To the extent Master Servicer performs custodial functions as a servicer, documents will be maintained in a manner consistent with the Servicing Standard.
Certain terms of the Pooling and Servicing Agreement regarding the Master Servicer’s removal or replacement, or resignation are described under “The Pooling and Servicing Agreement—Resignation of the Master Servicer, the Special Servicer and the Operating Advisor”, “—Servicer Termination Events”, “—Rights Upon Servicer Termination Event” and “—Waivers of Servicer Termination Events”.
The Master Servicer will only be liable under the Pooling and Servicing Agreement to the extent of the obligations specifically imposed by the Pooling and Servicing Agreement. The Master Servicer’s rights and obligations with respect to indemnification, and certain limitations on the Master Servicer’s liability under the Pooling and Servicing Agreement, are described under “The Pooling and Servicing Agreement—Limitation on Liability; Indemnification”.
For a description of any material affiliations, relationships and related transactions between the Master Servicer and the other transaction parties, see “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
Significant Primary Servicer
Berkadia Commercial Mortgage LLC
Berkadia Commercial Mortgage LLC (“Berkadia”) will be acting as a sub-servicer for KeyBank, as the CGCMT 2016-GC36 Master Servicer, with respect to three Outside Serviced Mortgage Loans (secured by the Mortgaged Properties identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, Austin Block 21 and 5 Penn Plaza (the “GC36 Berkadia Primary Serviced Loans”)), collectively representing approximately 19.4% of the Initial Pool Balance. Furthermore, Berkadia will be appointed as a sub-servicer for Wells Fargo Bank, as Master Servicer, with respect to three Serviced Loans (secured by the Mortgaged Properties identified on Annex A to this prospectus as McCallum Courts and McCallum Glen, Troy Place Apartments and Franklin Center (the “GC37 Berkadia Primary Serviced Loans”)), collectively representing approximately 5.7% of the Initial Pool Balance. Berkadia is a limited liability company organized under the laws of the state of Delaware. Berkadia is wholly-owned (indirectly) by Leucadia National Corporation and Berkshire Hathaway Inc.
Berkadia is one of the largest servicers of commercial real estate loans in the United States and is a rated primary and master servicer. The Berkadia team has experience with servicing commercial and multifamily mortgage loans in commercial mortgage-backed securities transactions dating back to 1995. In addition, Berkadia carries out servicing activities on a contracted basis for third parties such as insurance companies, banks and other financial institutions. Berkadia’s principal office location is: 323 Norristown Road, Suite 300, Ambler, Pennsylvania 19002.
As of December 31, 2015, Berkadia had a primary/master servicing portfolio of approximately 23,000 loans with an unpaid principal balance of $226.9 billion. The table below contains information on the size and growth of the portfolio of commercial and multifamily loans from 2013 to 2015 in respect of which Berkadia has acted as master and/or primary servicer:
Calendar Year End | ||||||
Portfolio—Primary/Master Servicing(1) | 2013 | 2014 | 2015 | |||
CMBS (US) | 75.8 billion | 65.1 billion | 53.8 billion | |||
Other | 162.2 billion | 173.3 billion | 173.1 billion | |||
Total | 238.0 billion | 238.4 billion | 226.9 billion |
(1) | Includes performance of primary/master servicing functions as a sub-servicer. |
279 |
Berkadia currently maintains ratings from Fitch, S&P and Morningstar. Berkadia’s primary servicing operations are rated CPS1 from Fitch, STRONG from S&P, and CS1 from Morningstar. Berkadia’s master servicing operations are rated CMS2 from Fitch, STRONG from S&P and CS1 from Morningstar.
Berkadia has developed policies, procedures and controls for the performance of its servicing obligations in compliance with applicable servicing agreements, and the applicable servicing criteria set forth in Item 1122 ofRegulation AB. Berkadia reviews its policies and procedures regularly and updates them on an annual basis to ensure that they reflect its current servicing practices. There were no material changes made to the policies and procedures in order for Berkadia to be named KeyBank’s sub-servicer in connection with this transaction.
Berkadia has an established business continuity program that is tested regularly in accordance with its policies and procedures. In the event of a disruption, all functions of the disrupted facility would transfer to a steady business recovery facility, providing access to all data and tools to continue to perform its servicing duties. Berkadia’s business continuity program is tested and updated on an annual basis.
Berkadia maintains a multi-application mortgage-servicing technology platform, with multiple capabilities and reporting functions, to facilitate the processing of its servicing activities. Berkadia may, from time to time, engage third party contractors or vendors to assist in performing certain routine servicing functions. Berkadia monitors and reviews its third party contractors and vendors in compliance with its internal procedures and applicable law.
No securitization transaction involving commercial mortgage loans in which Berkadia was acting as master servicer and/or sub-servicer has experienced an event of default as a result of any action or inaction of Berkadia as master servicer and/or sub-servicer, including as a result of Berkadia’s failure to comply with the applicable servicing criteria in connection with any securitization transaction.
Berkadia Services India Private Limited, located in Hyderabad (Andra Pradesh) India, has been assisting in the performance of servicing functions for Berkadia and Berkadia’s predecessors since 2002. Berkadia Services India Private Limited reports to the Executive Vice President of Servicing at Berkadia.
From time to time Berkadia and its affiliates are parties to lawsuits and other legal proceedings arising in the ordinary course of business. Berkadia does not believe that any of such lawsuits or proceedings would, individually or in the aggregate, have a material adverse effect on its business or its ability to serve as a primary servicer. Notwithstanding the foregoing, Berkadia discloses the following litigation: On February 23, 2016, a certificateholder of the J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2007-CIBC18 (the “Series 2007-CIBC18 Trust”), filed suit (the “Lawsuit”) in the Supreme Court of New York, County of New York, against KeyBank National Association (“KeyBank”), as special servicer, and Berkadia, as master servicer. The action was brought in connection with the determinations by KeyBank and Berkadia of the fair value of a loan secured by the Bryant Park Hotel in New York City. KeyBank and Berkadia deny liability, believe that they performed their obligations in accordance with the terms of the pooling and servicing agreement applicable to theSeries 2007-CIBC18 Trust, and intend to contest the claims asserted against them.
Neither Berkadia nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization. However, Berkadia or its affiliates may own in the future certain classes of Certificates. Any such party will have the right to dispose of any such Certificates at any time.
The foregoing information set forth in this “—Servicers—Significant Primary Servicer—Berkadia Commercial Mortgage LLC” section has been provided by Berkadia.
Summary of Berkadia Subservicing Agreement with KeyBank
General. KeyBank, as the CGCMT 2016-GC36 Master Servicer, has appointed Berkadia as the primary servicer of the GC36 Berkadia Primary Serviced Loans, representing approximately 19.4% of the Initial Pool Balance, pursuant to that certain Amended and Restated Subservicing Agreement dated as of January 18, 2013 (as amended, restated, replaced, or otherwise modified from time to time, the “KeyBank/Berkadia Primary Servicing Agreement”). The primary servicing of the GC36 Berkadia Primary Serviced Loans will be governed by the KeyBank/Berkadia Primary Servicing Agreement. The following summary describes certain provisions of the KeyBank/Berkadia Primary Servicing Agreement relating to the servicing and administration of the GC36 Berkadia Primary Serviced Loans. The summary does not purport to be complete and is subject, and qualified in its entirety, by reference to the provisions of the KeyBank/Berkadia Primary Servicing Agreement.
280 |
Summary of Duties. With respect to the GC36 Berkadia Primary Serviced Loans, Berkadia, as primary servicer, will be responsible for performing the primary servicing of the GC36 Berkadia Primary Serviced Loans in a manner consistent with the CGCMT 2016-GC36 Pooling and Servicing Agreement and the servicing standard set forth therein. Primary servicing will include:
· | maintaining the servicing file and releasing files upon borrower request or payoff of each GC36 Berkadia Primary Serviced Loan as approved by the CGCMT 2016-GC36 Master Servicer; |
· | (i) promptly providing the CGCMT 2016-GC36 Master Servicer with a copy of any repurchase demand received by the subservicer, (ii) within 5 business days of discovery, notifying the CGCMT 2016-GC36 Master Servicer in writing of any discovered document defect or breach of a GC36 Berkadia Primary Serviced Loan representation, and (iii) cooperating with the CGCMT 2016-GC36 Master Servicer in pursuing its obligations to make a repurchase claim against the related CGCMT 2016-GC36 mortgage loan seller; |
· | collecting monthly payments and escrow and reserve payments and maintaining a primary servicer certificate account and applicable escrow and reserve accounts to hold such collections in accordance with the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement; |
· | remitting to the CGCMT 2016-GC36 Master Servicer on a timely basis monthly payments less any primary servicer fees, and other borrower paid fees such as late payment charges, assumption fees, modification fees, and charges for prepayment, defeasance, and lease reviews that Berkadia is entitled to retain pursuant to the KeyBank/Berkadia Primary Servicing Agreement; |
· | preparing such reports, including property inspection reports, monthly remittance reports, and such other reports as reasonably requested by the CGCMT 2016-GC36 Master Servicer from time to time; |
· | collecting quarterly and annual budgets, rent rolls, and operating statements; |
· | performing inspections of the related Mortgaged Property and providing inspection reports to the CGCMT 2016-GC36 Master Servicer according to the requirements under the CGCMT 2016-GC36 Pooling and Servicing Agreement; |
· | monitoring tax amounts due and borrower insurance obligations on such loans and related specially serviced loans under the CGCMT 2016-GC36 Pooling and Servicing Agreement and obtaining such property level insurance when the borrower fails to maintain such insurance; |
· | maintaining errors and omissions insurance and an appropriate fidelity bond; |
· | notifying the CGCMT 2016-GC36 Master Servicer of any borrower requests or transactions; provided, however, that Berkadia will not approve or consummate any borrower request or transaction without obtaining the prior written consent of the CGCMT 2016-GC36 Master Servicer; |
· | promptly notifying the CGCMT 2016-GC36 Master Servicer of any defaults under the GC36 Berkadia Primary Serviced Loans, collection issues, or customer issues; provided that Berkadia will not take any action with respect to enforcing such loans (including enforcing an anticipated repayment date mortgage loan after its anticipated repayment date) without the prior written approval of the CGCMT 2016-GC36 Master Servicer; and |
· | reasonably cooperating with the CGCMT 2016-GC36 Master Servicer to facilitate the timely performance of all servicing responsibilities of the CGCMT 2016-GC36 Master Servicer under the CGCMT 2016-GC36 Pooling and Servicing Agreement that are not being performed by Berkadia under the KeyBank/Berkadia Primary Servicing Agreement. |
Berkadia will provide to the CGCMT 2016-GC36 Master Servicer access to all of the servicing files, mortgage loan files, and the servicing systems maintained by Berkadia with respect to the GC36 Berkadia Primary Serviced Loans. Berkadia’s custodial responsibilities are limited to electronic copies of the primary servicing files. Berkadia will fully cooperate with the CGCMT 2016-GC36 Master Servicer’s performance of its
281 |
servicing responsibilities under the CGCMT 2016-GC36 Pooling and Servicing Agreement including the related REMIC provisions. Berkadia will take, or refrain from taking, any action the CGCMT 2016-GC36 Master Servicer directs in writing relating to Berkadia’s responsibilities under the KeyBank/Berkadia Primary Servicing Agreement.
Berkadia will also timely provide such certifications, reports, and registered public accountant attestations required by the KeyBank/Berkadia Primary Servicing Agreement or bythe CGCMT 2016-GC36 Master Servicer to permit it to comply with the CGCMT 2016-GC36 Pooling and Servicing Agreement and to permit the CGCMT 2016-GC36 Depositor to comply with its Exchange Act reporting obligations.
TheCGCMT 2016-GC36 Master Servicer and Berkadia will each designate a portfolio manager and other appropriate personnel to receive documents and communications between each other so that Berkadia may perform its obligations under the KeyBank/Berkadia Primary Servicing Agreement and the CGCMT 2016-GC36 Master Servicer may perform its supervisory authority over Berkadia. Berkadia will not communicate directly with the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Controlling Class Representative, any rating agency under the CGCMT 2016-GC36 Pooling and Servicing Agreement, NRSRO, or any other similar person except in very limited circumstances set forth in the KeyBank/Berkadia Primary Servicing Agreement.
Berkadia will have no obligation to make any principal and interest advances. Berkadia is obligated to make servicing advances with respect to taxes and insurance (“T&I Advances”) when the CGCMT 2016-GC36 Master Servicer is otherwise required to make such T&I Advances under the CGCMT 2016-GC36 Pooling and Servicing Agreement. Berkadia is entitled to be reimbursed for any such T&I Advances in the same manner the CGCMT 2016-GC36 Master Servicer is entitled to be reimbursed under the CGCMT 2016-GC36 Pooling and Servicing Agreement for an Advance. Berkadia is permitted to advance interest on any T&I Advance at the prime rate commencing from the date such T&I Advance was made to the business day that Berkadia is reimbursed for such T&I Advance. Other than T&I Advances, Berkadia has no other obligation to make any servicing advances.
Berkadia will not perform any of the restricted servicing actions set forth in the KeyBank/Berkadia Primary Servicing Agreement without the prior written approval of theCGCMT 2016-GC36 Master Servicer. Such consent may be subject to the prior approval of the CGCMT 2016-GC36 Special Servicer, any required CGCMT 2016-GC36 certificateholder, the rating agencies under the CGCMT 2016-GC36 Pooling and Servicing Agreement, and any other person, as applicable, if required under the CGCMT 2016-GC36 Pooling and Servicing Agreement which approvals will be requested by the CGCMT 2016-GC36 Master Servicer.
Compensation. Under the KeyBank/Berkadia Primary Servicing Agreement, Berkadia is entitled to retain a portion of the servicing fees and additional servicing compensation that are payable to the CGCMT 2016-GC36 Master Servicer under the CGCMT 2016-GC36 Pooling and Servicing Agreement. The issuing entity under CGCMT 2016-GC36 will not have any obligation or be liable for the payment to Berkadia of any servicing compensation payable to Berkadia under the KeyBank/Berkadia Primary Servicing Agreement in excess of the servicing compensation payable to the CGCMT 2016-GC36 Master Servicer.
Berkadia will be required to promptly remit to the CGCMT 2016-GC36 Master Servicer any additional servicing compensation or other amounts received by it that Berkadia is not entitled to retain. Except as otherwise provided, Berkadia will pay all its overhead and similar expenses incurred by it in connection with its servicing activities under the KeyBank/Berkadia Primary Servicing Agreement. Notwithstanding the foregoing, Berkadia will not be entitled to receive any portion of any compensation, fee, or other amount that is payable to the CGCMT 2016-GC36 Special Servicer.
Indemnification; Limitation of Liability. Berkadia and its directors, officers, agents, or employees (the “Berkadia Parties”) will have no liability to the CGCMT 2016-GC36 Master Servicer for any action or inaction, done in good faith pursuant to the KeyBank/Berkadia Primary Servicing Agreement, or for errors in judgment. However, this will not protect the Berkadia Parties against losses resulting from any breach of representations or warranties, any expense or liability specifically required to be borne by Berkadia without right of reimbursement, any specific liability imposed on Berkadia for a breach of the accepted servicing practices, or any liability that would otherwise be imposed on Berkadia by reason of its misfeasance, bad faith, fraud, negligence, or willful violation of applicable law in the performance of its duties under the KeyBank/Berkadia Primary Servicing Agreement or by reason of its negligent disregard of its obligations or duties under the KeyBank/Berkadia Primary Servicing Agreement. The Berkadia Parties will be indemnified and held harmless by the CGCMT 2016-GC36 Master Servicer against any loss, liability, cost or expense (including reasonable legal fees and expenses) in connection with any claim or legal action incurred by reason of (i) the servicing of the GC36 Berkadia Primary
282 |
Serviced Loans prior to Berkadia’s servicing of the GC36 Berkadia Primary Serviced Loans, (ii) the CGCMT 2016-GC36 Master Servicer’s, (A) willful misfeasance, bad faith, or negligence in the performance of its obligations or duties under the KeyBank/Berkadia Primary Servicing Agreement, (B) material breach of its covenants or duties under the KeyBank/Berkadia Primary Servicing Agreement, (C) willful violation of applicable law in the performance of its obligations under the KeyBank/Berkadia Primary Servicing Agreement, or (D) breach of a representation or warranty made by the CGCMT 2016-GC36 Master Servicer in the KeyBank/Berkadia Primary Servicing Agreement, or (iii) the taking, or the refraining from the taking, of any action pursuant to the express written direction of the CGCMT 2016-GC36 Master Servicer. The CGCMT 2016-GC36 Master Servicer agrees to use reasonable efforts to pursue the CGCMT 2016-GC36 trust for indemnification against any loss, liability or expense incurred by Berkadia in connection with the performance of its duties and obligations as to which the CGCMT 2016-GC36 Pooling and Servicing Agreement grants to the CGCMT 2016-GC36 Master Servicer’s agents a right to indemnification from such trust.
Berkadia will indemnify and hold harmless the CGCMT 2016-GC36 Master Servicer and its directors, officers, agents or employees against any loss, damage, liability, penalty, fine, forfeiture, cost, or expense (including reasonable legal fees and expenses) in connection with any claim or legal action incurred by reason of Berkadia’s (i) breach of any representation or warranty made in the KeyBank/Berkadia Primary Servicing Agreement, (ii) breach of its Exchange Act reporting obligations in the KeyBank/Berkadia Primary Servicing Agreement, (iii) certification required under its Exchange Act obligations containing any material inaccuracy, (iv) willful misconduct, misfeasance, bad faith, or negligence in the performance of its obligations under the KeyBank/Berkadia Primary Servicing Agreement, (v) material breach of any of its covenants or obligations under the KeyBank/Berkadia Primary Servicing Agreement, (vi) willful violation of applicable law in the performance of its obligations under the KeyBank/Berkadia Primary Servicing Agreement, or (vii) breach of accepted servicing practices. Berkadia will not be required to indemnify the CGCMT 2016-GC36 Master Servicer for any action or inaction at the express direction of the CGCMT 2016-GC36 Master Servicer or with the specific consent of the CGCMT 2016-GC36 Master Servicer.
Termination. The KeyBank/Berkadia Primary Servicing Agreement will be terminated with respect to Berkadia if any of the following occurs:
· | Upon the purchase, repurchase, or replacement of a GC36 Berkadia Primary Serviced Loan pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement; |
· | If the CGCMT 2016-GC36 Master Servicer’s responsibilities and duties as CGCMT 2016-GC36 Master Servicer under the CGCMT 2016-GC36 Pooling and Servicing Agreement have been assumed by the CGCMT 2016-GC36 Trustee, and the CGCMT 2016-GC36 Trustee has elected to terminate Berkadia pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement; |
· | If the CGCMT 2016-GC36 Master Servicer (or the CGCMT 2016-GC36 Depositor, if applicable) elects to terminate Berkadia following an event of default by Berkadia under the KeyBank/Berkadia Primary Servicing Agreement; |
· | If required by the CGCMT 2016-GC36 Pooling and Servicing Agreement with respect to any GC36 Berkadia Primary Serviced Loan becoming a specially serviced loan or REO loan; |
· | Pursuant to any other agreement between the CGCMT 2016-GC36 Master Servicer and Berkadia in accordance with any provision thereof that expressly provides for the termination of the KeyBank/Berkadia Primary Servicing Agreement; or |
“Berkadia Event of Default”, means any one of the following events:
· | if the CGCMT 2016-GC36 Master Servicer has a cure period of at least 10 days under the CGCMT 2016-GC36 Pooling and Servicing Agreement, Berkadia fails to cure within a time period that is 5 days less than the cure period provided to the CGCMT 2016-GC36 Master Servicer in the CGCMT 2016-GC36 Pooling and Servicing Agreement and after receiving written notice of the default from CGCMT 2016-GC36 Master Servicer at least 2 business days prior to the expiration of the cure period provided to Berkadia under the KeyBank/Berkadia Primary Servicing Agreement; or |
283 |
· | if the CGCMT 2016-GC36 Master Servicer has a cure period under the CGCMT 2016-GC36 Pooling and Servicing Agreement that is less than 10 days long, Berkadia fails to cure within a time period that is 1 business day less than the cure period provided to the CGCMT 2016-GC36 Master Servicer in the CGCMT 2016-GC36 Pooling and Servicing Agreement and after receiving prompt notice of the default from the CGCMT 2016-GC36 Master Servicer prior to the expiration of the cure period provided to Berkadia under the KeyBank/Berkadia Primary Servicing Agreement; or |
· | any act, omission, or failure to act by Berkadia that causes the CGCMT 2016-GC36 Master Servicer to be terminated or results in the CGCMT 2016-GC36 Master Servicer being terminated under the CGCMT 2016-GC36 Pooling and Servicing Agreement; or |
· | any act, omission, or failure to act by Berkadia that results in a written notice of an event of default, under the CGCMT 2016-GC36 Pooling and Servicing Agreement being delivered to the CGCMT 2016-GC36 Master Servicer or Berkadia by a party to the CGCMT 2016-GC36 Pooling and Servicing Agreement, or |
· | any act, omission, or failure to act by Berkadia that constitutes, causes, or results in an event of default of the CGCMT 2016-GC36 Master Servicer under the CGCMT 2016-GC36 Pooling and Servicing Agreement which is not cured within the cure period set forth in the CGCMT 2016-GC36 Pooling and Servicing Agreement and which provides any party to the CGCMT 2016-GC36 Pooling and Servicing Agreement with the right to terminate the CGCMT 2016-GC36 Master Servicer or cause the CGCMT 2016-GC36 Master Servicer to be terminated under the CGCMT 2016-GC36 Pooling and Servicing Agreement; or |
· | any failure by Berkadia to remit to the CGCMT 2016-GC36 Master Servicer any amount required to be remitted pursuant to the KeyBank/Berkadia Primary Servicing Agreement, which failure continues unremedied until 6:00 p.m. (New York City time) on the date such remittance is due; provided that to the extent Berkadia does not timely make remittances, Berkadia shall pay to the CGCMT 2016-GC36 Master Servicer, interest on any amount not timely remitted at the prime rate from and including the applicable required remittance date to but not including the date such remittance is actually made; or |
· | any failure by Berkadia to timely deliver to the CGCMT 2016-GC36 Master Servicer or any other person any report or information required to be delivered pursuant to the KeyBank/Berkadia Primary Servicing Agreement, which failure continues unremedied for 1 business day after Berkadia’s receipt of notice from the CGCMT 2016-GC36 Master Servicer of such failure; or |
· | except as otherwise permitted pursuant to the KeyBank/Berkadia Primary Servicing Agreement, Berkadia’s (A) assignment of the KeyBank/Berkadia Primary Servicing Agreement, (B) assignment or delegation of all or any portion of its servicing duties or obligations under the KeyBank/Berkadia Primary Servicing Agreement, or (C) assignment of all or any portion of its rights to servicing compensation under the KeyBank/Berkadia Primary Servicing Agreement, which assignment would have a material adverse effect on the performance by Berkadia of its duties under the KeyBank/Berkadia Primary Servicing Agreement; or |
· | any failure by Berkadia to deposit into the designated accounts any amount required to be deposited under the KeyBank/Berkadia Primary Servicing Agreement, which failure continues unremedied for 1 business day following the date on which such deposit was first required to be made; or |
· | except as otherwise specified, any failure by Berkadia to observe or perform in any material respect any other of the covenants or agreements in the KeyBank/Berkadia Primary Servicing Agreement, which failure continues unremedied for a period of 25 days (or 10 days in the case of a failure to pay the premium for any insurance policy required to be maintained) after the date on which written notice of such failure, is given to Berkadia; provided, however, that, with respect to any such failure (other than a failure to pay insurance policy premiums) that is not curable within such 25 day period, Berkadia has an additional 30 day cure period so long as Berkadia has commenced to cure such failure within the initial 25 day period and has provided the CGCMT 2016-GC36 Master Servicer with an officer’s certificate certifying that it has diligently pursued, and is continuing to pursue, a full cure |
284 |
and such delay does not materially or adversely affect the CGCMT 2016-GC36 Master Servicer or the CGCMT 2016-GC36 certificateholders; or
· | any failure by Berkadia to (A) comply with any of the Exchange Act requirements under the KeyBank/Berkadia Primary Servicing Agreement or under the CGCMT 2016-GC36 Pooling and Servicing Agreement that are applicable to Berkadia, including the failure to deliver any required reports or certificates at the time such report or certification is required or (B) deliver any performance certification or any items required by Items 1122 and 1123 of Regulation AB that it is required to deliver under any other pooling and servicing agreement relating to any other series of certificates offered by the depositor under CGCMT 2016-GC36; or |
· | a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator, receiver, liquidator, trustee or similar official in any bankruptcy, insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against Berkadia and such decree or order shall have remained in force undischarged, undismissed or unstayed for 50 days; or |
· | Berkadia consents to the appointment of a conservator, receiver, liquidator, trustee or similar official in any bankruptcy, insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all or substantially all of its property; or |
· | Berkadia admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable bankruptcy, insolvency or reorganization statute, makes an assignment for the benefit of its creditors, voluntarily suspends payment of its obligations, takes any corporate action in furtherance of the foregoing, or takes any other actions indicating its insolvency or inability to pay its obligations; or |
· | The CGCMT 2016-GC36 Master Servicer receives notice that if Berkadia continues to act in such capacity, the rating or ratings on one or more classes of CGCMT 2016-GC36 certificates will be downgraded or withdrawn, and the related rating agency is citing servicing concerns relating to Berkadia as subservicer as the sole or material factor in such action; or |
· | failure by Berkadia to maintain the ratings required of a subservicer under the CGCMT 2016-GC36 Pooling and Servicing Agreement; or |
· | a rating agency has (i) qualified, downgraded or withdrawn its rating or ratings of one or more classes of CGCMT 2016-GC36 certificates, or (ii) placed one or more classes of CGCMT 2016-GC36 certificates on “watch status” in contemplation of rating downgrade or withdrawal and, in the case of either of clauses (i) or (ii), citing servicing concerns with Berkadia as a material factor in such rating action (and such qualification, downgrade, withdrawal or “watch status” placement has not been withdrawn by such rating agency within 20 days of such event). |
Notwithstanding the foregoing, upon any termination of Berkadia, Berkadia will be entitled to receive all accrued and unpaid primary servicing fees through the date of termination.
The foregoing information set forth in this “—Servicers—Significant Primary Servicer—Berkadia Commercial Mortgage LLC—Summary of Berkadia Subservicing Agreement with KeyBank” section has been provided by KeyBank.
Summary of GC37 Berkadia Primary Servicing Agreement with Wells Fargo
General. Berkadia will act as the primary servicer of three Mortgage Loans secured by the Mortgaged Properties identified on Annex A to this prospectus as McCallum Courts and McCallum Glen, Troy Place Apartments and Franklin Center (the “GC37 Berkadia Primary Serviced Mortgage Loans”). Accordingly, Wells Fargo Bank, as Master Servicer, and Berkadia, as primary servicer, will enter into a primary servicing agreement, dated as of April 1, 2016 (the “GC37 Berkadia Primary Servicing Agreement”). The primary servicing of the GC37 Berkadia Primary Serviced Mortgage Loans will be governed by the GC37 Berkadia Primary Servicing
285 |
Agreement. The following summary describes certain provisions of the GC37 Berkadia Primary Servicing Agreement relating to the primary servicing and administration of the GC37 Berkadia Primary Serviced Mortgage Loans. The summary does not purport to be complete and is subject, and qualified in its entirety, by reference to the provisions of the GC37 Berkadia Primary Servicing Agreement.
Summary ofCertain Primary Servicing Duties. With respect to the GC37 Berkadia Primary Serviced Mortgage Loans, Berkadia, as primary servicer, will be responsible for performing the primary servicing of the GC37 Berkadia Primary Serviced Mortgage Loans in a manner consistent with the Pooling and Servicing Agreement and in accordance with the Servicing Standard. Primary servicing duties will include:
· | maintaining the servicing file and releasing files in accordance with the Pooling and Servicing Agreement and the GC37 Berkadia Primary Servicing Agreement, |
· | within 5 business days of receipt of a repurchase communication, certificateholder repurchase request or pooling and servicing party repurchase request, reporting any such repurchase communication, certificateholder repurchase request or pooling and servicing party repurchase request to the Master Servicer and forwarding a copy of such repurchase communication, certificateholder repurchase request or pooling and servicing party repurchase request to the Master Servicer and such information in its possession reasonably requested by the Master Servicer, (ii) within 5 business days of discovery or notice of a document defect or breach, notifying the Master Servicer in writing of any discovered document defect or breach of a mortgage loan representation, and (iii) cooperating with the Master Servicer in pursuing its obligations to make a repurchase claim against the related Mortgage Loan Seller, |
· | collecting monthly payments and escrow and reserve payments and maintaining a primary servicer collection account and applicable escrow and reserve accounts to hold such collections, |
· | remitting to the Master Servicer on a timely basis monthly payments less any primary servicing fees, escrow and reserve payments and payments in the nature of additional servicing compensation due to Berkadia, as primary servicer, |
· | preparing such reports, including a collection report, monthly remittance report, various CREFC® reports and such other reports as reasonably requested by the master servicer from time to time, |
· | collecting monthly and quarterly borrower reports, rent rolls, income statements and operating statements, |
· | performing inspections of the related Mortgaged Property securing the GC37 Berkadia Primary Serviced Mortgage Loans at the frequency required of the Master Servicer under the Pooling and Servicing Agreement, and providing inspection reports to the Master Servicer, |
· | monitoring borrower insurance obligations on such loans and obtaining such property level insurance when the borrower fails to maintain such insurance, |
· | maintaining errors and omissions insurance and an appropriate fidelity bond, |
· | notifying the Master Servicer of any borrower requests or transactions; provided, however, that Berkadia will not approve or consummate any borrower request or transaction without obtaining the prior written consent of the Master Servicer, and |
· | with respect to all servicing responsibilities of the Master Servicer under the Pooling and Servicing Agreement which are not being performed by Berkadia under the GC37 Berkadia Primary Servicing Agreement, Berkadia will reasonably cooperate with the Master Servicer to facilitate the timely performance of such servicing responsibilities. |
Berkadia will provide to the Master Servicer access to all the servicing files, mortgage loan files and servicing systems maintained by Berkadia with respect to the GC37 Berkadia Primary Serviced Mortgage Loans for audit and review.
286 |
Berkadia will also timely provide such certifications, reports and registered public accountant attestations required by the GC37 Berkadia Primary Servicing Agreement or by the Master Servicer to permit it to comply with the Pooling and Servicing Agreement and the Depositor to comply with its Exchange Act reporting obligations.
Berkadia will not communicate directly with the Special Servicer, the Directing Holder or any Rating Agency except in very limited circumstances set forth in the GC37 Berkadia Primary Servicing Agreement.
Berkadia will have no obligation to make any principal and interest advance or any servicing advances. Berkadia will not make any Major Decisions, material servicing decisions or take any other action requiring the approval of the Master Servicer under the GC37 Berkadia Primary Servicing Agreement without the prior written approval of the Master Servicer. Such consent will be subject to the consent of the Special Servicer. The Master Servicer will request any such approvals or Rating Agency Confirmation.
Compensation. Under the GC37 Berkadia Primary Servicing Agreement, Berkadia is entitled to retain a portion of the servicing fees and additional servicing compensation that is payable to the master servicer under the Pooling and Servicing Agreement. The Issuing Entity will not have any obligation or be liable for the payment to Berkadia of any servicing compensation payable to Berkadia under the applicable GC37 Berkadia Primary Servicing Agreement in excess of the servicing compensation payable to the master servicer.
Berkadia will be required to promptly remit to the master servicer any additional servicing compensation or otheramounts received by it which Berkadia is not entitled to retain. Except as otherwise provided, Berkadia will pay all its overhead and similar expenses incurred by it in connection with its servicing activities under the GC37 Berkadia Primary Servicing Agreement.
Indemnification; Limitation of Liability. Neither Berkadia nor any of the affiliates, directors, members, managers, officers, employees or agents of Berkadia shall be under any liability to the Master Servicer for any action taken or for refraining from the taking of any action in good faith pursuant to the GC37 Berkadia Primary Servicing Agreement, or for errors in judgment; provided, however, that this provision shall not protect Berkadia or any of its affiliates, directors, members, managers, officers, employees or agents against liability to the master servicer for any breach of any representation or warranty made in the GC37 Berkadia Primary Servicing Agreement, or against any liability which would otherwise be imposed by reason of willful misconduct, bad faith, fraud or negligence in the performance of obligations or duties under the GC37 Berkadia Primary Servicing Agreement or by reason of negligent disregard of obligations or duties under the GC37 Berkadia Primary Servicing Agreement. Berkadia and any affiliate, director, member, officer, employee or agent of Berkadia may rely on any document of any kind which,prima facie,is properly executed and submitted by any person respecting any matters arising under the GC37 Berkadia Primary Servicing Agreement. Berkadia shall not be under any obligation to appear in, prosecute or defend any legal or administrative action (whether in equity or at law), proceeding, hearing or examination that is not incidental to its duties under the GC37 Berkadia Primary Servicing Agreement or which in its opinion may involve it in any expense or liability not recoverable under the GC37 Berkadia Primary Servicing Agreement; provided, however, that Berkadia may, with the consent of the master servicer, undertake any such action which it may deem necessary or desirable in respect to the GC37 Berkadia Primary Servicing Agreement and the rights and duties of the parties thereto. In such event, the legal expenses and all costs of such action and any loss, liability, penalty, fine, forfeiture, claim or judgment resulting therefrom, to the extent the master servicer may recover such amounts from the Issuing Entity pursuant to the Pooling and Servicing Agreement, shall be expenses, costs and liabilities for which the master servicer will be liable and Berkadia shall be entitled to be reimbursed therefor from the master servicer upon written demand.
The master servicer and Berkadia will each indemnify and hold harmless the master servicer, in the case of Berkadia, and Berkadia, in the case of the master servicer (including any of their affiliates, directors, members, managers, officers, employees or agents) from and against any and all liability, claim, loss, out-of-pocket cost (including reasonable attorneys’ fees), penalty, expense ordamage of the master servicer, in the case of Berkadia, and Berkadia, in the case of the master servicer (including any of their affiliates, directors, officers, employees or agents) resulting from (i) any breach by the indemnitor of a representation or warranty made by it in the GC37 Berkadia Primary Servicing Agreement, or (ii) any willful misconduct, bad faith, fraud or negligence by the indemnitor in the performance of its obligations or duties under the GC37 Berkadia Primary Servicing Agreement or by reason of negligent disregard of such obligations and duties.
Resignation. The GC37 Berkadia Primary Servicing Agreement will provide that Berkadia may resign from the obligations and duties imposed on it thereunder upon 60 days prior written notice to the master servicer or by
287 |
mutual consent of Berkadia and the master servicer or upon the determination that its duties thereunder are no longer permissible under applicable law and such incapacity cannot be cured by Berkadia.
Termination. The GC37 Berkadia Primary Servicing Agreement will be terminated with respect to Berkadia if any of the following occurs:
· | the master servicer elects to terminate Berkadia following a Berkadia Primary Servicer Termination Event (as defined below); |
· | at the Depositor’s request (to the extent the Depositor has the right to request termination of Berkadia under the Pooling and Servicing Agreement) pursuant to the final two bullets listed under Berkadia Primary Servicer Termination Events below; |
· | upon resignation by Berkadia; |
· | upon the later of the final payment or other liquidation of the last Berkadia Primary Serviced Mortgage Loan and the disposition of all REO Property and the remittance of all funds due thereunder; |
· | by mutual consent of Berkadia and the master servicer in writing; |
· | upon termination of the Pooling and Servicing Agreement; |
· | at the option of the purchaser of any Berkadia Primary Serviced Mortgage Loan pursuant to the terms of the Pooling and Servicing Agreement; provided that any such termination pursuant to this clause will only be effective with respect to the related loan and not with respect to the entire agreement; or |
· | if the master servicer’s responsibilities and duties as master servicer under the Pooling and Servicing Agreement have been assumed by the trustee, and the trustee elects to terminate Berkadia pursuant to the Pooling and Servicing Agreement. |
“Berkadia PrimaryServicer Termination Event”, means any one of the following events:
· | any failure by Berkadia to deposit into the accounts maintained by Berkadia, or to deposit into, or to remit to the master servicer for deposit into, the collection account, on a timely basis, any amount required to be so deposited or remitted by Berkadia, which failure continues unremedied for 1 Business Day following the date on which such deposit or remittance is required to be made; |
· | any failure on the part of Berkadia to deliver to the master servicer certain certificates or reports specified in the GC37 Berkadia Primary Servicing Agreement subject to cure periods specified in the GC37 Berkadia Primary Servicing Agreement; |
· | any failure on the part of Berkadia duly to observe or perform in any material respect any of the other covenants or obligations under the GC37 Berkadia Primary Servicing Agreement, which continues unremedied for a period of 25 days (10 days in the case of payment of insurance premiums or in any event such shorter period of time (not less than two (2) Business Days) as is necessary to avoid the commencement of foreclosure proceedings for any lien relating to unpaid real estate taxes or a lapse in any required insurance coverage if Berkadia had prior notice of the related borrower’s failure to pay such taxes, assessments or insurance premium) after the date on which written notice of such failure, requiring the same to be remedied, will have been given to Berkadia by the master servicer, provided, however, if such failure is capable of being cured and Berkadia is diligently pursuing such cure, such 25 day period will be extended for an additional 60 days; provided, further, however, that such extended period will not apply to the obligations regarding Exchange Act reporting; |
· | any breach on the part of Berkadia of any representation or warranty contained in the Pooling and Servicing Agreement and incorporated in the GC37 Berkadia Primary Servicing Agreement which materially and adversely affects the interests of the master servicer or any class of certificateholders and which continues unremedied for a period of 30 days after the date on which notice of such breach, requiring the same to be remedied, will have been given to Berkadia by the master servicer, |
288 |
provided, however, if such breach is capable of being cured and Berkadia is diligently pursuing such cure, such 30 day period will be extended for an additional 60 days;
· | a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator or receiver, liquidator, trustee or similar official in any bankruptcy, insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs, will have been entered against Berkadia and such decree or order will have remained in force, undischarged, undismissed or unstayed for a period of 60 days; |
· | Berkadia consents to the appointment of a conservator, receiver, liquidator, trustee or similar official in any bankruptcy, insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to Berkadia, or of or relating to all or substantially all of its property; |
· | Berkadia admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, voluntarily suspends payment of its obligations or take any corporate action in furtherance of the foregoing; |
· | either of Moody’s or KBRA has (A) qualified, downgraded or withdrawn its rating or ratings of one or more classes of Certificates or (B) placed one or more classes of Certificates on “watch status” in contemplation of rating downgrade or withdrawal and, in the case of either of clauses (A) or (B), publicly citing servicing concerns with Berkadia as the sole or material factor in such rating action (and such qualification, downgrade, withdrawal or “watch status” placement has not been withdrawn by such Rating Agency within 60 days of such event); |
· | Berkadia ceases to have a commercial primary servicer rating of at least “CPS3” from Fitch and that rating is not reinstated within 60 days; |
· | Berkadia shall assign or transfer or attempt to assign or transfer all or part of its rights and obligations under the GC37 Berkadia Primary Servicing Agreement except as permitted by the GC37 Berkadia Primary Servicing Agreement; |
· | Berkadia fails to deliver by the due date any Exchange Act reporting items required to be delivered to the master servicer pursuant to the Pooling and Servicing Agreement or the GC37 Berkadia Primary Servicing Agreement or to the master servicer under any other pooling and servicing agreement that the Depositor is a party to; or |
· | Berkadia fails to perform in any material respect any of its covenants or obligations contained in the GC37 Berkadia Primary Servicing Agreement regarding creating, obtaining or delivering any Exchange Act reporting items required in order for any party to the Pooling and Servicing Agreement to perform its obligations under the Pooling and Servicing Agreement or under the Exchange Act reporting requirements of any other pooling and servicing agreement that the Depositor is a party to. |
Notwithstanding the foregoing, upon any termination of Berkadia, Berkadia will be entitled toreceive all accrued and unpaid primary servicing fees through the date of termination and will cooperate fully with the master servicer to transition primary servicing of the GC37 Berkadia Primary Serviced Mortgage Loans to the master servicer or its designee.
The foregoing information regarding the Berkadia Primary Servicing Agreement set forth in this “—Summary of GC37 Berkadia Primary Servicing Agreement with Wells Fargo” section has been provided by Wells Fargo Bank.
The Special Servicer
Midland Loan Services, a Division of PNC Bank, National Association, a national banking association (“Midland”) will initially be appointed to act as the special servicer (in such capacity, the “Special Servicer”) under
289 |
the Pooling and Servicing Agreement, and in such capacity, Midland will be responsible for the servicing and administration of the Specially Serviced Loans (other than any Excluded Special Servicer Mortgage Loans) and any related REO Properties, and in certain circumstances, will review, evaluate and/or provide or withhold consent as to certain major decisions and other transactions relating to the Mortgage Loans (other than any Outside-Serviced Mortgage Loan and any Excluded Special Servicer Mortgage Loan) and any related Serviced Companion Loans when such Mortgage Loans (other than any Outside-Serviced Mortgage Loan and any Excluded Special Servicer Mortgage Loan) and any related Serviced Companion Loans are not Specially Serviced Loans pursuant to the Pooling and Servicing Agreement. Midland may also be responsible for taking certain actions to enforce certain obligations of (i) a Mortgage Loan Seller under its related Mortgage Loan Purchase Agreement and (ii) a borrower under the related Mortgage Loan documents, in each case with respect to Serviced Loans. Midland’s principal servicing office is located at 10851 Mastin Street, Building 82, Suite 300, Overland Park, Kansas 66210.
Midland is a real estate financial services company that provides loan servicing, asset management and technology solutions for large pools of commercial and multifamily real estate assets. Midland is approved as a master servicer, special servicer and primary servicer for investment-grade commercial and multifamily mortgage-backed securities (“CMBS”) by Standard & Poor’s Rating Services, Moody’s Investors Service, Inc., Fitch Ratings, Inc. and Morningstar Credit Ratings, LLC. Midland has received the highest rankings as a master, primary and special servicer of real estate assets under U.S. CMBS transactions from Standard & Poor’s Rating Services, Fitch Ratings, Inc. and Morningstar Credit Ratings, LLC. For each category, Standard & Poor’s Rating Services ranks Midland as “Strong”, Fitch Ratings, Inc. ranks Midland as “CMS1” as a master servicer, and “CSS1” as a special servicer, and Morningstar Credit Ratings, LLC ranks Midland as “CS1”. Midland is also a HUD/FHA-approved mortgagee and a Fannie Mae-approved multifamily loan servicer.
Midland has detailed operating procedures across the various servicing functions to maintain compliance with its servicing obligations and the servicing standards under Midland’s servicing agreements, including procedures for managing delinquent and specially serviced loans. The policies and procedures are reviewed annually and centrally managed. Furthermore, Midland’s disaster recovery plan is reviewed annually.
Midland will not have primary responsibility for custody services of original documents evidencing the underlying Mortgage Loans or the Serviced Companion Loans. Midland may from time to time have custody of certain of such documents as necessary for enforcement actions involving particular Mortgage Loans or the Serviced Companion Loans or otherwise. To the extent that Midland has custody of any such documents for any such servicing purposes, such documents will be maintained in a manner consistent with the Servicing Standard.
No securitization transaction involving commercial or multifamily mortgage loans in which Midland was acting as master servicer, primary servicer or special servicer has experienced a servicer event of default or servicer termination event as a result of any action or inaction of Midland as master servicer, primary servicer or special servicer, as applicable, including as a result of Midland’s failure to comply with the applicable servicing criteria in connection with any securitization transaction. Midland has made all advances required to be made by it under the servicing agreements on the commercial and multifamily mortgage loans serviced by Midland in securitization transactions.
From time-to-time Midland is a party to lawsuits and other legal proceedings as part of its duties as a loan servicer (e.g., enforcement of loan obligations) and/or arising in the ordinary course of business. Midland does not believe that any such lawsuits or legal proceedings would, individually or in the aggregate, have a material adverse effect on its business or its ability to service loans pursuant to the Pooling and Servicing Agreement.
Midland currently maintains an Internet-based investor reporting system, CMBS Investor Insight®, that contains performance information at the portfolio, loan and property levels on the various commercial mortgage-backed securities transactions that it services. Certificateholders, prospective transferees of the certificates and other appropriate parties may obtain access to CMBS Investor Insight® through Midland’s website at www.pnc.com/midland. Midland may require registration and execution of an access agreement in connection with providing access to CMBS Investor Insight®.
As of March 31, 2016, Midland was master and/or primary servicing approximately 28,884 commercial and multifamily mortgage loans with a principal balance of approximately $380 billion. The collateral for such loans is located in all 50 states, the District of Columbia, Puerto Rico, Guam and Canada. Approximately 9,902 of such loans, with a total principal balance of approximately $147 billion, pertain to commercial and multifamily mortgage-
290 |
backed securities. The related loan pools include multifamily, office, retail, hospitality and other income-producing properties.
Midland has been servicing commercial and multifamily loans and leases in CMBS and other servicing transactions since 1992. The table below contains information on the size of the portfolio of commercial and multifamily loans and leases in CMBS and other servicing transactions for which Midland has acted as master and/or primary servicer from 2013 to 2015.
Portfolio Size – Master/Primary Servicing | Calendar Year End | |||||
2013 | 2014 | 2015 | ||||
CMBS | $141 | $157 | $149 | |||
Other | $167 | $179 | $255 | |||
Total | $308 | $336 | $404 |
As of March 31, 2016, Midland was named the special servicer in approximately 207 commercial mortgage-backed securities transactions with an aggregate outstanding principal balance of approximately $104 billion. With respect to such transactions as of such date, Midland was administering approximately 86 assets with an outstanding principal balance of approximately $862 million.
Midland has acted as a special servicer for commercial and multifamily loans and leases in CMBS and other servicing transactions since 1992. The table below contains information on the size of the portfolio of specially serviced commercial and multifamily loans, leases and REO properties that have been referred to Midland as special servicer in CMBS and other servicing transactions from 2013 to 2015.
Portfolio Size –Special Servicing | Calendar Year End | |||||
2013 | 2014 | 2015 | ||||
Total | $70 | $85 | $110 |
Midland may enter into one or more arrangements with any Directing Holder, any Controlling Class Representative, a Controlling Class Certificateholder, any directing certificateholder, any Outside Controlling Note Holder, any Companion Loan Holder, the other Certificateholders (or an affiliate or a third-party representative of one or more of the preceding) or any other person with the right to appoint or remove and replace the Special Servicer to provide for a discount and/or revenue sharing with respect to certain of the Special Servicer compensation in consideration of, among other things, Midland’s appointment (or continuance) as Special Servicer under the Pooling and Servicing Agreement and any related co-lender agreement and limitations on the right of such person to remove the Special Servicer.
Pursuant to an interim servicing agreement between Midland and GSMC and certain of its affiliates, Midland acts as interim servicer with respect to certain of the Mortgage Loans to be sold to the Depositor by GSMC.
Midland assisted Eightfold Real Estate Capital Fund IV, L.P., or its affiliate, with due diligence relating to the Mortgage Loans in the Mortgage Pool.
Under the 600 Broadway Pooling and Servicing Agreement, Midland is expected to be the initial Outside Special Servicer of the 600 Broadway Loan Combination on and after the securitization of the 600 Broadway Controlling Pari Passu Companion Loan.
PNC Bank, National Association and its affiliates may use some of the same service providers (e.g., legal counsel, accountants and appraisal firms) as are retained on behalf of the Issuing Entity. In some cases, fee rates, amounts or discounts may be offered to PNC Bank, National Association and its affiliates by a third party vendor which differ from those offered to the Issuing Entity as a result of scheduled or ad hoc rate changes, differences in the scope, type or nature of the service or transaction, alternative fee arrangements, and negotiation by PNC Bank, National Association or its affiliates other than the Midland division.
291 |
From time to time, Midland and/or its affiliates may purchase or sell securities, including Certificates in the secondary market.
The foregoing information regarding Midland under this “—Servicers—The Special Servicer” heading has been provided by Midland.
Certain duties and obligations of the Special Servicer and the provisions of the Pooling and Servicing Agreement are described under “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans”, “—Enforcement of Due-On-Sale and Due-On-Encumbrance Clauses”, “—Inspections”, and“—Appraisal Reduction Amounts”. The Special Servicer’s ability to waive or modify any terms, fees, penalties or payments on the Mortgage Loans and the potential effect of that ability on the potential cash flows from the Mortgage Loans are described under “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans—Modifications, Waivers and Amendments”.
The Special Servicer will not have any advancing obligations.
The Special Servicer may be terminated, with respect to the Mortgage Loans serviced under the Pooling and Servicing Agreement (other than any Serviced Outside Controlled Loan Combination), without cause by (i) the applicable Certificateholders (if a Control Termination Event has occurred and is continuing) and (ii) the Controlling Class Representative (if a Control Termination Event does not exist). The Special Servicer may be removed and replaced with respect to a Serviced Outside Controlled Loan Combination, with or without cause at any time, at the direction of the related Outside Controlling Note Holder.
The Special Servicer may resign under the Pooling and Servicing Agreement as described under “The Pooling and Servicing Agreement—Resignation of the Master Servicer, the Special Servicer and the Operating Advisor”.
The Special Servicer and various related persons and entities will be entitled to be indemnified by the Issuing Entity for certain losses and liabilities incurred by the Special Servicer as described under “The Pooling and Servicing Agreement—Limitation on Liability; Indemnification”.
The Outside Servicers and the Outside Special Servicers
Each of the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination is being serviced and administered pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement by KeyBank National Association, as master servicer, and Wells Fargo Bank, National Association, as special servicer.
Each of the 79 Madison Avenue Loan Combination and, prior to the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination are being serviced and administered pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement by Wells Fargo Bank, National Association, as master servicer, and C-III Asset Management LLC, as special servicer.
Following the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination will be serviced under the 600 Broadway Pooling and Servicing Agreement for such securitization.
Berkadia Commercial Mortgage LLC, a Delaware limited liability company, will initially sub-service the Outside Serviced Mortgage Loans secured by the Mortgaged Properties identified on Annex A to this prospectus as Sheraton Denver Downtown Fee, Austin Block 21 and 5 Penn Plaza, collectively representing approximately 19.4% of the Initial Pool Balance.
The role and responsibilities of the related Outside Servicer with respect to each Outside Serviced Loan Combination are, or are expected to be, generally similar to those of the Master Servicer of the Mortgage Loans (other than the Outside Serviced Mortgage Loans) under the Pooling and Servicing Agreement, and are further summarized in this prospectus under “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
292 |
The role and responsibilities of the related Outside Special Servicer with respect to each Outside Serviced Loan Combination are, or are expected to be, similar to those of the Special Servicer of the Mortgage Loans (other than Outside Serviced Mortgage Loans) under the Pooling and Servicing Agreement, and are further summarized in this prospectus under “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
The CGCMT 2016-GC36 Master Servicer
KeyBank National Association (“KeyBank”) is the CGCMT 2016-GC36 Master Servicer, which is the Outside Servicer in respect of the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination (collectively, the “KeyBank Outside Serviced Loans”). As such Outside Servicer, KeyBank is responsible for the servicing and administration of the KeyBank Outside Serviced Loans pursuant to the terms of the CGCMT 2016-GC36 Pooling and Servicing Agreement.
KeyBank is a wholly-owned subsidiary of KeyCorp (NYSE: KEY), an Ohio corporation. KeyBank maintains a servicing office at 11501 Outlook Street, Suite 300, Overland Park, Kansas 66211. KeyBank is not an affiliate of the Issuing Entity, the Depositor, any Sponsor, the Certificate Administrator, the Operating Advisor, the Asset Representations Reviewer, the Special Servicer, the Master Servicer or the Trustee.
KeyBank has been engaged in the servicing of commercial mortgage loans since 1995 and commercial mortgage loans originated for securitization since 1998. The following table sets forth information about KeyBank’s portfolio of master or primary serviced commercial mortgage loans as of the dates indicated.
Loans | 12/31/13 | 12/31/14 | 12/31/15 | |||
By Approximate Number | 16,716 | 16,772 | 16,876 | |||
By Approximate Aggregate Principal Balance (in billions) | $170.1 | $174.6 | $185.24 |
Within this servicing portfolio are, as of December 31, 2015, approximately 9,539 loans with a total principal balance of approximately $145.8 billion that are included in approximately 405 commercial mortgage-backed securitization transactions.
KeyBank’s servicing portfolio includes mortgage loans secured by multifamily, office, retail, hospitality, and other types of income-producing properties that are located throughout the United States. KeyBank also services newly-originated commercial mortgage loans and mortgage loans acquired in the secondary market for issuers of commercial and multifamily mortgage-backed securities, financial institutions and a variety of investors and other third parties. Based on the aggregate outstanding principal balance of loans being serviced as of June 30, 2015, the Mortgage Bankers Association of America ranked KeyBank the third largest commercial mortgage loan servicer for loans related to commercial mortgage-backed securities in terms of total master and primary servicing volume.
KeyBank is approved as the master servicer, primary servicer, and special servicer for commercial mortgage-backed securities rated by Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”), Fitch Ratings, Inc. (“Fitch”), and Morningstar Credit Ratings, LLC (“Morningstar”). Moody’s does not assign specific ratings to servicers. KeyBank is on S&P’s Select Servicer list as a U.S. Commercial Mortgage Master Servicer and as a U.S. Commercial Mortgage Special Servicer, and S&P has assigned to KeyBank the rating of “Strong” as a master servicer, primary servicer, and special servicer. Fitch has assigned to KeyBank the ratings of “CMS1” as a master servicer, “CPS2” as a primary servicer, and “CSS1-” as a special servicer. Morningstar has assigned to KeyBank the rankings of “MOR CS1” as master servicer, “MOR CS1” as primary servicer, and “MOR CS1” as special servicer. S&P’s, Fitch’s, and Morningstar’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.
293 |
KeyBank’s servicing system utilizes a mortgage-servicing technology platform with multiple capabilities and reporting functions. This platform allows KeyBank to process mortgage servicing activities including: (i) performing account maintenance; (ii) tracking borrower communications; (iii) tracking real estate tax escrows and payments, insurance escrows and payments, replacement reserve escrows and operating statement data andrent rolls; (iv) entering and updating transaction data; and (v) generating various reports. KeyBank generally uses the CREFC format to report to trustees and certificate administrators of commercial mortgage-backed securities (CMBS) transactions and maintains a website (www.keybank.com/key2cre) that provides access to reports and other information to investors in CMBS transactions that KeyBank is the servicer.
KeyBank maintains the accounts it uses in connection with servicing commercial mortgage loans. The following table sets forth the ratings assigned to KeyBank’s long-term deposits and short-term deposits.
S&P | Fitch | Moody’s | |||
Long-Term Deposits | A- | A- | Aa3 | ||
Short-Term Deposits | A-2 | F1 | P-1 |
KeyBank believes that its financial condition will not have any material adverse effect on the performance of its duties under the CGCMT 2016-GC36 Pooling and Servicing Agreement and, accordingly, will not have any material adverse impact on the performance of the underlying mortgage loans or the performance of the Certificates.
KeyBank has developed policies, procedures and controls for the performance of its master servicing and special 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, procedures to (i) notify borrowers of payment delinquencies and other loan defaults, (ii) work with borrowers to facilitate collections and performance prior to the occurrence of a servicing transfer event, (iii) if a servicing transfer event occurs as a result of a delinquency, loss, bankruptcy or other loan default, transfer the subject loan to the special servicer, and (iv) managing delinquent loans and loans subject to the bankruptcy of the borrower.
KeyBank’s servicing policies and procedures for the servicing functions it will perform under the Pooling and Servicing Agreement for assets of the same type included in this transaction are updated periodically to keep pace with the changes in the CMBS industry. For example, KeyBank has, in response to changes in federal or state law or investor requirements, (i) made changes in its insurance monitoring and risk-management functions as a result of the Terrorism Risk Insurance Act of 2002 and (ii) established a website where investors and mortgage loan borrowers can access information regarding their investments and mortgage loans. Otherwise, KeyBank’s servicing policies and procedures have been generally consistent for the last three years in all material respects.
KeyBank is, as the Outside Servicer of the KeyBank Outside Serviced Loans, generally responsible for the master servicing and primary servicing functions with respect to the KeyBank Outside Serviced Loans. KeyBank, as the Outside Servicer of the KeyBank Outside Serviced Loans, is permitted to appoint one or more sub-servicers to perform all or any portion of its primary servicing functions under the CGCMT 2016-GC36 Pooling and Servicing Agreement pursuant to one or more sub-servicing agreements and any such sub-servicer will receive a fee for the services specified in such sub-servicing agreement. Additionally, KeyBank may from time to time perform some of its servicing obligations under the CGCMT 2016-GC36 Pooling and Servicing Agreement through one or more third-party vendors that provide servicing functions such as appraisals, environmental assessments, property condition assessments, property management, real estate brokerage services and other services necessary. KeyBank will, in accordance with its internal procedures and applicable law, monitor and review the performance of any third-party vendors retained by it to perform servicing functions, and KeyBank will remain liable for its servicing obligations under the CGCMT 2016-GC36 Pooling and Servicing Agreement as if KeyBank had not retained any such vendors.
No securitization transaction involving commercial or multifamily mortgage loans in which KeyBank was acting as master servicer, primary servicer or special servicer has experienced a servicer event of default as a result of any action or inaction of KeyBank as master servicer, primary servicer or special servicer, as applicable,
294 |
including as a result of KeyBank’s failure to comply with the applicable servicing criteria in connection with any securitization transaction. KeyBank has made all advances required to be made by it under its servicing agreements for commercial and multifamily mortgage loans.
From time to time KeyBank is a party to lawsuits and other legal proceedings as part of its duties as a loan servicer and otherwise arising in the ordinary course of its business. One such action was brought by a certificateholder of the J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2007-CBICB18 in the Supreme Court of New York, County of New York, in connection with KeyBank’s determination of the fair value of a loan secured by the Bryant Park Hotel in New York City. KeyBank denies liability in such action, and KeyBank does not believe that such action or any other lawsuits or legal proceedings that are pending at this time would, individually or in the aggregate, have a material adverse effect on its business or its ability to service the mortgage loans pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement. KeyBank is not aware of any lawsuits or legal proceedings, contemplated or pending, by governmental authorities against KeyBank at this time.
Neither KeyBank nor any of its affiliates intends to retain any Certificates issued by the Issuing Entity or any other economic interest in this securitization except as disclosed in this section “—The Outside Servicers and the Outside Special Servicers—The CGCMT 2016-GC36 Master Servicer”. However, KeyBank or its affiliates may own in the future certain classes of Certificates. Any such party will have the right to dispose of any such Certificates at any time.
The foregoing information set forth in this section “—The Outside Servicers and the Outside Special Servicers—The CGCMT 2016-GC36 Master Servicer” has been provided by KeyBank.
In its role as Outside Servicer, KeyBank is subject to such servicing compensation and expense payment rights and obligations, indemnification rights and obligations, termination and resignation rights and obligations, and has the ability to effect modification and waivers of the terms, fees, penalties or payments on the Outside Serviced Mortgage Loans as described elsewhere in this prospectus under the heading “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
The Operating Advisor and the Asset Representations Reviewer
Park Bridge Lender Services LLC (“Park Bridge Lender Services”), a New York limited liability company and an indirect, wholly owned subsidiary of Park Bridge Financial LLC (“Park Bridge Financial”), will act as the operating advisor (in such capacity, the “Operating Advisor”) under the Pooling and Servicing Agreement. Park Bridge Lender Services will also be serving as the asset representations reviewer (in such capacity, the “Asset Representations Reviewer”) under the Pooling and Servicing Agreement. Park Bridge Lender Services has an address at 600 Third Avenue, 40th Floor, New York, New York 10016 and its telephone number is (212) 230-9090.
Park Bridge Financial is a privately held commercial real estate finance advisory firm headquartered in New York, New York. Since its founding in 2009, Park Bridge Financial and its affiliates have been engaged by commercial banks (community, regional and multi-national), opportunity funds, REITs, investment banks, insurance companies, entrepreneurs and hedge funds on a wide variety of advisory assignments. These engagements have included: mortgage brokerage, loan syndication, contract underwriting, valuations, risk assessments, surveillance, litigation support, expert testimony, loan restructures as well as the disposition of commercial mortgages and related collateral.
Park Bridge Financial’s technology platform is server-based with back-up, disaster-recovery and encryption services performed by vendors and data centers that comply with industry and regulatory standards.
As of December 31, 2015, Park Bridge Lender Services was acting as operating advisor or trust advisor for CMBS transactions with an approximate aggregate initial principal balance of $73.8 billion issued in 68 transactions.
Park Bridge Lender Services is currently acting as asset representations reviewer for 6 CMBS transactions with an approximate aggregate initial principal balance of $5.1 billion.
295 |
There are no legal proceedings pending against Park Bridge Lender Services, or to which any property of Park Bridge Lender Services is subject, that are material to the Certificateholders, nor does Park Bridge Lender Services have actual knowledge of any proceedings of this type contemplated by governmental authorities.
The foregoing information under this “—The Operating Advisor and the Asset Representations Reviewer” heading regarding Park Bridge Lender Services has been provided by Park Bridge Lender Services.
For a description of any material affiliations, relationships and related transactions between the Operating Advisor or the Asset Representations Reviewer and the other transaction parties, see “—Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
Certain terms of the Pooling and Servicing Agreement regarding the Operating Advisor’s removal, replacement, resignation or transfer are described under “The Pooling and Servicing Agreement—Resignation of the Master Servicer, the Special Servicer and the Operating Advisor” and “—Operating Advisor”.
The Operating Advisor and the Asset Representations Reviewer will only be liable under the Pooling and Servicing Agreement to the extent of the obligations specifically imposed by the Pooling and Servicing Agreement, and no implied duties or obligations may be asserted against the Operating Advisor or Asset Representations Reviewer.
The Operating Advisor will have certain review and consultation duties with respect to activities of the Special Servicer. The Asset Representations Reviewer will be required to review certain delinquent Mortgage Loans after a specified delinquency threshold has been exceeded and notification from the Certificate Administrator that the required percentage of Certificateholders have voted to direct a review of such delinquent Mortgage Loans. For further information regarding the duties, responsibilities, rights and obligations of the Operating Advisor and the Asset Representations Reviewer under the Pooling and Servicing Agreement, including those related to indemnification and limitation of liability, see “The Pooling and Servicing Agreement—Operating Advisor”, “—The Asset Representations Reviewer” and “—Limitation on Liability; Indemnification”. Certain terms of the Pooling and Servicing Agreement regarding the Operating Advisor’s or the Asset Representations Reviewer’s removal, replacement, resignation or transfer are described under “The Pooling and Servicing Agreement—Operating Advisor”, and “—The Asset Representations Reviewer”.
Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties
Transaction Party and Related Party Affiliations
The Depositor and its affiliates are playing several roles in this transaction. The Depositor is an affiliate of CGMRC, a Sponsor and an Originator, Citigroup Global Markets Inc., one of the underwriters, and Citibank, N.A., the Certificate Administrator, Certificate Registrar and paying agent.
GSMC, a Sponsor and an Originator, and Goldman, Sachs & Co., one of the underwriters, are affiliated with each other.
Wells Fargo Bank, the Master Servicer, is also (a) the special servicer, certificate administrator and custodian under the CGCMT 2016-GC36 Pooling and Servicing Agreement, which governs the servicing of each of the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination, (b) the master servicer under the CGCMT 2016-P3 Pooling and Servicing Agreement, which governs the servicing of the 79 Madison Avenue Loan Combination and, prior to the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination, and (c) expected to be the master servicer, certificate administrator and custodian under the 600 Broadway Pooling and Servicing Agreement, pursuant to which the 600 Broadway Loan Combination is expected to be serviced after the 600 Broadway Companion Loan Securitization Date.
Midland, the Special Servicer, is also expected to be the initial special servicer under the 600 Broadway Pooling and Servicing Agreement, which is expected to govern the servicing of the 600 Broadway Loan Combination after the 600 Broadway Companion Loan Securitization Date.
296 |
Citibank, the Certificate Administrator, is also the certificate administrator and custodian under the CGCMT 2016-P3 Pooling and Servicing Agreement, which governs the servicing of the 79 Madison Avenue Loan Combination, and prior to the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination.
Park Bridge Lender Services, the Operating Advisor and the Asset Representations Reviewer, is also (a) the operating advisor and the asset representations reviewer under the CGCMT 2016-P3 Pooling and Servicing Agreement, which governs the servicing of the 79 Madison Avenue Loan Combination and, prior to the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Loan Combination, and (b) expected to be the operating advisor and the asset representations reviewer under the 600 Broadway Pooling and Servicing Agreement, pursuant to which the 600 Broadway Loan Combination is expected to be serviced after the 600 Broadway Companion Loan Securitization Date.
Berkadia, a primary servicer with respect to the GC37 Berkadia Primary Serviced Loans, is also a primary servicer with respect to the GC36 Berkadia Primary Serviced Loans.
Warehouse Financing Arrangements
Goldman Sachs Bank USA, an affiliate of GSMC, provides warehouse financing to an affiliate of Rialto through a repurchase facility. Seven (7) of the Mortgage Loans that Rialto will transfer to the Depositor, with an aggregate principal balance of approximately $78,625,000 as of the Cut-off Date and representing approximately 11.3% of the Initial Pool Balance, are subject to that repurchase facility. Proceeds received by Rialto in connection with the contribution of Mortgage Loans to this securitization transaction will be applied, among other things, to reacquire the financed Mortgage Loans and make payments to Goldman Sachs Bank USA as the repurchase agreement counterparty.
Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, provides warehouse financing to an affiliate of Rialto through a repurchase facility. One (1) of the Mortgage Loans that Rialto will transfer to the Depositor, with a principal balance of approximately $22,000,000 as of the Cut-off Date and representing approximately 3.2% of the Initial Pool Balance, is subject to that repurchase facility. Proceeds received by Rialto in connection with the contribution of Mortgage Loans to this securitization transaction will be applied, among other things, to reacquire the financed Mortgage Loan and make payments to Wells Fargo Bank, as the repurchase agreement counterparty.
Citibank, the Certificate Administrator and an affiliate of the Depositor, CGMRC, a Sponsor and an Originator, and Citigroup Global Markets Inc., one of the underwriters, provides warehouse financing to an affiliate of RAIT through a repurchase facility. However, none of the Mortgage Loans that RAIT will transfer to the Depositor are subject to that repurchase facility.
Citibank, the Certificate Administrator and an affiliate of the Depositor, CGMRC, a Sponsor and an Originator, and Citigroup Global Markets Inc., one of the underwriters, provides warehouse financing to an affiliate of KGS through a repurchase facility. Fourteen (14) of the Mortgage Loans that KGS will transfer to the Depositor, with an aggregate outstanding principal balance of approximately $70,243,922 as of the Cut-off Date and representing approximately 10.1% of the Initial Pool Balance, are subject to that repurchase facility. Proceeds received by KGS in connection with the contribution of such Mortgage Loans to this securitization transaction will be applied, among other things, to reacquire such financed Mortgage Loans and make payments to Citibank, as the repurchase agreement counterparty.
Interim Servicing Arrangements
Pursuant to an interim servicing agreement between Midland, the Special Servicer, and GSMC, a Sponsor and an Originator, and certain of its affiliates, Midland acts as interim servicer with respect to 2 of the Mortgage Loans (with an aggregate principal balance of approximately $16,260,681 as of the Cut-off Date and representing approximately 2.3% of the Initial Pool Balance) to be contributed to this securitization transaction by GSMC.
Pursuant to an interim servicing agreement between Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, and, CGMRC, a Sponsor and an Originator, and certain of its affiliates, Wells Fargo Bank acts as interim servicer with respect to eight (8) of the Mortgage Loans (with an
297 |
aggregate principal balance of approximately $173,463,693 as of the Cut-off Date and representing approximately 25.0% of the Initial Pool Balance) to be contributed to this securitization transaction by CGMRC.
Pursuant to an interim servicing agreement between Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, and, Rialto, a Sponsor and an Originator, and certain of its affiliates, Wells Fargo Bank acts as interim servicer with respect to all of the Mortgage Loans (with an aggregate principal balance of approximately $107,425,000 as of the Cut-off Date and representing approximately 15.5% of the Initial Pool Balance) to be contributed to this securitization transaction by Rialto.
Pursuant to an interim servicing agreement between Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, and, KGS, a Sponsor and an Originator, and certain of its affiliates, Wells Fargo Bank acts as interim servicer with respect to fourteen (14) of the Mortgage Loans (with an aggregate principal balance of approximately $51,525,999 as of the Cut-off Date and representing approximately 7.4% of the Initial Pool Balance) to be contributed to this securitization transaction by KGS.
Pursuant to certain interim servicing agreements between Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, and, BNY Mellon, a Sponsor and an Originator, and certain of its affiliates, Wells Fargo Bank acts as interim servicer with respect to all of the Mortgage Loans (with an aggregate principal balance of approximately $92,759,029 as of the Cut-off Date and representing approximately 13.4% of the Initial Pool Balance) to be contributed to this securitization transaction by BNY Mellon.
IH Capital, LLC, which provides mortgage origination, underwriting, securitization and related consulting services to BNY Mellon, is an affiliate of Ironhound Management Company, LLC, which provides consulting services to borrowers.
Pursuant to an interim servicing agreement between Berkadia, a primary servicer, and CGMRC, a Sponsor and an Originator, Berkadia acts as interim servicer with respect to three of the Mortgage Loans (with a principal balance of approximately $39,684,674 as of the Cut-off Date and representing approximately 5.7% of the Initial Pool Balance) to be contributed to this securitization transaction by CGMRC.
Interim and Other Custodial Arrangements
Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, is also acting as the interim custodian of the loan files for the Mortgage Loans to be contributed to this securitization by Rialto, KGS and RAIT.
Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, is also acting as the interim custodian of the loan files for twelve (12) of the Mortgage Loans to be contributed to this securitization by CGMRC. In addition, in the case of the Sheraton Denver Downtown Fee Mortgage Loan, the 5 Penn Plaza Mortgage Loan, and the Park Place Mortgage Loan, Wells Fargo is holding the related Mortgage Loan documents (other than the promissory notes for the Sheraton Denver Downtown Fee Mortgage Loan, the 5 Penn Plaza Mortgage Loan, and the Park Place Mortgage Loan and any 5 Penn Plaza Pari Passu Companion Loan or Park Place Pari Passu Companion Loan not included in the CGCMT 2016-GC36 Securitization) in its capacity as custodian for the CGCMT 2016-GC36 Securitization.
Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, is also acting as the interim custodian of the loan files for two (2) of the Mortgage Loans to be contributed to this securitization by GSMC. In addition, in the case of the Austin Block 21 Mortgage Loan, Wells Fargo is holding the related Mortgage Loan documents (other than the promissory note for the Austin Block 21 Mortgage Loan) in its capacity as custodian for the CGCMT 2016-GC36 Securitization.
With respect to the 79 Madison Avenue Mortgage Loan and the 600 Broadway Mortgage Loan, Citibank, N.A, the Certificate Administrator, is holding the related Mortgage Loan documents (other than the promissory note(s) for the 79 Madison Avenue Mortgage Loan and the 600 Broadway Mortgage Loan, respectively) in its capacity as custodian for the CGCMT 2016-P3 Securitization; provided that, in respect of the 600 Broadway Mortgage Loan, upon the 600 Broadway Companion Loan Securitization Date, the related Mortgage Loan documents (other than the related promissory notes) are expected to be delivered to the custodian under the 600 Broadway Pooling and Servicing Agreement.
298 |
Loan Combination and Mezzanine Loan Arrangements
CGMRC, an Originator and a Sponsor, or an affiliate thereof will, as of the date of initial issuance of the Offered Certificates, hold one of the Park Place Pari Passu Companion Loans, but is expected to transfer such Companion Loan to one or more future commercial mortgage securitization transactions.
Other Arrangements
The Master Servicer will enter into one or more agreements with the Sponsors to purchase the master servicing rights to the Mortgage Loans and/or the right to be appointed as the Master Servicer with respect to such Mortgage Loans and to purchase the primary servicing rights to certain of the Serviced Loans.
Eightfold Real Estate Capital Fund IV, L.P., or one of its affiliates, is expected to serve as the initial Controlling Class Representative, and has engaged Midland, the Special Servicer, as an independent contractor to conduct due diligence with respect to certain Mortgage Loans. Midland may enter into one or more arrangements with any Directing Holder, any Controlling Class Representative, a Controlling Class Certificateholder, any directing certificateholder, any Outside Controlling Note Holder, any Companion Loan Holder, the other Certificateholders (or an affiliate or a third-party representative of one or more of the preceding) or any other person with the right to appoint or remove and replace the Special Servicer to provide for a discount and/or revenue sharing with respect to certain of the Special Servicer compensation in consideration of, among other things, Midland’s appointment (or continuance) as Special Servicer under the Pooling and Servicing Agreement and any related co-lender agreement and limitations on the right of such person to remove the Special Servicer.
KeyBank, the CGCMT 2016-GC36 Master Servicer, has entered into a primary servicing agreement with Berkadia, pursuant to which Berkadia will perform most servicing duties of the CGCMT 2016-GC36 Master Servicer, other than making certain advances, with respect to three Outside Serviced Mortgage Loans, with an aggregate principal balance of approximately $134,876,237 as of the Cut-off Date and representing approximately 19.4% of the Initial Pool Balance.
Wells Fargo Bank, which is the Master Servicer, an Outside Servicer and an Outside Special Servicer, intends to enter into a subservicing agreement with Berkadia, pursuant to which Berkadia will perform certain servicing duties of the Master Servicer, other than making Advances, with respect to three Mortgage Loans, with an aggregate principal balance of approximately $39,684,674 as of the Cut-off Date and representing approximately 5.7% of the Initial Pool Balance.
These roles and other potential relationships may give rise to conflicts of interest as further described under “Risk Factors—Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned with Your Interests” and “—Other Potential Conflicts of Interest May Affect Your Investment”.
299 |
Description of the Certificates
General
The Issuing Entity’s Commercial Mortgage Pass-Through Certificates, Series 2016-GC37 (the “Certificates”) will be issued on or about April 26, 2016 (the “Closing Date”) pursuant to the Pooling and Servicing Agreement (as defined under “The Pooling and Servicing Agreement” below) and will represent in the aggregate the entire beneficial ownership interest in the Issuing Entity. The assets of the Issuing Entity will primarily consist of: (1) the Mortgage Loans and all payments under and proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of payments of principal and/or interest due on or before the Cut-off Date and interest relating to periods prior to, but due after, the Cut-off Date); (2) any Mortgaged Property acquired on behalf of the Issuing Entity (including, in the case of an Outside Serviced Mortgage Loan, pursuant to the Outside Servicing Agreement) through foreclosure or deed-in-lieu of foreclosure (upon acquisition, each, an “REO Property”) and all revenues received in respect of that REO Property (but, with respect to any REO Property relating to a Loan Combination, only to the extent of the Issuing Entity’s interest in such Loan Combination); (3) those funds or assets as from time to time are deposited in the accounts discussed in “The Pooling and Servicing Agreement—Accounts” (such accounts collectively, the “Securitization Accounts”) (but, with respect to any funds or assets relating to a Loan Combination, only to the extent of the Issuing Entity’s interest in such Loan Combination), if established; (4) the rights of the Master Servicer and Trustee under all insurance policies with respect to its Mortgage Loans; and (5) certain rights of the Depositor under each Mortgage Loan Purchase Agreement 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 Certificates will consist of the following classes (each, a “Class”): (i) the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A, Class X-B, Class A-S, Class B, Class EC and Class C Certificates (collectively, the “Offered Certificates”), which are offered by this prospectus; and (ii) the Class D, Class X-D, Class E, Class F, Class G, Class H and Class R Certificates (collectively, the “Non-Offered Certificates”), which are not offered by this prospectus. The Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B Certificates are referred to collectively in this prospectus as the “Senior Certificates”. The Class A-S, Class B, Class EC, Class C, Class D, Class X-D, Class E, Class F, Class G and Class H Certificates are referred to collectively in this prospectus as the “Subordinate Certificates”. The Class X-A, Class X-B and Class X-D Certificates are referred to collectively in this prospectus as the “Interest-Only Certificates” or “Class X Certificates”. The Class A-S, Class B and Class C Certificates are referred to collectively in this prospectus as the “Exchangeable Certificates”. The Class R Certificates are sometimes also referred to in this prospectus as the “Residual Certificates”. The Certificates (other than the Class A-S, Class B, Class EC, Class C and Class R Certificates) are collectively referred to in this prospectus as the “Regular Certificates”. The Senior Certificates (other than the Class X-A and Class X-B Certificates) and the Subordinate Certificates (other than the Class X-D Certificates) are collectively referred to in this prospectus as the “Principal Balance Certificates”.
300 |
Upon initial issuance, the respective Classes of the Principal Balance Certificates will have the Certificate Balances (or, in the case of the respective Classes of Exchangeable Certificates and the Class EC Certificates, the maximum Certificate Balances), and the respective Classes of the Interest-Only Certificates will have the Notional Amounts, shown below (in each case, subject to a variance of plus or minus 5%):
Class | Initial Certificate Balance or |
Class A-1 | $21,993,000 |
Class A-2 | $19,474,000 |
Class A-3 | $175,000,000 |
Class A-4 | $227,379,000 |
Class A-AB | $42,462,000 |
Class X-A | $526,255,000 |
Class X-B | $33,868,000 |
Class A-S(1)(2) | $39,947,000 |
Class B(1)(2) | $33,868,000 |
Class EC(1)(2) | $106,814,000 |
Class C(1)(2) | $32,999,000 |
Class D | $38,210,000 |
Class X-D | $38,210,000 |
Class E | $19,105,000 |
Class F | $7,816,000 |
Class G | $7,816,000 |
Class H | $28,657,724 |
(1) | The Exchangeable Certificates may be exchanged for Class EC Certificates, and Class EC Certificates may be exchanged for the Exchangeable Certificates. |
(2) | On the Closing Date, the Issuing Entity will issue the Class A-S, Class B, and Class C Trust Components, which will have outstanding Certificate Balances on the Closing Date of $39,947,000, $33,868,000 and $32,999,000, respectively. The Exchangeable Certificates and Class EC Certificates will, at all times, represent undivided beneficial ownership interests in the portion of a grantor trust that will hold such Trust Components. Each Class of the Class A-S and Class EC Certificates will, at all times, represent a beneficial interest in a percentage of the outstanding Certificate Balance of the Class A-S Trust Component; each Class of the Class B and Class EC Certificates will, at all times, represent a beneficial interest in a percentage of the outstanding Certificate Balance of the Class B Trust Component; and each Class of the Class C and Class EC Certificates will, at all times, represent a beneficial interest in a percentage of the outstanding Certificate Balance of the Class C Trust Component. Following any exchange of Class A-S, Class B, and Class C Certificates for Class EC Certificates or any exchange of Class EC Certificates for Class A-S, Class B, and Class C Certificates, the percentage interests of the outstanding Certificate Balances of the Class A-S, Class B, and Class C Trust Components that is represented by the Class A-S, Class B, Class EC and Class C Certificates will be increased or decreased accordingly. The initial Certificate Balance of each Class of Exchangeable Certificates shown in the table on the cover page of this prospectus, in the table above and on the back cover of this prospectus represents the maximum Certificate Balance of such class without giving effect to any issuance of Class EC Certificates. The initial Certificate Balance of the Class EC Certificates shown in the table on the cover page of this prospectus, in the table above and on the back cover of this prospectus is equal to the aggregate of the maximum initial Certificate Balances of the Exchangeable Certificates, representing the maximum Certificate Balance of the Class EC Certificates that could be issued in an exchange. The actual Certificate Balance of any Class of Exchangeable Certificates or the Class EC Certificates issued on the Closing Date may be less than the maximum Certificate Balance of that class and may be zero. The Certificate Balances of the Exchangeable Certificates to be issued on the Closing Date will be reduced, in required proportions, by an amount equal to the Certificate Balance of the Class EC Certificates issued on the Closing Date. The initial Certificate Balance of any Trust Component will equal the initial Certificate Balance of the Class of Exchangeable Certificates having the same alphabetical designation without regard to any exchange of such Certificates for Class EC Certificates. |
The “Certificate Balance” of any Class of Principal Balance Certificates or any Trust Component, as applicable, outstanding at any time represents the maximum amount that its holders (or, in the case of a Trust Component, the holders of the Class EC Certificates and the applicable Class of Exchangeable Certificates evidencing an interest in that Trust Component) are then entitled to receive as distributions allocable to principal from the cash flow on the Mortgage Loans and the other assets in the Issuing Entity over time, all as described in this prospectus. On each Distribution Date, the Certificate Balance of each Class of Principal Balance Certificates (exclusive of the Class EC Certificates) and each Trust Component will be reduced by any distributions of principal actually made on, and by any Realized Losses actually allocated to, that Class of Principal Balance Certificates or that Trust Component, as applicable, on that Distribution Date. The Certificate Balance of the Class EC Certificates from time to time will equal the excess, if any, of the aggregate of the Certificate Balances of the Trust Components over the aggregate of the Certificate Balances of the Exchangeable Certificates. In the event that Realized Losses previously allocated to a Class of Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) or a Trust Component (and, therefore, the Class EC Certificates and the applicable Class of Exchangeable Certificates evidencing an interest in such Trust
301 |
Component), as applicable, in reduction of its Certificate Balance are recovered subsequent to such Certificate Balance being reduced to zero, holders of such Class of Principal Balance Certificates or holders of the Class EC Certificates and such applicable Class of the Exchangeable Certificates, as the case may be, may receive distributions in respect of such recoveries in accordance with the distribution priorities described under “—Distributions—Priority of Distributions” below. “Trust Component” means any of the Class A-S Trust Component, Class B Trust Component or Class C Trust Component.
“Class A-S Trust Component” means an interest issued as a regular interest in the Upper-Tier REMIC with a Pass-Through Rate that is the same as the Pass-Through Rate on the Class A-S Certificates. See“—Distributions—Pass-Through Rates” below. The Class A-S Certificates will represent beneficial ownership of the Class A-S Percentage Interest of the Class A-S Trust Component, and the Class EC Certificates will represent beneficial ownership of the Class A-S-Exchange Percentage Interest of the Class A-S Trust Component. The Class A-S Trust Component will be held in the Grantor Trust.
“Class A-S Percentage Interest” means the quotient of the Certificate Balance of the Class A-S Certificates divided by the Certificate Balance of the Class A-S Trust Component. As of the Closing Date, the Class A-S Percentage Interest will be 100.0%.
“Class A-S-Exchange Percentage Interest” means 100.0% minus the Class A-S Percentage Interest. As of the Closing Date, the Class A-S-Exchange Percentage Interest will be 0.0%.
“Class B Trust Component” means an interest issued as a regular interest in the Upper-Tier REMIC with a Pass-Through Rate that is the same as the Pass-Through Rate on the Class B Certificates. See “—Distributions—Pass-Through Rates” below. The Class B Certificates will represent beneficial ownership of the Class B Percentage Interest of the Class B Trust Component, and the Class EC Certificates will represent beneficial ownership of the Class B-Exchange Percentage Interest of the Class B Trust Component. The Class B Trust Component will be held in the Grantor Trust.
“Class B Percentage Interest” means the quotient of the Certificate Balance of the Class B Certificates divided by the Certificate Balance of the Class B Trust Component. As of the Closing Date, the Class B Percentage Interest will be 100.0%.
“Class B-Exchange Percentage Interest” means 100.0% minus the Class B Percentage Interest. As of the Closing Date, the Class B-Exchange Percentage Interest will be 0.0%.
“Class C Trust Component” means an interest issued as a regular interest in the Upper-Tier REMIC with a Pass-Through Rate that is the same as the Pass-Through Rate on the Class C Certificates. See “—Distributions—Pass-Through Rates” below. The Class C Certificates will represent beneficial ownership of the Class C Percentage Interest of the Class C Trust Component, and the Class EC Certificates will represent beneficial ownership of the Class C-Exchange Percentage Interest of the Class C Trust Component. The Class C Trust Component will be held in the Grantor Trust.
“Class C Percentage Interest” means the quotient of the Certificate Balance of the Class C Certificates divided by the Certificate Balance of the Class C Trust Component. As of the Closing Date, the Class C Percentage Interest will be 100.0%.
“Class C-Exchange Percentage Interest” means 100.0% minus the Class C Percentage Interest. As of the Closing Date, the Class C-Exchange Percentage Interest will be 0.0%.
“Class EC Component” means any of the Class EC Component A-S, Class EC Component B or Class EC Component C.
“Class EC Component A-S” means the portion of the Class A-S Trust Component evidenced by the Class EC Certificates equal to the Class A-S-Exchange Percentage Interest of the Class A-S Trust Component.
“Class EC Component B” means the portion of the Class B Trust Component evidenced by the Class EC Certificates equal to the Class B-Exchange Percentage Interest of the Class B Trust Component.
302 |
“Class EC Component C” means the portion of the Class C Trust Component evidenced by the Class EC Certificates equal to the Class C-Exchange Percentage Interest of the Class C Trust Component.
The respective Classes of Interest-Only Certificates will not have Certificate Balances, nor will they entitle their holders to distributions of principal. However, each Class of the Interest-Only Certificates will represent the right to receive distributions of interest in an amount equal to the aggregate interest accrued on the related notional amount (a “Notional Amount”). The Notional Amount of the Class X-A Certificates will equal the aggregate of the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates and the Class A-S Trust Component outstanding from time to time. The Notional Amount of the Class X-B Certificates will equal the Certificate Balance of the Class B Trust Component outstanding from time to time. The Notional Amount of the Class X-D Certificates will equal the Certificate Balance of the Class D Certificates outstanding from time to time.
The Class R Certificates will not have a Certificate Balance or Notional Amount or entitle their holders to distributions of principal or interest.
Exchangeable Certificates
Exchanges
Exchangeable Certificates (i.e., Class A-S, Class B and Class C Certificates) may be exchanged for Class EC Certificates and vice versa, in whole or in part, as described more fully below. This process may occur repeatedly. However, exchanges will no longer be permitted following the date when the then-current principal balance of the Class A-S Trust Component (and, correspondingly, to the extent evidencing an interest in the Class A-S Trust Component, the Class A-S Certificates and the applicable component of the Class EC Certificates) is reduced to zero as a result of the payment in full of all interest and principal on that Trust Component.
Following the Closing Date, Exchangeable Certificates that collectively evidence a uniform Tranche Percentage Interest in each Trust Component (such Certificates in the aggregate, an “Exchangeable Proportion”) will be exchangeable on the books of DTC for Class EC Certificates that represent the same Tranche Percentage Interest in each Trust Component as the Exchangeable Certificates to be surrendered, and any Class EC Certificates will be exchangeable on the books of DTC for Exchangeable Certificates that evidence the same Tranche Percentage Interest in each Trust Component as the Class EC Certificates to be surrendered. For these purposes, the “Tranche Percentage Interest” of: (a) any Exchangeable Certificate in relation to the Trust Component with the same letter designation as such Certificate is the ratio, expressed as a percentage, of (i) the principal balance of that Certificate to (ii) the Certificate Balance of that Trust Component; and (b) any Class EC Certificate in relation to any Trust Component is the ratio, expressed as a percentage, of (i) the portion of the principal balance of the Class EC Component with the same letter designation as that Trust Component evidenced by that Certificate to (ii) the Certificate Balance of that Trust Component.
There will be no limit on the number of exchanges authorized under the exchange provisions of the Pooling and Servicing Agreement. Subject to compliance with the exchange procedures described below under “—Exchangeable Certificates—Procedures”, the requirement that the Class A-S Trust Component have a Certificate Balance greater than zero and the requirement that a Certificateholder is the beneficial owner of the requisite Classes of Exchangeable Certificates in the required Exchange Proportion or of Class EC Certificates, there are no other conditions or limitations to the exchange of Exchangeable Certificates. In all cases, however, an exchange may not occur if the face amount of the Certificates to be received in the exchange would not represent an authorized denomination for the relevant class as described under“—Delivery, Form, Transfer and Denomination” below. In addition, the Depositor will have the right to make or cause exchanges on the Closing Date pursuant to instructions delivered to the Certificate Administrator on the Closing Date.
The various amounts distributable on the Class EC Certificates on each Distribution Date in respect of interest, principal, reimbursements of Realized Losses and yield maintenance charges allocated to any of the respective Class EC Components will be so distributed in a single, aggregate distribution to the holders of the Class EC Certificates on such Distribution Date. In addition, the Class EC Certificates will be allocated the aggregate amount of Realized Losses, Interest Shortfalls and other interest shortfalls (including those resulting from Appraisal Reduction Events) corresponding to the respective Class EC Components. See “—Distributions” below.
303 |
For a discussion of the federal income tax consequences of the acquisition, ownership and disposition of the Class EC Certificates and/or the Exchangeable Certificates, see “Material Federal Income Tax Consequences—Taxation of Class EC and Exchangeable Certificates”.
Procedures
If a Certificateholder wishes to exchange Exchangeable Certificates for Class EC Certificates, or Class EC Certificates for Exchangeable Certificates, such Certificateholder must notify the Certificate Administrator by e-mail at ctssfexchanges@citi.com no later than three business days prior to the proposed date of such exchange (the “Exchange Date”). The Exchange Date can be any business day other than the first or last business day of the month. In addition, the Certificateholder must provide notice on the Certificateholder’s letterhead, which notice must carry a medallion stamp guarantee and set forth the following information: the CUSIP numbers of the Exchangeable Certificates and Class EC Certificates to be exchanged and received, the original and outstanding principal balance of the Exchangeable Certificates and Class EC Certificates to be exchanged and received, the Certificateholder’s DTC participant number and the proposed Exchange Date. The Certificateholder and the Certificate Administrator will utilize the “deposit and withdrawal system” at DTC to effect the exchange.
The aggregate principal and interest entitlements of the Certificates received must equal the aggregate entitlements of the Certificates surrendered. The notice of exchange will become irrevocable on the 2nd business day before the proposed Exchange Date.
The first distribution on an Exchangeable Certificate or Class EC Certificate received pursuant to the exchange will be made in the month following the month of exchange to the Certificateholder of record as of the applicable Record Date for such Certificate. Neither the Certificate Administrator nor the Depositor will have any obligation to ensure the availability of the applicable Certificates to accomplish any exchange.
Distributions
Method, Timing and Amount
Distributions on the Certificates are required to be made by the Certificate Administrator, to the extent of available funds as described in this prospectus, on the fourth business day following each Determination Date (each, a “Distribution Date”), commencing in May 2016. The “Determination Date” will be the sixth day of each calendar month (or, if the sixth calendar day of that month is not a business day, then the next business day), commencing in May 2016.
All distributions (other than the final distribution on any certificate) are required to be made to the persons in whose names the Certificates are registered at the close of business on each Record Date. With respect to any Distribution Date, the “Record Date” will be the last business day of the month preceding the month in which that Distribution Date occurs. These distributions are required to be made by wire transfer in immediately available funds to the account specified by the Certificateholder at a bank or other entity having appropriate facilities to accept such funds, if the Certificateholder has provided the Certificate Administrator with written wiring instructions no less than five business days prior to the related Record Date (which wiring instructions may be in the form of a standing order applicable to all subsequent distributions) or otherwise by check mailed to the Certificateholder. The final distribution on any Certificate is required to be made in like manner, but only upon presentation and surrender of the Certificate at the location that will be specified in a notice of the pendency of the final distribution. All distributions made with respect to a Class of Certificates will be allocatedpro rata among the outstanding Certificates of that class based on their respective Percentage Interests.
The “Percentage Interest” evidenced by: (a) any Certificate (other than a Class R Certificate) will equal its initial denomination as of the Closing Date divided by the initial Certificate Balance or Notional Amount, as applicable, of the related class; and (b) any Class R Certificate will be the percentage interest in the applicable Class specified on the face of that Certificate. For these purposes on any date of determination, the “initial denomination as of the Closing Date” of any Exchangeable Certificate or any Class EC Certificate received in an exchange will be determined as if such Certificate was part of the related Class on the Closing Date, the “initial denomination as of the Closing Date” of any Exchangeable Certificate or any Class EC Certificate surrendered in an exchange will be determined as if such Certificate was not part of the related Class on the Closing Date and the initial Certificate Balance of the related Class of Exchangeable Certificates or Class EC Certificates will be
304 |
determined as if such class consisted only of the Certificates comprising the Class on that date of determination and such Certificates had been outstanding as of the Closing Date.
The Master Servicer is authorized but not required to direct the investment of funds held in the Collection Account in U.S. government securities and other obligations that satisfy criteria established by 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.
Available Funds
The aggregate amount available for distributions of interest, principal and reimbursements of Realized Losses to holders of the Certificates on each Distribution Date (the “Available Funds”) will, in general, equal the sum of the following amounts (without duplication):
(a) the aggregate amount of all cash received on the Mortgage Loans and any REO Properties that is on deposit in the Collection Account (in each case, exclusive of any amount on deposit in or credited to any portion of the Collection Account that is held for the benefit of the holder of any related Companion Loan) and/or the Lower-Tier REMIC Distribution Account as of the close of business on the business day immediately preceding the Master Servicer Remittance Date, exclusive of any portion of the foregoing that represents (without duplication):
(i) | any scheduled payments of principal and/or interest, including any balloon payments that are accompanied by interest due through the related maturity date, paid by the borrowers of a Mortgage Loan, that are due (without regard to grace periods) on a Due Date that occurs after the related Determination Date; |
(ii) | payments (scheduled or otherwise) of principal (including prepayments) and interest, net liquidation proceeds, net insurance proceeds and net condemnation proceeds and other unscheduled recoveries that were received after the related Determination Date (other than the monthly remittance on the Outside Serviced Mortgage Loans or the Issuing Entity’s interest in any related REO Property contemplated by clause (b) of this definition for the subject Distribution Date); |
(iii) | amounts in the Collection Account that are due or reimbursable to any person other than the Certificateholders; |
(iv) | with respect to each Mortgage Loan that accrues interest on an Actual/360 Basis and any Distribution Date occurring in January (other than during a leap year) or February of any calendar year (unless such Distribution Date is the final Distribution Date), the related Withheld Amount to the extent those funds are on deposit in the Collection Account; |
(v) | yield maintenance charges and prepayment premiums; |
(vi) | amounts deposited in the Collection Account or the Lower-Tier REMIC Distribution Account in error; and/or |
(vii) | late payment charges or accrued interest on a Mortgage Loan allocable to the default interest rate for such Mortgage Loan, to the extent permitted by law, excluding any interest calculated at the Mortgage Rate for the related Mortgage Loan; |
(b) if and to the extent not already included in clause (a) of this definition for the subject Distribution Date, (i) the aggregate amount allocable to the Mortgage Loans transferred from the REO Account to the Collection Account for the subject Distribution Date and (ii) the remittance received on the Outside Serviced Mortgage Loans or the Issuing Entity’s interest in any related REO Property in the month of the subject Distribution Date, to the extent that each such transfer is made or such remittance is received by the close of business on the business day immediately preceding the related Master Servicer Remittance Date;
305 |
(c) all Compensating Interest Payments made by the Master Servicer with respect to the Mortgage Loans with respect to the subject Distribution Date and P&I Advances made by the Master Servicer or the Trustee, as applicable, with respect to the subject Distribution Date (net of certain amounts that are due or reimbursable to persons other than the Certificateholders); and
(d) with respect to each Mortgage Loan that accrues interest on an Actual/360 Basis and any Distribution Date occurring in March (or February, if such Distribution Date is the final Distribution Date), commencing in 2017, the related Withheld Amounts as required to be deposited in the Lower-Tier REMIC Distribution Account.
“Monthly Payment” with respect to any Mortgage Loan or Serviced Companion Loan (other than any REO Mortgage Loan or REO Companion Loan) and any Due Date is the scheduled monthly payment of principal (if any) and interest at the related Mortgage Rate which is payable by the related borrower on such Due Date, exclusive of any balloon payment. The Monthly Payment with respect to any Due Date for (i) an REO Mortgage Loan or REO Companion Loan, or (ii) any Mortgage Loan or Serviced Companion Loan that is delinquent at its maturity date and with respect to which the Special Servicer has not entered into an extension, will be the monthly payment that would otherwise have been payable on such Due Date had the related Mortgage Note not been discharged or the related maturity date had not been reached, as the case may be, determined as set forth in the preceding sentence and on the assumption that all other amounts, if any, due thereunder are paid when due. The Monthly Payment for any Serviced Loan Combination is the aggregate Monthly Payment for the related Mortgage Loan and Serviced Companion Loan(s).
The “Collection Period” for any Distribution Date will be the period beginning on the day immediately following the Determination Date occurring in the month preceding the month in which that Distribution Date occurs (or, in the case of the Collection Period for the initial Distribution Date, with respect to any particular Mortgage Loan or Companion Loan, beginning on the day immediately following the Due Date for such Mortgage Loan or Companion Loan in the month preceding the month in which that Distribution Date occurs (or the date that would have been the Due Date if such Mortgage Loan or Companion Loan had a Due Date in such preceding month)) and ending on and including the Determination Date occurring in the month in which that Distribution Date occurs.
“Due Date” means, with respect to each Mortgage Loan and Companion Loan, the date on which scheduled payments of principal, interest or both are required to be made by the related borrower (without regard to any grace period). However, with respect to any Mortgage Loan that is delinquent in respect of its balloon payment beyond the end of the Collection Period in which the related maturity date occurred or as to which the related Mortgaged Property has become an REO Property, for any calendar month, the Due Date will be deemed to be the date that, but for the occurrence of such event, would have been the related Due Date in such month.
The “Due Period” with respect to any Distribution Date and any Mortgage Loan or Companion Loan will be the period beginning on the day immediately following the Due Date in the month preceding the month in which such Distribution Date occurs (or, in the case of the Distribution Date occurring in May 2016, beginning on the day after the date that would have been the Due Date if such Mortgage Loan or Companion Loan had a Due Date in such preceding month) and ending on and including the Due Date in the month in which such Distribution Date occurs.
Priority of Distributions
On each Distribution Date, the Certificate Administrator is required to apply the Available Funds held by it in the following order of priority:
First, to the holders of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B Certificates, in respect of interest, up to an amount equal to, andpro rata in accordance with, the respective Interest Distribution Amounts for those classes;
306 |
Second,to the holders of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates, in reduction of the respective Certificate Balances of those classes, in the following priority (prior to the Cross-Over Date):
(i) | to the holders of the Class A-AB Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution date, until the related Certificate Balance is reduced to the scheduled Certificate Balance for the Class A-AB Certificates with respect to such Distribution Date set forth on Annex F to this prospectus (as to any Distribution Date, the “Class A-AB Scheduled Principal Balance”); |
(ii) | to the holders of the Class A-1 Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to subclause (i) of this clauseSecond, until the related Certificate Balance is reduced to zero; |
(iii) | to the holders of the Class A-2 Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior subclauses of this clauseSecond, until the related Certificate Balance is reduced to zero, |
(iv) | to the holders of the Class A-3 Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior subclauses of this clauseSecond, until the related Certificate Balance is reduced to zero, |
(v) | to the holders of the Class A-4 Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior subclauses of this clauseSecond, until the related Certificate Balance is reduced to zero, and |
(vi) | to the holders of the Class A-AB Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior subclauses of this clauseSecond, until the related Certificate Balance is reduced to zero, |
Third, to the holders of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates, up to an amount equal to, andpro rata based upon, the aggregate unreimbursed Realized Losses previously allocated to each such class, plus interest on that amount at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class;
Fourth,to the Class A-S Trust Component and, thus, concurrently, to the holders of Class A-S Certificates, in respect of interest, up to an amount equal to the Class A-S Percentage Interest multiplied by the aggregate Interest Distribution Amount with respect to the Class A-S Trust Component, and to the holders of the Class EC Certificates, in respect of interest, up to an amount equal to the Class A-S-Exchange Percentage Interest multiplied by the aggregate Interest Distribution Amount with respect to the Class A-S Trust Component,pro rata in proportion to their respective percentage interests in the Class A-S Trust Component;
Fifth,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates have been reduced to zero, to the Class A-S Trust Component and, thus, concurrently, to the holders of the Class A-S Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Class A-S Percentage Interest multiplied by the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, and to the holders of the Class EC Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Class A-S-Exchange Percentage Interest multiplied by the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses,pro rata in proportion to their respective percentage interests in the Class A-S Trust Component, until the Certificate Balance of the Class A-S Trust Component is reduced to zero;
307 |
Sixth,to the Class A-S Trust Component and, thus, concurrently, to the holders of the Class A-S Certificates, up to an amount equal to the Class A-S Percentage Interest multiplied by the aggregate of unreimbursed Realized Losses previously allocated to the Class A-S Trust Component, plus interest on that amount at the Pass-Through Rate for such Trust Component compounded monthly from the date the related Realized Loss was allocated to such Trust Component, and to the holders of the Class EC Certificates, up to an amount equal to the Class A-S-Exchange Percentage Interest multiplied by the aggregate of unreimbursed Realized Losses previously allocated to the Class A-S Trust Component, plus interest on that amount at the Pass-Through Rate for such Trust Component compounded monthly from the date the related Realized Loss was allocated to such Trust Component,pro rata in proportion to their respective percentage interests in the Class A-S Trust Component;
Seventh,to the Class B Trust Component and, thus, concurrently, to the holders of Class B Certificates, in respect of interest, up to an amount equal to the Class B Percentage Interest multiplied by the aggregate Interest Distribution Amount with respect to the Class B Trust Component, and to the holders of the Class EC Certificates, in respect of interest, up to an amount equal to the Class B-Exchange Percentage Interest multiplied by the aggregate Interest Distribution Amount with respect to the Class B Trust Component,pro rata in proportion to their respective percentage interests in the Class B Trust Component;
Eighth,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates and the Class A-S Trust Component have been reduced to zero, to the Class B Trust Component and, thus, concurrently, to the holders of the Class B Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Class B Percentage Interest multiplied by the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, and to the holders of the Class EC Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Class B-Exchange Percentage Interest multiplied by the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses,pro rata in proportion to their respective percentage interests in the Class B Trust Component, until the Certificate Balance of the Class B Trust Component is reduced to zero;
Ninth,to the Class B Trust Component and, thus, concurrently, to the holders of the Class B Certificates, up to an amount equal to the Class B Percentage Interest multiplied by the aggregate of unreimbursed Realized Losses previously allocated to the Class B Trust Component, plus interest on that amount at the Pass-Through Rate for such Trust Component compounded monthly from the date the related Realized Loss was allocated to such Trust Component, and to the holders of the Class EC Certificates, up to an amount equal to the Class B-Exchange Percentage Interest multiplied by the aggregate of unreimbursed Realized Losses previously allocated to the Class B Trust Component, plus interest on that amount at the Pass-Through Rate for such Trust Component compounded monthly from the date the related Realized Loss was allocated to such Trust Component,pro rata in proportion to their respective percentage interests in the Class B Trust Component;
Tenth,to the Class C Trust Component and, thus, concurrently, to the holders of Class C Certificates, in respect of interest, up to an amount equal to the Class C Percentage Interest multiplied by the aggregate Interest Distribution Amount with respect to the Class C Trust Component, and to the holders of the Class EC Certificates, in respect of interest, up to an amount equal to the Class C-Exchange Percentage Interest multiplied by the aggregate Interest Distribution Amount with respect to the Class C Trust Component,pro rata in proportion to their respective percentage interests in the Class C Trust Component;
Eleventh,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates, the Class A-S Trust Component and the Class B Trust Component have been reduced to zero, to the Class C Trust Component and, thus, concurrently, to the holders of the Class C Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Class C Percentage Interest multiplied by the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, and to the holders of the Class EC Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Class C-Exchange Percentage Interest multiplied by the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses,pro rata in proportion to their respective percentage interests in the Class C Trust Component, until the Certificate Balance of the Class C Trust Component is reduced to zero;
Twelfth,to the Class C Trust Component and, thus, concurrently, to the holders of the Class C Certificates, up to an amount equal to the Class C Percentage Interest multiplied by the aggregate of unreimbursed Realized Losses previously allocated to the Class C Trust Component, plus interest on that amount at the Pass-Through
308 |
Rate for such Trust Component compounded monthly from the date the related Realized Loss was allocated to such Trust Component, and to the holders of the Class EC Certificates, up to an amount equal to the Class C-Exchange Percentage Interest multiplied by the aggregate of unreimbursed Realized Losses previously allocated to the Class C Trust Component, plus interest on that amount at the Pass-Through Rate for such Trust Component compounded monthly from the date the related Realized Loss was allocated to such Trust Component,pro rata in proportion to their respective percentage interests in the Class C Trust Component;
Thirteenth,to the holders of the Class D and Class X-D Certificates, in respect of interest, up to an amount equal to, andpro rata in accordance with, the respective Interest Distribution Amounts of those classes;
Fourteenth,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates and all of the Trust Components have been reduced to zero, to the holders of the Class D Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, until the related Certificate Balance is reduced to zero;
Fifteenth,to the holders ofthe Class D Certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such class, plus interest on that amount at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class;
Sixteenth,to the holders of the Class E Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of that class;
Seventeenth,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class D Certificates and all of the Trust Components have been reduced to zero, to the holders of the Class E Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, until the related Certificate Balance is reduced to zero;
Eighteenth,to the holders ofthe Class E Certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such class, plus interest on that amount at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class;
Nineteenth,to the holders of the Class F Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of that class;
Twentieth,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class D and Class E Certificates and all of the Trust Components have been reduced to zero, to the holders of the Class F Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, until the related Certificate Balance is reduced to zero;
Twenty-First,to the holders ofthe Class F Certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such class, plus interest on that amount at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class;
Twenty-Second,to the holders of the Class G Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of that class;
Twenty-Third,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class D, Class E and Class F Certificates and all of the Trust Components have been reduced to zero, to the holders of the Class G Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, until the related Certificate Balance is reduced to zero;
309 |
Twenty-Fourth,to the holders ofthe Class G Certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such class, plus interest on that amount at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class;
Twenty-Fifth,to the holders of the Class H Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of that class;
Twenty-Sixth,after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class D, Class E, Class F and Class G Certificates and all of the Trust Components have been reduced to zero, to the holders of the Class H Certificates, in reduction of the related Certificate Balance, up to an amount equal to the Principal Distribution Amount for such Distribution Date, less the portion of such Principal Distribution Amount distributed pursuant to all prior clauses, until the related Certificate Balance is reduced to zero;
Twenty-Seventh,to the holders ofthe Class H Certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such class, plus interest on that amount at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class; and
Last,to the holders of the Class R Certificates, in the amount of any remaining portion of the Available Funds for such Distribution Date.
Notwithstanding the foregoing, on each Distribution Date occurring on and after Cross-Over Date, regardless of the allocation of principal payments described in clauseSecondabove, the Principal Distribution Amount for such Distribution Date is required to be distributedpro rata (based on their respective outstanding Certificate Balances), among the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates, in reduction of their respective Certificate Balances. The “Cross-Over Date” means the first Distribution Date as of which (without regard to the distribution of the Principal Distribution Amount on such Distribution Date) the Certificate Balances of the Class D, Class E, Class F, Class G and Class H Certificates and all of the Trust Components have been reduced to zero as a result of the allocation of Realized Losses to those Certificates.
Reimbursement of previously allocated Realized Losses will not constitute distributions of principal for any purpose and will not result in an additional reduction in the Certificate Balance of the Class of Certificates in respect of which a reimbursement is made.
Pass-Through Rates
The per annum rate at which interest accrues with respect to any Class of Certificates (exclusive of the Class EC and Class R Certificates) or any Trust Component is referred to in this prospectus as its “Pass-Through Rate”.
The Pass-Through Rate with respect to each Class of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class A-S, Class B and Class D Certificates for any Distribution Date will be fixed at the initial Pass-Through Rate for such Class set forth in the table under “Certificate Summary” in this prospectus.
The Pass-Through Rate with respect to each Class of the Class C, Class E, Class F, Class G and Class H Certificates for any Distribution Date will be a per annum rate equal to the WAC Rate for such Distribution Date.
The Pass-Through Rate for the Class X-A Certificates for any Distribution Date will equal the weighted average of the Class X Strip Rates for the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates and the Class A-S Trust Component for such Distribution Date, weighted on the basis of their respective Certificate Balances immediately prior to that Distribution Date. The Pass-Through Rate for the Class X-B Certificates for any Distribution Date will equal the Class X Strip Rate for the Class B Trust Component for such Distribution Date. The Pass-Through Rate for the Class X-D Certificates for any Distribution Date will equal the Class X Strip Rate for the Class D Certificates for such Distribution Date.
The Class EC Certificates will not have a Pass-Through Rate, but will be entitled to receive the sum of the interest distributable on the percentage interests of the Class A-S, Class B, and Class C Trust Components represented by the Class EC Certificates. The Pass-Through Rates on the Class A-S, Class B, and Class C Trust
310 |
Components will at all times be the same as the Pass-Through Rates of the Class A-S, Class B, and Class C Certificates, respectively.
The “WAC Rate” with respect to any Distribution Date is equal to the weighted average of the applicable Net Mortgage Pass-Through Rates of the Mortgage Loans for such Distribution Date, weighted on the basis of their respective Stated Principal Balances immediately prior to such Distribution Date.
The “Class X Strip Rate” for any Class of Principal Balance Certificates (exclusive of the Class EC Certificates and the Exchangeable Certificates) or any Trust Component with respect to any Distribution Date will equal the excess, if any, of the WAC Rate for such Distribution Date, over the Pass-Through Rate for such Class of Principal Balance Certificates or such Trust Component, as the case may be, for such Distribution Date.
In general, the “Net Mortgage Pass-Through Rate” will be: (a) with respect to any Mortgage Loan that accrues interest on the basis of a 360-day year consisting of twelve 30-day months (a “30/360 Basis”), for any Distribution Date, the Net Mortgage Rate in effect for such Mortgage Loan during the one-month accrual period applicable to the Due Date for such Mortgage Loan that occurs in the same month as that Distribution Date; and (b) with respect to any Mortgage Loan that accrues interest on an Actual/360 Basis, for any Distribution Date, the annualized rate at which interest would have to accrue in respect of such Mortgage Loan on a 30/360 Basis in order to produce the aggregate amount of interest actually accrued (or, in the event of a voluntary or involuntary principal prepayment affecting same, that otherwise would have accrued) in respect of such Mortgage Loan (adjusted to the related Net Mortgage Rate and, if applicable, exclusive of any Excess Interest) during the one-month accrual period applicable to the Due Date for such Mortgage Loan that occurs in the same month as that subsequent Distribution Date. However, with respect to each Mortgage Loan that accrues interest on an Actual/360 Basis, when determining: (i) the related Net Mortgage Pass-Through Rate for the Distribution Date in January (except during a leap year) or February of any year subsequent to 2016 (in any event unless that Distribution Date is the final Distribution Date), the “aggregate amount of interest actually accrued (or, in the event of a voluntary or involuntary principal prepayment affecting same, that otherwise would have accrued)”, as referred to in clause (b) of the preceding sentence, will be deemed to exclude related Withheld Amounts to be transferred to the Interest Reserve Account in such month; or (ii) the related Net Mortgage Pass-Through Rate for the Distribution Date in March (or in February if the final Distribution Date occurs in such particular month of February) in any year subsequent to 2016, the “aggregate amount of interest actually accrued (or, in the event of a voluntary or involuntary principal prepayment affecting same, that otherwise would have accrued)”, as referred to in clause (b) of the preceding sentence, will be deemed to include related Withheld Amounts to be deposited in the Lower-Tier REMIC Distribution Account for distribution on such Distribution Date. In addition, the Net Mortgage Pass-Through Rate with respect to any Mortgage Loan for any Distribution Date will be determined without regard to: (i) any modification, waiver or amendment of the terms of such Mortgage Loan, whether agreed to by the Master Servicer, the Special Servicer, an Outside Servicer or an Outside Special Servicer or resulting from a bankruptcy, insolvency or similar proceeding involving the related borrower; (ii) the occurrence and continuation of a default under such Mortgage Loan; (iii) the passage of the related maturity date or, in the case of an ARD Loan, the related Anticipated Repayment Date; and (iv) the related Mortgaged Property becoming an REO Property.
The “Net Mortgage Rate” with respect to any Mortgage Loan is a per annum rate equal to the related Mortgage Rate minus the related Administrative Fee Rate.
The “Mortgage Rate” with respect to any Mortgage Loan or any related Companion Loan is theper annum rate at which interest accrues on the Mortgage Loan or the related Companion Loan as stated in the related Mortgage Note or the promissory note evidencing such Companion Loan without giving effect to any default rate or Revised Rate.
Interest Distribution Amount
The “Interest Distribution Amount” with respect to any Distribution Date and any Class of Principal Balance Certificates (exclusive of the Class EC Certificates), any Class of Interest-Only Certificates or any Trust Component will equal (A) the sum of (i) the Interest Accrual Amount with respect to such Class or Trust Component for such Distribution Date and (ii) the Interest Shortfall, if any, with respect to such Class or Trust Component for such Distribution Date, less (B) any Excess Prepayment Interest Shortfall allocated to such Class or Trust Component on such Distribution Date.
311 |
The “Interest Accrual Amount” with respect to any Distribution Date and any Class of Principal Balance Certificates (exclusive of the Class EC Certificates), any Class of Interest-Only Certificates or any Trust Component is equal to interest for the related Interest Accrual Period accrued at the applicable Pass-Through Rate for such Class or Trust Component on the Certificate Balance or Notional Amount, as applicable, for such Class or Trust Component immediately prior to that Distribution Date. Calculations of interest for each Interest Accrual Period will be made on 30/360 Basis.
An “Interest Shortfall” with respect to any Distribution Date for any Class of Principal Balance Certificates (exclusive of the Class EC Certificates), any Class of Interest-Only Certificates or any Trust Component is the sum of (a) the portion of the Interest Distribution Amount for such Class or Trust Component remaining unpaid as of the close of business on the preceding Distribution Date (if any), and (b) to the extent permitted by applicable law, (i) other than in the case of the Interest-Only Certificates, one month’s interest on that amount remaining unpaid at the Pass-Through Rate applicable to such Class or Trust Component for the subject Distribution Date and (ii) in the case of a Class of Interest-Only Certificates, one-month’s interest on that amount remaining unpaid at the WAC Rate for the subject Distribution Date.
The “Interest Accrual Period” for each Distribution Date will be the calendar month prior to the month in which that Distribution Date occurs.
Principal Distribution Amount
The “Principal Distribution Amount” for any Distribution Date will be equal to the sum of the following amounts:
(1) | the Scheduled Principal Distribution Amount for that Distribution Date, |
(2) | the Unscheduled Principal Distribution Amount for that Distribution Date, |
(3) | the Principal Shortfall, if any, for the prior Distribution Date; and, |
provided, that the Principal Distribution Amount for any Distribution Date will be reduced, to not less than zero, by the amount of any reimbursements of:
(A) Nonrecoverable Advances (including any servicing advance with respect to an Outside Serviced Mortgage Loan under the related Outside Servicing Agreement), together with interest on such Nonrecoverable Advances at the Advance Rate, that are paid or reimbursed from principal collections on the Mortgage Loans in a period during which such principal collections would have otherwise been included in the Principal Distribution Amount for such Distribution Date, and
(B) Workout-Delayed Reimbursement Amounts that were paid or reimbursed from principal collections on the Mortgage Loans in a period during which such principal collections would have otherwise been included in the Principal Distribution Amount for such Distribution Date,
provided, further, that in the case of clauses (A) and (B) above, if any of the amounts that were reimbursed from principal collections on the Mortgage Loans (including REO Mortgage Loans) for a prior Distribution Date are subsequently recovered on the related Mortgage Loan (including an REO Mortgage Loan), such recovery will increase the Principal Distribution Amount for the Distribution Date related to the Collection Period in which such recovery occurs.
The “Scheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of the principal portions of: (a) all Monthly Payments (which do not include balloon payments) with respect to the Mortgage Loans due or deemed due during or, if and to the extent not previously received or advanced and distributable to Certificateholders on a preceding Distribution Date, prior to the related Collection Period, in each case to the extent paid by the related borrower as of the related Determination Date (or, in the case of an Outside Serviced Mortgage Loan, received by the Master Servicer as of the business day preceding the Master Servicer Remittance Date) or advanced by the Master Servicer or the Trustee, as applicable; and (b) all balloon payments with respect to the Mortgage Loans to the extent received during the related Collection Period (or, in the case of an Outside Serviced Mortgage Loan, received by the Master Servicer as of the business day preceding the
312 |
Master Servicer Remittance Date), and to the extent not included in clause (a) above for the subject Distribution Date and not previously received or advanced and distributable to Certificateholders on a preceding Distribution Date. The Scheduled Principal Distribution Amount from time to time will include all late payments of principal made by a borrower with respect to the Mortgage Loans, including late payments in respect of a delinquent balloon payment, received during the periods or by the times described above in this definition, except to the extent those late payments are otherwise available to reimburse the Master Servicer or the Trustee, as the case may be, for prior P&I Advances, as described in this prospectus.
The “Unscheduled Principal Distribution Amount” for any Distribution Date will equal the aggregate of: (a) all prepayments of principal received on the Mortgage Loans during the related Collection Period (or, in the case of the Outside Serviced Mortgage Loans, all principal prepayments received during the period that renders them includable in the Available Funds for such Distribution Date); and (b) any other collections (exclusive of payments by borrowers) received on the Mortgage Loans and, to the extent of the Issuing Entity’s interest therein, any REO Properties during the related Collection Period (or, in the case of an Outside Serviced Mortgage Loan or any interest in REO Property acquired with respect thereto, all such proceeds received during the period that renders them includable in the Available Funds for such Distribution Date), whether in the form of liquidation proceeds, insurance proceeds, condemnation proceeds, net income, rents, and profits from any REO Property or otherwise, that were identified and applied by the Master Servicer (and/or, in the case of an Outside Serviced Mortgage Loan, the related Outside Servicer) as recoveries of previously unadvanced principal of the related Mortgage Loan.
The “Principal Shortfall” for any Distribution Date means the amount, if any, by which (1) the Principal Distribution Amount for such Distribution Date exceeds (2) the aggregate amount actually distributed on such Distribution Date in respect of such Principal Distribution Amount.
Certain Calculations with Respect to Individual Mortgage Loans
The “Stated Principal Balance” of each Mortgage Loan will initially equal its Cut-off Date Balance (or in the case of a Qualified Substitute Mortgage Loan, the unpaid principal balance of such Mortgage Loan after application of all scheduled payments of principal and interest due during or prior to the month of substitution, whether or not received) and, on each Distribution Date, will be reduced by an amount generally equal to all payments and other collections of principal on such Mortgage Loan that are distributable on or advanced for such Distribution Date. With respect to any Serviced Companion Loan as of any date of determination, the Stated Principal Balance will generally equal the unpaid principal balance of such Companion Loan as of such date. With respect to any Serviced Loan Combination as of any date of determination, the Stated Principal Balance of such Loan Combination will be the sum of the Stated Principal Balance of the related Mortgage Loan and each related Companion Loan on such date. The Stated Principal Balance of a Mortgage Loan or Serviced Loan Combination may also be reduced in connection with any modification that reduces the principal amount due on such Mortgage Loan or Loan Combination, as the case may be, or any forced reduction of its actual unpaid principal balance imposed by a court presiding over a bankruptcy proceeding in which the related borrower is the debtor. See “Certain Legal Aspects of the Mortgage Loans”. If any Mortgage Loan or Loan Combination is paid in full, or if the Mortgage Loan or Loan Combination (or any Mortgaged Property acquired in respect of the Mortgage Loan or Loan Combination) is otherwise liquidated, then, as of the Distribution Date that relates to the Collection Period in which that payment in full or liquidation occurred and notwithstanding that a loss may have occurred in connection with any liquidation, the Stated Principal Balance of the Mortgage Loan or Loan Combination will be zero.
For purposes of calculating Pass-Through Rates and distributions on, and allocations of Realized Losses to, the Certificates, as well as for purposes of calculating the Servicing Fee, the Certificate Administrator/Trustee Fee, the Operating Advisor Fee and the Asset Representations Reviewer Ongoing Fee payable each month, each REO Property (including any REO Property with respect to an Outside Serviced Mortgage Loan held pursuant to an Outside Servicing Agreement) will be treated as if the related Mortgage Loan (an “REO Mortgage Loan”) and any related Companion Loan(s) (each, an “REO Companion Loan”; and each REO Mortgage Loan and REO Companion Loan, also an “REO Loan”) had remained outstanding and the related loan documents continued in full force and effect; and all references to “Mortgage Loan,” “Mortgage Loans” or “Mortgage Pool” in this prospectus, when used in that context, will be deemed to also be references to or to also include, as the case may be, any REO Mortgage Loan, and all references to “Companion Loan” or “Companion Loans” in this prospectus, when used in that context, will be deemed to also be references to or to also include, as the case may be, any REO Companion Loan. Each REO Loan will generally be deemed to have the same characteristics as its actual predecessor Mortgage Loan or Companion Loan, as applicable, including the same fixed Mortgage
313 |
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 or Companion Loan, as applicable, including any portion of those amounts payable or reimbursable to the Master Servicer, the Special Servicer, the Operating Advisor, the Asset Representations Reviewer, the Certificate Administrator or the Trustee, as applicable, will continue to be “due” in respect of the REO Loan; and amounts received in respect of the related REO Property, net of payments to be made, or reimbursements 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 or Companion Loan.
With respect to each Serviced Loan Combination, no amounts collected thereon or with respect to any related REO Property that are allocable to any related Companion Loan or REO Companion Loan will be available for amounts due to the Certificateholders or to reimburse the Issuing Entity, other than in the limited circumstances related to Servicing Advances, indemnification, Special Servicing Fees and other reimbursable expenses related to such Serviced Loan Combination incurred with respect to such Serviced Loan Combination in accordance with the Pooling and Servicing Agreement.
Application Priority of Mortgage Loan Collections or Loan Combination Collections
Absent express provisions in the related Mortgage Loan documents (and, with respect to each Serviced Loan Combination, the related Co-Lender Agreement) to the contrary, all amounts collected by or on behalf of the Issuing Entity in respect of any Mortgage Loan in the form of payments from the related borrower, liquidation proceeds, condemnation proceeds or insurance proceeds (excluding, if applicable, in the case of each Serviced Loan Combination, any amounts payable to the holder(s) of the related Companion Loan(s) pursuant to the related Co-Lender Agreement) will be deemed to be allocated for purposes of collecting amounts due under the Mortgage Loan, pursuant to the Pooling and Servicing Agreement, in the following order of priority:
First,as a recovery of any unreimbursed Advances (including any Workout-Delayed Reimbursement Amount) with respect to the related Mortgage Loan and unpaid interest at the Advance Rate on such Advances and, if applicable, unreimbursed and unpaid expenses of the Issuing Entity;
Second,as a recovery of Nonrecoverable Advances with respect to the related Mortgage Loan and any interest on those Nonrecoverable Advances at the Advance Rate, to the extent previously paid or reimbursed from principal collections on the Mortgage Pool (as described in the firstproviso in the definition of Principal Distribution Amount);
Third,to the extent not previously allocated pursuant to clause First, as a recovery of accrued and unpaid interest on such Mortgage Loan (exclusive of default interest and Excess Interest) to the extent of the excess of (i) accrued and unpaid interest on such Mortgage Loan at the related Mortgage Rate in effect from time to time through the end of the applicable mortgage interest accrual period, over (ii) the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts (to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to clause Fifth below on earlier dates);
Fourth, to the extent not previously allocated pursuant to clause First, as a recovery of principal of such Mortgage Loan then due and owing, including by reason of acceleration of such Mortgage Loan following a default thereunder (or, if the Mortgage Loan has been liquidated, as a recovery of principal to the extent of its entire remaining unpaid principal balance);
Fifth,as a recovery of accrued and unpaid interest on such Mortgage Loan to the extent of the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts (to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to this clause Fifth on earlier dates);
Sixth, as a recovery of amounts to be currently allocated to the payment of, or escrowed for the future payment of, real estate taxes, assessments and insurance premiums and similar items relating to such Mortgage Loan;
Seventh,as a recovery of any other reserves to the extent then required to be held in escrow with respect to such Mortgage Loan;
314 |
Eighth,as a recovery of any yield maintenance charge or prepayment premium then due and owing under such Mortgage Loan;
Ninth,as a recovery of any late payment charges and default interest then due and owing under such Mortgage Loan;
Tenth,as a recovery of any assumption fees, assumption application fees and Modification Fees then due and owing under such Mortgage Loan;
Eleventh, as a recovery of any other amounts then due and owing under such Mortgage Loan other than remaining unpaid principal and other than, if applicable, accrued and unpaid Excess Interest (and, if both Consent Fees and Operating Advisor Consulting Fees are due and owing,first, allocated to Consent Fees and,then, allocated to Operating Advisor Consulting Fees);
Twelfth,as a recovery of any remaining principal of such Mortgage Loan to the extent of its entire remaining unpaid principal balance; and
Thirteenth,in the case of an ARD Loan after the related Anticipated Repayment Date, as a recovery of any accrued but unpaid Excess Interest,
provided that, to the extent required under the REMIC provisions of the Code, payments or proceeds received (or receivable by exercise of the lender’s rights under the related Mortgage Loan documents) with respect to any partial release of a Mortgaged Property (including in connection with a condemnation) at a time when the loan-to-value ratio of the related Mortgage Loan or Serviced Loan Combination exceeds 125%, or would exceed 125% following any partial release (based solely on the value of real property and excluding personal property and going concern value, if any) must be collected and allocated to reduce the principal balance of the Mortgage Loan or Serviced Loan Combination in the manner permitted by the REMIC provisions.
Collections by or on behalf of the Issuing Entity in respect of any REO Property (exclusive of the amounts to beallocated to the payment of the costs of operating, managing, leasing, maintaining and disposing of such REO Property and, if applicable, in the case of each Serviced Loan Combination, exclusive of any amounts payable to the holder(s) of the related Companion Loan(s) pursuant to the related Co-Lender Agreement) will be deemed to be allocated for purposes of collecting amounts due under the Mortgage Loan, pursuant to the related Pooling and Servicing Agreement, in the following order of priority:
First,as a recovery of any unreimbursed Advances (including any Workout-Delayed Reimbursement Amount) with respect to the related Mortgage Loan and interest at the Advance Rate on all Advances and, if applicable, unreimbursed and unpaid expenses of the Issuing Entity with respect to the related Mortgage Loan;
Second,as a recovery of Nonrecoverable Advances with respect to the related Mortgage Loan and any interest on those Nonrecoverable Advances at the Advance Rate, to the extent previously paid or reimbursed from principal collections on the Mortgage Loans (as described in the first proviso in the definition of Principal Distribution Amount);
Third,to the extent not previously allocated pursuant to clause First, as a recovery of accrued and unpaid interest on the related Mortgage Loan (exclusive of default interest and Excess Interest) to the extent of the excess of (i) accrued and unpaid interest on such Mortgage Loan at the applicable Mortgage Rate in effect from time to time through the end of the applicable mortgage interest accrual period, over (ii) the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts (to the extent collections have not been allocated as a recovery of accrued and unpaid interest pursuant to clause Fifth below or clauseFifthof the prior paragraph on earlier dates);
Fourth,to the extent not previously allocated pursuant to clause First, as a recovery of principal of the related Mortgage Loan to the extent of its entire unpaid principal balance;
Fifth, as a recovery of accrued and unpaid interest on the related Mortgage Loan to the extent of the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that
315 |
have occurred in connection with related Appraisal Reduction Amounts (to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to this clause Fifth or clauseFifth of the prior paragraph on earlier dates);
Sixth,as a recovery of any yield maintenance charge or prepayment premium then due and owing under the related Mortgage Loan;
Seventh, as a recovery of any late payment charges and default interest then due and owing under the related Mortgage Loan;
Eighth,as a recovery of any Assumption Fees, assumption application fees and Modification Fees then due and owing under the related Mortgage Loan;
Ninth,as a recovery of any other amounts then due and owing under the related Mortgage Loan other than, if applicable, accrued and unpaid Excess Interest (and, if both Consent Fees and Operating Advisor Consulting Fees are due and owing,first, allocated to Consent Fees and,then, allocated to Operating Advisor Consulting Fees); and
Tenth,in the case of an ARD Loan after the related Anticipated Repayment Date as a recovery, any accrued but unpaid Excess Interest.
Allocation of Yield Maintenance Charges and Prepayment Premiums
On each Distribution Date, each yield maintenance charge collected on the Mortgage Loans during the related Collection Period (or, in the case of an Outside Serviced Mortgage Loan, that accompanied a principal prepayment included in the Available Funds for such Distribution Date) is required to be distributed to Certificateholders (excluding holders of the Class X-D, Class E, Class F, Class G, Class H and Class R Certificates) as follows: (a) first such yield maintenance charge will be allocated between (i) the group (the “YM Group A”) of Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class X-A Certificates and the Class A-S Trust Component (and, correspondingly, the Class A-S and Class EC Certificates,pro rata based on their respective percentage interests in the Class A-S Trust Component), and (ii) the group (the “YM Group B” and collectively with the YM Group A, the “YM Groups”) of the Class X-B Certificates, the Class B Trust Component (and, correspondingly, the Class B and Class EC Certificates,pro rata based on their respective percentage interests in the Class B Trust Component), the Class C Trust Component (and, correspondingly, the Class C and Class EC Certificates,pro rata based on their respective percentage interests in the Class C Trust Component) and the Class D Certificates,pro rata based upon the aggregate amount of principal distributed to the Classes of Regular Certificates (other than the Class X Certificates) and Trust Component(s) (and, therefore, the Class EC Certificates and the applicable Class(es) of Exchangeable Certificates) in each YM Group on such Distribution Date, and (b) then the portion of such yield maintenance charge allocated to each YM Group will be further allocated as among the Classes of Regular Certificates and the Trust Component(s) in such YM Group, in the following manner: (1) each Class of Regular Certificates (other than the Class X Certificates) and each Trust Component (and, therefore, the Class EC Certificates and the applicable Class of Exchangeable Certificates, collectively) in such YM Group will entitle the applicable Certificateholders to receive on the applicable Distribution Date that portion of such yield maintenance charge equal to the product of (x) a fraction whose numerator is the amount of principal distributed to such Class of Regular Certificates or Trust Component on such Distribution Date and whose denominator is the total amount of principal distributed to all of the Regular Certificates (other than the Class X Certificates) and Trust Components (and, therefore, the Class EC Certificates and the applicable Class(es) of Exchangeable Certificates) in that YM Group on such Distribution Date, (y) the Base Interest Fraction for the related principal prepayment and such Class of Regular Certificates or Trust Component, and (z) the amount of such yield maintenance charge allocated to such YM Group, and (2) the amount of such yield maintenance charge allocated to such YM Group and remaining after such distributions will be distributed to the Class of Class X Certificates in such YM Group. If there is more than one Class of Regular Certificates (exclusive of the Class X Certificates) and/or Trust Component in either YM Group entitled to distributions of principal on any particular Distribution Date on which yield maintenance charges are distributable to such class(es) and/or Trust Component(s), the aggregate amount of such yield maintenance charges will be allocated among all such Classes of Regular Certificates and/or Trust Components (and, therefore, the Class EC Certificates and the applicable Class(es) of Exchangeable Certificates) up to, and on apro rata basis in accordance with, their respective entitlements in those yield maintenance charges in accordance with the prior sentence of this paragraph.
316 |
The “Base Interest Fraction” with respect to any principal prepayment on any Mortgage Loan and with respect to any Class of Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class D Certificates or any Trust Component is a fraction (a) whose numerator is the amount, if any, by which (i) the Pass-Through Rate on such Class of Certificates or Trust Component exceeds (ii) the discount rate used in accordance with the related Mortgage Loan documents in calculating the yield maintenance charge with respect to such principal prepayment and (b) whose denominator is the amount, if any, by which (i) the Mortgage Rate on such Mortgage Loan exceeds (ii) the discount rate used in accordance with the related Mortgage Loan documents in calculating the yield maintenance charge with respect to such principal prepayment;provided, however, that under no circumstances will the Base Interest Fraction be greater than one. However, if such discount rate is greater than or equal to both of (x) the Mortgage Rate on such Mortgage Loan and (y) the Pass-Through Rate described in the preceding sentence, then the Base Interest Fraction will equal zero, and if such discount rate is greater than or equal to the Mortgage Rate on such Mortgage Loan, but less than the Pass-Through Rate described in the preceding sentence, then the Base Interest Fraction will equal one.
If a prepayment premium (calculated as a percentage of the amount prepaid) is imposed in connection with a prepayment rather than a yield maintenance charge, then the prepayment premium so collected will be allocated as described above. For this purpose, the discount rate used to calculate the Base Interest Fraction will be the discount rate used to determine the yield maintenance charge for Mortgage Loans that require payment at the greater of a yield maintenance charge or a minimum amount equal to a fixed percentage of the principal balance of the Mortgage Loan or, for Mortgage Loans that only have a prepayment premium based on a fixed percentage of the principal balance of the Mortgage Loan, such other discount rate as may be specified in the related Mortgage Loan documents.
No prepayment premiums or yield maintenance charges will be distributed to holders of the Class X-D, Class E, Class F, Class G, Class H or Class R Certificates. Instead, after the Notional Amounts of the Class X-A and Class X-B Certificates and the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class D Certificates and the Trust Components have been reduced to zero, all prepayment premiums and yield maintenance charges with respect to the Mortgage Loans will be distributed to holders of the Class X-B Certificates.
Prepayment premiums and yield maintenance charges will be distributed on any Distribution Date only to the extent they are received in respect of the Mortgage Loans during the related Collection Period.
For a description of yield maintenance charges, see “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans” and “Certain Legal Aspects of the Mortgage Loans—Default Interest and Limitations on Prepayments”.
Assumed Final Distribution Date; Rated Final Distribution Date
The “Assumed Final Distribution Date” with respect to any Class of Certificates is the Distribution Date on which the aggregate Certificate Balance or Notional Amount of that Class of Certificates would be reduced to zero based on a 0% CPR prepayment rate and the Modeling Assumptions. The Assumed Final Distribution Date with respect to each Class of Offered Certificates will in each case be as follows:
Class Designation | Assumed Final Distribution Date |
Class A-1 | December 2020 |
Class A-2 | April 2021 |
Class A-3 | January 2026 |
Class A-4 | January 2026 |
Class A-AB | September 2025 |
Class X-A | February 2026 |
Class X-B | February 2026 |
Class A-S | February 2026 |
Class B | February 2026 |
Class EC | February 2026 |
Class C | February 2026 |
The Assumed Final Distribution Dates set forth above were calculated without regard to any delays in the collection of balloon payments and without regard to delinquencies, defaults or liquidations. Accordingly, in the
317 |
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 assuming no prepayments of principal (other than the repayment in full of each ARD Loan on its Anticipated Repayment Date). Because the rate of payment (including prepayments) of the Mortgage Loans may exceed the scheduled rate of payments, and could exceed the scheduled rate by a substantial amount, the actual final Distribution Date for one or more Classes of the Offered Certificates may be earlier, and could be substantially earlier, than the related Assumed Final Distribution Date(s). The rate of payments (including prepayments) on the Mortgage Loans will depend on the characteristics of the Mortgage Loans, as well as on the prevailing level of interest rates and other economic factors, and we cannot assure you as to actual payment experience.
The “Rated Final Distribution Date” for each Class of Offered Certificates will be the Distribution Date in April 2049. See “Ratings”.
Prepayment Interest Shortfalls
If a borrower prepays a Mortgage Loan or Serviced Loan Combination in whole or in part, after the related Due Date in any Collection Period, the amount of interest (net of related Servicing Fees and any related Excess Interest and default interest) accrued on such prepayment from such due date to, but not including, the date of prepayment (or any later date through which interest accrues) will, to the extent actually collected (without regard to any prepayment premium or yield maintenance charge actually collected) constitute a “Prepayment Interest Excess”. Conversely, if a borrower prepays a Mortgage Loan or Serviced Loan Combination (with such prepayment allocated between the related Mortgage Loan and Serviced Companion Loan in accordance with the related Co-Lender Agreement) in whole or in part prior to the related Due Date in any Collection Period and does not pay interest on such prepayment through the end of the one-month accrual period applicable to such Due Date, then the shortfall in a full month’s interest (net of related Servicing Fees and any related Excess Interest and default interest) on such prepayment will constitute a “Prepayment Interest Shortfall”. Prepayment Interest Excesses (to the extent not offset by Prepayment Interest Shortfalls or required to be paid as Compensating Interest Payments) collected on the Mortgage Loans (other than the Outside Serviced Mortgage Loans) and any related Serviced Companion Loan, will be retained by the Master Servicer as additional servicing compensation.
The Master Servicer will be required to deliver to the Certificate Administrator for deposit in the Distribution Account (other than the portion of any Compensating Interest Payment described below that is allocable to a Serviced Companion Loan) on each Master Servicer Remittance Date, without any right of reimbursement thereafter, a cashpayment (a “Compensating Interest Payment”) in an amount, with respect to each Mortgage Loan (other than an Outside Serviced Mortgage Loan) and any related Serviced Pari Passu Companion Loan, equal to the lesser of:
(i) | the aggregate amount of Prepayment Interest Shortfalls incurred in connection with voluntary principal prepayments received in respect of the Mortgage Loans (other than the Outside Serviced Mortgage Loans)and any related Serviced Pari Passu Companion Loan(s) (in each case other than a Specially Serviced Loan or a Mortgage Loan or any related Serviced Pari Passu Companion Loan on which the Special Servicer allowed a prepayment on a date other than the applicable Due Date) for the related Distribution Date, and |
(ii) | the aggregate of (A) that portion of the Master Servicer’s Servicing Fees for the related Distribution Date that is, in the case of each Mortgage Loan, Serviced Pari Passu Companion Loan and REO Loan for which such Servicing Fees are being paid in such Collection Period, calculated at a rate of 0.00250%per annum and (B) all Prepayment Interest Excesses received by the Master Servicer during such Collection Period with respect to the Mortgage Loans (and, so long as a Loan Combination is serviced under the Pooling and Servicing Agreement, any related Serviced Pari Passu Companion Loan) subject to such prepayment and net investment earnings on such Prepayment Interest Excesses. In no event will the rights of the Certificateholders to the offset of the aggregate Prepayment Interest Shortfalls be cumulative. |
If a Prepayment Interest Shortfall occurs with respect to a Mortgage Loan as a result of the Master Servicer allowing the related borrower to deviate (a “Prohibited Prepayment”) from the terms of the related Mortgage Loan documents regarding principal prepayments (other than (w) if the Mortgage Loan is an Outside Serviced
318 |
Mortgage Loan, (x) subsequent to a default under the related Mortgage Loan documents or if the Mortgage Loan is a Specially Serviced Loan, (y) pursuant to applicable law or a court order or otherwise in such circumstances where the Master Servicer is required to accept such principal prepayment in accordance with the Servicing Standard, or (z) in connection with the payment of any insurance proceeds or condemnation awards), then for purposes of calculating the Compensating Interest Payment for the related Distribution Date, the Master Servicer will pay, without regard to clause (ii) above, the amount of the Prepayment Interest Shortfall with respect to such Mortgage Loan otherwise described in clause (i) above in connection with such Prohibited Prepayment.
Compensating Interest Payments with respect to the Serviced Loan Combinations will be allocated between the related Mortgage Loan and the related Serviced Pari Passu Companion Loan(s) in accordance with their respective principal amounts, and the Master Servicer will be required to pay the portion of such Compensating Interest Payments allocable to a related Serviced Pari Passu Companion Loan to the holder thereof.
The aggregate of any Prepayment Interest Shortfalls resulting from any principal prepayments made on the Mortgage Loans to be included in the Available Funds for any Distribution Date that are not covered by the Master Servicer’s Compensating Interest Payment for the related Distribution Date or, in the case of an Outside Serviced Mortgage Loan, the portion of any compensating interest payments allocable to such Outside Serviced Mortgage Loan to the extent received from the related Outside Servicer (the aggregate of the Prepayment Interest Shortfalls that are not so covered, as to the related Distribution Date, the “Excess Prepayment Interest Shortfall”) will be allocated on that Distribution Date among the respective Classes of the Regular Certificates and the respective Trust Components on apro rata basis in accordance with the respective Interest Accrual Amounts for those classes and Trust Components for such Distribution Date.
Subordination; Allocation of Realized Losses
As a means of providing a certain amount of protection to the holders of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B Certificates against losses associated with delinquent and defaulted Mortgage Loans, the rights of the holders of the Class A-S, Class B, Class EC, Class C, Class D, Class X-D, Class E, Class F, Class G and Class H Certificates to receive distributions of interest and principal,as applicable, will be subordinated to such rights of the holders of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B Certificates. The Class A-S Trust Component (and, correspondingly, to the extent evidencing an interest in the Class A-S Trust Component, the Class A-S and Class EC Certificates) will likewise be protected by the subordination of the Class B and Class C Trust Components and the Class D, Class X-D, Class E, Class F, Class G and Class H Certificates. The Class B Trust Component (and, correspondingly, to the extent evidencing an interest in the Class B Trust Component, the Class B and Class EC Certificates) will likewise be protected by the subordination of the Class C Trust Component and the Class D, Class X-D, Class E, Class F, Class G and Class H Certificates. The Class C Trust Component (and, correspondingly, to the extent evidencing an interest in the Class C Trust Component, the Class EC and Class C Certificates) will likewise be protected by the subordination of the Class D, Class X-D, Class E, Class F, Class G and Class H Certificates.
This subordination will be effected in two ways: (i) by the preferential right of the holders of a Class of Certificates or a Trust Component to receive on any Distribution Date the amounts of interest and/or principal distributable with respect to that Class or Trust Component prior to any distribution being made on such Distribution Date in respect of any Classes of Certificates or Trust Components subordinate to that Class or Trust Component (as described above under “—Distributions—Priority of Distributions”)and (ii) by the allocation of Realized Losses to Classes of Certificates or Trust Components that are subordinate to more senior Classes or Trust Components, as described below.
Noother form of credit support will be available for the benefit of the Offered Certificates or related Trust Components.
On and 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 and Class A-AB Certificates,pro rata based on Certificate Balance, until their respective Certificate Balances have been reduced to zero (and the schedule for the Class A-AB principal distributions will be disregarded). Prior to the Cross-Over Date, allocation of principal will be made as described under “—Distributions—Priority of Distributions” above. Allocation to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates, for so long as they are outstanding, of the entire Principal Distribution Amount for each Distribution Date will have the effect of reducing the aggregate Certificate Balance of the
319 |
Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB 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 and Class A-AB Certificates, the percentage interest in the Issuing Entity evidenced by the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates will be decreased (with a corresponding increase in the percentage interest in the Issuing Entity evidenced by the Principal Balance Certificates (other than the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB 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 and Class A-AB Certificates by the other Principal Balance Certificates.
Following retirement of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates, the successive allocation on each Distribution Date of the remaining Principal Distribution Amount to the Class A-S Trust Component (and, correspondingly, to the extent evidencing an interest in the Class A-S Trust Component, to the Class A-S Certificates and the Class EC Certificates), the Class B Trust Component (and, correspondingly, to the extent evidencing an interest in the Class B Trust Component, to the Class B Certificates and the Class EC Certificates), the Class C Trust Component (and, correspondingly, to the extent evidencing an interest in the Class C Trust Component, to the Class C Certificates and the Class EC Certificates), the Class D Certificates, the Class E Certificates, the Class F Certificates, the Class G Certificates and the Class H Certificates, in that order, in each case for so long as the subject Certificates are outstanding, will provide a similar, but diminishing benefit to those Certificates (other than the Class H Certificates) as to the relative amount of subordination afforded by the outstanding Classes of Certificates with later sequential designations.
On each Distribution Date, immediately following the distributions to be made to the Certificateholders on that date, the Certificate Administrator is required to calculate the amount, if any, by which (i) 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 Mortgage Loans expected to be outstanding immediately following that Distribution Date is less than (ii) the then aggregate Certificate Balance of the Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) and the Trust Components (and, correspondingly, the Exchangeable Certificates and the Class EC Certificates) after giving effect to distributions of principal on that Distribution Date (any such deficit, a “Realized Loss”). The Certificate Administrator will be required to allocate any Realized Losses among the respective Classes of Subordinate Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) and the Trust Components (and, correspondingly, the Exchangeable Certificates and the Class EC Certificates) in the following order, until the Certificate Balance of each such class and/or Trust Component is reduced to zero:
first, to the Class H Certificates;
second, to the Class G Certificates;
third, to the Class F Certificates;
fourth,to the Class E Certificates;
fifth,to the Class D Certificates;
sixth, to the Class C Trust Component (and, correspondingly, to the Class C Certificates and the Class EC Certificates,pro rata based on their respective percentage interests in the Class C Trust Component); and
seventh, to the Class B Trust Component (and, correspondingly, to the Class B Certificates and the Class EC Certificates,pro rata based on their respective percentage interests in the Class B Trust Component); and
eighth, to the Class A-S Trust Component (and, correspondingly, to the Class A-S Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class A-S Trust Component).
Following the reduction of the Certificate Balances of all Classes of Subordinate Certificates and Trust Components to zero, the Certificate Administrator will be required to allocate Realized Losses among the Senior
320 |
Certificates(other than the Class X-A and Class X-B Certificates),pro rata, based upon their respective Certificate Balances, until their respective Certificate Balances have been reduced to zero.
Realized Losses will not be allocated to the Class R Certificates and will not be directly allocated to the Interest-Only Certificates. However, the Notional Amounts of the Classes of Interest-Only Certificates will be reduced if the Certificate Balances of the related Classes of Principal Balance Certificates and/or Trust Components are reduced by such Realized Losses.
In general, Realized Losses could result from the occurrence of: (1) losses and other shortfalls on or in respect of the Mortgage Loans, including as a result of defaults and delinquencies on the related Mortgage Loans, Nonrecoverable Advances made in respect of the Mortgage Loans, the payment to the Special Servicer or an Outside Special Servicer of any compensation as described in“The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, and the payment of interest on Advances and certain servicing expenses; and (2) certain unanticipated, non-Mortgage Loan specific expenses of the Issuing Entity, including certain reimbursements to the Certificate Administrator or Trustee as described under “Transaction Parties—The Trustee” or“—The Certificate Administrator”, and certain federal, state and local taxes, and certain tax-related expenses, payable out of the Issuing Entity, as described under “Material Federal Income Tax Consequences”.
A Class of Offered Certificates or a Trust Component will be considered outstanding until its Certificate Balance or Notional Amount is reduced to zero, except that the Class X-B Certificates will be considered outstanding so long as holders of such Certificates are entitled to receive yield maintenance charges and prepayment premiums. However, notwithstanding a reduction of its Certificate Balance to zero, reimbursements of any previously allocated Realized Losses are required thereafter to be made to a Class of Principal Balance Certificates in accordance with the payment priorities set forth in “—Distributions—Priority of Distributions” above.
Reports to Certificateholders; Certain Available Information
Certificate Administrator Reports
On each Distribution Date, the Certificate Administrator will be required to provide or make available to each Certificateholder of record a Distribution Date statement in the form of Annex D providing all applicable information required under Regulation AB relating to distributions made on that date for the relevant class and the recent status of the Mortgage Loans.
In addition, the Certificate Administrator will include (to the extent it receives such information from the applicable person) (i) the identity of any Mortgage Loans permitting additional debt, identifying (A) the amount of any additional debt incurred during the related Collection Period, (B) the total DSCR calculated on the basis of the Mortgage Loan and such additional debt and (C) the aggregate loan-to-value ratio calculated on the basis of the Mortgage Loan and the additional debt in each applicable Form 10-D filed on behalf of the Issuing Entity and (ii) the beginning and ending account balances for each of the Securitization Accounts (for the applicable period) in each Form 10-D filed on behalf of the Issuing Entity.
Within a reasonable period of time after the end of each calendar year, upon request, the Certificate Administrator is required to furnish to each person or entity who at any time during the calendar year was a holder of a Certificate, a statement containing information (i) the amount of the distribution on each Distribution Date in reduction of the related Certificate Balance (if any), and (ii) the amount of the distribution on each Distribution Date of the applicable Interest Distribution Amount, in each case, as to the applicable class, aggregated for the related calendar year or applicable partial year during which that person was a Certificateholder, together with any other information that the Certificate Administrator deems necessary or desirable, or that a Certificateholder or Certificate Owner reasonably requests, to enable Certificateholders to prepare their tax returns for that calendar year. This obligation of the Certificate Administrator will be deemed to have been satisfied to the extent that substantially comparable information will be provided by the Certificate Administrator pursuant to any requirements of the Code as from time to time are in force.
321 |
Inaddition, the Certificate Administrator will provide or make available on its website (www.sf.citidirect.com), to the extent received from the applicable person, on each Distribution Date to each Privileged Person the following reports (other than clause (1) below, the “CREFC® Reports”) prepared by the Master Servicer, the Certificate Administrator or the Special Servicer, as applicable, substantially in the forms provided in the Pooling and Servicing Agreement (which forms are subject to change) and including substantially the following information:
(1) the Distribution Date Statement;
(2) a Commercial Real Estate Finance Council (“CREFC®”) delinquent loan status report;
(3) a CREFC® historical loan modification and corrected loan report;
(4) a CREFC® advance recovery report;
(5) a CREFC® total loan report;
(6) a CREFC® operating statement analysis report;
(7) a CREFC® comparative financial status report;
(8) a CREFC® net operating income adjustment worksheet;
(9) a CREFC® real estate owned status report;
(10) a CREFC® servicer watch list;
(11) a CREFC® loan level reserve and letter of credit report;
(12) a CREFC® property file;
(13) a CREFC® financial file;
(14) a CREFC® loan setup file; and
(15) a CREFC® loan periodic update file.
The Master Servicer or the Special Servicer, as applicable, may omit any information from these reports that the Master Servicer or the Special Servicer regards as confidential. Subject to any potential liability for willful misconduct, bad faith or negligence as described under“The Pooling and Servicing Agreement—Limitation on Liability; Indemnification”, none of the Master Servicer, the Special Servicer, the Trustee or the Certificate Administrator will be responsible for the accuracy or completeness of any information supplied to it by or on behalf of a borrower, a Sponsor or another party to the Pooling and Servicing Agreement or a party to an Outside Servicing Agreement that is included in any reports, statements, materials or information prepared or provided by it. Some information will be made available to Certificateholders by electronic transmission as may be agreed upon between the Depositor and the Certificate Administrator.
Before each Distribution Date, the Master Servicer will deliver to the Certificate Administrator by electronic means various CREFC® Reports, including:
(i) | a CREFC® property file; |
(ii) | a CREFC® financial file; and |
(iii) | a CREFC® loan periodic update file. |
322 |
In addition, the Master Servicer (with respect to a Mortgage Loan that is not a Specially Serviced Loan) or Special Servicer (with respect to Specially Serviced Loans and REO Properties), as applicable, is also required toprepare the following for each Mortgaged Property and REO Property related to a Serviced Mortgage Loan:
(i) Within 30 days after receipt of a quarterly operating statement, if any, commencing with respect to the quarter ending September 30, 2016, a CREFC®operating statement analysis report but only to the extent the related borrower is required by the Mortgage Loan documents to deliver and does deliver, or otherwise agrees to provide and does provide, that information, for the Mortgaged Property or REO Property as of the end of that calendar quarter,provided, however, that any analysis or report with respect to the first calendar quarter of each year will not be required to the extent provided in the then current applicable CREFC® guidelines (it being understood that as of the date of this prospectus, the applicable CREFC® guidelines provide that such analysis or report with respect to the first calendar quarter (in each year) is not required for a Mortgaged Property unless such Mortgaged Property is analyzed on a trailing 12-month basis, or if the related Mortgage Loan is on the CREFC® Servicer Watch List). The Master Servicer (with respect to Mortgage Loans that are not Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans and REO Properties), as applicable, will deliver to the Certificate Administrator, the Operating Advisor and each holder of a Serviced Companion Loan by electronic means the operating statement analysis upon request.
(ii) Within 30 days after receipt by the Special Servicer (with respect to Specially Serviced Loans and REO Properties) or the Master Servicer (with respect to a Mortgage Loan that is not a Specially Serviced Loan) of any annual operating statements or rent rolls, commencing with respect to the calendar year ending December 31, 2016, a CREFC®net operating income adjustment worksheet, but only to the extent the related borrower is required by the mortgage to deliver and does deliver, or otherwise agrees to provide and does provide, that information, presenting the computation made in accordance with the methodology described in the Pooling and Servicing Agreement to “normalize” the full year net operating income and debt service coverage numbers used by the Master Servicer to satisfy its reporting obligation described in clause (7) above. The Special Servicer or the Master Servicer will deliver to the Certificate Administrator, the Operating Advisor and each holder of a related Serviced Companion Loan by electronic means the CREFC®net operating income adjustment worksheet upon request.
Certificate Owners and any holder of a Serviced Companion Loan who are also Privileged Persons may also obtain access to any of the Certificate Administrator reports upon request and pursuant to the provisions of the Pooling and Servicing Agreement. Otherwise, until the time Definitive Certificates are issued to evidence the Certificates, the information described above will be available to the related Certificate Owners only if DTC and its participants provide the information to the Certificate Owners. See “Risk Factors—Book-Entry Registration Will Mean You Will Not Be Recognized as a Holder of Record”.
“Privileged Person” includes the Depositor and its designees, the initial purchasers, the underwriters, the Sponsors, the Master Servicer, the Special Servicer, the Excluded Mortgage Loan Special Servicer, the Trustee, the Certificate Administrator, any additional servicer designated by the Master Servicer or the Special Servicer, the Directing Holder (but, in the case of the Controlling Class Representative, only for so long as a Consultation Termination Event does not exist), the Operating Advisor, any affiliate of the Operating Advisor designated by the Operating Advisor, the Asset Representations Reviewer, any affiliate of the Asset Representations Reviewer designated by the Asset Representations Reviewer, any holder of a Companion Loan who provides an Investor Certification, any other person who provides the Certificate Administrator with an Investor Certification and any nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act (“NRSRO”), including any Rating Agency, that delivers a NRSRO Certification to the Certificate Administrator;provided, that in no event will an Excluded Controlling Class Holder be entitled to Excluded Information with respect to an Excluded Controlling Class Mortgage Loan with respect to which it is a Borrower Party (but this exclusion will not apply to any other Mortgage Loan). In no event will a borrower, manager of a Mortgaged Property, affiliate of any of the foregoing or an agent, principal, partner, member, joint venturer, limited partner, employee, representative, director, trustee, advisor or investor in or of any of the foregoing be considered a Privileged Person;provided that the foregoing will not be applicable to, nor limit, an Excluded Controlling Class Holder’s right to access information with respect to any Mortgage Loan other than Excluded Information with respect to a related Excluded Controlling Class Mortgage Loan.
The Controlling Class Representative and each member of the Controlling Class will be considered a Privileged Person with respect to any Mortgage Loans or Serviced Loan Combinations for which it is not then a
323 |
Borrower Party, and the limitations on access to information set forth in the Pooling and Servicing Agreement will apply only with respect to the related Mortgage Loan for which the applicable party is a Borrower Party and only with respect to the related Excluded Information. If the Special Servicer acquires knowledge that it is a Borrower Party with respect to any Mortgage Loan or Serviced Loan Combination, the Special Servicer will nevertheless remain a Privileged Person, provided, that the Special Servicer will not be permitted to, directly or indirectly, provide any information related to any Excluded Special Servicer Mortgage Loan (which will include, without limitation, any asset status reports, Final Asset Status Reports (or summaries thereof), and such other information as may be specified in the Pooling and Servicing Agreement pertaining to such Excluded Special Servicer Mortgage Loan) to any person or entity, including any related Borrower Party, the Special Servicer’s employees or personnel or any of its affiliates involved in the management of any investment in the related Borrower Party or the related Mortgaged Property, or any non-affiliate that (to its knowledge) holds a direct or indirect ownership interest in the related Borrower Party, and the Special Servicer will be required to maintain sufficient internal controls and appropriate policies and procedures in place in order to comply with those obligations.
“Investor Certification” means a certificate substantially in the form(s) attached to the Pooling and Servicing Agreement representing that the person executing the certificate is a Certificateholder, a Certificate Owner or a prospective purchaser of a Certificate (or any investment advisor or manager of the foregoing), the Controlling Class Representative (to the extent the Controlling Class Representative is not a Certificateholder or a Certificate Owner), or a Serviced Companion Loan Holder or its representative, and that (i) for purposes of obtaining certain information and notices (including access to information and notices on the Certificate Administrator’s website), (A) (1) such person is not a borrower, a manager of a Mortgaged Property, an affiliate of any of the foregoing or an agent, principal, partner, member, joint venturer, limited partner, employee, representative, director, trustee, advisor or investor in or of any of the foregoing or, in the case of the Controlling Class Representative or any Controlling Class Certificateholder, such person is not a Borrower Party or (2) such person is a Borrower Party as to any identified Excluded Controlling Class Mortgage Loan and (B) except in the case of a prospective purchaser of a Certificate or a Serviced Companion Loan Holder or its representative, such person has received a copy of this prospectus and/or (ii) for purposes of exercising Voting Rights (which does not apply to a prospective purchaser of a Certificate or a Serviced Companion Loan Holder or its representative), (A) (1) such person is not a Borrower Party or an agent of any borrower or (2) such person is a Borrower Party as to any identified Excluded Controlling Class Mortgage Loan, (B) such person is or is not the Depositor, the Master Servicer, the Special Servicer, the Trustee, the Operating Advisor, the Certificate Administrator or an affiliate of any of the foregoing and (C) such person has received a copy of this prospectus. Notwithstanding any provision to the contrary herein, the Certificate Administrator will not have any obligation to restrict access by the Special Servicer or any Excluded Special Servicer to any information on the Certificate Administrator’s website related to any Excluded Special Servicer Loan.
For the avoidance of doubt if a Borrower Party is the Controlling Class Representative or a Controlling ClassCertificateholder, such person (A) will be prohibited from having access to the Excluded Information solely with respect to the related Excluded Controlling Class Mortgage Loan and (B) will not be permitted to exercise voting or control, consultation and/or special servicer appointment rights as a member of the Controlling Class solely with respect to the related Excluded Controlling Class Mortgage Loan.
A “Certificateholder” is the person in whose name a Certificate is registered in the certificate register maintained pursuant to the Pooling and Servicing Agreement (including, solely for the purposes of distributing reports, statements or other information pursuant to the Pooling and Servicing Agreement, beneficial owners of Certificates or potential transferees of Certificates to the extent the person distributing such information has been provided with an appropriate Investor Certification by or on behalf of such beneficial owner or potential transferee),provided, however, that (a) solely for the purpose of giving any consent, approval or waiver or taking any action pursuant to the Pooling and Servicing Agreement (including voting on amendments to the Pooling and Servicing Agreement) that specifically relates to the rights, duties, compensation or termination of, and/or any other matter specifically involving, the Depositor, the Master Servicer, the Special Servicer, any Excluded Special Servicer, the Trustee, the Certificate Administrator, the Operating Advisor, any Mortgage Loan Seller or any person known to a responsible officer of the Certificate Registrar to be an affiliate of any such party, any Certificate registered in the name of or beneficially owned by such party or any affiliate thereof will be deemed not to be outstanding and the Voting Rights to which it is entitled will not be taken into account in determining whether the requisite percentage of Voting Rights necessary to effect any such consent, approval or waiver or take any such action has been obtained (provided, that notwithstanding the foregoing, for purposes of exercising any rights it may have solely as a member of the Controlling Class, any Controlling Class Certificate owned by an Excluded Controlling Class Holder will be deemed not to be outstanding as to such holder solely with respect to any related
324 |
Excluded Controlling Class Mortgage Loan), (b) solely for the purpose of giving any consent, approval or waiver or taking any action pursuant to the Pooling and Servicing Agreement, any Certificate beneficially owned by a manager of a Mortgaged Property, a borrower or any person known to a responsible officer of the Certificate Registrar to be an affiliate of a manager of a Mortgaged Property or a borrower will be deemed not to be outstanding and the Voting Rights to which it is entitled will not be taken into account in determining whether the requisite percentage of Voting Rights necessary to effect any such consent, approval or waiver or take any such action has been obtained, and (c) if the Master Servicer, the Special Servicer or an affiliate of the Master Servicer or the Special Servicer is a member of the Controlling Class, it will be permitted to act in such capacity and exercise all rights under the Pooling and Servicing Agreement bestowed upon the Controlling Class (other than, with respect to any Excluded Controlling Class Mortgage Loan with respect to which such party is an Excluded Controlling Class Holder, as described above).
A “Certificate Owner” is the beneficial owner of a certificate held in book-entry form.
“Non-Reduced Certificates” means, as of any date of determination, any Class of Certificates (other than the Class R and Class X Certificates) then outstanding for which (a) (1) the initial Certificate Balance of such Class of Certificatesminus (2) the sum (without duplication) of (x) any payments of principal (whether as principal prepayments or otherwise) previously distributed to the Certificateholders of such Class of Certificates, (y) any Appraisal Reduction Amounts allocated to such Class of Certificates as of the date of determination and (z) any Realized Losses previously allocated to such Class of Certificates, is equal to or greater than (b) 25% of the remainder of (i) the initial Certificate Balance of such Class of Certificatesless (ii) any payments of principal (whether as principal prepayments or otherwise) previously distributed to the Certificateholders of such Class of Certificates;provided that for purposes of this definition, the Class A-S Certificates and the Class EC Component A-S will be considered as if they together constitute a single “Class” of Certificates, the Class B Certificates and the Class EC Component B will be considered as if they together constitute a single “Class” of Certificates, the Class C Certificates and the Class EC Component C will be considered as if they together constitute a single “Class” of Certificates, and the Class EC Certificates will be Non-Reduced Certificates only with respect to each component thereof that is part of a “Class” of Non-Reduced Certificates determined as described in this proviso.
“NRSRO Certification” means a certification executed by an NRSRO in favor of the 17g-5 Information Provider that states that such NRSRO is a Rating Agency as such term is defined in the Pooling and Servicing Agreement or that such NRSRO has provided the Depositor with the appropriate certifications pursuant to paragraph (e) of Rule 17g-5 under the Exchange Act (“Rule 17g-5”), that such NRSRO has access to the Depositor’s Rule 17g-5 website, and that such NRSRO will keep such information confidential except to the extent such information has been made available to the general public.
Under the Pooling and Servicing Agreement, with respect to a Subordinate Companion Loan, the Master Servicer or the Special Servicer, as applicable, is required to provide to the holder of such Subordinate Companion Loan certain other reports, copies and information relating to an AB Loan Combination. In addition, under the Pooling and Servicing Agreement, the Master Servicer or the Special Servicer, as applicable, is required to provide to the holders of any Pari Passu Companion Loan (or their designee including any master servicer or special servicer) certain other reports, copies and information relating to the related Serviced Loan Combination to the extent required under the related Co-Lender Agreement.
Certain information concerning the Mortgage Loans and the Certificates, including the Distribution Date statements, CREFC® Reports and supplemental notices with respect to such Distribution Date statements and CREFC® Reports, may be provided by the Certificate Administrator to certain market data providers, such as Bloomberg, L.P., Trepp, LLC, Intex Solutions, Inc., BlackRock Financial Management, Inc. and Markit Group Limited, pursuant to the terms of the Pooling and Servicing Agreement.
Upon the reasonable request of any Certificateholder that has delivered an appropriate Investor Certification, the Master Servicer may provide (or forward electronically) at the expense of such Certificateholder copies of any appraisals, operating statements, rent rolls and financial statements obtained by the Master Servicer;provided, that in connection with such request, the Master Servicer may require a written confirmation executed by the requesting person substantially in such form as may be reasonably acceptable to the Master Servicer, generally to the effect that such person will keep such information confidential and will use such information only for the purpose of analyzing asset performance and evaluating any continuing rights the Certificateholder may have
325 |
under the Pooling and Servicing Agreement. Certificateholders will not, however, be given access to or be provided copies of, any Mortgage Files or Diligence Files.
Information Available Electronically
The Certificate Administrator will make available to any Privileged Person via the Certificate Administrator’s website (and will make available to the general public this prospectus, Distribution Date statements, the Pooling and Servicing Agreement, the Mortgage Loan Purchase Agreements and the SEC EDGAR filings referred to below):
(A) | thefollowing “deal documents”: |
· | this prospectus; |
· | the Pooling and Servicing Agreement, each sub-servicing agreement delivered to the Certificate Administrator from and after the Closing Date, if any, and the Mortgage Loan Purchase Agreements and any amendments and exhibits to those agreements; and |
· | the CREFC® loan setup file delivered to the Certificate Administrator by the Master Servicer; |
(B) | thefollowing “SEC EDGAR filings”: |
· | any reports on Forms 10-D, 10-K and 8-K that have been filed by the Certificate Administrator with respect to the Issuing Entity through the SEC��s Electronic Data Gathering and Retrieval (EDGAR) system; |
(C) | the following documents, which will be made available under a tab or heading designated “periodic reports”: |
· | the Distribution Date statements; |
· | the CREFC® bond level files; |
· | the CREFC® collateral summary files; |
· | the CREFC® Reports, other than the CREFC® loan setup file (provided that they are received by the Certificate Administrator); and |
· | the annual reports prepared by the Operating Advisor; |
(D) | thefollowing documents, which will be made available under a tab or heading designated “additional documents”: |
· | the summary of any Final Asset Status Report as provided by the Special Servicer; and |
· | any Third Party Reports (or updates of Third Party Reports) delivered to the Certificate Administrator in electronic format; |
(E) | thefollowing documents, which will be made available under a tab or heading designated “special notices”: |
· | notice of any release based on an environmental release under the Pooling and Servicing Agreement; |
· | notice of any waiver, modification or amendment of any term of any Mortgage Loan; |
326 |
· | notice of final payment on the Certificates; |
· | all notices of the occurrence of any Servicer Termination Event received by the Certificate Administrator or any notice to Certificateholders of the termination of the Master Servicer or the Special Servicer; |
· | any notice of resignation or termination of the Master Servicer or Special Servicer; |
· | notice of resignation of the Trustee or the Certificate Administrator, and notice of the acceptance of appointment by the successor Trustee or the successor Certificate Administrator, as applicable; |
· | any notice of any request by requisite percentage of Certificateholders for a vote to terminate the Special Servicer, the Operating Advisor or the Asset Representations Reviewer;provided, that such request may be made solely by holders of Non-Reduced Certificates as and to the extent specified in the Pooling and Servicing Agreement; |
· | any notice to Certificateholders of the Operating Advisor’s recommendation to replace the Special Servicer and the related report prepared by the Operating Advisor in connection with such recommendation; |
· | notice of resignation or termination of the Operating Advisor or the Asset Representations Reviewer and notice of the acceptance of appointment by the successor Operating Advisor or the successor Asset Representations Reviewer, as applicable; |
· | notice of the Certificate Administrator’s determination that an Asset Review Trigger has occurred and a copy of any Final Asset Review Report received by the Certificate Administrator; |
· | any notice of the termination of a sub-servicer with respect to Mortgage Loans representing 10% or more of the aggregate principal balance of all the Mortgage Loans; |
· | officer’s certificates supporting any determination that any Advance was (or, if made, would be) a Nonrecoverable Advance; |
· | any notice of the termination of the Issuing Entity; |
· | any notice that a Control Termination Event has occurred or is terminated or that a Consultation Termination Event has occurred; |
· | any notice of the occurrence of an Operating Advisor Termination Event; |
· | any notice of the occurrence of an Asset Reviewer Termination Event; |
· | any assessments of compliance delivered to the Certificate Administrator; |
· | any Attestation Reports delivered to the Certificate Administrator; |
· | any “special notices” requested by a Certificateholder to be posted on the Certificate Administrator’s website described under “—Certificateholder Communication” below; and |
· | Proposed Course of Action Notice; |
(F) | the “Investor Q&A Forum”; and |
(G) | solely to Certificateholders and Certificate Owners that are Privileged Persons, the “Investor Registry”. |
327 |
Notwithstanding the foregoing, if the Controlling Class Representative or any Controlling Class Certificateholder is a Borrower Party with respect to any related Excluded Controlling Class Mortgage Loan (each, an “Excluded Controlling Class Holder” with respect to such Excluded Controlling Class Mortgage Loan only), such Excluded Controlling Class Holder is required to promptly notify each of the Master Servicer, Special Servicer, Operating Advisor, Trustee and Certificate Administrator pursuant to the Pooling and Servicing Agreement and provide a new Investor Certification pursuant to the Pooling and Servicing Agreement and will not be entitled to access any Excluded Information (as defined below) (unless a loan-by-loan segregation is later performed by the Certificate Administrator in which case such access will only be prohibited with respect to the Excluded Controlling Class Loan(s) for which such Excluded Controlling Class Holder is a Borrower Party) made available on the Certificate Administrator’s website for so long as it is an Excluded Controlling Class Holder. The Pooling and Servicing Agreement will require each Excluded Controlling Class Holder in such new Investor Certification to certify that it acknowledges and agrees that it is prohibited from accessing and reviewing (and it agrees not to access and review) any Excluded Information with respect to any Excluded Controlling Class Mortgage Loans for which it is a Borrower Party. In addition, if the Controlling Class Representative or any Controlling Class Certificateholder is not an Excluded Controlling Class Holder, such person will certify and agree that they will not share any Excluded Information with any Excluded Controlling Class Holder.
Notwithstanding the foregoing, nothing set forth in the Pooling and Servicing Agreement will prohibit the Controlling Class Representative or any Controlling Class Certificateholder from receiving, requesting or reviewing any Excluded Information relating to any Excluded Controlling Class Loan with respect to which the Controlling Class Representative or such Controlling Class Certificateholder is not a Borrower Party and, if such Excluded Information is not available via the Certificate Administrator’s website, such Controlling Class Representative or Controlling Class Certificateholder that is not a Borrower Party with respect to the related Excluded Controlling Class Loan will be permitted to obtain (upon reasonable request) such information in accordance with terms of the Pooling and Servicing Agreement.
“Excluded Information” means, with respect to any Excluded Controlling Class Mortgage Loan, any information solely related to such Excluded Controlling Class Mortgage Loan and/or the related Mortgaged Properties, which may include any asset status reports, Final Asset Status Reports (or summaries thereof) and such other information specifically related to such Excluded Controlling Class Mortgage Loan or any related Mortgaged Property as may be specified in the Pooling and Servicing Agreement other than such information with respect to such Excluded Controlling Class Mortgage Loan that is aggregated with information on other Mortgage Loans at a pool level.
Any reports on Form 10-D filed by the Certificate Administrator will contain (i) the information required by Rule 15Ga-1(a) concerning all Mortgage Loans of the Issuing Entity that were the subject of a demand to repurchase or replace due to a breach of one or more representations and warranties and (ii) a reference to the most recent Form ABS-15G filed by the Depositor and the Mortgage Loan Sellers, if applicable, and the SEC’s assigned “Central Index Key” for each such filer.
The Certificate Administrator will be required to post to the 17g-5 Website any Form 15-E received by the Certificate Administrator from any party to the Pooling and Servicing Agreement.
The Certificate Administrator will not make any representation or warranty as to the accuracy or completeness of any report, document or other information made available on the Certificate Administrator’s website and will assume no responsibility for any such report, document or other information, other than with respect to such reports, documents or other information prepared by the Certificate Administrator. In addition, the Certificate Administrator may disclaim responsibility for any information distributed by it for which it is not the original source.
In connection with providing access to the Certificate Administrator’s website (other than with respect to access provided to the general public in accordance with the Pooling and Servicing Agreement), the Certificate Administrator may require registration and the acceptance of a disclaimer, including an agreement to keep certain nonpublic information made available on the website confidential, as required under the Pooling and Servicing Agreement. The Certificate Administrator will not be liable for the dissemination of information in accordance with the Pooling and Servicing Agreement.
The Certificate Administrator will make the “Investor Q&A Forum” available to Privileged Persons via the Certificate Administrator’s website under a tab or heading designated “Investor Q&A Forum”, where
328 |
(i) Certificateholders and beneficial owners that are Privileged Persons may submit inquiries to (a) the Certificate Administrator relating to the Distribution Date statements, (b) the Master Servicer or the Special Servicer relating to servicing reports prepared by that party, the Mortgage Loans (excluding the Outside Serviced Mortgage Loans) or the related Mortgaged Properties or (c) the Operating Advisor relating to annual or other reports prepared by the Operating Advisor or actions by the Special Servicer referenced in such reports, and (ii) Privileged Persons may view previously submitted inquiries and related answers. The Certificate Administrator will forward such inquiries to the appropriate person and, in the case of an inquiry relating to an Outside Serviced Mortgage Loan, to the applicable party under the related Outside Servicing Agreement. The Certificate Administrator, the Master Servicer, the Special Servicer or the Operating Advisor, as applicable, will be required to answer each inquiry, unless such party determines (i) the question is beyond the scope of the topics detailed above, (ii) that answering the inquiry would not be in the best interests of the Issuing Entity and/or the Certificateholders, (iii) that answering the inquiry would be in violation of applicable law, the Pooling and Servicing Agreement (including requirements in respect of non-disclosure of Privileged Information) or the Mortgage Loan documents, (iv) that answering the inquiry would materially increase the duties of, or result in significant additional cost or expense to, the Certificate Administrator, the Master Servicer, the Special Servicer or the Operating Advisor, as applicable, (v) that answering the inquiry would require the disclosure of Privileged Information (subject to the Privileged Information Exception) or (vi) that answering the inquiry is otherwise, for any reason, not advisable. In the case of an inquiry relating to an Outside Serviced Mortgage Loan, the Certificate Administrator is required to make reasonable efforts to obtain an answer from the applicable party under the related Outside Servicing Agreement;provided, that the Certificate Administrator will not be responsible for the content of such answer, or any delay or failure to obtain such answer. The Certificate Administrator will be required to post the inquiries and related answers, if any, on the Investor Q&A Forum, subject to and in accordance with the Pooling and Servicing Agreement. However, no party will post or otherwise disclose any direct communications with the Directing Holder as part of its responses to any inquiries. The Investor Q&A Forum may not reflect questions, answers and other communications that are not submitted through the Certificate Administrator’s website. Answers posted on the Investor Q&A Forum will be attributable only to the respondent, and will not be deemed to be answers from any of the Depositor, the underwriters or any of their respective affiliates. None of the underwriters, Depositor, any of their respective affiliates or any other person will certify as to the accuracy of any of the information posted in the Investor Q&A Forum and no such person will have any responsibility or liability for the content of any such information.
The Certificate Administrator will make the “Investor Registry” available to any Certificateholder and any Certificate Owner that is a Privileged Person via the Certificate Administrator’s website. Certificateholders and Certificate Owners may register on a voluntary basis for the “Investor Registry” and obtain contact information for any other Certificateholder or Certificate Owner that has also registered,provided, that they comply with certain requirements as provided for in the Pooling and Servicing Agreement.
The Certificate Administrator’s internet website will initially be located at “www.sf.citidirect.com”. Access will be provided by the Certificate Administrator to such persons upon receipt by the Certificate Administrator from such person of an appropriate Investor Certification or NRSRO Certification in the form(s) attached to the Pooling and Servicing Agreement. The parties to the Pooling and Servicing Agreement will not be required to provide that certification. In connection with providing access to the Certificate Administrator’s internet website, the Certificate Administrator may require registration and the acceptance of a disclaimer. The Certificate Administrator will not be liable for the dissemination of information in accordance with the terms of the Pooling and Servicing Agreement. The Certificate Administrator will make no representation or warranty as to the accuracy or completeness of such documents and will assume no responsibility for them. In addition, the Certificate Administrator may disclaim responsibility for any information distributed by the Certificate Administrator for which it is not the original source. Assistance in using the Certificate Administrator’s internet website can be obtained by calling the Certificate Administrator’s customer service desk at 888-422-2066.
The Certificate Administrator is responsible for the preparation of tax returns on behalf of the Issuing Entity and the preparation of Distribution Reports on Form 10-D (based on information included in each monthly Statement to Certificateholders and other information provided by other transaction parties) and Annual Reports on Form 10-K and certain other reports on Form 8-K that are required to be filed with the SEC on behalf of the Issuing Entity.
“17g-5 Information Provider” means the Certificate Administrator.
329 |
The Pooling and Servicing Agreement will require the Master Servicer, 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 access to the reports available as set forth above, as well as certain other information received by the Master Servicer, to any Privileged Person so identified by a Certificate Owner or an underwriter, that requests reports or information. However, the Master Servicer will be permitted to require payment of a sum sufficient to cover the reasonable costs and expenses of providing copies of these reports or information (which amounts in any event are not reimbursable as additional trust fund expenses), except that, other than for extraordinary or duplicate requests, the Directing Holder (but, in the case of the Controlling Class Representative, only if a Consultation Termination Event does not exist) 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 only to the extent they are forwarded by or otherwise available through DTC and its Participants. Conveyance of notices and other communications by DTC to Participants, and by Participants to Certificate Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Except as otherwise set forth in this paragraph, the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator and the Depositor are required to recognize as Certificateholders only those persons in whose names the Certificates are registered on the books and records of the certificate registrar. The initial registered holder of the 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) 1% in the aggregate in the case of the respective Classes of the Interest-Only Certificates, allocatedpro rata based upon their respective Notional Amounts as of the date of determination, and
(2) in the case of any Class of Certificates (other than the Class X and Class R Certificates), a percentage equal to the product of 99% and a fraction, the numerator of which is equal to the Certificate Balance of the class, determined as of the prior Distribution Date, and the denominator of which is equal to the aggregate Certificate Balance of all Classes of the Principal Balance Certificates (or, if with respect to a vote of Non-Reduced Certificates, theCertificate Balances of all Classes of the Non-Reduced Certificates), each determined as of the prior Distribution Date; provided, that in certain circumstances described under “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause”, “—Operating Advisor—Termination of the Operating Advisor Without Cause” and “—The Asset Representations Reviewer—Termination of the Asset Representations Reviewer Without Cause” in this prospectus, Voting Rights will only be exercisable by holders of the Non-Reduced Certificates.
For purposes of such allocations, the Class A-S Certificates and the Class EC Component A-S evidenced bythe Class EC Certificates will be considered as if they together constitute a single “class”, the Class B Certificates and the Class EC Component B evidenced by the Class EC Certificates will be considered as if they together constitute a single “class”, and the Class C Certificates and the Class EC Component C evidenced by the Class EC Certificates will be considered as if they together constitute a single “class”. Voting Rights will be allocated to the Class EC Certificates only with respect to each Trust Component that is part of a “Class of Certificates” determined as described in the preceding sentence.
The Voting Rights of any Class of Certificates are required to be allocated among Certificateholders of such class in proportion to their respective Percentage Interests.
The Class R Certificates will not be entitled to any Voting Rights.
Delivery, Form, Transfer and Denomination
The Offered Certificates (other than the Class X-A and Class X-B Certificates) will be issued, maintained and transferred in the book-entry form only in minimum denominations of $10,000 initial principal balance, and in multiples of $1 in excess of $10,000. The Class X-A and Class X-B 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 of $1,000,000. However, in connection with an exchange of Class A-S, Class B and Class C Certificates for Class EC Certificates and vice versa, each of the Class A-S, Class B, and Class C
330 |
Certificates exchanged (whether surrendered or received in such exchange) will be required to be in denominations of at least $10,000 initial principal balance, and the initial principal balance of the Class EC Certificates exchanged will be required to equal the aggregate initial principal balance of the Class A-S, Class B and Class C Certificates being exchanged therefor (i.e., at least $30,000 initial principal balance).
Book-Entry Registration
The Offered Certificates will initially be represented by one or more global Certificates for each such class registered in the name of a nominee of The Depository Trust Company (“DTC”). The Depositor has been informed by DTC that DTC’s nominee will be Cede & Co. No holder of an Offered Certificate will be entitled to receive a certificate issued in fully registered, certificated form (each, a “Definitive Certificate”) representing its interest in such class, except under the limited circumstances described under “―Delivery, Form, Transfer and Denomination—Definitive Certificates” below. Unless and until Definitive Certificates are issued, all references to actions by holders of the Offered Certificates will refer to actions taken by DTC upon instructions received from holders of Offered Certificates through its participating organizations (together with Clearstream Banking, société anonyme (“Clearstream”) and Euroclear Bank, as operator of the Euroclear System (“Euroclear”) participating organizations, the “Participants”), and all references in this prospectus to payments, notices, reports, statements and other information to holders of Offered Certificates will refer to payments, notices, reports and statements to DTC or Cede & Co., as the registered holder of the Offered Certificates, for distribution to holders of Offered Certificates through its Participants in accordance with DTC procedures;provided,however, that to the extent that the party to the Pooling and Servicing Agreement responsible for distributing any report, statement or other information has been provided in writing with the name of the Certificate Owner of such an Offered Certificate (or the prospective transferee of such Certificate Owner), such report, statement or other information will be provided to such Certificate Owner (or prospective transferee) under the same circumstances, and subject to the same conditions, as such report, statement or other information would be provided to a Certificateholder.
Until Definitive Certificates are issued in respect of the Offered Certificates, interests in the Offered Certificates will be transferred on the book-entry records of DTC and its Participants. The Certificate Administrator will initially serve as certificate registrar for purposes of recording and otherwise providing for the registration of the Offered Certificates.
Holders of Offered Certificates may hold their Certificates through DTC (in the United States) or Clearstream or Euroclear (in Europe) if they are Participants of such system, or indirectly through organizations that are participants in such systems. Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream Participants and the Euroclear Participants, respectively, through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries (collectively, the “Depositaries”), which in turn will hold such positions in customers’ securities accounts in the Depositaries’ names on the books of DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and to facilitate the clearance and settlement of securities transactions between Participants through electronic computerized book-entries, thereby eliminating the need for physical movement of Certificates. Participants (“DTC Participants”) include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (“Indirect Participants”).
Transfers between DTC Participants will occur in accordance with DTC rules. Transfers between Clearstream Participants and Euroclear Participants will occur in accordance with the applicable rules and operating procedures of Clearstream and Euroclear.
Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly through Clearstream Participants or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its Depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Depositary to take action to effect final settlement on
331 |
its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a DTC Participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and such credits or any transactions in such securities settled during such processing will be reported to the relevant Clearstream Participant or Euroclear Participant on such business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.
The holders of Offered Certificates in global form that are not Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, such Offered Certificates may do so only through Participants and Indirect Participants. In addition, holders of Offered Certificates in global form will receive all distributions of principal and interest through the Participants who in turn will receive them from DTC. Under a book-entry format, holders of such Offered Certificates may experience some delay in their receipt of payments, since such payments will be forwarded by the Certificate Administrator to Cede & Co., as nominee for DTC. DTC will forward such payments to its Participants, which thereafter will forward them to Indirect Participants or the applicable Certificate Owners. Certificate Owners will not be recognized by the Trustee, the Certificate Administrator, the certificate registrar, the Operating Advisor, the Special Servicer or the Master Servicer as holders of record of Certificates and Certificate Owners will be permitted to receive information furnished to Certificateholders and to exercise the rights of Certificateholders only indirectly through DTC and its Participants and Indirect Participants, except thatCertificate Owners will be entitled to receive or have access to notices and information and to exercise certain rights as holders of beneficial interests in the Certificates through the Certificate Administrator and the Trustee to the extent described in “Description of the Certificates—Reports to Certificateholders; Certain Available Information”, “—Certificateholder Communication” and “—List of Certificateholders” and“The Pooling and Servicing Agreement—Operating Advisor”, “—The Asset Representations Reviewer”, “—Termination of the Special Servicer Without Cause”, “—Limitation on Liability; Indemnification”, “—Termination; Retirement of Certificates”and “—Qualification, Resignation and Removal of the Trustee and the Certificate Administrator”.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the “DTC Rules”), DTC is required to make book-entry transfers of Offered Certificates in global form among Participants on whose behalf it acts with respect to such Offered Certificates and to receive and transmit distributions of principal of, and interest on, such Offered Certificates. Participants and Indirect Participants with which the Certificate Owners have accounts with respect to the Offered Certificates similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Certificate Owners. Accordingly, although the Certificate Owners will not possess the Offered Certificates, the DTC Rules provide a mechanism by which Certificate Owners will receive payments on Offered Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of a holder of Offered Certificates in global form to pledge such Offered Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Offered Certificates, may be limited due to the lack of a physical certificate for such Offered Certificates.
DTC has advised the Depositor that it will take any action permitted to be taken by a holder of an Offered Certificate under the Pooling and Servicing Agreement only at the direction of one or more Participants to whose accounts with DTC such certificate is credited. DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of Participants whose holdings include such undivided interests.
Clearstream is incorporated under the laws of Luxembourg and is a global securities settlement clearing house. Clearstream holds securities for its participating organizations (“Clearstream Participants”) and facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of Certificates. Transactions may be settled in Clearstream in numerous currencies, including United States dollars. Clearstream provides to its Clearstream Participants, among other things, services for safekeeping,
332 |
administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. Clearstream is regulated as a bank by the Luxembourg Monetary Institute. Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the underwriters. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the Euroclear system (“Euroclear Participants”) and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of Certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of numerous currencies, including United States dollars. The Euroclear system includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by Euroclear Bank S.A./N.V. (the “Euroclear Operator”). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the underwriters. Indirect access to the Euroclear system is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related operating procedures of the Euroclear System and applicable Belgian law (collectively, the “Terms and Conditions”). The Terms and Conditions govern transfers of securities and cash within the Euroclear system, withdrawal of securities and cash from the Euroclear system, and receipts of payments with respect to securities in the Euroclear system. All securities in the Euroclear system are held on a fungible basis without attribution of specific Certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants and has no record of or relationship with persons holding through Euroclear Participants.
Although DTC, Euroclear and Clearstream have implemented the foregoing procedures in order to facilitate transfers of interests in book-entry securities among Participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to comply with such procedures, and such procedures may be discontinued at any time. None of the Depositor, the Trustee, the Certificate Administrator, the Master Servicer, the Special Servicer or the underwriters will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective direct or indirect Participants of their respective obligations under the rules and procedures governing their operations.
Definitive Certificates
Owners of beneficial interests in Certificates of any class held in book-entry form will not be entitled to receive physical delivery of Definitive Certificates unless: (i) DTC advises the certificate registrar in writing that DTC is no longer willing or able to discharge properly its responsibilities as Depository with respect to the Certificates of such class held in book-entry form or ceases to be a clearing agency, and the Certificate Administrator and the Depositor are unable to locate a qualified successor within 90 days of such notice; or (ii) the Trustee has instituted or has been directed to institute any judicial proceeding to enforce the rights of the Certificateholders of such class and the Trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the Trustee to obtain possession of the Certificates of such class.
Certificateholder Communication
Access to Certificateholders’ Names and Addresses
Upon the written request of any Certificateholder or Certificate Owner that has delivered an executed investor certification reflecting the appropriate information to the Certificate Administrator (a “Certifying Certificateholder”), which request is made for the purpose of communicating with other Certificateholders and Certificate Owners with respect to their rights under the Pooling and Servicing Agreement or the Certificates and is required to include a copy of the communication the Certifying Certificateholder proposes to transmit, the
333 |
certificate registrar is required, within 10 business days after receipt of such request, to furnish or cause to be furnished to such requesting party a list of the names and addresses of the Certificateholders as of the most recent Record Date as they appear in the certificate register, at the expense of the requesting party.
Requests to Communicate
The Pooling and Servicing Agreement will require that the Certificate Administrator include in any Form 10–D any request received prior to the Distribution Date to which the Form 10-D relates (and on or after the Distribution Date preceding such Distribution Date) from a Certificateholder or Certificate Owner to communicate with other Certificateholders or Certificate Owners related to Certificateholders or Certificate Owners exercising their rights under the terms of the Pooling and Servicing Agreement. Any Form 10-D containing such disclosure regarding the request to communicate is required to include no more than the name of the Certificateholder or Certificate Owner making the request, the date the request was received, a statement to the effect that Certificate Administrator has received such request, stating that such Certificateholder or Certificate Owner is interested in communicating with other Certificateholders or Certificate Owners with regard to the possible exercise of rights under the Pooling and Servicing Agreement, and a description of the method other Certificateholders or Certificate Owners may use to contact the requesting Certificateholder or Certificate Owner.
Any Certificateholder or Certificate Owner wishing to communicate with other Certificateholders and Certificate Owners regarding the exercise of its rights under the terms of the Pooling and Servicing Agreement (such party, a “Requesting Investor”) should deliver a written request (a “Communication Request”) signed by an authorized representative of the Requesting Investor to the Certificate Administrator at the address below:
388 Greenwich Street, 14th Floor
New York, New York 10013
Attention: Global Transaction Services – CGCMT 2016-GC37
Any Communication Request must contain the name of the Requesting Investor and the method other Certificateholders and Certificate Owners should use to contact the Requesting Investor, and, if the Requesting Investor is not the registered holder of a Certificate, then the Communication Request must contain (i) a written certification from the Requesting Investor that it is a beneficial owner of a Certificate, and (ii) one of the following forms of documentation evidencing its beneficial ownership in such Certificate: (A) a trade confirmation, (B) an account statement, (C) a medallion stamp guaranteed letter from a broker or dealer stating the Requesting Investor is the beneficial owner, or (D) a document acceptable to the Certificate Administrator that is similar to any of the documents identified in clauses (A) through (C). Requesting Investors will be responsible for their own expenses in making any Communication Request, but will not be required to bear any expenses of the Certificate Administrator, which will be borne by the Issuing Entity.
The Mortgage Loan Purchase Agreements
Sale of Mortgage Loans; Mortgage File Delivery
On the Closing Date, the Depositor will acquire the Mortgage Loans from the Sponsors pursuant to the related Mortgage Loan purchase agreements (each, a “Mortgage Loan Purchase Agreement”), between the Depositor and the applicable Sponsor, 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 direct each Sponsor to deliver to the Trustee or to a document custodian on behalf of the Trustee, among other things, the following documents with respect to each Mortgage Loan (subject to the following sentence with respect to any Outside Serviced Mortgage Loan) sold by the applicable Sponsor and each Serviced Loan Combination (collectively, as to each Mortgage Loan or, if applicable, any related Serviced Loan Combination, the “Mortgage File”): (i)(A) for each Mortgage Loan, the original executed 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 Sponsor or another prior holder, together with a copy of the Mortgage Note), and (B) if such Mortgage Loan is part of a Serviced Loan Combination, a copy of the executed promissory note for each related Serviced Companion Loan; (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 (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon or certified by the applicable recorder’s office; (iii) the original or a copy of any related assignment of leases (if such item is a document separate from the Mortgage) and of any intervening assignments of such
334 |
assignment of leases, in each case (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon or certified by the applicable recorder’s office; (iv) an original executed assignment of the Mortgage in favor of the Trustee or in blank and in recordable form (except for missing recording information not yet available if the instrument being assigned has not been returned from the applicable recording office), or a copy of such assignment if the related Sponsor or its designee, rather than the Trustee, is responsible for recording such assignment; (v) an original assignment of any related assignment of leases (if such item is a document separate from the Mortgage) in favor of the Trustee or in blank and in recordable form (except for missing recording information not yet available if the instrument being assigned has not been returned from the applicable recording office), or a copy of such assignment if the related Sponsor or its designee, rather than the Trustee, is responsible for recording such assignment; (vi) the original assignment of all unrecorded documents relating to the Mortgage Loan (or the related Serviced Loan Combination, if applicable), if not already assigned pursuant to items (iv) or (v) above; (vii) originals or copies of all final written modification agreements in those instances in which the terms or provisions of the Mortgage or the Mortgage Note have been modified, in each case (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon if the instrument being modified is a recordable document; (viii) the original or a copy of the policy or certificate of lender’s title insurance issued in connection with such Mortgage Loan (or Serviced Loan Combination, if applicable) or, if such policy has not been issued or located, an irrevocable, binding commitment (which may be a marked version of the policy that has been executed by an authorized representative of the title company or an agreement to provide the same pursuant to binding escrow instructions executed by an authorized representative of the title company) to issue such title insurance policy; (ix) an original or copy of the related ground lease, if any, and any ground lessor estoppel; (x) an original or copy of the related loan agreement, if any; (xi) an original of any guaranty under such Mortgage Loan (or Serviced Loan Combination, if applicable), if any; (xii) an original or copy of the related lockbox agreement or cash management agreement, if any; (xiii) an original or copy of the environmental indemnity from the related borrower, if any; (xiv) an original or copy of the related escrow agreement and the related security agreement (in each case, if such item is a document separate from the related Mortgage) and, if applicable, any intervening assignments thereof; (xv) if not already included in the assignment referred to in clause (vi) above, an original assignment of the related security agreement (if such item is a document separate from the related Mortgage) in favor of the Trustee; (xvi) in the case of each Loan Combination, an original or a copy of the related Co-Lender Agreement; (xvii) any filed copies (bearing evidence of filing) or evidence of filing of any UCC financing statements in favor of the originator of such Mortgage Loan (or Serviced Loan Combination, if applicable) or in favor of any assignee prior to the Trustee and an original UCC-3 assignment financing statements in favor of the Trustee or a copy of such assignment financing statements; (xviii) an original or copy of any mezzanine loan intercreditor agreement if any; (xix) the original or copy of any related environmental insurance policy; (xx) a copy of any related letter of credit and any related assignment thereof (with the original to be delivered to the Master Servicer); and (xxi) copies of any related franchise agreement, property management agreement or hotel management agreement and related comfort letters and/or estoppel letters, and any related assignment thereof. Notwithstanding anything to the contrary contained in this prospectus, in the case of an Outside Serviced Mortgage Loan, the preceding document delivery requirement will be deemed satisfied by the delivery by the related Sponsor of, with respect to clause (i), executed originals of the related documents and, with respect to clauses (ii) through (xxi) above, a copy of the mortgage file related to the applicable Outside Serviced Companion Loan delivered under the Outside Servicing Agreement.
As provided in the Pooling and Servicing Agreement, the Trustee, a custodian on its behalf, or another appropriate party as described in the Pooling and Servicing Agreement is required to review each Mortgage File within a specified period following its receipt of such Mortgage File.See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”.
If, as provided in the respective Mortgage Loan Purchase Agreements and the Pooling and Servicing Agreement, any document required to be included in the Mortgage File for any Mortgage Loan by the related Sponsor has not been properly executed, is missing, contains information that does not conform in any material respect with the corresponding information set forth in the mortgage loan schedule to be attached to the related Mortgage Loan Purchase Agreement, or does not appear regular on its face (each, a “Document Defect”), and that Document Defect constitutes a Material Document Defect, then the Issuing Entity will have the rights against the applicable Sponsor (and, in the case of KGS, also against KGS Holdings, L.P. (“KGS Holdings”), as guarantor of the repurchase and substitution obligations of KGS, and in the case of RAIT, also against RAIT Financial Trust (“RFT”), as guarantor of the repurchase and substitution obligations of RAIT, as described under “—Cures, Repurchases and Substitutions” below.
335 |
A “Material Document Defect” is a Document Defect that materially and adversely affects the value of the affected Mortgage Loan (or any related REO Property) or the interests of the Certificateholders in the affected Mortgage Loan (or any related REO Property) or causes any Mortgage Loan to fail to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3) (but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage) (a “Qualified Mortgage”). Subject to the applicable Sponsor’s right to cure, failure of such Sponsor to deliver the documents referred to in clauses (i), (ii), (viii), (ix), (xx) and (xxi) in the definition of “Mortgage File”above will be deemed a Material Document Defect;provided,however, that no Document Defect (except such a deemed Material Document Defect) will be considered to be a Material Document Defect unless the document with respect to which the Document Defect exists is required in connection with an imminent enforcement of the lender’s rights or remedies under the related Mortgage Loan, defending any claim asserted by any borrower or third party with respect to the related Mortgage Loan, establishing the validity or priority of any lien on any collateral securing the related Mortgage Loan or for any immediate significant servicing obligation.
In addition, in order to facilitate Asset Reviews as described under “The Pooling and Servicing Agreement—The Asset Representations Reviewer” in this prospectus, each Sponsor is required to deliver to the Depositor the Diligence File with respect to each Mortgage Loan sold by it electronically within 60 days after the Closing Date by posting such Diligence File to a designated website, and the Depositor will deliver electronic copies of such Diligence File to the Certificate Administrator for posting to the secure data room. The Depositor will have no responsibility for determining whether any Diligence Files delivered to it are complete and will have no liability to the Issuing Entity or the Certificateholders for the failure of any Sponsor to deliver a Diligence File (or a complete Diligence File) to the Depositor.
“Diligence File” means with respect to each Mortgage Loan, if applicable, generally the following documents in electronic format:
(a) a copy of each of the following documents:
(i) (A) for each Mortgage Loan, the 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 Sponsor or another prior holder, together with a copy of the Mortgage Note), and (B) if such Mortgage Loan is part of a Serviced Loan Combination, the executed promissory note for each related Serviced Companion Loan;
(ii) the Mortgage, together with any intervening assignments of the Mortgage, in each case (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon or certified by the applicable recorder’s office (if in the possession of the applicable Mortgage Loan Seller);
(iii) any related assignment of leases (if such item is a document separate from the Mortgage) and any intervening assignments of such assignment of leases, in each case (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon or certified by the applicable recorder’s office (if in the possession of the applicable Mortgage Loan Seller);
(iv) final written modification agreements in those instances in which the terms or provisions of the Mortgage or the Mortgage Note have been modified, in each case (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon if the instrument being modified is a recordable document;
(v) the policy or certificate of lender’s title insurance issued in connection with such Mortgage Loan (or the related Serviced Loan Combination, if applicable) or, if such policy has not been issued or located, an irrevocable, binding commitment (which may be a marked version of the policy that has been executed by an authorized representative of the title company or an agreement to provide the same pursuant to binding escrow instructions executed by an authorized representative of the title company) to issue such title insurance policy;
(vi) the related ground lease, if any, and any ground lessor estoppel;
336 |
(vii) the related loan agreement, if any;
(viii) the guaranty under such Mortgage Loan (or Serviced Loan Combination, if applicable), if any;
(ix) the related lockbox agreement or cash management agreement, if any;
(x) the environmental indemnity from the related borrower, if any;
(xi) the related escrow agreement and the related security agreement (in each case, if such item is a document separate from the related Mortgage) and, if applicable, any intervening assignments thereof;
(xii) in the case of a Mortgage Loan that is a part of a Loan Combination, the related Co-Lender Agreement;
(xiii) any filed copies (bearing evidence of filing) or evidence of filing of any UCC financing statements in favor of the originator of such Mortgage Loan (or the related Serviced Loan Combination, if applicable) or in favor of any assignee prior to the Trustee and UCC-3 assignment financing statements in favor of the Trustee (or, in each case, a copy thereof certified to be the copy of such assignment submitted or to be submitted for filing), if in the possession of the applicable Mortgage Loan Seller;
(xiv) any mezzanine loan intercreditor agreement;
(xv) any related environmental insurance policy;
(xvi) any related letter of credit and any related assignment thereof; and
(xvii) any related franchise agreement, property management agreement or hotel management agreement and related comfort letters and/or estoppel letters, and any related assignment thereof.
(b) a copy of any engineering reports or property condition reports;
(c) other than with respect to a hotel property (except with respect to tenanted commercial space within a hotel property), copies of a rent roll;
(d) for any office, retail, industrial or warehouse property, a copy of all leases and estoppels and subordination and non-disturbance agreements delivered to the related mortgage loan seller;
(e) a copy of all legal opinions (excluding attorney-client communications between the related mortgage loan seller, and its counsel that are privileged communications or constitute legal or other due diligence analyses), if any, delivered in connection with the closing of the related Mortgage Loan;
(f) a copy of all mortgagor’s certificates of hazard insurance and/or hazard insurance policies or other applicable insurance policies (to the extent not previously included as part of this definition), if any, delivered in connection with the closing of the related Mortgage Loan;
(g) a copy of the appraisal for the related Mortgaged Property or Mortgaged Properties;
(h) for any Mortgage Loan that the related Mortgaged Property is leased to a single tenant, a copy of the lease;
(i) a copy of the applicable mortgage loan seller’s asset summary;
(j) a copy of all surveys for the related Mortgaged Property or Mortgaged Properties;
337 |
(k) a copy of all zoning reports;
(l) a copy of financial statements of the related mortgagor;
(m) a copy of operating statements for the related Mortgaged Property or Mortgaged Properties;
(n) a copy of all UCC searches;
(o) a copy of all litigation searches;
(p) a copy of all bankruptcy searches;
(q) a copy of the origination settlement statement;
(r) a copy of any insurance summary report;
(s) a copy of the organizational documents of the related mortgagor and any guarantor;
(t) a copy of any escrow statementsrelated to the escrow account balances as of the Mortgage Loan origination date, if not included in the origination settlement statement;
(u) the original or a copy of all related environmental reports that were received by the applicable mortgage loan seller;
(v) unless already included as part of the environmental reports, a copy of any closure letter (environmental); and
(w) unless already included as part of the environmental reports, a copy of any environmental remediation agreement for the related Mortgaged Property or Mortgaged Properties,
in each case, to the extent that the related Originator received such documents in connection with the origination of such Mortgage Loan. In the event any of the items identified above were not received in connection with the origination of such Mortgage Loan (other than documents that would not be included in connection with the origination of the Mortgage Loan because such document is inapplicable to the origination of the Mortgage Loan of that structure or type, taking into account whether or not such Mortgage Loan has any additional debt), the Diligence File will be required to include a statement to that effect. No information that is proprietary to the related Originator or Sponsor or any draft documents, privileged or internal communications, credit underwriting or due diligence analysis will constitute part of the Diligence File. It is generally not required to include any of the same items identified above again if such items have already been included under another clause of the definition of “Diligence File”, and the Diligence File will be required to include a statement to that effect. The related Sponsor may, without any obligation to do so, include such other documents as part of the Diligence File that such Sponsor believes should be included to enable the Asset Representations Reviewer to perform the Asset Review on a Mortgage Loan; provided that such documents are clearly labeled and identified.
Representations and Warranties
Pursuant to the related Mortgage Loan Purchase Agreement, each Sponsor will make, with respect to each Mortgage Loan sold by it that we include in the Issuing Entity, representations and warranties generally to the effect set forth on Annex E-1 to this prospectus, subject to the exceptions set forth on Annex E-2 to this prospectus.
The representations and warranties:
· | do not cover all of the matters that we would review in underwriting a Mortgage Loan; |
· | should not be viewed as a substitute for a reunderwriting of the Mortgage Loans; and |
338 |
· | in some respects represent an allocation of risk rather than a confirmed description of the Mortgage Loans, although the Sponsors have not made representations and warranties that they know to be untrue, when taking into account the exceptions set forth on Annex E-2 to this prospectus. |
If, as provided in the respective Mortgage Loan Purchase Agreements and the Pooling and Servicing Agreement, there exists a breach of any of the above-described representations and warranties made by the applicable Sponsor, and that breach constitutes a Material Breach, then the Issuing Entity will have the rights against the applicable Sponsor (and, if applicable, against any related guarantor(s)), as described under “—Cures, Repurchases and Substitutions” below.
A “Material Breach” is a breach of any of the above-described representations or warranties made by the applicable Sponsor that materially and adversely affects the value of the affected Mortgage Loan (or any related REO Property) or the interests of the Certificateholders in the affected Mortgage Loan (or any related REO Property) or causes any Mortgage Loan to fail to be a Qualified Mortgage.
Cures, Repurchases and Substitutions
A “Material Defect” means, with respect to any Mortgage Loan, a Material Breach or a Material Document Defect with respect to such Mortgage Loan. If a Material Defect exists with respect to any Mortgage Loan, then the applicable Sponsor will be required to remedy that Material Defect, or if such Material Defect cannot be cured within the time periods set forth in the applicable Mortgage Loan Purchase Agreement, then the applicable Sponsor will be required to either:
· | within two years following the Closing Date, substitute a Qualified Substitute Mortgage Loan and pay any shortfall amount equal to the difference between the Repurchase 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; or |
· | to repurchase the affected Mortgage Loan (or any related REO Property) at a price (the “Repurchase Price”) generally equal to the sum of— |
(i) | the outstanding principal balance of that Mortgage Loan (or the related REO Mortgage Loan), at the time of purchase, less any Loss of Value Payment available to reduce the outstanding principal balance; plus |
(ii) | all accrued and unpaid interest, other than default interest or Excess Interest, due with respect to that Mortgage Loan (or the related REO Mortgage Loan), pursuant to the related Mortgage Loan documents at the related Mortgage Rate through the due date in the Collection Period of purchase; plus |
(iii) | all unreimbursed property protection advances relating to that Mortgage Loan (including any property protection advances and accrued interest on those advances that were reimbursed out of general collections on the Mortgage Loans) (or, in the case of an Outside Serviced Mortgage Loan, thepro rata portion of any similar amounts allocable to such Mortgage Loan and payable with respect thereto pursuant to the related Co-Lender Agreement); plus |
(iv) | all accrued and unpaid interest accrued on advances made by the Master Servicer, the Special Servicer and/or the Trustee with respect to that Mortgage Loan (or, in the case of an Outside Serviced Mortgage Loan, all such amounts with respect to P&I Advances related to such Outside Serviced Mortgage Loan and, with respect to outstanding Property Advances, thepro rata portion of any similar interest amounts payable with respect thereto pursuant to the related Co-Lender Agreement); plus |
(v) | to the extent not otherwise covered byclause (iv) of this bullet, all unpaid Special Servicing Fees and other unpaid additional expenses of the Issuing Entity outstanding or previously incurred related to that Mortgage Loan, including all expenses incurred by the Master Servicer, the Special Servicer, the Depositor, the Certificate Administrator and the Trustee in respect of the Material Defect giving rise to the repurchase;provided,however, that such expenses will |
339 |
not include expenses incurred by investors in instituting an Asset Review Vote Election, in taking part in an Asset Review Vote or in exercising rights under the dispute resolution provisions described below under “—Dispute Resolution Provisions”; plus |
(vi) | to the extent not otherwise covered byclause (v) of this bullet, any Liquidation Fee if and to the extent payable in accordance with the terms and provisions of the Pooling and Servicing Agreement; plus |
(vii) | any related Asset Representations Reviewer Asset Review Fee to the extent not previously paid by the related Mortgage Loan Seller. |
With respect to the KGS Mortgage Loans, KGS Holdings, the parent of KGS, will guarantee the repurchase obligations of KGS under the related Mortgage Loan Purchase Agreement in the event KGS fails to perform its obligations to repurchase or substitute a Qualified Substitute Mortgage Loan for the affected Mortgage Loan and pay any substitution shortfall amount in response to a Material Defect. With respect to the RAIT Mortgage Loans, RFT, the parent of RAIT, will guarantee the repurchase obligations of RAIT under the related Mortgage Loan Purchase Agreement in the event RAIT fails to perform its obligations to repurchase or substitute a Qualified Substitute Mortgage Loan for the affected Mortgage Loan and pay any substitution shortfall amount in response to a Material Defect.
Notwithstanding the foregoing, in lieu of a Sponsor repurchasing, substituting or curing a Material Defect, to the extent that the Sponsor and the Master Servicer (with respect to non-Specially Serviced Loans) or the Sponsor and the Special Servicer (with respect to Specially Serviced Loans), are in any such case able to agree upon a cash payment payable by the Sponsor to the Issuing Entity that would be deemed sufficient to compensate the Issuing Entity for such Material Defect (a “Loss of Value Payment”), the Sponsor may elect, in its sole discretion, to pay such Loss of Value Payment. With respect to a Mortgage Loan that is not a Specially Serviced Loan, the Master Servicer’s agreement with a Sponsor as to any Loss of Value Payment will be subject to the reasonable approval of the Special Servicer (with the consent of the Controlling Class Representative for so long as no Control Termination Event has occurred and is continuing and other than with respect to an Excluded Mortgage Loan). In connection with obtaining the Special Servicer’s approval, the Master Servicer will be required to provide the Special Servicer with the servicing file for such Mortgage Loan and any other information reasonably requested by the Special Servicer as set forth in the Pooling and Servicing Agreement in order to enable the Special Servicer to exercise its approval right. Any agreement by the Special Servicer with a Sponsor as to any Loss of Value Payment with respect to a Specially Serviced Loan will be subject to the consent of the Controlling Class Representative (so long as no Control Termination Event has occurred and is continuing and other than with respect to an Excluded Mortgage Loan). Upon its making such payment, the Sponsor will be deemed to have cured such Material Defect in all respects. A Loss of Value Payment may not be made with respect to any Material Defect that would cause the applicable Mortgage Loan not to be a Qualified Mortgage.
In addition, each Mortgage Loan Purchase Agreement provides that, with respect to each Outside Serviced Mortgage Loan, if a “material document defect” (as such term or any analogous term is defined in the related Outside Servicing Agreement) exists under the related Outside Servicing Agreement with respect to the related Pari Passu Companion Loan that is included in the Outside Securitization established under the related Outside Servicing Agreement, and if such Pari Passu Companion Loan is repurchased from such Outside Securitization as a result of such “material document defect” (as such term or any analogous term is defined in the related Outside Servicing Agreement), then the applicable Sponsor will be required to repurchase such Outside Serviced Mortgage Loan;provided,however, that such repurchase obligation does not apply to any “material document defect” (as such term or any analogous term is defined in the related Outside Servicing Agreement) related to the promissory note for the subject Pari Passu Companion Loan.
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 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 as 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 loan-to-value ratio equal
340 |
to or less than the lesser of (i) the Cut-off Date LTV Ratio for the deleted Mortgage Loan and (ii) 75%, in each case using a “value” for the Mortgaged Property as determined using an appraisal from an Appraiser in accordance with MAI standards; (g) comply (except in a manner that would not be adverse to the interests of the Certificateholders) as of the date of substitution in all material respects with all of the representations and warranties set forth in the applicable Mortgage Loan Purchase Agreement; (h) have an environmental report that indicates no material adverse environmental conditions 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 at least equal to the greater of (i) the debt service coverage ratio of the deleted Mortgage Loan as of the Closing Date and (ii) 1.25x; (j) constitute a “qualified replacement mortgage” within the meaning of Code Section 860G(a)(4) as evidenced by an opinion of counsel (provided at the applicable Sponsor’s expense); (k) not have a maturity date or an amortization period that extends to a date that is after the date that is three years prior to the 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 and the Certificate Administrator have received a prior Rating Agency Confirmation from each Rating Agency (the cost, if any, of obtaining the Rating Agency Confirmation to be paid by the applicable Sponsor); (n) have been approved, so long as a Consultation Termination Event has not occurred and is not continuing, by the Controlling Class Representative; (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 either Trust REMIC or the imposition of tax on either Trust REMIC other than a tax on income expressly permitted or contemplated to be imposed by the terms of the Pooling and Servicing Agreement, as determined by an opinion of counsel; (q) have an engineering report with respect to the related Mortgaged Property which will be delivered as a part of the related servicing file; and (r) be current in the payment of all scheduled payments of principal and interest then due. In the event that more than one Mortgage Loan is substituted for a deleted Mortgage Loan or Mortgage Loans, then (x) the amounts described in clause (a) are required to be determined on the basis of aggregate principal balances and (y) each proposed substitute mortgage loan must individually satisfy each of the requirements specified in clauses (b) through (r) of the preceding sentence, except that 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 related Administrative Fee Rate) may be lower than the highest fixed Pass-Through Rate (not subject to a cap equal to, or based on, the WAC Rate) of any Class of Principal Balance Certificates or Trust Component having a principal balance then outstanding. When one or more Qualified Substitute Mortgage Loans are substituted for a deleted Mortgage Loan, the applicable Sponsor will be required to certify that the replacement Mortgage Loan(s) meet(s) all of the requirements of the above definition and send the certification to the Certificate Administrator and the Trustee and, prior to the occurrence and continuance of a Consultation Termination Event, to the Controlling Class Representative.
The time period within which the applicable Sponsor must complete that remedy, repurchase or substitution will generally be limited to 90 days following the earlier of the applicable Sponsor’s discovery or receipt of notice of, and receipt of a demand to take action with respect to, the related Material Defect, as the case may be (or, in the case of a Material Defect relating to a Mortgage Loan not being a Qualified Mortgage, 90 days from any party discovering such Material Defect). However, if the applicable Sponsor is diligently attempting to correct the problem, then, with limited exception (including if such Material Defect would cause the Mortgage Loan not to be a Qualified Mortgage), it will be entitled to an additional 90 days (or more in the case of a Material Document Defect resulting from the failure of the responsible party to have received the recorded documents) to complete that remedy, repurchase or substitution.
If (x) a Mortgage Loan is to be repurchased or replaced as described above (a “Defective Mortgage Loan”), (y) such Defective Mortgage Loan is part of a Crossed Group and (z) the applicable Document Defect or breach does not constitute a Material Defect as to the other Mortgage Loan(s) that are a part of such Crossed Group (the “Other Crossed Loans”) (without regard to this paragraph), then the applicable Document Defect or breach (as the case may be) will be deemed to constitute a Material Defect as to each such Other Crossed Loan for purposes of the above provisions, and the applicable Sponsor will be obligated to repurchase or replace each such Other Crossed Loan in accordance with the provisions above unless the applicable Sponsor satisfies certain conditions set forth in the related Mortgage Loan Purchase Agreement, including, without limitation, that (i) the applicable Sponsor has delivered an opinion that the repurchase of solely the Defective Mortgage Loan will not cause the Issuing Entity to fail to qualify as one or more REMICs or any portion of the Issuing Entity to fail to qualify as a Grantor Trust, and (ii) if the applicable Sponsor were to repurchase or replace only the Defective Mortgage Loan and not the Other Crossed Loans, (x) the debt service coverage ratio for such Other Crossed Loans (excluding the Defective Mortgage Loan) for the four calendar quarters immediately preceding the repurchase or replacement is not less than the lesser of (1) 0.10x below the debt service coverage ratio for the Crossed Group
341 |
(including the Defective Mortgage Loan) set forth in Annex A to this prospectus and (2) the debt service coverage ratio for the Crossed Group (including the Defective Mortgage Loan) for the four preceding calendar quarters preceding the repurchase or replacement, (y) the loan-to-value ratio for the Other Crossed Loans (excluding the Defective Mortgage Loan) is not greater than the greatest of (1) the loan-to-value ratio, expressed as a whole number percentage (taken to one decimal place), for the Crossed Group (including the Defective Mortgage Loan) set forth in Annex A to this prospectusplus 10%, (2) the loan-to-value ratio, expressed as a whole number percentage (taken to one decimal place), for the Crossed Group (including the Defective Mortgage Loan) at the time of repurchase or replacement and (3) 75%; and (z) either the exercise of remedies against the primary collateral of any Mortgage Loan in the Crossed Group will not impair the ability to exercise remedies against the primary collateral of the other Mortgage Loan(s) in the Crossed Group or the related Mortgage Loan documents have been modified in a manner that removes any threat of impairment of the ability to exercise remedies against the primary collateral of the other Mortgage Loan(s) in the Crossed Group as a result of the exercise of remedies against the primary collateral of any Mortgage Loan in the Crossed Group. The Master Servicer or the Special Servicer, as applicable, will be entitled to cause to be delivered, or direct the applicable Sponsor to (in which case the applicable Sponsor is required to) cause to be delivered, to the Master Servicer or the Special Servicer, as applicable, an appraisal of any or all of the related Mortgaged Properties for purposes of determining whether the condition set forth above has been satisfied, in each case at the expense of the applicable Sponsor if the scope and cost of the appraisal is approved by the applicable Sponsor and, prior to the occurrence and continuance of a Control Termination Event, the Controlling Class Representative (such approval not to be unreasonably withheld in each case). With respect to any Defective Mortgage Loan that forms a part of a Crossed Group and as to which the conditions described in the first sentence of this paragraph are satisfied, such that the Issuing Entity will continue to hold the Other Crossed Loans, the applicable Sponsor and the Depositor (as predecessor in interest to the Issuing Entity with respect to the subject Crossed Group) have agreed to forbear from enforcing any remedies against the other’s primary collateral but each is permitted to exercise remedies against the primary collateral securing its respective Mortgage Loan(s). If the exercise of remedies by one such party would impair the ability of the other such party to exercise its remedies with respect to the primary collateral securing the Mortgage Loan(s) held by the other such party, then both parties will forbear from exercising such remedies unless and until the related Mortgage Loan documents can be modified to remove the threat of impairment as a result of the exercise of remedies. Any reserve or other cash collateral or letters of credit securing any of the Mortgage Loans that form a Crossed Group will be allocated between such Mortgage Loans in accordance with the related Mortgage Loan documents, or otherwise on apro rata basis based upon their outstanding principal balances.
The cure, repurchase and substitution obligations described above or the election by the applicable Sponsor to pay a Loss of Value Payment will constitute the sole remedy available to the Series 2016-GC37 certificateholders in connection with any Material Defect. None of the Depositor, the underwriters, the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator, the Operating Advisor, the Asset Representations Reviewer, any other Sponsor or any other person will be obligated to repurchase any affected Mortgage Loan or pay any Loss of Value Payment in connection with a Material Defect if the applicable Sponsor (and, in the case of a KGS Mortgage Loan, KGS Holdings, as guarantor of the repurchase and substitution obligations of KGS, and, in the case of a RAIT Mortgage Loan, RFT, as guarantor of the repurchase and substitution obligations of RAIT) defaults on its obligations to do so. We cannot assure you that the applicable Sponsor (or, in the case of KGS, KGS Holdings, as guarantor of the repurchase and substitution obligations of KGS, or, in the case of RAIT, RFT, as guarantor of the repurchase and substitution obligations of RAIT) will have sufficient assets to repurchase or substitute a Mortgage Loan if required to do so. See “Risk Factors—Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans” and “—Any Loss of Value Payment Made by a Sponsor May Not be Sufficient to Cover All Losses on a Defective Mortgage Loan”.
Dispute Resolution Provisions
Each Sponsor will be subject to the dispute resolution provisions described under “The Pooling and Servicing Agreement—Dispute Resolution Provisions” to the extent those provisions are triggered with respect to any Mortgage Loan sold to the Depositor by such Sponsor and will be obligated under the related Mortgage Loan Purchase Agreement to comply with all applicable provisions and to take part in any mediation or arbitration proceedings that may result.
342 |
Asset Review Obligations
Each Sponsor will be obligated to perform its obligations described under “The Pooling and Servicing Agreement—The Asset Representations Reviewer—Asset Review” relating to any Asset Reviews performed by the Asset Representations Reviewer, and such Sponsor will have the rights described under that heading.
343 |
The Pooling and Servicing Agreement
General
The Certificates will be issued pursuant to that certain Pooling and Servicing Agreement, to be dated as of April 1, 2016 (the “Pooling and Servicing Agreement”), by and between the Depositor, the Master Servicer, the Special Servicer, the Operating Advisor, the Certificate Administrator, the Trustee and the Asset Representations Reviewer.
The servicing of the Serviced Mortgage Loans, the Serviced Companion Loans (as defined below) and any related REO Properties will be governed by the Pooling and Servicing Agreement. The following summaries describe the material provisions of the Pooling and Servicing Agreement relating to the servicing and administration of the Serviced Mortgage Loans, the Serviced Companion Loans and any related REO Properties. The summaries do not purport to be complete and are subject to the provisions of the Pooling and Servicing Agreement.
In connection with the servicing of the Loan Combinations, the following definitions apply:
· | “Serviced Pari Passu Loan Combination” means a Pari Passu Loan Combination that is serviced under the Pooling and Servicing Agreement. |
· | “Serviced AB Loan Combination” means an AB Loan Combination that is serviced under the Pooling and Servicing Agreement. |
· | “Serviced Loan Combination” means a Serviced Pari Passu Loan Combination or a Serviced AB Loan Combination, as applicable. |
· | “Serviced Pari Passu Companion Loan” means a Pari Passu Companion Loan that is part of a Serviced Pari Passu Loan Combination (and is therefore serviced under the Pooling and Servicing Agreement). |
· | “Serviced Subordinate Companion Loan” means a Subordinate Companion Loan that is part of a Serviced AB Loan Combination (and is therefore serviced under the Pooling and Servicing Agreement). |
· | “Serviced Companion Loan” means a Serviced Pari Passu Companion Loan or a Serviced Subordinate Companion Loan, as applicable. |
· | “Companion Loan Holder” means the holder of a Companion Loan. |
· | “Serviced Pari Passu Companion Loan Holder” means the holder of a Serviced Pari Passu Companion Loan. |
· | “Serviced Subordinate Companion Loan Holder” means the holder of a Serviced Subordinate Companion Loan. |
· | “Serviced Companion Loan Holder” means a Serviced Pari Passu Companion Loan Holder or a Serviced Subordinate Companion Loan Holder, as applicable. |
· | “Serviced Mortgage Loans” means all of the Mortgage Loans included in the Issuing Entity (other than any Outside Serviced Mortgage Loan(s)). |
· | “Serviced Loans” means all of the Serviced Mortgage Loans, together with any Serviced Companion Loans. |
· | “Serviced Outside Controlled Loan Combination” means a Serviced Loan Combination if and for so long as the “controlling note” with respect to such Serviced Loan Combination is not included in this |
344 |
securitization transaction (regardless of whether such note evidences a Pari Passu Companion Loan or a Subordinate Companion Loan). However, a Serviced Outside Controlled Loan Combination may cease to be such if, by virtue of any trigger event contemplated by the related Co-Lender Agreement, the promissory note evidencing the related Split Mortgage Loan becomes the controlling note for such Loan Combination, in which case the discussion in this prospectus regarding “Serviced Outside Controlled Loan Combinations” will thereafter cease to apply to the subject Loan Combination. |
· | “Serviced Outside Controlled Mortgage Loan” means the Mortgage Loan that is part of a Serviced Outside Controlled Loan Combination. |
· | “Serviced Outside Controlled Companion Loan” means the Companion Loan that is part of a Serviced Outside Controlled Loan Combination. |
· | “Outside Controlling Note Holder” means, with respect to any Loan Combination that is, and only for so long as such Loan Combination is, a Serviced Outside Controlled Loan Combination, the holder of the related controlling note (regardless of whether such note evidences a Pari Passu Companion Loan or a Subordinate Companion Loan) or such holder’s designated representative. If a controlling note is included in a securitization trust, the Outside Controlling Note Holder may be a “controlling class representative” (or equivalent party), the majority holder of a particular class, a servicer or another service provider that is designated from time to time under the related pooling and servicing agreement, trust and servicing agreement and/or other comparable agreement (although the right of any such designated party to exercise some or all of such rights may terminate or shift to another designated party upon the occurrence of certain trigger events). |
· | “Outside Serviced Companion Loan” means a Companion Loan that is part of an Outside Serviced Loan Combination. Each of (i) the Sheraton Denver Downtown Fee Pari Passu Companion Loan, (ii) the 79 Madison Avenue Pari Passu Companion Loan, (iii) the Austin Block 21 Pari Passu Companion Loan, (iv) the 600 Broadway Pari Passu Companion Loans, (v) the 5 Penn Plaza Pari Passu Companion Loans and (vi) the Park Place Pari Passu Companion Loans, is an Outside Serviced Companion Loan. |
· | “Outside Serviced Loan Combination” means a Loan Combination that is being serviced pursuant to the pooling and servicing agreement, trust and servicing agreement or other comparable agreement governing the securitization of a related Companion Loan. Each of (i) the Sheraton Denver Downtown Fee Loan Combination, (ii) the 79 Madison Avenue Loan Combination, (iii) the Austin Block 21 Loan Combination, (iv) the 600 Broadway Loan Combination, (v) the 5 Penn Plaza Loan Combination and (vi) the Park Place Loan Combination, is an Outside Serviced Loan Combination. |
· | “Outside Serviced Mortgage Loan” means the Mortgage Loan that is part of an Outside Serviced Loan Combination. Each of (i) the Sheraton Denver Downtown Fee Mortgage Loan, (ii) the 79 Madison Avenue Mortgage Loan, (iii) the Austin Block 21 Mortgage Loan, (iv) the 600 Broadway Mortgage Loan, (v) the 5 Penn Plaza Mortgage Loan and (vi) the Park Place Mortgage Loan, is an Outside Serviced Mortgage Loan. |
· | “Outside Servicing Agreement” means the pooling and servicing agreement, trust and servicing agreement or other comparable agreement pursuant to which an Outside Serviced Loan Combination is being serviced. Each of (i) the CGCMT 2016-GC36 Pooling and Servicing Agreement, (ii) the CGCMT 2016-P3 Pooling and Servicing Agreement, and (iii) after the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Pooling and Servicing Agreement, is an Outside Servicing Agreement. |
· | “Outside Securitization” means the securitization with respect to an Outside Serviced Companion Loan. |
· | “Outside Servicer”, “Outside Special Servicer ”, “Outside Trustee”, “Outside Certificate Administrator”, “Outside Operating Advisor”, “Outside Depositor” and “Outside Controlling Class Representative” mean the master servicer, special servicer, trustee, certificate administrator, operating advisor, |
345 |
depositor and controlling class representative (or, in each such case, an equivalent party), respectively, under the applicable Outside Servicing Agreement. |
See “Description of the Mortgage Pool—The Loan Combinations”.
There are no Serviced Loan Combinations, Serviced Companion Loans, Serviced Outside Controlled Loan Combinations, Subordinate Companion Loans or AB Loan Combinations related to this securitization transaction and, therefore, all references in this prospectus to “Serviced Loan Combinations”, “Serviced Companion Loans”, “Serviced Outside Controlled Loan Combinations”, “Subordinate Companion Loans”, “AB Loan Combinations” or any related terms should be disregarded.
Certain Considerations Regarding the Outside Serviced Loan Combinations
Each Outside Serviced Mortgage Loan and Outside Serviced Companion Loan is being or will be serviced and administered in accordance with the related Outside Servicing Agreement and the related Co-Lender Agreement (and all decisions, consents, waivers, approvals and other actions on the part of the holders of such Outside Serviced Mortgage Loan and Outside Serviced Companion Loan(s) will be effected in accordance with the related Outside Servicing Agreement and the related Co-Lender Agreement). Consequently, the servicing provisions set forth in this prospectus and the administration of certain accounts related to the servicing of the Mortgage Loans will generally not be applicable to the Outside Serviced Mortgage Loans, but instead such servicing and administration of each Outside Serviced Mortgage Loan will be governed by the related Outside Servicing Agreement.
The Master Servicer, the Special Servicer, the Operating Advisor, the Certificate Administrator and the Trustee have no obligation or authority to supervise any Outside Servicer, any Outside Special Servicer and/or any Outside Trustee under any Outside Servicing Agreement or to make property protection advances with respect to any Outside Serviced Loan Combination or P&I advances with respect to any Outside Serviced Companion Loans or any Serviced Companion Loan. Any obligations of the Master Servicer and the Special Servicer to provide information or remit collections on an Outside Serviced Mortgage Loan are dependent on their receipt of the same from the applicable party under the related Outside Servicing Agreement. Each Outside Servicing Agreement provides for servicing in a manner acceptable for rated transactions similar in nature to this securitization transaction. For more detailed information, see “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans”.
As used in this prospectus, references to the Mortgage Loans, when discussing servicing activities with respect to the Mortgage Loans, do not include, unless otherwise specifically indicated, the Outside Serviced Mortgage Loans. In certain instances references are made that specifically exclude the Outside Serviced Mortgage Loans from the servicing provisions in this prospectus by indicating actions are taken with respect to the “Serviced Mortgage Loans” or the “Mortgage Loans other than the Outside Serviced Mortgage Loans” or are taken “except with respect to the Outside Serviced Mortgage Loans” or words of similar import. These references and carveouts are intended to highlight particular provisions to draw prospective investors’ attention to the fact that the Master Servicer, Special Servicer, Certificate Administrator or Trustee are not responsible for the particular servicing or administrative activity with respect to the Outside Serviced Mortgage Loans and are not intended to imply that when other servicing actions are described in this prospectus without such specific reference or carveouts, that the Master Servicer, Special Servicer, Certificate Administrator or Trustee are responsible for those duties with respect to the Outside Serviced Mortgage Loans. Servicing of any Outside Serviced Mortgage Loan is handled under the Outside Servicing Agreement. Prospective investors are encouraged to review “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Servicing of the Outside Serviced Mortgage Loans” for a discussion of certain important servicing terms related to the Outside Serviced Mortgage Loans.
Assignment of the Mortgage Loans
On the Closing Date, the Depositor will sell, transfer or otherwise convey, assign or cause the assignment of the Mortgage Loans, together with all payments due on or with respect to the Mortgage Loans, other than principal and interest due on or before the Cut-off Date and principal prepayments received on or before the Cut-off Date, without recourse, to the Trustee for the benefit of the holders of Certificates.
346 |
The Certificate Administrator, concurrently with the assignment, will execute and deliver Certificates evidencing the beneficial ownership interests in the related Issuing Entity to or at the direction of the Depositor in exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Pooling and Servicing Agreement (the “Mortgage Loan Schedule”). The Mortgage Loan Schedule will include, among other things, as to each Mortgage Loan, information as to its outstanding principal balance as of the close of business on the Cut-off Date, as well as information respecting the interest rate and the maturity date of each Mortgage Loan.
Pursuant to each Mortgage Loan Purchase Agreement, the applicable Sponsor will be required to deliver to the Trustee, in its capacity as custodian, the Mortgage File for each of the Mortgage Loans. See “The Mortgage Loan Purchase Agreements—Sale of Mortgage Loans; Mortgage File Delivery”.
In addition, pursuant to each Mortgage Loan Purchase Agreement, the related Sponsor will be required to deliver the Diligence Files for each of its Mortgage Loans to the Depositor by uploading such Diligence Files to the designated website, and the Depositor will thereafter deliver such Diligence Files to the Certificate Administrator for posting to the secure data room. The Depositor will have no responsibility for determining whether any Diligence Files delivered to it are complete and will have no liability to the Issuing Entity or the Certificateholders for the failure of any Sponsor to deliver a Diligence File (or a complete Diligence File) to the Depositor.
Pursuant to the Pooling and Servicing Agreement, the Depositor will assign to the Trustee for the benefit of Certificateholders the representations and warranties made by the Sponsors to the Depositor in the Mortgage Loan Purchase Agreements and any rights and remedies that the Depositor has against the Sponsors under the Mortgage Loan Purchase Agreements with respect to any Material Defect. See “—Repurchase Requests; Enforcement of Mortgage Loan Seller’s Obligations Under the Mortgage Loan Purchase Agreement”and “—Dispute Resolution Provisions”.
The Trustee (in its capacity as custodian), or any other custodian appointed under the Pooling and Servicing Agreement, will hold the Mortgage File for each Mortgage Loan in trust for the benefit of all Certificateholders and the holders of any related Serviced Companion Loans. Pursuant to the Pooling and Servicing Agreement, the Trustee, in its capacity as custodian, is obligated to review the Mortgage File for each Mortgage Loan within a specified number of days after the execution and delivery of the Pooling and Servicing Agreement. If the Master Servicer (with respect to Mortgage Loans that are non-Specially Serviced Loans) or the Special Servicer (with respect to Mortgage Loans that are Specially Serviced Loans) determines that a Material Document Defect exists, the Master Servicer or the Special Servicer, as applicable, will promptly notify, among others, the Depositor, the applicable Sponsor, the Certificate Administrator, the Trustee and the Master Servicer or the Special Servicer, as applicable. If the applicable Sponsor cannot cure the Material Document Defect within the time period specified in the Pooling and Servicing Agreement, the applicable Sponsor will be obligated either to replace the affected Mortgage Loan with a substitute Mortgage Loan or Mortgage Loans, or to repurchase the related Mortgage Loan from the Issuing Entity within the time period specified in the Pooling and Servicing Agreement at the Repurchase Price or at its election, subject to specified conditions, make a Loss of Value Payment with respect to the related Mortgage Loan. In the case ofKGS, its parent, KGS Holdings, is guaranteeing its repurchase and substitution obligations under the related Mortgage Loan Purchase Agreement in the event that KGS fails to perform its obligations to cure, effect a repurchase or substitute a Qualified Substitute Mortgage Loan and pay any substitution shortfall amount in response to a Material Defect. In the case of RAIT, its parent, RFT, is guaranteeing its repurchase and substitution obligations under the related Mortgage Loan Purchase Agreement in the event that RAIT fails to perform its obligations to cure, effect a repurchase or substitute a Qualified Substitute Mortgage Loan and pay any substitution shortfall amount in response to a Material Defect. This substitution or purchase obligation (and such guaranty obligations) or the making of a Loss of Value Payment will constitute the sole remedy available to the Certificateholders or the Issuing Entity for a Material Defect. See “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions”.
347 |
Servicing of the Mortgage Loans
Each of the Master Servicer and the Special Servicer will be required to service and administer the Serviced Loans (as described below). The Master Servicer and the Special Servicer, as the case may be, will each be required to service and administer the Serviced Loans and each related REO Property for which it is responsible in accordance with the terms of the Pooling and Servicing Agreement , to the extent consistent with the foregoing, in accordance with the following (the “Servicing Standard”):
· the higher of the following standards of care:
1. with the same care, skill, prudence and diligence with which the Master Servicer or the Special Servicer, as the case may be, services and administers comparable mortgage loans with similar borrowers and comparable REO properties for other third-party portfolios, giving due consideration to the customary and usual standards of practice of prudent institutional commercial mortgage lenders servicing their own mortgage loans and REO properties; and
2. with the same care, skill, prudence and diligence with which the Master Servicer or the Special Servicer, as the case may be, services and administers comparable mortgage loans and REO properties owned by the Master Servicer or the Special Servicer, as the case may be; and
in either case, exercising reasonable business judgment and acting in accordance with applicable law, the terms of the respective Serviced Loans and, if applicable, the related Co-Lender Agreement;
· with a view to—
1. the timely recovery of all payments of principal and interest, including balloon payments, under those Serviced Loans; or
2. in the case of (a) a Specially Serviced Loan or (b) a Mortgage Loan (or Serviced Loan Combination) as to which the related Mortgaged Property is an REO Property, the maximization of recovery on that Mortgage Loan (or Serviced Loan Combination) to the Certificateholders (as if they were one lender) (or, if a Serviced Loan Combination is involved, with a view to the maximization of recovery on such Serviced Loan Combination to the Certificateholders and the related Serviced Companion Loan Holder(s) as if they were one lender (and, with respect to any Serviced AB Loan Combination, taking into account the subordinate nature of the related Subordinate Companion Loan)) of principal and interest, including balloon payments, on a present value basis; and
· without regard to—
1. any relationship, including as lender on any other debt, that the Master Servicer or the Special Servicer, as the case may be, or any of its affiliates may have with any of the underlying borrowers, or any affiliate of the underlying borrowers, or any other party to the Pooling and Servicing Agreement;
2. the ownership of any Certificate (or any Companion Loan or other indebtedness secured by the related Mortgaged Property or any security backed by a Companion Loan) by the Master Servicer or the Special Servicer or any affiliate of the Master Servicer or the Special Servicer, as the case may be;
3. the obligation, if any, of the Master Servicer to make Advances;
4. the right of the Master Servicer or the Special Servicer, as the case may be, or any of its affiliates to receive compensation or reimbursement of costs under the Pooling and Servicing Agreement generally or with respect to any particular transaction; and
5. the ownership, servicing or management for others of any mortgage loan or real property not covered by the Pooling and Servicing Agreement by the Master Servicer or the Special Servicer, as the case may be, or any of its affiliates.
348 |
The Servicing Standard will apply with respect to the Outside Serviced Mortgage Loans or related REO Property only to the extent that the Master Servicer or the Special Servicer has any express duties or rights to grant consent with respect thereto pursuant to the Pooling and Servicing Agreement.
In general, the Master Servicer will be responsible for the servicing and administration of each Serviced Mortgage Loan (and Serviced Companion Loan)—
· | which is not a Specially Serviced Loan; or |
· | that is a Corrected Loan. |
A “Specially Serviced Loan” means any Serviced Loan (including a related REO Mortgage Loan or REO Companion Loan) being serviced under the Pooling and Servicing Agreement for which any of the following events (each, a “Servicing Transfer Event”) has occurred as follows:
(a) the related borrower has failed to make when due any scheduled monthly debt service payment or a balloon payment, which failure continues unremedied (without regard to any grace period):
· | except in the case of a Serviced Loan delinquent in respect of its balloon payment, for 60 days beyond the date that payment was due; or |
· | solely in the case of a delinquent balloon payment, (A) 60 days beyond the date on which that balloon payment was due (except as described in clause B below) or (B) in the case of a Serviced Loan delinquent with respect to the balloon payment as to which the related borrower delivered to the Master Servicer or the Special Servicer (and in either such case the Master Servicer or the Special Servicer, as applicable, must promptly deliver a copy thereof to the other such servicer), a written and fully executed or otherwise binding commitment (subject only to customary closing conditions) for refinancing from an acceptable lender reasonably satisfactory in form and substance to the Special Servicer prior to the date 60 days after maturity, 120 days beyond the date on which that balloon payment was due (or for such shorter period beyond the date on which that balloon payment was due during which the refinancing is scheduled to occur); or |
(b) there has occurred a default (other than as set forth in clause (a) and other than an Acceptable Insurance Default) that the Master Servicer or the Special Servicer (and, in the case of the Special Servicer, with the consent of the related Directing Holder (unless, if the Controlling Class Representative is the related Directing Holder, a Control Termination Event has occurred and is continuing) determines materially impairs the value of the related Mortgaged Property as security for the Serviced Loan or otherwise materially adversely affects the interests of Certificateholders in the Serviced Mortgage Loan (or, in the case of a Serviced Loan Combination, the interests of the Certificateholders and the related Serviced Companion Loan Holder(s) in such Serviced Loan Combination), and continues unremedied for the applicable grace period under the terms of the Serviced Loan (or, if no grace 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 of the related Serviced Loan without the application of a grace period under the terms of the Serviced Loan documents; andprovided,further, that any default requiring a Property Advance will be deemed to materially and adversely affect the interests of the Certificateholders in the subject Serviced Mortgage Loan (or, in the case of a Serviced Loan Combination, the interests of the Certificateholders and the related Serviced Companion Loan Holder(s) in such Serviced Loan Combination); or
(c) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law or the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs, has been entered against the related borrower and such decree or order has remained in force and not dismissed for a period of 60 days (or a shorter period if the Master Servicer or the Special Servicer (and, in the case of the Special Servicer, with the consent of the related Directing Holder, unless a Control Termination Event has occurred and is continuing) determines in accordance with the Servicing Standard that the circumstances warrant that the related Serviced Loan (or REO Mortgage Loan or REO Serviced Companion Loan) be transferred to special servicing); or
349 |
(d) the related borrower consents to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to such borrower or of or relating to all or substantially all of its property; or
(e) the related borrower admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations; or
(f) the Master Servicer has received notice of the commencement of foreclosure or similar proceedings with respect to the related Mortgaged Property; or
(g) the Master Servicer (with the consent of the Special Servicer, which will in turn be required to obtain the consent of the related Directing Holder (unless, if the Controlling Class Representative is the related Directing Holder, a Control Termination Event has occurred and is continuing, in which event the consent of the Special Servicer will not be required)), or the Special Servicer (with the consent of the related Directing Holder (unless, if the Controlling Class Representative is the related Directing Holder, a Control Termination Event has occurred and is continuing)) determines that (i) a default (other than an Acceptable Insurance Default) under the Serviced Loan is reasonably foreseeable, (ii) such default would materially impair the value of the corresponding Mortgaged Property as security for the Serviced Loan or otherwise materially adversely affect the interests of Certificateholders in the Serviced Mortgage Loan (or, in the case of a Serviced Loan Combination, the interests of the Certificateholders or the related Serviced Companion Loan Holder(s) in the Serviced Loan Combination), and (iii) the default is likely to continue unremedied for the applicable cure period under the terms of the Serviced 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 Serviced Loan).
It will be considered an “Acceptable Insurance Default” (and neither the Master Servicer nor the Special Servicer will be required to obtain the below described insurance) if the related Mortgage Loan documents specify that the related borrower must maintain all-risk casualty insurance or other insurance that covers damages or losses arising from acts of terrorism and the Special Servicer has determined, in its reasonable judgment in accordance with the Servicing Standard (and, with the consent of the related Directing Holder (unless, if the Controlling Class Representative is the related Directing Holder, a Control Termination Event has occurred and is continuing), that (i) this insurance is not available at commercially reasonable rates and the subject hazards are not commonly insured against by prudent owners of similar real properties located in or near the geographic region in which the Mortgaged Property is located (but only by reference to such insurance that has been obtained by such owners at current market rates), or (ii) this insurance is not available at any rate;provided,however, that the related Directing Holder will not have more than 30 days to respond to the Special Servicer’s request for such consent;provided,further, that upon the Special Servicer’s determination, consistent with the Servicing Standard, that exigent circumstances do not allow the Special Servicer to consult with the related Directing Holder, the Special Servicer will not be required to do so. In making this determination, the Special Servicer, to the extent consistent with the Servicing Standard, is entitled to rely on the opinion of an insurance consultant.
A Serviced Loan will cease to be a Specially Serviced Loan and will become a “Corrected Loan” when:
· | with respect to the circumstances described in clause (a) of the definition of “Specially Serviced Loan”, the related borrower has made three consecutive full and timely scheduled monthly debt service payments under the terms of the Serviced Loan (as such terms may be changed or modified in connection with a bankruptcy or similar proceeding involving the related borrower or by reason of a modification, extension, waiver or amendment granted or agreed to by the Master Servicer or the Special Servicer pursuant to the Pooling and Servicing Agreement); |
· | with respect to the circumstances described in clauses (c), (d), (e) and (g) of the definition of “Specially Serviced Loan”, the circumstances cease to exist in the good faith, reasonable judgment of the Special Servicer, but, with respect to any bankruptcy or insolvency proceedings described in clauses (c), (d) and (e), no later than the entry of an order or decree dismissing such proceeding; |
350 |
· | with respect to the circumstances described in clause (b) of the definition of “Specially Serviced Loan”, the default is cured as determined by the Special Servicer in its reasonable, good faith judgment; and |
· | with respect to the circumstances described in clause (f) of the definition of “Specially Serviced Loan”, the proceedings are terminated; |
provided that at such time no other circumstance described in clauses (a) through (g) of the definition of “Specially Serviced Loan” exists that would cause the Mortgage Loan to be characterized as a “Specially Serviced Loan.”
If a Servicing Transfer Event exists with respect to the Mortgage Loan or any Companion Loan in a Serviced Loan Combination, it will be considered to exist for the entire Serviced Loan Combination.
The Special Servicer, on the other hand, will be responsible for the servicing and administration of each Serviced Loan as to which a Servicing Transfer Event has occurred and which has not yet become a Corrected Loan, and for the approval of certain matters related to Serviced Loans that are non-Specially Serviced Loans. The Special Servicer may be responsible for conducting or managing certain Mortgage Loan-related litigation (including with respect to non-Specially Serviced Loans) as and to the extent set forth in the Pooling and Servicing Agreement. The Special Servicer will also be responsible for the administration of each REO Property acquired by the Issuing Entity.
Despite the foregoing, the Pooling and Servicing Agreement will require the Master Servicer to continue to collect information and prepare all reports to the Certificate Administrator required to be collected or prepared with respect to any Specially Serviced Loans (based on, among other things, certain information provided by the Special Servicer), receive payments on Specially Serviced Loans, maintain escrows and all reserve accounts on Specially Serviced Loans, maintain insurance with respect to the Mortgaged Properties securing the Specially Serviced Loans and, otherwise, to render other incidental services with respect to any such specially serviced assets. In addition, the Special Servicer will perform limited duties and have certain approval rights regarding servicing actions with respect to Serviced Loans that are not Specially Serviced Loans.
Neither the Master Servicer nor the Special Servicer will have responsibility for the performance by the other of its respective obligations and duties under the Pooling and Servicing Agreement.
The Master Servicer will transfer servicing of a Serviced Loan to the Special Servicer when that Serviced Loan becomes a Specially Serviced Loan. The Special Servicer will return the servicing of that Serviced Loan to the Master Servicer when it becomes a Corrected Loan.
The Special Servicer will be obligated to, among other things, oversee the resolution of Serviced Loans that are Specially Serviced Loans and act as disposition manager of REO Properties (other than any interest in a Mortgaged Property acquired through foreclosure or deed-in-lieu of foreclosure with respect to an Outside Serviced Loan Combination). Each Outside Servicing Agreement provides or is expected to provide, as applicable, for certain servicing transfer events. Upon the occurrence of a servicing transfer event with respect to an Outside Serviced Loan Combination under the Outside Servicing Agreement, servicing of both the affected Outside Serviced Mortgage Loan and the related Outside Serviced Companion Loan(s) will be transferred to the Outside Special Servicer.
With respect to all non-Specially Serviced Loans, and subject to the rights of the Special Servicer and the related Directing Holder (as described below under “—Directing Holder”), the Master Servicer, without the consent of the Special Servicer or the related Directing Holder, will be responsible to determine whether to consent to or approve any request by a borrower with respect to the following (each of the following, a “Master Servicer Decision”):
(A) approving routine leasing activity for customary leases of space for parking, office, retail, warehouse, industrial and/or manufacturing purposes, including the granting of subordination and non-disturbance and attornment agreements and consenting to modification, waiver, amendment, execution, termination or renewal of any lease that (1) do not involve a ground lease or lease of an outparcel, (2) affect an area less than the lesser of (i) 20,000 square feet and (ii) 20% of the net rentable area of the related Mortgaged Property, (3) does not involve a lease for a tenant or space specifically identified by name or
351 |
space location in the related Mortgage Loan documents as requiring the consent of the lender for the associated activity and (4) such transaction does not relate to a Specially Serviced Loan;
(B) subject to other restrictions in this prospectus regarding principal prepayments, waiving any provision of a Serviced Loan requiring a specified number of days’ notice prior to a principal prepayment;
(C) approving defeasances subject to the terms of the Pooling and Servicing Agreement, non-material modifications, consents or waivers (other than modifications, consents or waivers specifically prohibited under this “—Realization Upon Mortgage Loans—Modifications, Waivers and Amendments” section) in connection with a defeasance permitted by the terms of the Pooling and Servicing Agreement that do not materially and adversely impact the Issuing Entity, and subject to certain conditions, including in certain cases, delivery of an opinion of counsel (which opinion of counsel will be an expense of the borrower) to the effect that such modification, waiver or consent would not cause any Trust REMIC to fail to qualify as a REMIC under the Code or result in a “prohibited transaction” under the REMIC provisions of the Code or cause the Grantor Trust to fail to qualify as a grantor trust for federal income tax purposes, other than a modification, consent or waiver with respect to (i) a waiver of a Mortgage Loan event of default, (ii) a modification of the type of defeasance collateral required under the Mortgage Loan documents such that defeasance collateral other than direct, non-callable obligations of the United States would be permitted or (iii) a modification that would permit a principal prepayment instead of defeasance if the applicable Mortgage Loan documents do not otherwise permit such principal prepayment;
(D) granting waivers of minor covenant defaults (other than financial covenants);
(E) as permitted under the Mortgage Loan documents, payment from any escrow, reserve or letter of credit, except releases of any escrows, reserve accounts or letters of credit held as performance escrows or reserves unless required pursuant to the specific terms of the related Serviced Loan and for which there is no lender discretion;
(F) subject to the satisfaction of any conditions precedent set forth in the related Serviced Loan documents, approving disbursements of any holdback amounts in accordance with the related Mortgage Loan documents with respect to certain Serviced Loans other than those Serviced Loans identified in the Pooling and Servicing Agreement;provided, that such disbursements are required pursuant to the specific terms of the related Serviced Loan and for which there is no lender discretion (other than confirming the satisfaction of the other conditions to the transaction set forth in the related Mortgage Loan documents that do not include any other approval);
(G) approving any immaterial waiver affecting the timing of receipt of financial statements from any borrower; provided that such financial statements are delivered no less often than quarterly and within 60 days after the end of the calendar quarter;
(H) approving consents with respect to non-material rights-of-way and non-material easements and consent to subordination of the related Serviced Mortgage Loan or Serviced Loan Combination to such non-material rights-of-way or easements; provided, that the Master Servicer has determined in accordance with the Servicing Standard that such right-of-way or easement does not materially interfere with the then-current use of the related Mortgaged Property or the security intended to be provided by the related Mortgage and will not have a material adverse effect on the value of such Mortgaged Property; and
(I) any non-material modifications, waivers or amendments of a non-monetary term of an applicable Mortgage Loan document, including any Co-Lender Agreement or intercreditor agreement, not provided for in clauses (A) through (H) above, which are necessary to cure any ambiguities or to correct scrivener’s errors in the terms of the related Serviced Loan.
The Special Servicer’s consent is required with respect to any consent or other action with regard to any performing Serviced Loan under the Pooling and Servicing Agreement that constitutes a Major Decision or is not a Master Servicer Decision. In such case, if the Master Servicer is recommending approval with respect to such consent or other action that is a Major Decision or is not a Master Servicer Decision, the Master Servicer is required to promptly provide the Special Servicer with written notice of any request for such consent or other action, accompanied by the Master Servicer’s written recommendation and analysis and any and all information in the Master Servicer’s possession or reasonably available to it that the Special Servicer or, with respect to a Major
352 |
Decision, the related Directing Holder may reasonably request in order to withhold or grant its consent, and in all cases the Special Servicer will be entitled (subject to, with respect to Major Decision, in each case if applicable, the consultation rights of the Operating Advisor, the consent and/or consultation rights of the related Directing Holder and/or the consultation rights of any related Serviced Companion Loan Holder or its Companion Loan Holder Representative) to approve or disapprove such consent or other action in accordance with the terms and provisions of the Pooling and Servicing Agreement. When the Special Servicer’s consent is required under the Pooling and Servicing Agreement, such consent will be deemed given if the Special Servicer does not respond to a request for consent within the time periods set forth in the Pooling and Servicing Agreement.
The Master Servicer and the Special Servicer, as applicable, will be required, no less often than on a monthly basis, to make a knowledgeable servicing officer available via telephone to verbally answer questions from the Operating Advisor (after the occurrence and during the continuance of a Control Termination Event) and the Directing Holder (unless, if the Controlling Class Representative is the related Directing Holder, a Control Termination Event has occurred and is continuing) regarding the performance and servicing of the applicable Serviced Mortgage Loans and/or REO Properties for which such Master Servicer or Special Servicer, as applicable, is responsible.
All net present value calculations and determinations made under the Pooling and Servicing Agreement with respect to any Serviced Mortgage Loan or related Mortgaged Property or REO Property (including for purposes of the definition of “Servicing Standard” set forth above) will be made by using a discount rate appropriate for the type of cash flows being discounted; namely (i) for principal and interest payments on the Mortgage Loan or proceeds from the sale of a defaulted Mortgage Loan, the highest of (1) the rate determined by the Master Servicer or the Special Servicer, as applicable, that approximates the market rate that would be obtainable by the borrowers on similar debt of the borrowers as of such date of determination, (2) the Mortgage Rate and (3) the yield on 10-year U.S. treasuries and (ii) for all other cash flows, including property cash flow, the “discount rate” set forth in the most recent appraisal (or updated appraisal).
Subservicing
The Master Servicer may delegate and/or assign some or all of their respective servicing obligations and duties with respect to some or all of the Serviced Loans to one or more third-party sub-servicers provided that the Master Servicer will remain obligated under the Pooling and Servicing Agreement. Certain servicing and administrative functions may also be provided by one or more primary servicers that previously serviced the Mortgage Loans for the applicable mortgage loan seller. The Master Servicer will be responsible for paying the servicing fees of any sub-servicer or primary servicer retained by it. Notwithstanding any sub-servicing agreement or primary servicing agreement, the Master Servicer will remain primarily liable to the Trustee, the Certificate Administrator, the Certificateholders and any Serviced Companion Loan Holder for the servicing and administering of the Serviced Loans in accordance with the provisions of the Pooling and Servicing Agreement without diminution of such obligation or liability by virtue of such sub-servicing agreement or primary servicing agreement. A sub-servicer may be an affiliate of the Depositor, the Master Servicer or the Special Servicer. The Special Servicer will not be permitted to appoint sub-servicers with respect to any of its servicing obligations and duties (provided, that if and to the extent Midland is terminated as Special Servicer by the Controlling Class Representative for no cause (i.e., not as a result of a Servicer Termination Event) and Midland would otherwise be a qualified special servicer in accordance with the terms of the Pooling and Servicing Agreement, Midland may be appointed as a sub-special servicer of a successor Special Servicer appointed by the Controlling Class Representative).
Each sub-servicing agreement between the Master Servicer and a sub-servicer (a “Sub-Servicing Agreement”) will generally be required to provide that (i) such Sub-Servicing Agreement may be assumed by the Trustee, if the Trustee has assumed the duties of the Master Servicer or by any successor Master Servicer without cost or obligation to the assuming party or the Issuing Entity, upon the assumption by such party of the obligations of the Master Servicer pursuant to the Pooling and Servicing Agreement and (ii) the sub-servicer will be in default under such Sub-Servicing Agreement and such Sub-Servicing Agreement will be terminated if the sub-servicer fails (A) to deliver by the due date any Exchange Act reporting items required to be delivered to the Master Servicer pursuant to the Pooling and Servicing Agreement or such Sub-Servicing Agreement or to the master servicer under any other pooling and servicing agreement that the Depositor is a party to, or (B) to perform in any material respect any of its covenants or obligations contained in such Sub-Servicing Agreement regarding creating, obtaining or delivering any Exchange Act reporting items required in order for any party to the Pooling and Servicing Agreement to perform its obligations under the Pooling and Servicing Agreement or under the
353 |
Exchange Act reporting requirements of any other pooling and servicing agreement that the Depositor is a party to. The Master Servicer will be required to monitor the performance of sub-servicers retained by it and will have the right to remove a sub-servicer retained by it in accordance with the terms of the related Sub-Servicing Agreement. However, no sub-servicer will be permitted under any Sub-Servicing Agreement to make material servicing decisions, such as loan modifications or determinations as to the manner or timing of enforcing remedies under the Mortgage Loan documents, without the consent of the Master Servicer.
Advances
The Master Servicer will be obligated (subject to the limitations described below) to advance, on the business day immediately preceding a Distribution Date (the “Master Servicer Remittance Date”), an amount (each such amount, a “P&I Advance”) equal to the total or any portion of the Monthly Payment (exclusive of the related Servicing Fee) due or deemed due (without regard to any grace period) on each Mortgage Loan (including the Outside Serviced Mortgage Loans and REO Mortgage Loans, but not including any Companion Loan) for the Due Date in the related Collection Period, to the extent not received by the Master Servicer as of the close of business on the Determination Date in the same month as (or, in the case of an Outside Serviced Mortgage Loan, as of the close of business on the business day immediately preceding) such Master Servicer Remittance Date. In the event the Monthly Payment has been reduced pursuant to any modification, waiver or amendment of the terms of the Mortgage Loan, whether agreed to by the Special Servicer or resulting from bankruptcy, insolvency or any similar proceeding involving the related borrower, the amount required to be advanced will be so reduced. The Master Servicer will not be required or permitted to make an advance for balloon payments, default interest, Excess Interest, prepayment premiums or yield maintenance charges or delinquent monthly debt service payments on the Companion Loans. The amount required to be advanced by the Master Servicer with respect to any Distribution Date in respect of delinquent payments of interest on any Mortgage Loan as to which an Appraisal Reduction Amount exists will equal the product of (i) the amount otherwise required to be advanced by the Master Servicer with respect to delinquent payments of interest without giving effect to such Appraisal Reduction Amount, and (ii) a fraction, the numerator of which is the Stated Principal Balance of such Mortgage Loan as of the last day of the related Collection Period, reduced by such Appraisal Reduction Amount, and the denominator of which is the Stated Principal Balance of such Mortgage Loan as of the last day of the related Collection Period. Appraisal Reduction Amounts will not affect advances in respect of delinquent payments of principal.
The Master Servicer will also be obligated (subject to the limitations described below) with respect to each Serviced Loan serviced, and each REO Property administered, under the Pooling and Servicing Agreement, to make cash advances (“Property Advances” and, together with P&I Advances, “Advances”) to pay all customary, reasonable and necessary “out of pocket” costs and expenses (including attorneys’ fees and fees and expenses of real estate brokers) incurred in connection with the servicing and administration of such Serviced Loan if a default is imminent thereunder or a default, delinquency or other unanticipated event has occurred, or in connection with the administration of any such REO Property, including, but not limited to, the cost of the preservation, insurance, restoration, protection and management of a related Mortgaged Property, the cost of delinquent real estate taxes and assessments, ground lease rent payments, condominium assessments, hazard insurance premiums and to cover other similar costs and expenses necessary to preserve the priority of or enforce the related Mortgage or to maintain a related Mortgaged Property, subject to a non-recoverability determination. The Master Servicer has no obligation to make any Property Advances with regard to any Outside Serviced Mortgage Loan. No Property Advances will be made with regard to a Subordinate Companion Loan if the related Mortgage Loan is no longer held by the Issuing Entity.
The Master Servicer will advance the cost of preparation of any environmental assessments required to be obtained in connection with taking title to any REO Property unless the Master Servicer determines, in accordance with the Servicing Standard, that such Advance would be a Nonrecoverable Advance but the cost of any compliance, containment, clean-up or remediation of an REO Property will be an expense of the Issuing Entity and paid from the Collection Account.
The Pooling and Servicing Agreement will obligate the Trustee to make any P&I Advance that the Master Servicer was obligated, but failed, to make unless the Trustee or the Special Servicer determines such P&I Advance would be a Nonrecoverable Advance.
The Special Servicer is required to request the Master Servicer to make Property Advances with respect to a Specially Serviced Loan or REO Property under the Pooling and Servicing Agreement. The Special Servicer
354 |
must make the request a specified number of days in advance of when the Property Advance is required to be made under the Pooling and Servicing Agreement. The Master Servicer, in turn, must make the requested Property Advance within a specified number of days following the Master Servicer’s receipt of the request unless the Master Servicer determines such Advance would be a Nonrecoverable Advance. The Special Servicer will have no obligation to make any Property Advance.
If the Master Servicer is required under the Pooling and Servicing Agreement to make a Property Advance, but does not do so within 15 days after the Property Advance is required to be made by it, then the Trustee will be required:
· | if a responsible officer of the Trustee has actual knowledge of the failure, to give the Master Servicer notice of its failure; and |
· | if the failure continues for three more business days, to make the Property Advance, unless the Trustee determines such Property Advance would be a Nonrecoverable Advance. |
The Master Servicer, the Special Servicer and the Trustee, as applicable, will each be entitled to receive interest on Advances at the Prime Rate, compounded annually (the “Advance Rate”), as of each Master Servicer Remittance Date;provided,however, that with respect to any P&I Advance made prior to the expiration of the related grace period, interest on such P&I Advance will accrue only from and after the expiration of such grace period. If the interest on such Advance is not recovered from Modification Fees on the related Mortgage Loan or Penalty Charges on any Mortgage Loan, a shortfall will result which will have the same effect as a liquidation loss on a defaulted Mortgage Loan. The “Prime Rate” is the rate on any day set forth as such inThe Wall Street Journal, Eastern edition.
The obligation of the Master Servicer or the Trustee, as applicable, to make Advances with respect to any Mortgage Loan pursuant to the Pooling and Servicing Agreement continues through the foreclosure of such Mortgage Loan and until the liquidation of such Mortgage Loan or the related Mortgaged Properties. Advances are intended to provide a limited amount of liquidity, not to guarantee or insure against losses.
Each Outside Servicer will (or is expected to) be obligated to make servicing advances with respect to the related Outside Serviced Loan Combination and will (or is expected to) be entitled to reimbursement for such servicing advances with interest at a prime lending rate. In addition, if any such servicing advance is determined to be a nonrecoverable advance under an Outside Servicing Agreement, then the Outside Servicer or the Outside Trustee, as applicable, will (or is expected to) be entitled to reimbursement from general collections on the Mortgage Loans in this securitization transaction for the pro rata portion of such nonrecoverable advances allocable to the related Outside Serviced Mortgage Loan (with interest at a prime lending rate) pursuant to the terms of the related Co-Lender Agreement.
If the Master Servicer or the Special Servicer, in accordance with the Servicing Standard, or the Trustee in its good faith business judgment, as applicable, determines that any Advance (together with accrued interest on the Advance) previously made by it (or, in the case of a determination by the Special Servicer, by the Master Servicer or the Trustee) will not be ultimately recoverable out of related late payments, net insurance proceeds, net condemnation proceeds, net liquidation proceeds or other collections with respect to the Mortgage Loan or REO Property, as the case may be, as to which such Advance was made (any such Advance, a “Nonrecoverable Advance”), then the Master Servicer or the Trustee, as applicable, will be entitled to be reimbursed for such Advance, plus interest on the Advance at the Advance Rate, out of amounts payable on or in respect of all of the Mortgage Loans and REO Properties prior to distributions on the Certificates, which will be deemed to have been reimbursed first out of amounts collected or advanced in respect of principal and then out of all other amounts collected on the Mortgage Loans and REO Properties.
In connection with a determination by the Master Servicer, the Special Servicer or the Trustee as to whether an Advance previously made or to be made constitutes or would constitute a Nonrecoverable Advance:
· | neither the Master Servicer nor the Trustee will be required to make any Advance that the Master Servicer, in accordance with the Servicing Standard, or the Trustee in its good faith business judgment, determines will not be ultimately recoverable (including interest accrued on the Advance) by the Master Servicer or the Trustee, as applicable, out of related late payments, net insurance |
355 |
proceeds, net condemnation proceeds, net liquidation proceeds or other collections with respect to the Mortgage Loan or REO Property, as the case may be, as to which such Advance was made; |
· | the Special Servicer may, at its option, make a determination in accordance with the Servicing Standard that any proposed Advance, if made, would be a Nonrecoverable Advance or that any outstanding Advance is a Nonrecoverable Advance and may deliver to the Master Servicer, the Trustee, the Controlling Class Representative (prior to the occurrence and continuance of a Consultation Termination Event) and, in the case of a Property Advance with respect to a Serviced Outside Controlled Loan Combination, the related Outside Controlling Note Holder notice of such determination, which determination will be conclusive and binding on the Master Servicer and the Trustee; |
· | although the Special Servicer may determine whether an outstanding Advance is a Nonrecoverable Advance, the Special Servicer will have no right to (i) make an affirmative determination that any Property Advance previously made, to be made (or contemplated to be made) by the Master Servicer or the Trustee is, or would be, recoverable or (ii) reverse any other authorized person’s determination or to prohibit any such other authorized person from making a determination, that an Advance constitutes or would constitute a Nonrecoverable Advance;provided that this sentence will not be construed to limit the Special Servicer’s right to make a determination that an Advance to be made (or contemplated to be made) would be or a previously made Advance is a Nonrecoverable Advance, as described in the preceding bullet; |
· | any non-recoverability determination by the Master Servicer or the Special Servicer described in this paragraph with respect to the non-recoverability of Advances will be conclusive and binding on the Master Servicer (in the case of such a determination by the Special Servicer) and the Trustee; and |
· | notwithstanding the foregoing, the Trustee may conclusively rely upon any determination by the Master Servicer or the Special Servicer that any Advance would be recoverable (unless a non-recoverability determination has been made by the other servicer in accordance with the preceding bullet which is binding on the Trustee), and the Master Servicer may conclusively rely upon any determination by the Special Servicer that any Advance would be recoverable. |
Any such judgment or determination with respect to the recoverability of Advances by any of the Trustee, the Master Servicer or the Special Servicer must be made (i) in the case of the Master Servicer or the Special Servicer, in accordance with the Servicing Standard, or (ii) in the case of the Trustee, in accordance with its good faith business judgment, and in any event will be required to be evidenced by an officer’s certificate delivered to, among others, the other such parties, the Controlling Class Representative (prior to the occurrence and continuance of a Control Termination Event) and, in the case of a Property Advance with respect to any Serviced Outside Controlled Loan Combination, the related Outside Controlling Note Holder, setting forth such judgment or determination of nonrecoverability and the procedures and considerations of the Master Servicer, the Special Servicer or the Trustee, as applicable, forming the basis of such determination.
With respect to an Outside Serviced Mortgage Loan and the Master Servicer’s and Trustee’s obligation to make P&I Advances, the Master Servicer and the Trustee may make their own independent determination as to the recoverability or the nonrecoverability notwithstanding any determination of the recoverability or the nonrecoverability, as the case may be, by the Outside Servicer or Outside Trustee. In addition, an Outside Servicer or Outside Special Servicer, as applicable, will be entitled to seek recovery from the Issuing Entity of the pro rata share of any non-recoverable servicing advance made with respect to such Outside Serviced Loan Combination, with interest at a prime lending rate.
The Master Servicer or the Trustee, as applicable, will be entitled to reimbursement for any Advance made by it, including, solely in the case of the Master Servicer or the Trustee, all P&I Advances made with respect to the Outside Serviced Mortgage Loans, equal to the amount of such Advance and interest accrued on the Advance at the Advance Rate (i) from Penalty Charges and Modification Fees on the related Mortgage Loan by the borrower and any other collections on the Mortgage Loan, (ii) from insurance proceeds, condemnation proceeds or Liquidation Proceeds collected on the defaulted Mortgage Loan or the related Mortgaged Property or (iii) upon determining in good faith that such Advance with interest is not recoverable from amounts described in clauses (i) and (ii), from any other amounts from time to time on deposit in the Collection Account.
356 |
Notwithstanding anything in this prospectus to the contrary, the Master Servicer may in accordance with the Servicing Standard elect (but is not required) to make a payment (and in the case of a Specially Serviced Loan, at the direction of the Special Servicer will be required to make a payment) from amounts on deposit in the Collection Account that would otherwise be a Property Advance with respect to a Mortgage Loan notwithstanding that the Master Servicer or the Special Servicer has determined that such a Property Advance would, if made, be a Nonrecoverable Advance, if making the payment would (x) prevent (i) the related Mortgaged Property from being uninsured or being sold at a tax sale or (ii) any event that would cause a loss of the priority of the lien of the related Mortgage, or the loss of any security for the related Mortgage Loan, or (y) would remediate any adverse environmental condition or circumstance at any of the Mortgaged Properties, if, in each instance, the Special Servicer or the Master Servicer, as applicable, determines in accordance with the Servicing Standard that making the payment is in the best interest of the Certificateholders (and, with respect to any Serviced Loan Combination, the related Serviced Companion Loan Holder) (as a collective whole as if such Certificateholders and/or the related Serviced Companion Loan Holder constituted a single lender) (and, with respect to a Serviced AB Loan Combination, taking into account the subordinate nature of the related Subordinate Companion Loan).
Notwithstanding the foregoing, if the funds in the Collection Account allocable to principal and available for distribution on the next Distribution Date are insufficient to fully reimburse the Master Servicer or the Trustee, as applicable, for a Nonrecoverable Advance, then such party may elect, on a monthly basis, in its sole discretion, to defer reimbursement of some or all of the portion that exceeds such amount allocable to principal (in which case interest will continue to accrue on the unreimbursed portion of the Advance) for a period not to exceed 12 months in any event;provided that any deferral in excess of six months will be subject to the consent of the Controlling Class Representative (or, in the case of a Property Advance with respect to a Serviced Outside Controlled Loan Combination, the related Outside Controlling Note Holder) (unless, if the Controlling Class Representative is the consenting party, a Control Termination Event has occurred and is continuing, in which case the Controlling Class Representative must be consulted with unless a Consultation Termination Event has occurred and is continuing). In addition, the Master Servicer or the Trustee, as applicable, will be entitled to recover any Advance that is outstanding at the time that a Mortgage Loan is modified but is not repaid in full by the borrower in connection with such modification but becomes an obligation of the borrower to pay such amounts in the future (such Advance, a “Workout-Delayed Reimbursement Amount”) out of principal collections in the Collection Account (net of any amounts used to pay a Nonrecoverable Advance or interest on such Nonrecoverable Advance). The Master Servicer or the Trustee will be permitted to recover a Workout-Delayed Reimbursement Amount from general collections in the Collection Account if the Master Servicer, the Special Servicer or the Trustee, as applicable, (a) has determined that such Workout-Delayed Reimbursement Amount would not be recoverable out of collections on the related Mortgage Loan or (b) has determined that such Workout-Delayed Reimbursement Amount would not ultimately be recoverable, along with any other Workout-Delayed Reimbursement Amounts and Nonrecoverable Advances, out of the principal portion of future collections on the Mortgage Loans and the REO Properties.
Any requirement of the Master Servicer or the Trustee to make an Advance in the Pooling and Servicing Agreement is intended solely to provide liquidity for the benefit of the Certificateholders and not as credit support or otherwise to impose on any such person the risk of loss with respect to one or more Mortgage Loans.
Any election described above by any party to refrain from reimbursing itself for any Nonrecoverable Advance (together with interest for that Nonrecoverable Advance) or portion of any Nonrecoverable Advance with respect to any Distribution Date will not be construed to impose on any party any obligation to make the above described election (or any entitlement in favor of any Certificateholder or any other person to an election) with respect to any subsequent Collection Period or to constitute a waiver or limitation on the right of the person making the election to otherwise be reimbursed for a Nonrecoverable Advance immediately (together with interest on that Nonrecoverable Advance). An election by the Master Servicer or the Trustee will not be construed to impose any duty on the other party to make an election (or any entitlement in favor of any Certificateholder or any other person to such an election). The fact that a decision to recover a Nonrecoverable Advance over time, or not to do so, benefits some Classes of Certificateholders to the detriment of other Classes of Certificateholders will not constitute a violation of the Servicing Standard or a breach of the terms of the Pooling and Servicing Agreement by any party, or a violation of any fiduciary duty owed by any party to the Certificateholders. The Master Servicer’s or the Trustee’s decision to defer reimbursement of such Nonrecoverable Advances as set forth above is an accommodation to the Certificateholders and is not to be construed as an obligation on the part of the Master Servicer, the Special Servicer or the Trustee or a right of the Certificateholders.
357 |
Accounts
The Master Servicer will be required to deposit amounts collected in respect of the Mortgage Loans into a segregated account (the “Collection Account”) established pursuant to the Pooling and Servicing Agreement. The Master Servicer will also be required to establish and maintain a segregated custodial account (the “Loan Combination Custodial Account”) with respect to each Serviced Loan Combination (if any), which may be a sub-account of the Collection Account and deposit amounts collected in respect of such Serviced Loan Combination in the related Loan Combination Custodial Account. The Issuing Entity will only be entitled to amounts on deposit in a Loan Combination Custodial Account to the extent these funds are not otherwise payable to a related Companion Loan Holder or payable or reimbursable to any party to the Pooling and Servicing Agreement. Any amounts in a Loan Combination Custodial Account to which the Issuing Entity is entitled will be transferred on a monthly basis to the Collection Account.
The Certificate Administrator will be required to establish and maintain the following two accounts, which may be sub-accounts of a single account: (i) the “Lower-Tier REMIC Distribution Account”, and (ii) the “Upper-Tier REMIC Distribution Account” (together with the Lower-Tier REMIC Distribution Account, the “Distribution Account”).
With respect to each Distribution Date, on the related Master Servicer Remittance Date, the Master Servicer will be required to disburse from the Collection Account and remit to the Certificate Administrator for deposit into the Lower-Tier REMIC Distribution Account in respect of the related Mortgage Loans, to the extent of funds on deposit in the Collection Account, the Available Funds for such Distribution Date and any prepayment premiums or yield maintenance charges collected during the related Collection Period (or, in the case of an Outside Serviced Mortgage Loan, received by the Master Servicer as of the close of business on the business day immediately preceding the applicable Master Servicer Remittance Date and not previously so remitted to the Certificate Administrator). In addition, the Master Servicer will be required to remit to the Certificate Administrator all P&I Advances for deposit into the Lower-Tier REMIC Distribution Account on the related Master Servicer Remittance Date. To the extent the Master Servicer fails to do so, the Trustee will deposit all P&I Advances into the Lower-Tier REMIC Distribution Account, as applicable, as described in this prospectus. On each Distribution Date, the Certificate Administrator will be required to withdraw amounts distributable on such date on the Regular Certificates, the Class R Certificates (other than in respect of the residual interest in the Lower-Tier REMIC) and the Trust Components first, from the Lower-Tier REMIC Distribution Account, and deposit such amounts in the Upper-Tier REMIC Distribution Account for distribution on the Certificates. See “Description of the Certificates—Distributions”.
The Certificate Administrator will also be required to establish and maintain an account (the “Interest Reserve Account”), which may, together with any other Securitization Account(s), be a sub-account of a single account. On each Master Servicer Remittance Date occurring in January (except during a leap year) or February (commencing in 2017) (unless, in either case, the related Distribution Date is the final Distribution Date), the Master Servicer will be required to remit to the Certificate Administrator for deposit, in respect of each Mortgage Loan that accrues interest on an Actual/360 basis, an amount equal to one day’s interest at the related Net Mortgage Rate on the respective Stated Principal Balance, as of the close of business on the Distribution Date in the month preceding the month in which such Master Servicer Remittance Date occurs, to the extent the applicable Monthly Payment or a P&I Advance is made in respect of the Monthly Payment (all amounts so deposited in any consecutive January (if applicable) and February, “Withheld Amounts”). On each Master Servicer Remittance Date occurring in March (or February, if such Distribution Date is the final Distribution Date), the Certificate Administrator will be required to withdraw from the Interest Reserve Account an amount equal to the Withheld Amounts, if any, from the preceding January (if applicable) and February, and deposit such amount into the Lower-Tier REMIC Distribution Account.
If there are any ARD Loans included in the Issuing Entity, the Certificate Administrator will also be required to establish and maintain an account (the “Excess Interest Distribution Account”), which may, together with any other Securitization Account(s), be a sub-account of a single account. The Excess Interest Distribution Account will be an asset of the Grantor Trust. On the Master Servicer Remittance Date immediately preceding the applicable Distribution Date, the Master Servicer is required to remit to the Certificate Administrator for deposit into the Excess Interest Distribution Account an amount equal to any Excess Interest received by the Master Servicer during the related Collection Period.Because there are no ARD Loans in the Issuing Entity, the Certificate Administrator will not establish an Excess Interest Distribution Account.
358 |
The Certificate Administrator will also be required to establish and maintain an account (the “Excess Liquidation Proceeds Reserve Account”), which may, together with any other Securitization Account(s), be a sub-account of a single account. To the extent that any gains are realized on sales of Mortgaged Properties, such gains will be deposited into the Excess Liquidation Proceeds Reserve Account and applied to all amounts due and payable on the Regular Certificates and the Trust Components and all Realized Losses allocable to such Certificates or Trust Components after application of the Available Funds for such Distribution Date. However, holders of the Class R Certificates will be entitled to distributions of amounts on deposit in the Excess Liquidation Proceeds Reserve Account that exceed amounts reasonably anticipated to be required to offset possible future Realized Losses, as determined by the Special Servicer from time to time, or that remain after all distributions with respect to the Regular Certificates on the final Distribution Date.
The Certificate Administrator will also be required to establish and maintain an account (the “ExchangeableDistribution Account”), for the benefit of holders of Exchangeable Certificates and the Class EC Certificates, which may, together with any other Securitization Account(s), be a sub-account of a single account. Amounts distributed with respect to a Trust Component are to be deposited in the Exchangeable Distribution Account and then withdrawn and distributed in the appropriate proportions to the holders of the applicable Class of Exchangeable Certificates and the Class EC Certificates.
Other accounts to be established pursuant to the Pooling and Servicing Agreement are one or more segregated custodial accounts (each, an “REO Account”) for collections from REO Properties and the Loss of Value Reserve Fund.
The Collection Account, any Loan Combination Custodial Account, any REO Account, the Loss of Value Reserve Fund, the Distribution Account, the Interest Reserve Account, the Exchangeable Distribution Account, the Excess Liquidation Proceeds Reserve Account and the Excess Interest Distribution Account will be held in the name of the Certificate Administrator (or the Master Servicer (in the case of the Collection Account and each Loan Combination Custodial Account) or the Special Servicer (in the case of any REO Account and the Loss of Value Reserve Fund)) on behalf of the Trustee for the benefit of the holders of Certificates. Each of the Collection Account, any Loan Combination Custodial Account, any REO Account, the Loss of Value Reserve Fund, the Distribution Account, the Interest Reserve Account, any escrow account, the Exchangeable Distribution Account, the Excess Liquidation Proceeds Reserve Account and the Excess Interest Distribution Account will be held at a depository institution or trust company meeting the requirements of the Pooling and Servicing Agreement or satisfactory to the Rating Agencies.
Amounts on deposit in the Distribution Account, the Exchangeable Distribution Account, the Excess Liquidation Proceeds Reserve Account, the Excess Interest Distribution Account and the Interest Reserve Account will remain uninvested, and such accounts will be non-interest bearing.
Amounts on deposit in the Collection Account, any Loan Combination Custodial Account, the Excess Interest Distribution Account, any REO Account and the Loss of Value Reserve Fund may be invested in certain United States government securities and other high-quality investments meeting the requirements of the Pooling and Servicing Agreement or otherwise satisfactory to the Rating Agencies, and maturing (unless payable on demand) no later than the business day preceding the date on which such funds are required to be withdrawn pursuant to the Pooling and Servicing Agreement. Interest or other income earned on funds in the Collection Account, any Loan Combination Custodial Account and certain other servicing accounts will be paid to the Master Servicer as additional servicing compensation, and interest or other income earned on funds in any REO Account and the Loss of Value Reserve Fund will be payable to the Special Servicer.
If with respect to any Serviced Loan the related Mortgage Loan documents permit the lender to, at its option prior to an event of default under the related Serviced Loan, apply amounts held in any reserve account as a prepayment or hold such amounts in a reserve account, neither the Master Servicer or the Special Servicer, as applicable, may apply such amounts as a prepayment, and will instead continue to hold such amounts in the applicable reserve account. Such amount may be used, if permitted under the Serviced Loan documents, to defease the loan, or may be used to prepay the Serviced Loan upon a subsequent default.
Withdrawals from the Collection Account
The Master Servicer may make withdrawals from the Collection Account (exclusive of any Loan Combination Custodial Account that may be a subaccount thereof) for the following purposes, to the extent permitted, as well
359 |
as any other purpose described in this prospectus (the order set forth below not constituting an order of priority for such withdrawals): (i) to remit on or before each Master Servicer Remittance Date (A) to the Certificate Administrator for deposit into the Lower-Tier REMIC Distribution Account an amount equal to the sum of (I) the Available Funds for the related Distribution Date (to the extent on deposit in the Collection Account) and (ii) any prepayment premiums or yield maintenance charges collected during the related Collection Period (or, in the case of an Outside Serviced Mortgage Loan, received by the Master Servicer as of the close of business on the business day immediately preceding the applicable Master Servicer Remittance Date and not previously so remitted to the Certificate Administrator), (B) to the Certificate Administrator, as compensation for it and the Trustee, the Trustee/Certificate Administrator Fee for the related Distribution Date, (C) to the Certificate Administrator for deposit into the Excess Liquidation Proceeds Reserve Account an amount equal to the excess Liquidation Proceeds received during the related Collection Period (or, in the case of an Outside Serviced Mortgage Loan, received by the Master Servicer as of the close of business on the business day immediately preceding the applicable Master Servicer Remittance Date and not previously so remitted to the Certificate Administrator), if any,(D) to the Certificate Administrator for deposit into the Excess Interest Distribution Account an amount equal to the Excess Interest received during the related Collection Period, if any, and (E) if such Master Servicer Remittance Date occurs in January (except during a leap year) or February (unless, in either case, the related Distribution Date is the final Distribution Date), to the Certificate Administrator for deposit into the Interest Reserve Account an amount required to be withheld as described above under “—Accounts,” (ii) to pay or reimburse the Master Servicer and the Trustee, as applicable, pursuant to the terms of the Pooling and Servicing Agreement for Advances made by any of them and interest on Advances (the Master Servicer’s or the Trustee’s right, as applicable, to reimbursement for items described in this clause (ii) being limited as described above under “—Advances”), (iii) to pay on or before each Master Servicer Remittance Date (x) to the Master Servicer as compensation, the aggregate unpaid Servicing Fee earned with respect to the Mortgage Loans through the end of the most recently ended Interest Accrual Period, and (y) to the Special Servicer as compensation, unpaid special servicing compensation earned with respect to the Mortgage Loans through the immediately preceding Determination Date (or, in the case of Special Servicing Fees, accrued with respect to the Mortgage Loans that are Specially Serviced Loans through the end of the most recently ended Interest Accrual Period), (iv) to pay to the Operating Advisor the Operating Advisor Consulting Fee (but only to the extent actually received from the related borrower) and the Operating Advisor Fee, (v) to pay to the Asset Representations Reviewer the Asset Representations Reviewer Ongoing Fee and any unpaid Asset Representations Reviewer Asset Review Fee (to the extent such fee is to be payable by the Issuing Entity), (vi) to pay on or before each Distribution Date to any person with respect to each related Mortgage Loan or REO Property that has previously been purchased or repurchased by such person pursuant to the Pooling and Servicing Agreement, a Mortgage Loan Purchase Agreement, a Co-Lender Agreement (if applicable) or a mezzanine intercreditor agreement, all amounts received on such Mortgage Loan or REO Property during the related Collection Period and subsequent to the date as of which the amount required to effect such purchase or repurchase was determined, (vii) to the extent not reimbursed or paid pursuant to any of the above clauses, to reimburse or pay the Master Servicer, the Special Servicer, the Trustee, the Custodian, the Certificate Administrator, the Operating Advisor, the Asset Representations Reviewer, and/or the Depositor for unpaid compensation (in the case of the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator or the Operating Advisor), unpaid additional expenses of the Issuing Entity and certain other unreimbursed expenses incurred by such person pursuant to and to the extent reimbursable under the Pooling and Servicing Agreement and to satisfy any indemnification obligations of the Issuing Entity under the Pooling and Servicing Agreement, (viii) to pay to the Certificate Administrator amounts reasonably determined by the Certificate Administrator to be necessary to pay any applicable federal, state or local taxes imposed on either Trust REMIC, (ix) to pay the CREFC® Intellectual Property Royalty License Fee, (x) to make such payments and reimbursements out of funds transferred to the Collection Account from the Loss of Value Reserve Fund as described under “—Application of Loss of Value Payments” below, (xi) to withdraw any amount deposited into the Collection Account that was not required to be deposited in the Collection Account, and (xii) to clear and terminate the Collection Account pursuant to a plan for termination and liquidation of the Issuing Entity. However, certain of the foregoing withdrawals of items specifically related to a Serviced Loan Combination or related REO Property will first be made out of the related Loan Combination Custodial Account and will be made out of the Collection Account only if and to the extent that amounts in the related Loan Combination Custodial Account are insufficient or, based on the related Co-Lender Agreement, unavailable to make the relevant payment or reimbursement. If the Master Servicer makes any reimbursement or payment out of the Collection Account to cover the related Serviced Companion Loan Holder’s share of any cost, expense, indemnity, Property Advance or interest on such Property Advance, or fee with respect to a Serviced Loan Combination (taking into account the subordinate nature of any related Subordinate Companion Loan), then the Master Servicer (with respect to non-Specially Serviced Loans) and the Special Servicer (with respect to Specially Serviced Loans) must use efforts consistent with the Servicing Standard to collect such amount out of collections
360 |
on such Serviced Companion Loan or, if and to the extent permitted under the related Co-Lender Agreement, from such Serviced Companion Loan Holder. The Master Servicer will also be entitled to make withdrawals from the Collection Account of amounts necessary for the payments or reimbursements required to be paid to the parties to, and/or the securitization trust created under, any Outside Servicing Agreement pursuant to the related Co-Lender Agreement.
If a P&I Advance is made with respect to any Serviced Mortgage Loan that is part of a Serviced Pari Passu Loan Combination, then that P&I Advance, together with interest on such P&I Advance, may only be reimbursed out of future payments and collections on that Serviced Mortgage Loan or, as and to the extent described under “—Advances” above, on other Mortgage Loans, but not out of payments or other collections on the related Serviced Pari Passu Companion Loan. Likewise, the Trustee/Certificate Administrator Fee, the Operating Advisor Fee and the Asset Representations Reviewer Ongoing Fee that accrue with respect to any Serviced Mortgage Loan that is part of a Serviced Loan Combination and any other amounts payable to the Operating Advisor may only be paid out of payments and other collections on such Serviced Mortgage Loan and/or the Mortgage Pool generally, but not out of payments or other collections on the related Serviced Companion Loan.
Application of Loss of Value Payments
If any Loss of Value Payments are deposited into the Loss of Value Reserve Fund with respect to any Mortgage Loan or any related REO Property, then the Special Servicer will be required to transfer such Loss of Value Payments (up to the remaining portion of such Loss of Value Payments) from the Loss of Value Reserve Fund to the Master Servicer for deposit into the Collection Account for the following purposes:
(i) to reimburse the Master Servicer or the Trustee, in accordance with the terms of the Pooling and Servicing Agreement, for any Non-Recoverable Advance made by such party with respect to such Mortgage Loan or any related REO Property (together with interest on such Advance);
(ii) to pay, or to reimburse the Issuing Entity for the prior payment of, any expense relating to such Mortgage Loan or any related REO Property that constitutes or, if not paid out of such Loss of Value Payments, would constitute an additional expense of the Issuing Entity, and to pay, in accordance with the terms of the Pooling and Servicing Agreement, any unpaid Liquidation Fee due and owing to the Special Servicer with respect to such Mortgage Loan or any related REO Property;
(iii) to offset any portion of Realized Losses that are attributable to such Mortgage Loan or related REO Property (as calculated without regard to the application of such Loss of Value Payments), incurred with respect to such Mortgage Loan or any related successor REO Mortgage Loan;
(iv) following the liquidation of such Mortgage Loan or any related REO Property and any related transfers from the Loss of Value Reserve Fund with respect to the items contemplated by the immediately preceding clauses (i) to (iii) above as to such Mortgage Loan, to cover the items contemplated by the immediately preceding clauses (i) to (iii) in respect of any other Mortgage Loan or REO Mortgage Loan; and
(v) on the final Distribution Date after all distributions have been made as set forth in clauses (i) through (iv) above, to each Sponsor, its pro rata share, based on the amount that it contributed, net of any amount contributed by such Sponsor that was used pursuant to clauses (i) to (iii) above to offset any portion of Realized Losses that are attributable to such Mortgage Loan or related REO Property, additional expenses of the Issuing Entity or any Non-Recoverable Advances incurred with respect to the Mortgage Loan related to such contribution.
Servicing and Other Compensation and Payment of Expenses
Master Servicing Compensation
The fee of the Master Servicer (the “Servicing Fee”) will be payable monthly from amounts received in respect of the related Mortgage Loan and any related Serviced Companion Loan (including any Specially Serviced Loan and any Outside Serviced Mortgage Loan) or any successor REO Mortgage Loan or successor REO Companion Loan. With respect to each such Mortgage Loan and Serviced Companion Loan (including each Specially Serviced Loan and each Outside Serviced Mortgage Loan) or any successor REO Mortgage Loan or successor REO Companion Loan, the Servicing Fee will: (a) accrue on the related Stated Principal Balance at
361 |
a fixed annual rate (the “Servicing Fee Rate”), which, together with the CREFC® Intellectual Property Royalty License Fee Rate (in the case of a Mortgage Loan), the Trustee/Certificate Administrator Fee Rate (in the case of a Mortgage Loan), the Operating Advisor Fee Rate (in the case of a Mortgage Loan) and the Asset Representations Reviewer Ongoing Fee Rate (in the case of a Mortgage Loan), is equal to the per annum rate set forth on Annex A to this prospectus as the Administrative Fee Rate with respect to such Mortgage Loan or Serviced Companion Loan; (b) be calculated on the same interest accrual basis (e.g., an Actual/360 Basis or a 30/360 Basis) as interest is calculated on the related Mortgage Loan or Serviced Companion Loan, and (c) be prorated for partial periods. The Servicing Fee includes (i) all amounts required to be paid to any primary servicer or subservicer, and (ii) (a) with respect to the Sheraton Denver Downtown Fee Mortgage Loan, the 0.00250% per annum servicing fee required to be paid to the CGCMT 2016-GC36 Master Servicer, (b) with respect to the 79 Madison Avenue Mortgage Loan, the 0.00250% per annum servicing fee required to be paid to the CGCMT 2016-P3 Servicer, (c) with respect to the Austin Block 21 Mortgage Loan, the aggregate 0.00750% per annum servicing fee required to be paid to the CGCMT 2016-GC36 Master Servicer and the subservicer for the Austin Block 21 Loan Combination, (d) with respect to the 600 Broadway Mortgage Loan, the 0.00250% per annum servicing fee required to be paid to the CGCMT 2016-P3 Servicer and, following the 600 Broadway Companion Loan Securitization Date, expected to be paid to the 600 Broadway Servicer, (e) with respect to the 5 Penn Plaza Mortgage Loan, the 0.00250% per annum servicing fee required to be paid to the CGCMT 2016-GC36 Master Servicer, and (f) with respect to the Park Place Mortgage Loan, the 0.02000% per annum servicing fee required to be paid to the CGCMT 2016-GC36 Master Servicer.
With respect to any Distribution Date, the Master Servicer will be entitled to retain any Prepayment Interest Excesses received on the Serviced Loans to the extent not needed to make Compensating Interest Payments. In addition to the Servicing Fee, the Master Servicer will be entitled to retain, as additional servicing compensation (a) a specified percentage (which may be either 50% or 100% for performing Serviced Loans, and 0% for Specially Serviced Loans) of Excess Modification Fees, Excess Penalty Charges, Consent Fees, Ancillary Fees (other than fees for insufficient or returned checks), extension fees and Assumption Fees with respect to each Serviced Loan, (b) 100% of any assumption application fees with respect to each Serviced Loan that is not a Specially Serviced Loan, any defeasance fee received in connection with the defeasance of a Serviced Loan (which defeasance fee will not include the Special Servicer’s portion of any Modification Fees or waiver fees in connection with a defeasance to which the Special Servicer is entitled to under the Pooling and Servicing Agreement), and (c) 100% of fees for insufficient or returned checks actually received from borrowers on all Serviced Loans. With respect to Excess Penalty Charges, the Master Servicer will be entitled to any collections of Excess Penalty Charges that represent amounts accrued while the related Serviced Loan is a non-Specially Serviced Loan even if collected when the Serviced Loan is a Specially Serviced Loan. The Master Servicer also is authorized but not required to invest or direct the investment of funds held in the Collection Account and any Loan Combination Custodial Account in certain investments permitted under the terms of the Pooling and Servicing Agreement, and the Master Servicer will be entitled to retain any interest or other income earned on those funds and will bear any losses resulting from the investment of these funds, except as set forth in the Pooling and Servicing Agreement. The Master Servicer also is entitled to retain any interest earned on any servicing escrow account to the extent the interest is not required to be paid to the related borrowers. The Master Servicer will be entitled to charge and retain reasonable review fees in connection with any borrower request to the extent such fees are permitted under the related Mortgage Loan documents and are actually paid by or on behalf of the related borrower.
Although the Master Servicer is required to service and administer the Serviced Loans in accordance with the Servicing Standard and, accordingly, without regard to its rights to receive compensation under the Pooling and Servicing Agreement, additional servicing compensation in the nature of assumption and modification fees may under certain circumstances provide the Master Servicer with an economic disincentive to comply with this standard.
The Master Servicer will be entitled to designate a portion of the Servicing Fee accrued on the Mortgage Loans and the Serviced Companion Loans at a specified rate per annum, the right to which portion will be transferable by the Master Servicer to other parties. That specified rate will be subject to reduction at any time following any resignation of the Master Servicer or any termination of the Master Servicer for cause, in each case to the extent reasonably necessary for the Trustee to appoint a successor Master Servicer that satisfies the requirements of the Pooling and Servicing Agreement.
“Consent Fees” means, with respect to any Serviced Loan, any and all fees actually paid by a borrower with respect to any consent or approval required or requested pursuant to the terms of the Serviced Loan documents
362 |
that does not involve a modification evidenced by a signed writing, assumption, extension, waiver or amendment of the terms of the Serviced Loan documents.
“Excess Modification Fees” means, with respect to any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable), the sum of (A) the excess of (i) any and all Modification Fees with respect to a modification, waiver, extension or amendment of any of the terms of a Serviced Mortgage Loan (or Serviced Loan Combination, if applicable),over (ii) all unpaid or unreimbursed Advances and additional expenses of the Issuing Entity (including, without limitation, interest on unreimbursed Advances with respect to such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable), but excluding (1) Special Servicing Fees, Workout Fees and Liquidation Fees and (2) Borrower Delayed Reimbursements) outstanding or previously incurred on behalf of the Issuing Entity with respect to the related Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) and reimbursed from such Modification Fees (which additional expenses will be reimbursed from such Modification Fees) and (B) expenses previously paid or reimbursed from Modification Fees as described in the preceding clause (A), which expenses have been recovered from the related borrower as Penalty Charges, specific reimbursements or otherwise. All Excess Modification Fees earned by the Special Servicer will be required to offset any future Workout Fees or Liquidation Fees payable with respect to the related Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) or REO Property;provided, that if the Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) ceases being a Corrected Loan, and is subject to a subsequent modification, any Excess Modification Fees earned by the Special Servicer prior to such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) ceasing to be a Corrected Loan will no longer be offset against future Liquidation Fees and Workout Fees unless such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) ceased to be a Corrected Loan within 18 months of it becoming a modified Mortgage Loan (or a modified Loan Combination, if applicable). In such case, the Special Servicer will be entitled to a Liquidation Fee or Workout Fee (to the extent not previously offset) with respect to the new modification, waiver, extension or amendment or future liquidation of the Specially Serviced Loan or related REO Property (including in connection with a repurchase, sale, refinance, discounted or final payoff or other liquidation);provided that any Excess Modification Fees earned and paid to the Special Servicer in connection with such subsequent modification, waiver, extension or amendment will be applied to offset such Liquidation Fee or Workout Fee to the extent described above. Within any prior 12-month period, all Excess Modification Fees earned by the Master Servicer or the Special Servicer (after taking into account any offset described above applied during such 12- month period) with respect to any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) will be subject to a cap equal to the greater of (i) 1% of the outstanding principal balance of such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) after giving effect to such transaction and (ii) $25,000.
“Borrower Delayed Reimbursements” means any unpaid or unreimbursed additional expenses (including, without limitation, Advances and interest on Advances) that the related borrower is required pursuant to a written modification agreement to pay in the future to the Issuing Entity in its capacity as owner of the related Mortgage Loan.
“Modification Fees” means, with respect to any Serviced Loan, any and all fees collected from the related borrower with respect to a modification, extension, waiver or amendment that modifies, extends, amends or waives any term of the Serviced Loan documents (as evidenced by a signed writing) agreed to by the Master Servicer or the Special Servicer (other than all Assumption Fees, assumption application fees, Consent Fees and defeasance fees).
“Penalty Charges” means, with respect to any Mortgage Loan (or Serviced Loan Combination, if applicable) (or successor REO Mortgage Loan or successor REO Companion Loan), any amounts actually collected thereon from the borrower that represent default charges, penalty charges, late fees and default interest (in the case of any Split Mortgage Loan or Serviced Companion Loan, to the extent allocable thereto pursuant to the related Co-Lender Agreement, and, in the case of a Serviced Companion Loan, to the extent not payable to the Serviced Companion Loan Holder, and, in the case of an Outside Serviced Mortgage Loan, to the extent remitted by the Outside Servicer to the Master Servicer).
“Ancillary Fees” means, with respect to any Serviced Loan, any and all demand fees, beneficiary statement charges, fees for insufficient or returned checks and other usual and customary charges and fees (other than Modification Fees, Consent Fees, Penalty Charges, defeasance fees, Assumption Fees and assumption application fees) actually received from the borrower.
363 |
“Excess Penalty Charges” means, with respect to any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) and any Collection Period, the sum of (A) the excess of (i) any and all Penalty Charges collected in respect of such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) during such Collection Period,over (ii) all unpaid or unreimbursed Advances and additional expenses of the Issuing Entity (including without limitation Advances and interest on Advances to the extent not otherwise paid or reimbursed by the borrower, but excluding Special Servicing Fees, Workout Fees and Liquidation Fees) outstanding or previously incurred on behalf of the Issuing Entity (and, if applicable, the related Serviced Companion Loan Holder) with respect to such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) and reimbursed from such Penalty Charges (which Advances and additional expenses will be reimbursed from such Penalty Charges) and (B) Advances and expenses previously paid or reimbursed from Penalty Charges as described in the immediately preceding clause (A), which Advances and expenses have been recovered from the related borrower or otherwise.
“Assumption Fees” means, with respect to any Serviced Loan, any and all assumption fees with respect to a transfer of a related Mortgaged Property or interests in a related borrower (excluding assumption application fees).
An Outside Servicer will be entitled to receive servicing compensation with respect to the related Outside Serviced Loan Combination pursuant to the terms of the Outside Servicing Agreement, which servicing compensation will be similar, but not necessarily identical, to that payable to the Master Servicer with respect to a Serviced Loan Combination under the Pooling and Servicing Agreement (except that the applicable primary servicing fee rate under the related Outside Servicing Agreement will be as indicated above under this “—Servicing and Other Compensation and Payment of Expenses—Master Servicing Compensation” heading, and below in the footnotes to the table under the “—Servicing and Other Compensation and Payment of Expenses—Fees and Expenses” heading, and in each case such applicable primary servicing fee rate is included in the related Servicing Fee Rate presented in this prospectus).
Special Servicing Compensation
The principal compensation to be paid to the Special Servicer in respect of its special servicing activities will be the Special Servicing Fee, the Workout Fee and the Liquidation Fee.
The “Special Servicing Fee” will accrue with respect to each Specially Serviced Loan and REO Property serviced and administered under the Pooling and Servicing Agreement at the applicable Special Servicing Fee Rate calculated on the basis of the Stated Principal Balance of the related Specially Serviced Loan on the same interest accrual basis (e.g., an Actual/360 Basis or a 30/360 Basis) as interest is calculated on the related Specially Serviced Loan and will be prorated for partial periods, and will be payable monthly from general collections on all the Mortgage Loans and any REO Properties.
“Special Servicing Fee Rate” means (a) 0.25% per annum or (b) if such rate in clause (a) would result in a Special Servicing Fee with respect to a Specially Serviced Loan or REO Property serviced and administered under the Pooling and Servicing Agreement, that would be less than $3,500 in any given month, then the Special Servicing Fee Rate for such month for such Specially Serviced Loan or REO Property will be such higher per annum rate as would result in a Special Servicing Fee equal to $3,500 for such month with respect to such Specially Serviced Loan or REO Property.
The “Workout Fee” will generally be payable with respect to each Corrected Loan serviced and administered under the Pooling and Servicing Agreement, and will be calculated by application of the applicable Workout Fee Rate to each collection of interest (excluding default interest and Excess Interest) and principal received on that Corrected Loan, for so long as it remains a Corrected Loan;provided that no Workout Fee will be payable by the Issuing Entity with respect to any such Corrected Loan if and to the extent that the Corrected Loan became a Specially Serviced Loan under clause (g) of the definition of “Specially Serviced Loan” (and no other clause of that definition) and no event of default actually occurs, unless the Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) is modified by the Special Servicer in accordance with the terms of the Pooling and Servicing Agreement;provided,further, that if a Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) becomes a Specially Serviced Loan under the Pooling and Servicing Agreement only because of an event described in the second bullet of clause (a) of the definition of “Specially Serviced Loan” as a result of a payment default at maturity and the related collection of interest and principal is received within 90 days following the related maturity date in connection with the full and final payoff or refinancing of the related Serviced
364 |
Mortgage Loan (or Serviced Loan Combination, if applicable), the Special Servicer will not be entitled to collect a Workout Fee, but may collect and retain appropriate fees from the related borrower in connection with such workout. The Workout Fee with respect to any Specially Serviced Loan that becomes a Corrected Loan under the Pooling and Servicing Agreement will be reduced by any Excess Modification Fees paid by or on behalf of the related borrower with respect to such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) as described in the definition of Excess Modification Fees, but only to the extent those fees have not previously been deducted from a Workout Fee or Liquidation Fee.
The Workout Fee with respect to any Corrected Loan serviced and administered under the Pooling and Servicing Agreement, will cease to be payable if the Corrected Loan again becomes a Specially Serviced Loan but will become payable again if and when the Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) again becomes a Corrected Loan.
The “Workout Fee Rate” under the Pooling and Servicing Agreement will be a rate equal to the lesser of (a) 1.0% and (b) such lower rate as would result in a workout fee of $1,000,000 when applied to each expected payment of principal and interest (other than default interest and Excess Interest) on the subject Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) from the date such Mortgage Loan (or Serviced Loan Combination, if applicable) becomes a Corrected Loan, through and including the then-related maturity date;provided that, if the rate in clause (a) above would result in a Workout Fee that would be less than $25,000 when applied to each expected payment of principal and interest (other than default interest and Excess Interest) on the subject Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) from the date such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) becomes a Corrected Loan through and including the then-related maturity date, then the Workout Fee Rate will be a rate equal to such higher rate as would result in a Workout Fee equal to $25,000 when applied to each expected payment of principal and interest (other than default interest and Excess Interest) on such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) from the date such Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) becomes a Corrected Loan through and including the then-related maturity date.
If the Special Servicer resigns or is terminated other than for cause, it will receive any Workout Fees payable on the Serviced Mortgage Loans (or Serviced Loan Combinations, if applicable) that were Corrected Loans at the time of the resignation or termination or for which the resigning or terminated Special Servicer had cured the event of default through a modification, restructuring or workout negotiated by the Special Servicer and evidenced by a signed writing, but which had not as of the time the Special Servicer resigned or was terminated become a Corrected Loan solely because the borrower had not had sufficient time to make three consecutive full and timely Monthly Payments and which subsequently becomes a Corrected Loan as a result of the borrower making such three consecutive timely Monthly Payments, but such fee will cease to be payable in each case if the Corrected Loan again becomes a Specially Serviced Loan. The successor Special Servicer will not be entitled to any portion of those Workout Fees.
A “Liquidation Fee” will be payable: (i) with respect to each Specially Serviced Loan serviced and administered under the Pooling and Servicing Agreement, 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, (ii) except as otherwise described below, with respect to any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) repurchased or substituted for, or with respect to which a Loss of Value Payment is made, by a Sponsor, and (iii) with respect to any Specially Serviced Loan or any REO Property serviced and administered under the Pooling and Servicing Agreement, as to which the Special Servicer receives any Liquidation Proceeds, insurance proceeds or condemnation proceeds. The Liquidation Fee for each such Serviced Mortgage Loan, Specially Serviced Loan or REO Property serviced and administered under the Pooling and Servicing Agreement, will be payable from, and will be calculated by application of the Liquidation Fee Rate, to the related payment or proceeds;provided, that the Liquidation Fee with respect to any such Specially Serviced Loan or REO Property will be reduced by the amount of any Excess Modification Fees paid by or on behalf of the related borrower with respect to the Specially Serviced Loan or REO Property as described in the definition of “Excess Modification Fees” but only to the extent those fees have not previously been deducted from a Workout Fee or Liquidation Fee;provided,further, that if a Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) becomes a Specially Serviced Loan under the Pooling and Servicing Agreement only because of an event described in the second bullet of clause (a) of the definition of “Specially Serviced Loan” as a result of a payment default at maturity and the related proceeds or payment are received within 90 days following the related default in connection with the full and final payoff or refinancing of the related Serviced Mortgage Loan or Serviced Loan Combination, if applicable, the Special
365 |
Servicer will not be entitled to collect a Liquidation Fee, but may collect and retain appropriate fees from the related borrower in connection with such liquidation;provided,however, that, except as contemplated by each of the immediately preceding provisos and the second following paragraph, no Liquidation Fee will be less than $25,000. Notwithstanding the foregoing, in the event a party to the Pooling and Servicing Agreement is required to enforce the obligations of a Mortgage Loan Seller under its related Mortgage Loan Purchase Agreement with respect to an Outside Serviced Mortgage Loan, such party may be entitled to receive a liquidation fee (similar to the Liquidation Fee) in the amount and under the circumstances set forth in the Pooling and Servicing Agreement.
The “Liquidation Fee Rate” under the Pooling and Servicing Agreement will be a rate equal to the lesser of (a) such rate as would result in a Liquidation Fee of $1,000,000 and (b) 1.0%.
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, or substitution for, or payment of any Loss of Value Payment with respect to, any Mortgage Loan by the applicable Sponsor for a Material Defect within 120 days of the discovery or receipt of notice by the Sponsor of the Material Defect that gave rise to the particular repurchase or substitution obligation or the payment of the particular Loss of Value Payment, (ii) the purchase of any Specially Serviced Loan or REO Property by a mezzanine loan holder, if any (based on a purchase option set forth under the related intercreditor agreement), or the holder of a Subordinate Companion Loan , if any (based on a purchase option set forth under the related Co-Lender Agreement or the Pooling and Servicing Agreement), in each case within 90 days of the date that the first purchase option related to the subject Servicing Transfer Event first becomes exercisable; or (iii) the purchase or other acquisition of all of the Mortgage Loans and REO Properties (or the Issuing Entity’s interest therein) in connection with an optional termination of the Issuing Entity. The Special Servicer may not receive a Workout Fee and a Liquidation Fee with respect to the same proceeds collected on a Mortgage Loan.
“Liquidation Proceeds” means the amount (other than insurance proceeds and condemnation proceeds) received in connection with (i) a liquidation of a Mortgage Loan, Serviced Companion Loan, Mortgaged Property, REO Property or interest in a Mortgage Loan, Serviced Companion Loan, Mortgaged Property or REO Property or (ii) the transfer of any Loss of Value Payments from the Loss of Value Reserve Fund to the Collection Account in accordance with the Pooling and Servicing Agreement (provided that for the purpose of determining the amount of the Liquidation Fee (if any) payable to the Special Servicer in connection with such Loss of Value Payment, the full amount of such Loss of Value Payment will be deemed to constitute “Liquidation Proceeds” from which the Liquidation Fee (if any) is payable as of such time such Loss of Value Payment is made by the applicable Sponsor).
“Defaulted Mortgage Loan” means a Serviced Loan (i) that is delinquent at least 60 days in respect of its Monthly Payments or delinquent in respect of its balloon payment, if any, in either case such delinquency to be determined without giving effect to any grace period permitted by the related Mortgage or Mortgage Note and without regard to any acceleration of payments under the related Mortgage and Mortgage Note or (ii) as to which the Master Servicer or the Special Servicer has, by written notice to the related borrower, accelerated the maturity of the indebtedness evidenced by the related Mortgage Note.
The Special Servicer will also be entitled to retain, as additional servicing compensation: (a) a specified percentage (which may be either 0% or 50% for performing Serviced Loans, and 100% for Specially Serviced Loans) of Excess Modification Fees, Excess Penalty Charges, Consent Fees, Ancillary Fees (other than fees for insufficient or returned checks), extension fees and Assumption Fees with respect to each Serviced Loan; (b) 100% of any assumption application fees with respect to Specially Serviced Loans; and (c) any interest or other income earned on deposits in the REO Accounts and the reserve account established to hold any Loss of Value Payments that may be made by a Sponsor (or, if applicable, any related guarantor(s)) in connection with a Material Defect. With respect to Excess Penalty Charges, the Special Servicer will be entitled to any collections of Excess Penalty Charges that represent amounts accrued while the subject Serviced Loan is a Specially Serviced Loan even if collected when the Serviced Loan is not a Specially Serviced Loan. The Special Servicer will be entitled to charge and retain reasonable review fees in connection with any borrower request to the extent such fees are permitted under the related Mortgage Loan documents and are actually paid by or on behalf of the related borrower.
Although the Special Servicer is required to service and administer the Serviced Loans in accordance with the Servicing Standard and, accordingly, without regard to its rights to receive compensation under the Pooling and Servicing Agreement, additional servicing compensation in the nature of assumption and modification fees
366 |
may under certain circumstances provide the Special Servicer with an economic disincentive to comply with this standard.
With respect to each Collection Period, the Special Servicer will be required to deliver or cause to be delivered to the Master Servicer within two business days following the related Determination Date, and the Master Servicer will deliver, to the extent it has received such information, to the Certificate Administrator, without charge and within one business day prior to the related Distribution Date, a report that discloses and contains an itemized listing of any Disclosable Special Servicer Fees received by the Special Servicer or any of its affiliates during the related Collection Period;provided, that no such report will be due in any month during which no Disclosable Special Servicer Fees were received.
The Special Servicer and its affiliates will be prohibited from receiving or retaining any compensation or any other remuneration (including, without limitation, in the form of commissions, brokerage fees or rebates) from any person or entity (including, without limitation, the Issuing Entity, any borrower, any property manager, any guarantor or indemnitor in respect of a Serviced Mortgage Loan or Serviced Companion Loan and any purchaser of any Serviced Mortgage Loan, Serviced Companion Loan or REO Property) in connection with the disposition, workout or foreclosure of any Serviced Loan, the management or disposition of any REO Property, or the performance of any other special servicing duties under the Pooling and Servicing Agreement, other than as expressly provided for in the Pooling and Servicing Agreement;provided, that such prohibition will not apply to the Permitted Special Servicer/Affiliate Fees or the fees received by any person acting as an Outside Servicer or an Outside Special Servicer as expressly provided for under the Outside Servicing Agreement, or as master servicer or special servicer as expressly provided for under the pooling and servicing agreement governing the securitization of a Serviced Companion Loan.
“Disclosable Special Servicer Fees” means, with respect to any Serviced Loan or REO Property, any compensation and other remuneration (including, without limitation, in the form of commissions, brokerage fees and rebates received or retained by the Special Servicer or any of its affiliates that is paid by any person or entity (including, without limitation, the Issuing Entity, any borrower, any property manager, any guarantor or indemnitor in respect of a Serviced Loan and any purchaser of any Serviced Loan or REO Property (or interest in an REO Property related to any Serviced Loan Combinations, if applicable)) in connection with the disposition, workout or foreclosure of any Serviced Loan, the management or disposition of any REO Property, and the performance by the Special Servicer or any such affiliate of any other special servicing duties under the Pooling and Servicing Agreement, other than (1) any special servicing compensation which is payable to the Special Servicer under the Pooling and Servicing Agreement, and (2) any Permitted Special Servicer/Affiliate Fees.
“Permitted Special Servicer/Affiliate Fees” means any commercially reasonable treasury management fees, banking fees, title insurance and/or other insurance commissions and fees received or retained by the Special Servicer or any of its affiliates in connection with any services performed by such party with respect to any Serviced Loan or REO Property, in each case, in accordance with the Pooling and Servicing Agreement.
An Outside Special Servicer will be entitled to receive special servicing compensation with respect to the related Outside Serviced Loan Combination pursuant to the terms of the Outside Servicing Agreement, which special servicing compensation will be similar, but not necessarily identical, to that payable to the Special Servicer with respect to a Serviced Loan Combination under the Pooling and Servicing Agreement.
Trustee / Certificate Administrator Compensation
Pursuant to the Pooling and Servicing Agreement, the Trustee and Certificate Administrator will be entitled to receive a monthly fee (the “Trustee/Certificate Administrator Fee”). The Trustee/Certificate Administrator Fee will be payable monthly from amounts received in respect of the Mortgage Loans and, as to each Mortgage Loan, will accrue at 0.00750% per annum (the “Trustee/Certificate Administrator Fee Rate”). The Trustee/Certificate Administrator Fee will be paid monthly to the Certificate Administrator and the Certificate Administrator will pay the Trustee its portion of the Trustee/Certificate Administrator Fee in accordance with the Pooling and Servicing Agreement. The Trustee/Certificate Administrator Fee will accrue on the Stated Principal Balance of each Mortgage Loan and will be calculated on the same interest accrual basis (e.g., an Actual/360 Basis or a 30/360 Basis) as the related Mortgage Loan and prorated for any partial periods.
367 |
Operating Advisor Compensation
An operating advisor fee (the “Operating Advisor Fee”) will be payable to the Operating Advisor monthly from amounts received in respect of the Mortgage Loans (including any Outside Serviced Mortgage Loan)and will accrue at the applicable Operating Advisor Fee Rate with respect to each Mortgage Loan (including any Outside Serviced Mortgage Loan) on the Stated Principal Balance of the Mortgage Loan and will be calculated on the same interest accrual basis as the related Mortgage Loan and prorated for any partial periods.
The “Operating Advisor Fee Rate” with respect to each Interest Accrual Period is a rate equal to 0.00240% per annum.
An Operating Advisor Consulting Fee will be payable to the Operating Advisor with respect to each Major Decision on which the Operating Advisor has consultation rights. The “Operating Advisor Consulting Fee” will be a fee for each such Major Decision equal to $12,000 or such lesser amount as the related borrower agrees to pay with respect to any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable);provided that the Operating Advisor may in its sole discretion reduce the Operating Advisor Consulting Fee with respect to any Major Decision. Each of the Operating Advisor Fee and the Operating Advisor Consulting Fee will be payable from funds on deposit in the Collection Account out of amounts otherwise available to make distributions on the Certificates as described in “—Withdrawals from the Collection Account” above, but with respect to the Operating Advisor Consulting Fee only to the extent that such fee is actually received from the related borrower. If the Operating Advisor has consultation rights with respect to a Major Decision, the Pooling and Servicing Agreement will require the Master Servicer or the Special Servicer, as applicable, to use commercially reasonable efforts consistent with the Servicing Standard to collect the applicable Operating Advisor Consulting Fee from the related borrower in connection with such Major Decision, but only to the extent not prohibited by the related Mortgage Loan documents. The Master Servicer or the Special Servicer, as applicable, will each be permitted to waive or reduce the amount of any such Operating Advisor Consulting Fee payable by the related borrower if it determines that such full or partial waiver is in accordance with the Servicing Standard but may in no event take any enforcement action with respect to the collection of such Operating Advisor Consulting Fee other than requests for collection;provided that the Master Servicer or the Special Servicer, as applicable, will be required to consult with the Operating Advisor prior to any such waiver or reduction.
The Operating Advisor Fee will be payable from funds on deposit in the Collection Account out of amounts otherwise available to make distributions on the Certificates as described in “—Withdrawals from the Collection Account” above.
CREFC® Intellectual Property Royalty License Fee
The CREFC® Intellectual Property Royalty License Fee will be paid to CREFC® on a monthly basis. The “CREFC® Intellectual Property Royalty License Fee” with respect to each Mortgage Loan (including any REO Mortgage Loan) and for any Distribution Date is the amount accrued during the related Interest Accrual Period at the CREFC® Intellectual Property Royalty License Fee Rate on the Stated Principal Balance of such Mortgage Loan as of the close of business on the Distribution Date in such Interest Accrual Period;provided, that such amounts will be computed for the same period and on the same interest accrual basis (e.g., an Actual/360 Basis or 30/360 Basis) respecting which any related interest payment due or deemed due on the related Mortgage Loan is computed and will be prorated for partial periods. The CREFC® Intellectual Property Royalty License Fee is a fee payable to CREFC® for a license to use the CREFC® Investor Reporting Package in connection with the servicing and administration, including delivery of periodic reports to the Certificateholders, of the Issuing Entity pursuant to the Pooling and Servicing Agreement. No CREFC® Intellectual Property Royalty License Fee will be paid on any Companion Loan.
“CREFC® Intellectual Property Royalty License Fee Rate” with respect to each Mortgage Loan is a rate equal to 0.00050% per annum.
The “Administrative Fee Rate” is the per annum rate set forth on Annex A to this prospectus as the “Administrative Fee Rate”, which is equal to the sum of the Servicing Fee Rate, the CREFC® Intellectual Property Royalty License Fee Rate, the Trustee/Certificate Administrator Fee Rate, the Operating Advisor Fee Rate and the Asset Representations Reviewer Ongoing Fee Rate.
368 |
Asset Representations Reviewer Compensation
The Asset Representations Reviewer will be paid a fee of $5,000 (the “Asset Representations Reviewer Upfront Fee”) on the Closing Date to be paid by the Sponsors. The Asset Representations Reviewer will also be paid an ongoing fee (the “Asset Representations Reviewer Ongoing Fee”), which will be payable monthly from amounts received in respect of each Mortgage Loan (including any Outside Serviced Mortgage Loan), and for any Distribution Date will be equal to the amount accrued during the related Interest Accrual Period at 0.00036% per annum (the “Asset Representations Reviewer Ongoing Fee Rate”) on the Stated Principal Balance of the Mortgage Loan as of the close of business on the Distribution Date in such interest Accrual Period and will be calculated on the same interest accrual basis (e.g., an Actual/360 Basis or 30/360 Basis) as the related Mortgage Loan and prorated for any partial periods.
In connection with each Asset Review with respect to each Delinquent Loan, the Asset Representations Reviewer will be entitled to a fee (the “Asset Representations Reviewer Asset Review Fee”) that is equal the sum of: (i) $12,500 multiplied by the number of Delinquent Loans subject to any Asset Review (for purposes of this paragraph, the “Subject Loans”), plus (ii) $1,500 per Mortgaged Property relating to the Subject Loans in excess of one Mortgaged Property per Subject Loan, plus (iii) $2,000 per Mortgaged Property relating to a Subject Loan subject to a ground lease, plus (iv) $1,000 per Mortgaged Property relating to a Subject Loan subject to a franchise agreement, hotel management agreement or hotel license agreement, subject, in the case of each of clauses (i) through (iv), to adjustments on the basis of the year-end Consumer Price Index for All Urban Consumers or other similar index if the Consumer Price Index for All Urban Consumers is no longer calculated, for the year of the Closing Date and for the year in which the related Asset Review Notice is given.
If paid by the Issuing Entity as described below, the Asset Representations Reviewer Asset Review Fee will be payable from funds on deposit in the Collection Account out of amounts otherwise available to make distributions on the Certificates as described in “—Withdrawals from the Collection Account” above. The Asset Representations Reviewer Asset Review Fee with respect to each Delinquent Loan will be required to be paid by the related Mortgage Loan Seller;provided,however, that if the related Mortgage Loan Seller is insolvent or fails to pay such amount within 90 days of written request by the Asset Representations Reviewer, such fee will be paid by the Issuing Entity following delivery by the Asset Representations Reviewer of evidence reasonably satisfactory to the Master Servicer or the Special Servicer, as applicable, of such insolvency or failure to pay such amount;provided,further, that notwithstanding any payment of such fee by the Issuing Entity to the Asset Representations Reviewer, such fee will remain an obligation of the related Mortgage Loan Seller and the Master Servicer (in the case of Mortgage Loans that are not Specially Serviced Loans) or the Special Servicer (in the case of Mortgage Loans that are Specially Serviced Loans) will be required, to the extent consistent with the Servicing Standard, to pursue remedies against such Mortgage Loan Seller or its insolvency estate to recover any such amounts to the extent paid by the Issuing Entity. The Asset Representations Reviewer Asset Review Fee with respect to a Delinquent Loan is required to be included in the Repurchase Price for any Mortgage Loan that was the subject of a completed Asset Review and that is repurchased by the related Mortgage Loan Seller, and such portion of the Repurchase Price received will be used to reimburse the Issuing Entity for any such fees paid to the Asset Representations Reviewer pursuant to the terms of the Pooling and Servicing Agreement Fees and Expenses.
369 |
Fees and Expenses
The amounts available for distribution on the Certificates on any Distribution Date will generally be net of the following amounts:
Type/Recipient | Amount(1) | Frequency | Source of Funds | |||
Servicing Fee(2) and Sub-Servicing Fee / Master Servicer / Outside Servicer | with respect to each Mortgage Loan (including an REO Mortgage Loan and including an Outside Serviced Mortgage Loan), will accrue on the related Stated Principal Balance at a rate (which rate includes any sub-servicing fee rate and the primary servicing fee rate payable to the Outside Servicer with respect to an Outside Serviced Mortgage Loan), which together with the CREFC® Intellectual Property Royalty License Fee Rate, the Trustee/Certificate Administrator Fee Rate, the Asset Representations Reviewer Ongoing Fee Rate and the Operating Advisor Fee Rate, is equal to the per annum rate set forth on Annex A to this prospectus as the Administrative Fee Rate with respect to such Mortgage Loan (calculated on the same basis as interest is calculated on the related Mortgage Loan and prorated for partial periods) | monthly | interest collections | |||
Additional Servicing Compensation(3) / Master Servicer | – a specified percentage (which may be either 50% or 100% for performing Serviced Loans, and 0% for Specially Serviced Loans) of Excess Modification Fees, Excess Penalty Charges, Consent Fees, review fees, Ancillary Fees (other than fees for insufficient or returned checks), extension fees and Assumption Fees with respect to the Serviced Mortgage Loans(4) | from time to time | the related fee/ investment income | |||
– 100% of assumption application fees on the Serviced Mortgage Loans that are not Specially Serviced Loans and any defeasance fee actually paid by a borrower in connection with the defeasance of a Serviced Mortgage Loan | from time to time | |||||
– 100% of fees for insufficient or returned checks actually received from borrowers on all Serviced Loans | from time to time | |||||
– all investment income earned on amounts on deposit in the collection account, loan combination custodial account(s) and certain reserve accounts | monthly | |||||
Special Servicing Fee(5) / Special Servicer | with respect to any Serviced Mortgage Loan that is a Specially Serviced Loan or REO Mortgage Loan, will accrue on the related Stated Principal Balance at a rate equal to 0.25% per annum (or, if 0.25% per annum would result in a Special Servicing Fee with respect to such Specially Serviced Mortgage Loan that would be less than $3,500 in any given month, then at such higher per annum rate as would result in a Special Servicing Fee equal to $3,500 for such month with respect to such Mortgage Loan) (calculated on the related Stated Principal Balance and same basis as interest is calculated on the related Mortgage Loan and prorated for partial periods) | monthly | general collections |
370 |
Type/Recipient | Amount(1) | Frequency | Source of Funds | |||
Workout Fee(6) / Special Servicer | with some limited exceptions, an amount equal to the Workout Fee Rate applied to each payment or other collection of principal and interest (excluding default interest and Excess Interest) on any Serviced Mortgage Loan that became a Corrected Loan under the Pooling and Servicing Agreement, which Workout Fee Rate will equal the lesser of (a) 1.0% and (b) such lower rate as would result in a Workout Fee of $1,000,000, when applied to each expected payment of principal and interest (excluding default interest and Excess Interest) with respect to the subject Serviced Mortgage Loan from the date such Mortgage Loan becomes a Corrected Loan, through and including the then-related maturity date;provided that, if the rate in clause (a) above would result in a Workout Fee that would be less than $25,000 when applied to each expected payment of principal and interest (excluding default interest and Excess Interest) on any Serviced Mortgage Loan from the date such Mortgage Loan becomes a Corrected Loan through and including the then-related maturity date, then the Workout Fee Rate will be a rate equal to such higher rate as would result in a Workout Fee equal to $25,000 when applied to each expected payment of principal and interest (excluding default interest and Excess Interest) on such Mortgage Loan from the date such Mortgage Loan becomes a Corrected Loan through and including the then-related maturity date); andprovided,further, that no Workout Fee will be payable to the Special Servicer under the Pooling and Servicing Agreement with respect to any Outside Serviced Mortgage Loan. | monthly | the related collections of principal and interest | |||
Liquidation Fee(7) / Special Servicer | with some limited exceptions, an amount generally equal to 1.0% of each recovery by the Special Servicer of Liquidation Proceeds, insurance proceeds, condemnation proceeds and/or other payments, with respect to each Serviced Mortgage Loan repurchased or substituted by a Sponsor, each Specially Serviced Loan and each REO Property;provided,however, that, the Liquidation Fee payable under the Pooling and Servicing Agreement with respect to any such Mortgage Loan will generally not be more than $1,000,000 or, with limited exception, less than $25,000; andprovided,further, that no Liquidation Fee will be payable to the Special Servicer under the Pooling and Servicing Agreement with respect to any Outside Serviced Mortgage Loan.(8) | upon receipt of such proceeds and payments | the related Liquidation Proceeds, insurance proceeds, condemnation proceeds and borrower payments | |||
Additional Special Servicing Compensation(3) / Special Servicer | – a specified percentage (which may be either 0% or 50% for performing Serviced Loans, and 100% for Specially Serviced Loans) of Excess Modification Fees, Excess Penalty Charges, Consent Fees, review fees, Ancillary Fees (other than fees for insufficient or returned checks), extension fees and Assumption Fees with respect to the Serviced Mortgage Loans(4) | from time to time | the related fee/ investment income | |||
– 100% of assumption application fees on Specially Serviced Loans (other than any Outside Serviced Mortgage Loan) | from time to time | |||||
– all investment income received on funds in any REO account | from time to time | |||||
Trustee/Certificate Administrator Fee / Trustee/Certificate Administrator | with respect to each Mortgage Loan (including an REO Mortgage Loan), will accrue at a per annum rate equal to 0.00750% on the Stated Principal Balance of the related Mortgage Loan (calculated on the same basis as interest is calculated on the related Mortgage Loan and prorated for partial periods) | monthly | general collections |
371 |
Type/Recipient | Amount(1) | Frequency | Source of Funds | |||
Operating Advisor Fee / Operating Advisor | with respect to each Mortgage Loan (including an REO Mortgage Loan), will accrue at a per annum rate equal to 0.00240% on the Stated Principal Balance of the related Mortgage Loan (calculated on the same basis as interest is calculated on the related Mortgage Loan and prorated for any partial periods) | monthly | general collections | |||
Operating Advisor Consulting Fee / Operating Advisor | a fee in connection with each Major Decision for which the Operating Advisor has consulting rights equal to $12,000 or such lesser amount as the related borrower agrees to pay with respect to any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) | from time to time | to the extent paid by related borrower with respect to any Major Decision for which the Operating Advisor has consultation rights | |||
Asset Representations Reviewer Ongoing Fee / Asset Representations Reviewer | with respect to each Mortgage Loan (including an REO Mortgage Loan), will accrue at a per annum rate equal to 0.00036% on the Stated Principal Balance of the related Mortgage Loan (calculated on the same basis as interest is calculated on the related Mortgage Loan and prorated for any partial periods) | monthly | general collections | |||
Asset Representations Reviewer Upfront Fee / Asset Representations Reviewer | a fee of $5,000 | at closing | payable by the Mortgage Loan Sellers | |||
Asset Representations Reviewer Asset Review Fee/Asset Representations Reviewer | (i) $12,500 multiplied by the number of Delinquent Loans subject to an Asset Review (for purposes of this paragraph, the “Subject Loans”), plus (ii) $1,500 per Mortgaged Property relating to the Subject Loans in excess of one Mortgaged Property per Subject Loan, plus (iii) $2,000 per Mortgaged Property relating to a Subject Loan subject to a ground lease, plus (iv) $1,000 per Mortgaged Property relating to a Subject Loan subject to a franchise agreement, hotel management agreement or hotel license agreement, subject, in the case of each of clauses (i) through (iv), to adjustments on the basis of the year-end Consumer Price Index for All Urban Consumers taking into account the Consumer Price Index for All Urban Consumers | in connection with each Asset Review with respect to a Delinquent Loan. | payable by the related Mortgage Loan Seller; provided, however, that if the related Mortgage Loan Seller is insolvent or fails to pay such amount, such fee will be paid by the Issuing Entity out of general collections | |||
Property Advances(9) / Master Servicer and Trustee | to the extent of funds available, the amount of any Property Advances | from time to time | collections on the related loan, or if not recoverable or in the case of Workout-Delayed Reimbursement Amounts, from general collections | |||
Interest on Property Advances(9) / Master Servicer and Trustee | at Prime Rate | when advance is reimbursed | first from default interest/late payment fees and modification fees collected on the related loan, then from general collections |
372 |
Type/Recipient | Amount(1) | Frequency | Source of Funds | |||
P&I Advances / Master Servicer and Trustee | to the extent of funds available, the amount of any P&I Advances | from time to time | collections on the related loan, or if not recoverable or in the case of Workout-Delayed Reimbursement Amounts, from general collections | |||
Interest on P&I Advances / Master Servicer and Trustee | at Prime Rate | when advance is reimbursed | first from default interest/late payment fees and modification fees collected on the related loan, then from general collections | |||
Indemnification Expenses(9) / Depositor, Certificate Administrator, paying agent, custodian, Certificate Registrar, Trustee, Operating Advisor, Asset Representations Reviewer, Master Servicer and Special Servicer | amounts and expenses for which the Depositor, the Certificate Administrator, the paying agent, the custodian, the Certificate Registrar, the Trustee, the Operating Advisor, the Asset Representations Reviewer, the Master Servicer (for itself or on behalf of certain indemnified sub-servicers) and the Special Servicer are entitled to indemnification. | from time to time | general collections |
(1) | The above chart generally does not include amounts payable to the Master Servicer, the Special Servicer, any Outside Servicer, or any Outside Special Servicer with respect to the Companion Loans. |
(2) | With respect to the Outside Serviced Mortgage Loans, the related Outside Servicer (or primary servicer) will be entitled to a primary servicing fee accruing at a rate equal to (a) 0.00250% per annum with respect to the Sheraton Denver Downtown Fee Mortgage Loan, (b) 0.00250% per annum with respect to the 79 Madison Avenue Mortgage Loan, (c) 0.00750% per annum with respect to the Austin Block 21 Mortgage Loan, (d) 0.00250% per annum with respect to the 600 Broadway Mortgage Loan, (e) 0.00250% per annum with respect to the 5 Penn Plaza Mortgage Loan, and (f) 0.02000% per annum with respect to the Park Place Mortgage Loan. |
(3) | In general, with respect to each Outside Serviced Mortgage Loan, we anticipate that the related Outside Servicer and/or Outside Special Servicer, as applicable, will be entitled to receive fees with respect to such Outside Serviced Mortgage Loan in amounts, from sources and at frequencies that are similar, but not necessarily identical, to those described in the table. The rights to compensation for such parties will be governed by the applicable Outside Servicing Agreement. See “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus. |
(4) | Allocable between the Master Servicer and the Special Servicer as provided in the Pooling and Servicing Agreement and as described in “The Pooling and Servicing Agreement—Withdrawals from the Collection Account” in this prospectus. The allocations between each Outside Servicer and each Outside Special Servicer pursuant to the related Outside Servicing Agreement may be different. |
(5) | With respect to the Outside Serviced Mortgage Loans, the related Outside Special Servicer will be entitled to a special servicing fee accruing at a rate equal to (a) with respect to the Sheraton Denver Downtown Fee Mortgage Loan, the greater of 0.25% per annum or such rate as would result in a special servicing fee of $3,500 for the related month, (b) with respect to the 79 Madison Avenue Mortgage Loan, the greater of 0.25% per annum or such rate as would result in a special servicing fee of $3,500 for the related month, (c) with respect to the Austin Block 21 Mortgage Loan, the greater of 0.25% per annum or such rate as would result in a special servicing fee of $3,500 for the related month, (d) with respect to the 600 Broadway Mortgage Loan, during (i) such time as the related Loan Combination is serviced pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement and (ii) following the 600 Broadway Companion Loan Securitization Date, the rate to be specified in the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement, as applicable (which, pursuant to the related Co-Lender Agreement, will be no greater than 0.25% per annum), (e) with respect to the 5 Penn Plaza Mortgage Loan, the greater of 0.25% per annum or such rate as would result in a special servicing fee of $3,500 for the related month, and (f) with respect to the Park Place Mortgage Loan, the greater of 0.25% per annum or such rate as would result in a special servicing fee of $3,500 for the related month. |
(6) | With respect to the Outside Serviced Mortgage Loans, the related Outside Special Servicer will be entitled to a workout fee accruing at a rate equal to (a) with respect to the Sheraton Denver Downtown Fee Mortgage Loan, the lesser of 1.0% and such rate as would result in a workout fee of $1,000,000, provided that no workout fee will be less than $25,000, (b) with respect to the 79 Madison Avenue Mortgage Loan, the lesser of 1.0% and such rate as would result in a workout fee of $1,000,000, provided that no workout fee will be less than |
373 |
$25,000, (c) with respect to the Austin Block 21 Mortgage Loan, the lesser of 1.0% and such rate as would result in a workout fee of $25,000, provided that no workout fee will be less than $1,000,000, (d) with respect to the 600 Broadway Mortgage Loan, during (i) such time as the related Loan Combination is serviced pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement and (ii) following the 600 Broadway Companion Loan Securitization Date, the rate to be specified in the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement, as applicable (which, pursuant to the related Co-Lender Agreement, will be no greater than 1.0%), (e) with respect to the 5 Penn Plaza Mortgage Loan, the lesser of 1.0% and such rate as would result in a workout fee of $1,000,000, provided that no workout fee will be less than $25,000, and (f) with respect to the Park Place Mortgage Loan, the lesser of 1.0% and such rate as would result in a workout fee of $1,000,000, provided that no workout fee will be less than $25,000. |
(7) | With respect to the Outside Serviced Mortgage Loans, the related Outside Special Servicer will be entitled to a liquidation fee accruing at a rate equal to (a) with respect to the Sheraton Denver Downtown Fee Mortgage Loan, the lesser of 1.0% and such rate as would result in a liquidation fee of $1,000,000, provided that, except as provided under the CGCMT 2016-GC36 Pooling and Servicing Agreement, no liquidation fee will be less than $25,000, (b) with respect to the 79 Madison Avenue Mortgage Loan, the lesser of 1.0% and such rate as would result in a liquidation fee of $1,000,000, provided that, except as provided under the CGCMT 2016-P3 Pooling and Servicing Agreement, no liquidation fee will be less than $25,000, (c) with respect to the Austin Block 21 Mortgage Loan, the lesser of 1.0% and such rate as would result in a liquidation fee of $1,000,000, provided that, except as provided under the CGCMT 2016-GC36 Pooling and Servicing Agreement, no liquidation fee will be less than $25,000, (d) with respect to the 600 Broadway Mortgage Loan, during (i) such time as the related Loan Combination is serviced pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement and (ii) following the 600 Broadway Companion Loan Securitization Date, the rate to be specified in the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement, as applicable (which, pursuant to the related Co-Lender Agreement, will be no greater than 1.0%), (e) with respect to the 5 Penn Plaza Mortgage Loan, the lesser of 1.0% and such rate as would result in a liquidation fee of $1,000,000, provided that, except as provided under the CGCMT 2016-GC36 Pooling and Servicing Agreement, no liquidation fee will be less than $25,000, and (f) with respect to the Park Place Mortgage Loan, the lesser of 1.0% and such rate as would result in a liquidation fee of $1,000,000, provided that, except as provided under the CGCMT 2016-GC36 Pooling and Servicing Agreement, no liquidation fee will be less than $25,000. |
(8) | Notwithstanding the foregoing, in the event a party to the Pooling and Servicing Agreement is required to enforce the obligations of a Mortgage Loan Seller under its related Mortgage Loan Purchase Agreement with respect to an Outside Serviced Mortgage Loan, such party may be entitled to receive a liquidation fee (similar to the Liquidation Fee) in the amount and under the circumstances set forth in the Pooling and Servicing Agreement. |
(9) | In general, with respect to each Outside Serviced Mortgage Loan, we anticipate that the related Outside Servicer, Outside Special Servicer, Outside Operating Advisor (if any), Outside Certificate Administrator and Outside Trustee will be entitled to receive reimbursement and/or indemnification with respect to such Outside Serviced Mortgage Loan in amounts, from sources and at frequencies that are similar, but not necessarily identical, to those described in the table. See “Description of the Mortgage Pool—The Loan Combinations” and “The Pooling and Servicing Agreement—Certain Considerations Regarding the Outside Serviced Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus. |
Application of Penalty Charges and Modification Fees
On or prior to the second business day before each Master Servicer Remittance Date, the Master Servicer is required to apply all Penalty Charges and Modification Fees received by it with respect to a Mortgage Loan (including each Outside Serviced Mortgage Loan, to the extent allocable to such Outside Serviced Mortgage Loan pursuant to the related Co-Lender Agreement and remitted to the Master Servicer by the Outside Servicer) or Serviced Loan Combination (subject to the allocation of Penalty Charges under the related Co-Lender Agreement) during the related one-month period ending on the related Determination Date, as follows:
first, to the extent of all Penalty Charges and Modification Fees (in such order), to pay or reimburse the Master Servicer, the Special Servicer and/or the Trustee, as applicable, for all outstanding Advances (including unreimbursed Advances that have been determined to be Nonrecoverable Advances), the related interest on Advances and other outstanding additional expenses of the Issuing Entity (exclusive of Special Servicing Fees, Workout Fees and Liquidation Fees) other than Borrower Delayed Reimbursements, in each case, with respect to such Mortgage Loan or Serviced Loan Combination;
second, to the extent of all remaining Penalty Charges and Modification Fees (in such order), as a reimbursement to the Issuing Entity of all Advances (and related interest on Advances) with respect to such Mortgage Loan or Serviced Loan Combination previously determined to be Nonrecoverable Advances and previously reimbursed to the Master Servicer, the Special Servicer and/or the Trustee, as applicable, from amounts on deposit in the Collection Account (and such amounts will be retained or deposited in the Collection Account as recoveries of such Nonrecoverable Advances and related interest on Nonrecoverable Advances) other than Borrower Delayed Reimbursements;
third, to the extent of all remaining Penalty Charges and Modification Fees (in such order), as a reimbursement to the Issuing Entity of all other additional expenses of the Issuing Entity (exclusive of Special Servicing Fees, Workout Fees and Liquidation Fees) with respect to such Mortgage Loan or Serviced Loan Combination previously paid from the Collection Account or Loan Combination Custodial Account (and such amounts will be retained or deposited in the Collection Account or Loan Combination Custodial Account, as
374 |
applicable, as recoveries of such additional expenses of the Issuing Entity) other than Borrower Delayed Reimbursements; and
fourth, to the extent of any remaining Penalty Charges and any remaining Modification Fees, to the Master Servicer or the Special Servicer, as applicable, as compensation.
Notwithstanding the foregoing, Penalty Charges collected on any Loan Combination are allocable in accordance with the related Co-Lender Agreement as described under “Description of the Mortgage Pool—The Loan Combinations” above.
Enforcement of Due-On-Sale and Due-On-Encumbrance Clauses
Due-On-Sale
Subject to the discussion under “—Directing Holder” and “—Operating Advisor” below and “Description of the Mortgage Pool—The Loan Combinations”, the Master Servicer (with respect to Serviced Loans that are non-Specially Serviced Loans and with the Special Servicer’s consent) and the Special Servicer (with respect to Specially Serviced Loans) will be required to determine, in a manner consistent with the Servicing Standard, whether to waive any right the lender under any Serviced Loan may have under a due-on-sale clause (which will include, without limitation, sale or transfers of Mortgaged Properties, in full or in part, or the sale, transfer, pledge or hypothecation of direct or indirect interests in the borrower or its owner, to the extent prohibited under the related Mortgage Loan documents) to accelerate payment of that Serviced Loan. With respect to any Serviced Loans that are non-Specially Serviced Loans, the Master Servicer or, in the case of Specially Serviced Loans, the Special Servicer, each in a manner consistent with the Servicing Standard, will be required, to the extent permitted by applicable law, to enforce the restrictions contained in the related Mortgage Loan documents on transfers of the related Mortgaged Property and on transfers of interests in the related borrower, unless following its receipt of a request of a waiver or consent in respect of a due-on-sale provision the Master Servicer (with the written consent of the Special Servicer) or the Special Servicer, as applicable, has determined (subject to the discussion under “—Directing Holder” below and “Description of the Mortgage Pool—The Loan Combinations”), consistent with the Servicing Standard, that the waiver of such restrictions or granting of consent would be in accordance with the Servicing Standard. However, neither the Master Servicer nor the Special Servicer may waive the rights of the lender or grant its consent under any due-on-sale clause, unless—
· | the Master Servicer or the Special Servicer, as applicable, has received a Rating Agency Confirmation, or |
· | such Serviced Mortgage Loan (or the Serviced Mortgage Loan related to the Serviced Loan Combination) (A) represents less than 5% of the principal balance of all of the Mortgage Loans in the Issuing Entity, (B) has a principal balance that is $35 million or less, and (C) is not one of the 10 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) in the pool based on principal balance (although no such Rating Agency Confirmation will be required if such Serviced Mortgage Loan has a principal balance less than $10,000,000). |
Due-On-Encumbrance
Subject to the discussion under “—Directing Holder” and “—Operating Advisor” below and “Description of the Mortgage Pool—The Loan Combinations”, the Master Servicer (with respect to Serviced Loans that are non-Specially Serviced Loans, and with the Special Servicer’s consent) and the Special Servicer (with respect to Specially Serviced Loans) will be required to determine, in a manner consistent with the Servicing Standard, whether to waive any right the lender under any such Serviced Loan may have under a due-on-encumbrance clause (which will include, without limitation, any mezzanine/subordinate financing of the borrower or the Mortgaged Property or any sale or transfer of preferred equity in the borrower or its owners, to the extent prohibited under the related Mortgage Loan documents) to accelerate payment of that Serviced Loan. With respect to any Serviced Loans that are non-Specially Serviced Loans, the Master Servicer or, in the case of Specially Serviced Loans, the Special Servicer, each in a manner consistent with the Servicing Standard, will be required, to the extent permitted by applicable law, to enforce the restrictions contained in the related Mortgage Loan documents on further encumbrances of the related Mortgaged Property and on further encumbrances of interests in the related borrower, unless following its receipt of a request of a waiver or consent in respect of a
375 |
due-on-encumbrance provision the Master Servicer (with the written consent of the Special Servicer) or the Special Servicer, as applicable, has determined (subject to the discussion under “—Directing Holder” below and “Description of the Mortgage Pool—The Loan Combinations”), consistent with the Servicing Standard, that the waiver of such restrictions or granting of consent would be in accordance with the Servicing Standard. However, neither the Master Servicer nor the Special Servicer may waive the rights of the lender or grant its consent under any due-on-encumbrance clause, unless—
· | the Master Servicer or the Special Servicer, as applicable, has received a Rating Agency Confirmation, or |
· | such Serviced Mortgage Loan (or the Serviced Mortgage Loan related to the Serviced Loan Combination) (A) represents less than 2% of the aggregate principal balance of all of the Mortgage Loans in the Issuing Entity, (B) has a principal balance that is $20 million or less, (C) has a loan-to-value ratio equal to or less than 85% (including any existing and proposed debt), (D) has a debt service coverage ratio equal to or greater than 1.20x (in each case, determined based upon the aggregate of the principal balance of the Serviced Mortgage Loan, any related Serviced Companion Loan (if applicable) and the principal amount of the proposed additional lien) and (E) is not one of the 10 largest Mortgage Loans (considering any Crossed Group as a single Mortgage Loan) in the pool based on principal balance (although no such Rating Agency Confirmation will be required if such Mortgage Loan has a principal balance less than $10,000,000). |
Notwithstanding the foregoing, without any other approval or consent, the Master Servicer (for non-Specially Serviced Loans) or the Special Servicer (for Specially Serviced Loans) may grant and process a borrower’s request for consent to subject the related Mortgaged Property to an immaterial easement, right of way or similar agreement for utilities, access, parking, public improvements or another purpose and may consent to subordination of the related Mortgage Loan to such easement, right of way or similar agreement.
Appraisal Reduction Amounts
After an Appraisal Reduction Event has occurred, an Appraisal Reduction Amount is required to be calculated. An “Appraisal Reduction Event” will occur with respect to a Serviced Loan on the earliest of:
· | the date on which a modification of the Serviced Loan that, among other things, reduces the amount of Monthly Payments on a Serviced Loan, or changes any other material economic term of the Serviced Loan or impairs the security of the Serviced Loan, becomes effective as a result of a modification of the related Serviced Loan following the occurrence of a Servicing Transfer Event; |
· | the date on which the Serviced Loan is 60 days or more delinquent in respect of any scheduled monthly debt service payment (other than a balloon payment); |
· | solely in the case of a delinquent balloon payment, (A) the date occurring 60 days beyond the date on which that balloon payment was due (except as described in the immediately following clause (B) or (B) if the related borrower has delivered to the Master Servicer or the Special Servicer (and in either such case the Master Servicer or the Special Servicer, as applicable, is required to promptly deliver a copy thereof to the other such servicer), a refinancing commitment acceptable to the Special Servicer prior to the date 60 days after maturity, the date occurring 120 days after the date on which that balloon payment was due (or for such shorter period beyond the date on which that balloon payment was due during which the refinancing is scheduled to occur); |
· | the date on which the related Mortgaged Property became an REO Property; |
· | the 60th day after a receiver or similar official is appointed (and continues in that capacity) in respect of the related Mortgaged Property; |
· | the 60th day after the date the related borrower is subject to a bankruptcy, insolvency or similar proceedings (if, in the case of an involuntary bankruptcy, insolvency or similar proceeding, not dismissed within those 60 days); or |
376 |
· | the date on which the Serviced Loan remains outstanding five years following any extension of its maturity date pursuant to the Pooling and Servicing Agreement. |
If an Appraisal Reduction Event occurs with respect to any Serviced Mortgage Loan that is part of a Serviced Loan Combination, then an Appraisal Reduction Event will be deemed to have occurred with respect to the related Serviced Companion Loan(s). If an Appraisal Reduction Event occurs with respect to any Serviced Companion Loan that is part of a Serviced Loan Combination, then an Appraisal Reduction Event will be deemed to have occurred with respect to the related Serviced Mortgage Loan and any other Serviced Companion Loan(s) included as part of that Serviced Loan Combination.
No Appraisal Reduction Event may occur at any time when the aggregate Certificate Balance of all Classes of Principal Balance Certificates (other than the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates) has been reduced to zero.
Promptly upon the occurrence of an Appraisal Reduction Event with respect to a Serviced Loan, the Special Servicer is required to use reasonable efforts to obtain an appraisal of the related Mortgaged Property from an Appraiser in accordance with Member of the Appraisal Institute (“MAI”) standards. No new appraisal will be required if an appraisal from an Appraiser in accordance with MAI standards was obtained within the prior nine months unless the Special Servicer determines in accordance with the Servicing Standard that such earlier appraisal is materially inaccurate. The cost of the appraisal will be advanced by the Master Servicer and will be reimbursed to the Master Servicer as a Property Advance.
On the first Determination Date occurring on or after the receipt of the appraisal, the Special Servicer will be required to calculate the Appraisal Reduction Amount, if any, taking into account the results of such appraisal and such information, if any, reasonably requested by the Special Servicer from the Master Servicer reasonably required to calculate or recalculate the Appraisal Reduction Amount. In the event that the Special Servicer has not received any required appraisal within 120 days after the event described in the applicable clause of the definition of “Appraisal Reduction Event” (without regard to the time periods set forth in the definition), then, solely for purposes of determining the amounts of the P&I Advances, the amount of the Appraisal Reduction Amount for or allocable to the related Serviced Mortgage Loan will be deemed to be an amount equal to 25% of the current Stated Principal Balance of such related Serviced Mortgage Loan until the appraisal is received. The Master Servicer will provide (via electronic delivery) the Special Servicer with information in its possession that is reasonably required to calculate or recalculate any Appraisal Reduction Amount pursuant to the definition thereof using reasonable efforts to deliver such information within four business days of the Special Servicer’s reasonable written request. None of the Master Servicer, the Trustee or the Certificate Administrator will calculate or verify Appraisal Reduction Amounts.
The “Appraisal Reduction Amount” for any Distribution Date and for any Serviced Mortgage Loan (or Serviced Loan Combination, if applicable) as to which any Appraisal Reduction Event has occurred and the Appraisal Reduction Amount is required to be calculated will generally be equal to (subject to the discussion in the prior paragraph) the excess of (a) the Stated Principal Balance of that Serviced Mortgage Loan (or Serviced Loan Combination) as of the last day of the related Collection Periodover (b) the excess of (i) the sum of (A) 90% of the appraised value of the related Mortgaged Property or Mortgaged Properties as determined by the appraisal, minus such downward adjustments as the Special Servicer, in accordance with the Servicing Standard, may make (without implying any obligation to do so) based upon the Special Servicer’s review of the appraisal and such other information as the Special Servicer may deem appropriate and (B) all escrows, letters of credit and reserves in respect of such Serviced Mortgage Loan (or Serviced Loan Combination) as of the date of calculation over (ii) the sum as of the Due Date occurring in the month of the date of determination of (A) to the extent not previously advanced by the Master Servicer or the Trustee, all unpaid interest on that Serviced Mortgage Loan (or Serviced Loan Combination) at a per annum rate equal to the Mortgage Rate (and, with respect to a Serviced Loan Combination, interest on the related Serviced Companion Loan(s) at the related Mortgage Rate), (B) all unreimbursed Advances and interest on those Advances at the Advance Rate in respect of that Serviced Mortgage Loan (or Serviced Loan Combination) and (C) all currently due and unpaid real estate taxes and assessments, insurance premiums and ground rents, unpaid Special Servicing Fees and all other amounts due and unpaid under the Serviced Mortgage Loan (or Serviced Loan Combination) (which tax, premiums, ground rents and other amounts have not been the subject of an Advance by the Master Servicer, the Special Servicer or Trustee, as applicable, and/or for which funds have not been escrowed). The Master Servicer and the Certificate Administrator will be entitled to conclusively rely on the Special Servicer’s calculation or determination of any Appraisal Reduction Amount. Any Appraisal Reduction Amount with respect to a Serviced Loan Combination will
377 |
be allocated,first, to any related Serviced Subordinate Companion Loan (up to the outstanding principal balance thereof), andthen, to the related Serviced Mortgage Loan and any related Serviced Pari Passu Companion Loan(s) on apro rata andpari passu basis in accordance with the respective outstanding principal balances of the related Serviced Mortgage Loan and Serviced Pari Passu Companion Loan. In the case of an Outside Serviced Loan Combination, pursuant to the Outside Servicing Agreement, certain events will require the calculation of an “appraisal reduction amount”, which will be allocated to the subject Outside Serviced Mortgage Loan and its Outside Serviced Companion Loan(s) on apro rata andpari passu basis in accordance with the respective outstanding principal balances of such Outside Serviced Mortgage Loan and its Outside Serviced Companion Loan(s) (with any such allocation to such Outside Serviced Mortgage Loan to constitute an “Appraisal Reduction Amount” for purposes of this prospectus). For the avoidance of doubt, the Outside Special Servicer (and not the Special Servicer) will be required to calculate any “appraisal reduction amount” related to an Outside Serviced Loan Combination.
An “Appraiser” is an independent nationally recognized professional commercial real estate appraiser who (i) is a member in good standing of the Appraisal Institute, (ii) if the state in which the related Mortgaged Property is located certifies or licenses appraisers, is certified or licensed in such state and (iii) has a minimum of five years’ experience in the related property type and market.
As a result of calculating one or more Appraisal Reduction Amounts, the amount of any required P&I Advance will be reduced, which will generally have the effect of reducing the amount of interest available to the most subordinate Class of Regular Certificates or Trust Component then outstanding (i.e., first to the Class H Certificates, then to the Class G Certificates, then to the Class F Certificates, then to the Class E Certificates, then, pro rata based on interest entitlements, to the Class D and Class X-D Certificates, then to the Class C Trust Component (and correspondingly, to the Class C Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class C Trust Component), then to the Class B Trust Component (and correspondingly, to the Class B Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class B Trust Component), then to the Class A-S Trust Component (and correspondingly, to the Class A-S Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class A-S Trust Component), and then, pro rata based on interest entitlements, to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A and Class X-B Certificates). See“The Pooling and Servicing Agreement—Advances”in this prospectus.
With respect to each Serviced Loan as to which an Appraisal Reduction Event has occurred (unless the Serviced Loan has become a Corrected Loan (if a Servicing Transfer Event had occurred with respect to the related Serviced Loan) and has remained current for three consecutive Monthly Payments, and no other Appraisal Reduction Event has occurred with respect to the Serviced Loan during the preceding three months), the Special Servicer is required, within 30 days of each annual anniversary of the related Appraisal Reduction Event to order an appraisal (which may be an update of a prior appraisal), the cost of which will be a Property Advance. Based upon the appraisal, the Special Servicer is required to redetermine the amount of the Appraisal Reduction Amount with respect to the Serviced Mortgage Loan (or Serviced Loan Combination).
Any Serviced Loan previously subject to an Appraisal Reduction Amount which ceases to be a Specially Serviced Loan (if applicable), which becomes current and remains current for three consecutive Monthly Payments, and with respect to which no other Appraisal Reduction Event has occurred and is continuing, will no longer be subject to an Appraisal Reduction Amount. An Outside Serviced Mortgage Loan will cease to be subject to an appraisal reduction amount upon the occurrence of certain events specified in the Outside Servicing Agreement.
As of the first Determination Date following a Serviced Mortgage Loan becoming an AB Modified Loan, the Special Servicer will be required to calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, taking into account the most recent appraisal obtained by the Special Servicer with respect to such Serviced Mortgage Loan, and all other information relevant to a Collateral Deficiency Amount determination. The Master Servicer will provide (via electronic delivery) the Special Servicer with information in its possession that is reasonably required to calculate or recalculate any Collateral Deficiency Amount pursuant to the definition thereof using reasonable efforts to deliver such information within four business days of the Special Servicer’s reasonable written request.
Upon obtaining actual knowledge or receipt of notice by the Master Servicer that an Outside Serviced Mortgage Loan has become an AB Modified Loan, the Master Servicer will be required to (i) promptly request
378 |
from the related Outside Servicer, Outside Special Servicer and Outside Trustee the most recent appraisal with respect to such AB Modified Loan, in addition to all other information reasonably required by the Master Servicer to calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, and (ii) as of the first Determination Date following receipt by the Master Servicer of the appraisal and any other information set forth in the immediately preceding clause (i) that the Master Servicer reasonably expects to receive, calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, taking into account the most recent appraisal obtained by the Master Servicer from the Outside Servicer with respect to such Outside Serviced Mortgage Loan, and all other information relevant to a Collateral Deficiency Amount determination. The Master Servicer will be required to notify the Special Servicer of any Collateral Deficiency Amount calculated by the Master Servicer with respect to an Outside Serviced Mortgage Loan that has become an AB Modified Loan. The Special Servicer will be entitled to conclusively rely on any Collateral Deficiency Amounts calculated by the Master Servicer. Upon obtaining knowledge or receipt of notice by any other party to the Pooling and Servicing Agreement that an Outside Serviced Mortgage Loan has become an AB Modified Loan, such party will be required to promptly notify the Master Servicer thereof. Neither of the Trustee or the Certificate Administrator will calculate or verify any Collateral Deficiency Amount. For the avoidance of doubt, the Master Servicer will only calculate Collateral Deficiency Amounts with respect to Outside Serviced Mortgage Loans.
A “Cumulative Appraisal Reduction Amount”, as of any date of determination by the Special Servicer, is equal to the sum of (i) all Appraisal Reduction Amounts then in effect, and (ii) with respect to any AB Modified Loan, any Collateral Deficiency Amount then in effect. The Certificate Administrator will be entitled to conclusively rely on the Special Servicer’s calculation or determination of any Cumulative Appraisal Reduction Amount. None of the Master Servicer (except if such Cumulative Appraisal Reduction Amount consists solely of Collateral Deficiency Amounts calculated with respect to one or more Outside Serviced Mortgage Loans), the Trustee nor the Certificate Administrator will calculate or verify Cumulative Appraisal Reduction Amounts.
“AB Modified Loan” means any Corrected Loan (1) that became a Corrected Loan (which includes for purposes of this definition any Outside Serviced Mortgage Loan that became a “corrected loan” (or any term substantially similar thereto) pursuant to the related Outside Servicing Agreement) due to a modification thereto that resulted in the creation of an A/B note structure (or similar structure) and as to which the new junior note(s) did not previously exist or the principal amount of the new junior note(s) was previously part of either an A note held by the Issuing Entity or the original unmodified Mortgage Loan and (2) as to which an Appraisal Reduction Amount is not in effect.
“Collateral Deficiency Amount” means, with respect to any AB Modified Loan as of any date of determination, the excess of (i) the Stated Principal Balance of such AB Modified Loan (taking into account the related junior note(s) included therein), over (ii) the sum of (in the case of a Loan Combination, solely to the extent allocable to the subject Mortgage Loan) (x) the most recent Appraised Value for the related Mortgaged Property or Mortgaged Properties, plus (y) solely to the extent not reflected or taken into account in such Appraised Value and to the extent on deposit with, or otherwise under the control of, the lender as of the date of such determination, any capital or additional collateral contributed by the related borrower at the time the Mortgage Loan became (and as part of the modification related to) such AB Modified Loan for the benefit of the related Mortgaged Property or Mortgaged Properties (provided, that in the case of an Outside Serviced Mortgage Loan, the amounts set forth in this clause (y) will be taken into account solely to the extent relevant information is received by the Master Servicer) , plus (z) any other escrows or reserves (in addition to any amounts set forth in the immediately preceding clause (y)) held by the lender in respect of such AB Modified Loan as of the date of such determination. The Certificate Administrator will be entitled to conclusively rely on the Master Servicer’s or the Special Servicer’s calculation or determination of any Collateral Deficiency Amount.
For purposes of determining the Non-Reduced Certificates and the Controlling Class, as well as the occurrence of a Control Termination Event, Appraisal Reduction Amounts will be allocated to each Class of Regular Certificates (other than the Class X Certificates) and each Trust Component (and correspondingly to the Class EC Certificates and the applicable Class of Exchangeable Certificates) in reverse sequential order to notionally reduce the Certificate Balance thereof until the related Certificate Balance of each such class is reduced to zero (i.e., first to the Class 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 Trust Component (and correspondingly, to the Class C Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class C Trust Component), then to the Class B Trust Component (and correspondingly, to the Class B Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class B Trust Component), then to the Class A-S Trust Component (and
379 |
correspondingly, to the Class A-S Certificates and the Class EC Certificates, pro rata based on their respective percentage interests in the Class A-S Trust Component), and then, pro rata based on Certificate Balance, to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates). In addition, for purposes of determining the Controlling Class, as well as the occurrence of a Control Termination Event, Collateral Deficiency Amounts will be allocated to each Class of Control Eligible Certificates in reverse sequential order to notionally reduce the Certificate Balance thereof until the related Certificate Balance of each such Class is reduced to zero (i.e., first to the Class H Certificates, then to the Class G Certificates, then to the Class F Certificates, and then to the Class E Certificates). For the avoidance of doubt, for purposes of determining the Controlling Class, as well as the occurrence of a Control Termination Event, any Class of Control Eligible Certificates will be allocated both applicable Appraisal Reduction Amounts and applicable Collateral Deficiency Amounts (the sum of which will constitute the applicable “Cumulative Appraisal Reduction Amount”), in accordance with the preceding two sentences.
With respect to any Appraisal Reduction Amount calculated for purposes of determining the Non-Reduced Certificates and with respect to any Appraisal Reduction Amount or Collateral Deficiency Amount calculated for purposes of determination the Controlling Class or the occurrence of a Control Termination Event, the appraised value of the related Mortgaged Property will be determined on an “as-is” basis. The Master Servicer and the Special Servicer (in each case, to the extent any such amount is required to be calculated by it) will be required to promptly notify the Certificate Administrator of (i) any Appraisal Reduction Amount, (ii) any Collateral Deficiency Amount, and (iii) any resulting Cumulative Appraisal Reduction Amount, and the Certificate Administrator will be required to promptly post notice of such Appraisal Reduction Amount, Collateral Deficiency Amount and/or Cumulative Appraisal Reduction Amount, as applicable, to the Certificate Administrator’s internet website.
The holders of Certificates representing the majority of the Certificate Balance of the most senior Class of Control Eligible Certificates whose Certificate Balance is notionally reduced to less than 25% of the initial Certificate Balance of that Class as a result of an allocation of an Appraisal Reduction Amount or Collateral Deficiency Amount in respect of such Class (such Class, an “Appraised-Out Class”) will have the right to challenge the Special Servicer’s Appraisal Reduction Amount or Collateral Deficiency Amount determination, and, at their sole expense, obtain a second appraisal of any Serviced Loan for which an Appraisal Reduction Event has occurred or as to which there exists a Collateral Deficiency Amount (such holders, the “Requesting Holders”). The Requesting Holders will be required to cause the appraisal to be prepared on an “as-is” basis by an Appraiser in accordance with MAI standards, and the appraisal must be reasonably acceptable to the Special Servicer in accordance with the Servicing Standard. The Requesting Holders will be required to provide the Special Servicer with notice of their intent to challenge the Special Servicer’s Appraisal Reduction Amount or Collateral Deficiency Amount determination within 10 days of the Requesting Holders’ receipt of written notice of the Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable.
An Appraised-Out Class will be entitled to continue to exercise the rights of the Controlling Class until 10 days following its receipt of written notice of the Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, unless the Requesting Holders provide written notice of their intent to challenge such Appraisal Reduction Amount or Collateral Deficiency Amount to the Special Servicer and the Certificate Administrator within such ten-day period as described above. If the Requesting Holders provide this notice, then the Appraised-Out Class will be entitled to continue to exercise the rights of the Controlling Class until the earliest of (i) 120 days following the related Appraisal Reduction Event or receipt of written notice of a Collateral Deficiency Amount, as applicable, unless the Requesting Holders provide the second appraisal within such 120-day period, (ii) the determination by the Special Servicer (described below) that a recalculation of the Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, is not warranted or that such recalculation does not result in the Appraised-Out Class remaining the Controlling Class and (iii) the occurrence of a Consultation Termination Event. After the Appraised-Out Class is no longer entitled to exercise the rights of the Controlling Class, the rights of the Controlling Class will be exercised by the Class of Control Eligible Certificates immediately senior to such Appraised-Out Class, if any, unless a recalculation results in the reinstatement of the Appraised-Out Class as the Controlling Class.
In addition, the holders of Certificates representing the majority of the Certificate Balance of any Appraised-Out Class will have the right, at their sole expense, to require the Special Servicer to order an additional appraisal of any Serviced Loan for which an Appraisal Reduction Event has occurred or as to which a Collateral Deficiency Amount exists if an event has occurred at or with regard to the related Mortgaged Property or Mortgaged Properties that would have a material effect on its appraised value, and the Special Servicer is required to use its reasonable efforts, in accordance with the Servicing Standard, to obtain such appraisal within 30 days from
380 |
receipt of such holders’ written request and is required to use its reasonable efforts, in accordance with the Servicing Standard, to obtain an appraisal that is prepared on an “as-is” basis by an Appraiser in accordance with MAI standards;provided that the Special Servicer will not be required to obtain such appraisal if it determines in accordance with the Servicing Standard that no events at or with regard to the related Mortgaged Property or Mortgaged Properties have occurred that would have a material effect on the appraised value of the related Mortgaged Property or Mortgaged Properties.
Upon receipt of an appraisal provided by, or requested by, holders of an Appraised-Out Class as described above and any other information reasonably requested by the Special Servicer from the Master Servicer reasonably required to calculate or recalculate the Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, the Special Servicer will be required to determine, in accordance with the Servicing Standard, whether, based on its assessment of such additional appraisal, any recalculation of the Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, is warranted and, if so warranted, to recalculate such Appraisal Reduction Amount or Collateral Deficiency Amount based upon such additional appraisal. If required by any such recalculation, the Appraised-Out Class will be reinstated as the Controlling Class. The Special Servicer will be required to promptly notify the Certificate Administrator of any such determination and recalculation in its monthly reporting, and the Certificate Administrator will be required to promptly post that reporting to the Certificate Administrator’s website.
Appraisals that are permitted to be presented by, or obtained by the Special Servicer at the request of, holders of an Appraised-Out Class will be in addition to any appraisals that the Special Servicer may otherwise be required to obtain in accordance with the Servicing Standard or the Pooling and Servicing Agreement without regard to any appraisal requests made by any holder of an Appraised-Out Class.
The “Control Eligible Certificates” will be any of the Class E, Class F, Class G and Class H Certificates.
Inspections
The Master Servicer (or with respect to any Specially Serviced Loan, the Special Servicer) is required to inspect or cause to be inspected each Mortgaged Property (other than a Mortgaged Property securing the Outside Serviced Mortgage Loans) at such times and in such manner as are consistent with the Servicing Standard, but in any event at least once every calendar year with respect to Serviced Mortgage Loans with an outstanding principal balance of $2,000,000 or more and at least once every other calendar year with respect to Serviced Mortgage Loans with an outstanding principal balance of less than $2,000,000, in each case commencing in 2017;provided that the Master Servicer is not required to inspect any Mortgaged Property that has been inspected by the Special Servicer during the preceding 12 months. The Special Servicer is required to inspect the Mortgaged Property securing each Serviced Loan that becomes a Specially Serviced Loan as soon as practicable after it becomes a Specially Serviced Loan and thereafter at least once every calendar year until such condition ceases to exist. The cost of any such inspection is required to be borne by the Master Servicer unless the related Serviced Loan is a Specially Serviced Loan, in which case the Master Servicer will be required to reimburse the Special Servicer for such cost as a Property Advance (or as an expense of the Issuing Entity if the Property Advance would be a Nonrecoverable Advance) and any out-of-pocket costs will be borne by the Issuing Entity.
Copies of the inspection reports referred to above that are delivered to the Certificate Administrator will be posted to the Certificate Administrator’s website for review by Privileged Persons pursuant to the Pooling and Servicing Agreement. See “Description of the Certificates—Reports to Certificateholders;Certain Available Information”.
Evidence as to Compliance
Each of the Master Servicer, the Special Servicer (regardless of whether it has commenced special servicing of any Mortgage Loan) and the Certificate Administrator are required under the Pooling and Servicing Agreement to deliver (and each of the Master Servicer and the Certificate Administrator is required to cause (or, in the case of a sub-servicer retained at the request of a Sponsor, use commercially reasonable efforts to cause) any affiliated sub-servicer, or any of its other sub-servicers that is servicing at least 10% of the Mortgage Loans by balance, to deliver) annually to, among others, the Certificate Administrator and the Operating Advisor (only in the case of an officer’s certificate furnished by the Special Servicer and after the occurrence and during the continuance of a Control Termination Event) and the Depositor on or before the date specified in the Pooling and
381 |
Servicing Agreement, a certificate of an authorized officer of such party stating, among other things, that (i) a review of that party’s servicing activities during the preceding calendar year or portion of that year and of performance under the Pooling and Servicing Agreement (or the related sub-servicing agreement in the case of a sub-servicer, as applicable) has been made under such officer’s supervision and (ii) to the best of such officer’s knowledge, based on the review, such party has fulfilled all of its obligations under the Pooling and Servicing Agreement (or the related sub-servicing agreement in the case of a sub-servicer, as applicable) in all material respects throughout the preceding calendar year or portion of the preceding year, or, if there has been a failure to fulfill any such obligation in any material respect, specifying the failure known to such officer and the nature and status of the failure. In general, none of these parties will be responsible for the performance by any other such party of that other party’s duties described above.
In addition, the Master Servicer, the Special Servicer (regardless of whether the Special Servicer has commenced special servicing of any Mortgage Loan), the Certificate Administrator and the Operating Advisor are each (at its own expense) required to furnish (and each of the preceding parties, as applicable, is required to cause (or, in the case of a Servicing Function Participant retained at the request of a Sponsor, to use commercially reasonable efforts to cause) each Servicing Function Participant retained by it to furnish), annually, to, among others, the Certificate Administrator, the Trustee, the Operating Advisor (in the case of the Special Servicer only and only after the occurrence and during the continuance of a Control Termination Event) and the Depositor, a report (an “Assessment of Compliance”) assessing compliance by that party with the servicing criteria set forth in Item 1122(d) of Regulation AB that contains the following:
· | a statement of the party’s responsibility for assessing compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB applicable to it; |
· | a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria; |
· | the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the preceding calendar year, setting forth any material instance of noncompliance identified by the party, a discussion of each such failure and the nature and status of each such failure; and |
· | a statement that a registered public accounting firm has issued an attestation report (an“Attestation Report”) on the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the preceding calendar year. |
Each party that is required to deliver an Assessment of Compliance will also be required to simultaneously deliver an Attestation Report of a registered public accounting firm, prepared in accordance with the standards for attestation engagements issued or adopted by the public company accounting oversight board, that expresses an opinion, or states that an opinion cannot be expressed (and the reasons for this), concerning the party’s assessment of compliance with the applicable servicing criteria set forth in Item 1122(d) of Regulation AB.
For the avoidance of doubt, the Trustee will have no obligation or duty to determine whether any Assessment of Compliance provided by the Master Servicer, the Special Servicer or any other Servicing Function Participant is in form and substance in compliance with the requirements of Regulation AB.
A “Servicing Function Participant” is any person or entity, other than the Certificate Administrator, the Operating Advisor, the Master Servicer, the Special Servicer and the Trustee, that is performing activities with respect to the Issuing Entity that address the servicing criteria set forth in Item 1122(d) of Regulation AB, unless those activities relate to 5% or less of the Mortgage Loans by balance.
Limitation on Liability; Indemnification
The Pooling and Servicing Agreement will provide that none of the Depositor, the Master Servicer, the Special Servicer, the Operating Advisor, the Asset Representations Reviewer, or any director, member, manager, officer, employee or agent of the Depositor, the Master Servicer, the Special Servicer, the Operating Advisor or the Asset Representations Reviewer will be under any liability to the Issuing Entity, the holders of the Certificates, a Companion Loan Holder, or any other person for any action taken or for refraining from the taking of any action in good faith pursuant to the Pooling and Servicing Agreement, or for errors in judgment. However, none of the
382 |
Depositor, the Master Servicer, the Special Servicer, the Operating Advisor, the Asset Representations Reviewer or any such person will be protected against any liability which would otherwise be imposed by reason of (i) any breach of warranty or representation by such party in the Pooling and Servicing Agreement, or (ii) any willful misconduct, bad faith, fraud or negligence by such party in the performance of its respective obligations and duties under the Pooling and Servicing Agreement or by reason of negligent disregard by such party of its respective obligations or duties under the Pooling and Servicing Agreement. In addition, each of the Master Servicer, the Special Servicer, the Operating Advisor or the Asset Representations Reviewer, as applicable, will indemnify the Issuing Entity against any and all loss, liability or reasonable expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by the Issuing Entity as a result of any willful misconduct, bad faith, fraud or negligence in the performance of the respective duties of the Master Servicer, the Special Servicer, the Operating Advisor or the Asset Representations Reviewer, as the case may be, or by reason of negligent disregard of such person’s obligations or duties under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement further provides that the Depositor, the Master Servicer, the Special Servicer, the Operating Advisor, the Asset Representations Reviewer and any director, member, manager, officer, employee or agent of the Depositor, the Master Servicer, the Special Servicer, the Operating Advisor or the Asset Representations Reviewer will be entitled to indemnification by the Issuing Entity for any loss, liability, penalty, fine, forfeiture, claim, judgment or expense incurred in connection with, or relating to, the Pooling and Servicing Agreement or the Certificates, other than any such loss, liability, penalty, fine, forfeiture, claim, judgment or expense: (i) specifically required to be borne by the party seeking indemnification, without right of reimbursement pursuant to the terms of the Pooling and Servicing Agreement; (ii) which constitutes an Advance that is otherwise reimbursable under the Pooling and Servicing Agreement; (iii) resulting from any breach on the part of that party of a representation or warranty made in the Pooling and Servicing Agreement; or (iv) incurred by reason of any willful misconduct, bad faith, fraud or negligence on the part of that party in the performance of its obligations or duties under the Pooling and Servicing Agreement or negligent disregard of such obligations or duties.
In addition, the Pooling and Servicing Agreement provides that none of the Depositor, the Master Servicer, the Special Servicer, the Certificate Administrator, the Trustee, the Operating Advisor or the Asset Representations Reviewer will be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its duties under the Pooling and Servicing Agreement and which in its opinion does not expose it to any expense or liability for which reimbursement is not reasonably assured, provided that neither the Operating Advisor nor the Asset Representations Reviewer may prosecute on behalf of the Trust or in the interests of the Certificateholders any legal action related to its duties under the Pooling and Servicing Agreement under any circumstances. The Depositor, the Master Servicer, the Special Servicer, the Certificate Administrator or the Trustee may, however, in its discretion undertake any such action which it may deem necessary or desirable with respect to the Pooling and Servicing Agreement and the rights and duties of the parties to the Pooling and Servicing Agreement and the interests of the holders of Certificates under the Pooling and Servicing Agreement. In such event, the reasonable legal expenses and costs of such action and any liability resulting from such action will be expenses, costs and liabilities of the Issuing Entity, and the Depositor, the Master Servicer, the Special Servicer, the Certificate Administrator and the Trustee will be entitled to be reimbursed for those amounts from the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of the Master Servicer, the Special Servicer, the Certificate Administrator, the Trustee, the Operating Advisor or the Asset Representations Reviewer under the Pooling and Servicing Agreement. The Depositor may, but is not obligated to, enforce the obligations of the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement and may, but is not obligated to, perform or cause a designee to perform any defaulted obligation of the Master Servicer or the Special Servicer or exercise any right of the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement. In the event the Depositor undertakes any such action, it will be reimbursed and indemnified by the Issuing Entity to the extent not recoverable from the Master Servicer or the Special Servicer, as applicable. Any such action by the Depositor will not relieve the Master Servicer or the Special Servicer of its obligations under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires that the Master Servicer and the Special Servicer each obtain and maintain in effect a fidelity bond or similar form of insurance coverage (which may provide blanket coverage) or a combination of fidelity bond and insurance coverage insuring against loss occasioned by fraud, theft or other intentional misconduct of the officers and employees of the Master Servicer or the Special Servicer, as the case may be. In addition, the Pooling and Servicing Agreement requires that the Master Servicer and Special Servicer each keep in force during the term of the Pooling and Servicing Agreement insurance coverage against loss
383 |
occasioned by the errors and omissions of their respective officers and employees in connection with their respective obligations under the Pooling and Servicing Agreement. Notwithstanding the foregoing, the Pooling and Servicing Agreement permits the Master Servicer and the Special Servicer to self-insure against the losses discussed above in this paragraph, so long as certain rating criteria set forth in the Pooling and Servicing Agreement are met with respect to that entity or its parent.
Pursuant to the Pooling and Servicing Agreement, the Issuing Entity will be required to indemnify each of the Trustee and the Certificate Administrator (including in any other capacities in which it acts under the Pooling and Servicing Agreement) and certain related persons against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and any other costs, fees and expenses that the indemnified party may sustain in connection with the Pooling and Servicing Agreement (including, without limitation, reasonable fees and disbursements of counsel and of all persons not regularly in its employ incurred by the indemnified party in any action or proceeding between the Issuing Entity and the indemnified party, or between the indemnified party and any third party or otherwise) arising in respect of the Pooling and Servicing Agreement or the Certificates, other than those resulting from the negligence, fraud, bad faith or willful misconduct, or the negligent disregard of obligations and duties under the Pooling and Servicing Agreement, of the Trustee or Certificate Administrator, as applicable. Pursuant to the Pooling and Servicing Agreement, the Trustee or Certificate Administrator, as applicable, will be required to indemnify the Issuing Entity against any loss, liability or reasonable expense (including, without limitation, reasonable attorneys’ fees and expenses) incurred by the Issuing Entity as a result of any willful misconduct, bad faith, fraud or negligence in the performance of the obligations or duties of the Trustee or Certificate Administrator, as the case may be, or by reason of negligent disregard of the such party’s obligations or duties under the Pooling and Servicing Agreement. Except in the event of the Trustee’s or Certificate Administrator’s, as applicable, willful misconduct, bad faith or fraud, in no event will the Trustee or Certificate Administrator, as applicable, be liable for special, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee or Certificate Administrator, as applicable, has been advised of the likelihood of such loss or damage and regardless of the form of action. Neither the Trustee nor the Certificate Administrator will be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of holders of Certificates entitled to greater than 25% of the Percentage Interests (or such other percentage as specified in the Pooling and Servicing Agreement for such action) of each affected Class, or of the aggregate Voting Rights of the Certificates, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee or the Certificate Administrator, as applicable, or exercising any trust or power conferred upon the Trustee or the Certificate Administrator, as applicable, under the Pooling and Servicing Agreement. Neither the Trustee or Certificate Administrator, as applicable, will be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties under the Pooling and Servicing Agreement, or in the exercise of any of its rights or powers if, in such party’s opinion, the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
Neither the Trustee nor the Certificate Administrator will be accountable for the use or application by the Depositor of any Certificates issued to it or of the proceeds of the sale of such Certificates, or for the use of or application of any funds paid to the Depositor, the Master Servicer or the Special Servicer in respect of the Mortgage Loans, or for investment of such amounts (except, in the case of the Certificate Administrator, for any investment of such amounts in investments issued by the Certificate Administrator in its commercial capacity), nor will the Trustee or the Certificate Administrator be required to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer (except, in the case of the Trustee, for advancing obligations as described in this prospectus), the Special Servicer, the Trustee, the Operating Advisor or the Asset Representations Reviewer under the Pooling and Servicing Agreement, unless, in the case of the Trustee, it is acting as the successor to, and is vested with the rights, duties, powers and privileges of, the Master Servicer or the Special Servicer in accordance with the terms of the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement provides that neither the Trustee nor the Certificate Administrator will be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized, or within the discretion or rights or powers conferred on it, by the Pooling and Servicing Agreement. Furthermore, neither the Trustee nor the Certificate Administrator will be liable for an error in judgment, unless the Trustee or Certificate Administrator was negligent in ascertaining the pertinent facts.
Each of the Trustee and the Certificate Administrator may execute any of the trusts or powers under the Pooling and Servicing Agreement or perform any duties thereunder either directly or by or through agents or attorneys but will not be relieved of its obligations hereunder.
384 |
The Trustee or the Certificate Administrator, as applicable, will have notice of an event only when one of certain designated officers of the Trustee or the Certificate Administrator, as applicable, has received written notice or obtains actual knowledge of such event.
Neither the Trustee nor the Certificate Administrator will be responsible for delays or failures in performance resulting from acts beyond its control (such acts to include but are not limited to acts of God, strikes, lockouts, riots and acts of war).
Pursuant to the Pooling and Servicing Agreement, the Trustee and Certificate Administrator may rely upon and will be protected in acting or refraining from acting upon any resolution, officer’s certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties. In addition, the Trustee and Certificate Administrator may consult with counsel and the written advice of such counsel or any opinion of counsel will be full and complete authorization and protection in respect of any action taken or suffered or omitted by it under the Pooling and Servicing Agreement in good faith and in accordance therewith. The Trustee and Certificate Administrator will not be under any obligation to exercise any of the trusts or powers vested in it by the Pooling and Servicing Agreement, or to make any investigation of matters arising thereunder or to institute, conduct or defend any litigation under or in relation to the Pooling and Servicing Agreement, at the request, order or direction of any of the Certificateholders, unless those Certificateholders have offered the Trustee or Certificate Administrator, as applicable, reasonable security or indemnity against the costs, expenses and liabilities that may be incurred as a result. The Trustee and Certificate Administrator will not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Pooling and Servicing Agreement, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of those funds or adequate indemnity against that risk or liability is not reasonably assured to it. The protections, immunities and indemnities afforded to the Certificate Administrator will also be available to it in its capacity as, and to any other person or entity appointed by it to act as, authenticating agent, certificate registrar, and paying agent. The protections, immunities and indemnities afforded to the Trustee will also be available to it in its capacity as, and to any other person or entity appointed by it to act as, custodian.
The Pooling and Servicing Agreement provides that, with respect to each Outside Serviced Mortgage Loan, each of (a) (as and to the same extent the Outside Securitization established under the related Outside Servicing Agreement is required to indemnify each of the following parties in respect of other mortgage loans in such Outside Securitization pursuant to the terms of the related Outside Servicing Agreement) the Outside Servicer, the Outside Special Servicer, the Outside Trustee, the Outside Certificate Administrator, the Outside Operating Advisor and the Outside Depositor under the related Outside Servicing Agreement (and any director, officer, employee or agent of any of the foregoing, to the extent such parties are identified as indemnified parties in the related Outside Servicing Agreement in respect of other mortgage loans included in such Outside Securitization) and (b) the Outside Securitization (such parties in clause (a) and the Outside Securitization collectively, the “Pari Passu Indemnified Parties”) will be entitled to be indemnified against any claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, liabilities, fees and expenses incurred in connection with the servicing and administration of such Outside Serviced Mortgage Loan and the related Mortgaged Property (or, with respect to the Outside Operating Advisor, incurred in connection with the provision of services for such Outside Serviced Mortgage Loan) under the Outside Servicing Agreement (collectively, the “Pari Passu Indemnified Items”) to the extent of the Issuing Entity’s pro rata share of such Pari Passu Indemnified Items, and to the extent amounts on deposit in the related “loan combination custodial account” maintained pursuant to the related Outside Servicing Agreement that are allocated to such Outside Serviced Mortgage Loan are insufficient for reimbursement of such amounts, such Indemnified Party will be entitled to be reimbursed by the Issuing Entity (including out of general collections in the Collection Account) for the Issuing Entity’s pro rata share of the insufficiency.
In addition, the Co-Lender Agreement executed with respect to each Outside Serviced Loan Combination provides that this securitization transaction is obligated to promptly reimburse the Outside Servicer, the Outside Special Servicer, the Outside Trustee, and the Outside Certificate Administrator under the related Outside Servicing Agreement and/or the Outside Securitization established under the related Outside Servicing Agreement, as applicable, for the Issuing Entity’s pro rata share of any fees, costs or expenses incurred in connection with the servicing and administration of such Outside Serviced Loan Combination as to which such Outside Securitization or any of the parties thereto are entitled to be reimbursed pursuant to the terms of the Outside Servicing Agreement. Reimbursement of such pro rata share will be made out of general collections in
385 |
the Issuing Entity’s Collection Account, to the extent reimbursement out of collections on the applicable Outside Serviced Mortgage Loan are insufficient therefor.
Servicer Termination Events
“Servicer Termination Events” under the Pooling and Servicing Agreement with respect to the Master Servicer or the Special Servicer, as the case may be, will include, without limitation:
(a) (i) any failure by the Master Servicer to make a required deposit to the Collection Account or any Loan Combination Custodial Account or make a required remittance to any Serviced Companion Loan Holder, on the day such deposit or remittance was first required to be made, which failure is not remedied within one business day or (ii) any failure by the Master Servicer to deposit into, or remit to the Certificate Administrator for deposit into, the Distribution Account any amount required to be so deposited or remitted, which failure is not remedied by 11:00 a.m., New York City time, on the relevant Distribution Date;
(b) any failure by the Special Servicer to deposit into any REO Account within two business days after the day such deposit is required to be made, or to remit to the Master Servicer for deposit in the Collection Account or any Loan Combination Custodial Account such remittance required to be made by the Special Servicer within one business day after such remittance is required to be made, under the Pooling and Servicing Agreement;
(c) any failure by the Master Servicer or the Special Servicer duly to observe or perform in any material respect any of its other covenants or obligations under the Pooling and Servicing Agreement, which failure continues unremedied for 30 days (10 days in the case of the Master Servicer’s failure to make a Property Advance or 20 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 such shorter period (not less than two business days) as may be required to avoid the commencement of foreclosure proceedings for unpaid real estate taxes or the lapse of insurance, as applicable) after written notice of the failure has been given to the Master Servicer or the Special Servicer, as the case may be, by any other party to the Pooling and Servicing Agreement, or to the Master Servicer or the Special Servicer, as the case may be, with a copy to each other party to the related Pooling and Servicing Agreement, by Certificateholders of any Class, evidencing, as to that Class, not less than 25% of the Voting Rights allocable thereto (considering each Class of the Class A-S, Class B and Class C Certificates together with the Class EC Component with the same alphabetical designation as a single “Class” for such purpose), or, if affected thereby, by the Serviced Companion Loan Holder;provided,however, if that failure is capable of being cured and the Master Servicer or the Special Servicer, as applicable, is diligently pursuing that cure, that 30-day period will be extended an additional 60 days (provided that the Master Servicer, or the Special Servicer, as applicable, has commenced to cure such failure within the initial 30-day period and has certified that it has diligently pursued, and is continuing to pursue, a full cure);
(d) any breach on the part of the Master Servicer or the Special Servicer of any representation or warranty in the Pooling and Servicing Agreement, which materially and adversely affects the interests of any Class of Certificateholders or a Serviced Companion Loan Holder, as applicable, and which continues unremedied for a period of 30 days after the date on which notice of that breach, requiring the same to be remedied, has been given to the Master Servicer or the Special Servicer, as the case may be, by the Depositor, the Certificate Administrator or the Trustee, or to the Master Servicer, the Special Servicer, the Depositor, the Certificate Administrator and the Trustee by the holders of Certificates entitled to not less than 25% of the Voting Rights, or, if affected thereby, by the Serviced Companion Loan Holder;provided,however, if that breach is capable of being cured and the Master Servicer or the Special Servicer, as applicable, is diligently pursuing that cure, that 30-day period will be extended an additional 60 days (provided that the Master Servicer, or the Special Servicer, as applicable, has commenced to cure such failure within the initial 30-day period and has certified that it has diligently pursued, and is continuing to pursue, a full cure);
(e) certain events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings in respect of or relating to the Master Servicer or the Special Servicer, and certain actions by or on behalf of the Master Servicer or the Special Servicer indicating its insolvency or inability to pay its obligations;
386 |
(f) either of Moody’s Investors Service, Inc. (“Moody’s”) or Kroll Bond Rating Agency, Inc. (“KBRA”) (or, in the case of Serviced Companion Loan Securities, any Companion Loan Rating Agency) has (i) qualified, downgraded or withdrawn its rating or ratings of one or more Classes of Certificates or Serviced Companion Loan Securities, or (ii) placed one or more Classes of Certificates or Serviced Companion Loan Securities on “watch status” in contemplation of rating downgrade or withdrawal and, in the case of either of clauses (i) or (ii), publicly citing servicing concerns with the Master Servicer or the Special Servicer, as applicable, as the sole or material factor in such rating action (and such qualification, downgrade, withdrawal or “watch status” placement has not been withdrawn by such Rating Agency (or, in the case of Serviced Companion Loan Securities, such Companion Loan Rating Agency) within 60 days of such event);
(g) the Master Servicer ceases to have a commercial master servicer rating of at least “CMS3” from Fitch Ratings, Inc. (“Fitch”) and that rating is not reinstated within 60 days or the Special Servicer ceases to have a commercial special servicer rating of at least “CSS3” from Fitch and that rating is not reinstated within 60 days, as the case may be; or
(h) the Master Servicer or the Special Servicer, as applicable, or any primary servicer or sub-servicer appointed by the Master Servicer or the Special Servicer, as applicable, after the Closing Date (but excluding any primary servicer or sub-servicer which the Master Servicer has been instructed to retain by the Depositor or a Sponsor), (i) fails to deliver the items required by the Pooling and Servicing Agreement after any applicable notice and cure period to enable the Certificate Administrator or Depositor to comply with the Issuing Entity’s reporting obligations under the Exchange Act or (ii) for so long as the trust created pursuant to the securitization of a Serviced Companion Loan is subject to the reporting requirements of Regulation AB or the Exchange Act, fails to deliver any Exchange Act reporting items required to be delivered by such servicer pursuant to the Pooling and Servicing Agreement at the times required under the Pooling and Servicing Agreement after any applicable notice and cure periods (and any primary servicer or sub-servicer that defaults in accordance with this clause may be terminated at the direction of the Depositor).
“Serviced Companion Loan Securities” mean any commercial mortgage-backed securities that evidence an interest in or are secured by the assets of an Issuing Entity, which assets include a Serviced Companion Loan (or a portion of or interest in a Serviced Companion Loan).
“Companion Loan Rating Agency” means, with respect to any Serviced Companion Loan, any rating agency that was engaged by a participant in the securitization of such Serviced Companion Loan to assign a rating to the related Serviced Companion Loan Securities.
Rights Upon Servicer Termination Event
If a Servicer Termination Event with respect to the Master Servicer or the Special Servicer is continuing and has not been remedied, then either (i) the Trustee may or (ii) upon the written direction of the holders of Certificates evidencing at least 25% of the aggregate Voting Rights of all Certificates (or, solely in the case of a Serviced Loan Combination only, subject to the discussion below, upon the written direction of the affected Serviced Companion Loan Holder) to the Trustee, the Trustee will be required to, terminate all of the rights and obligations of the Master Servicer as master servicer or the Special Servicer as special servicer under the Pooling and Servicing Agreement and in and to the Issuing Entity (except in its capacity as a Certificateholder). Notwithstanding the foregoing, upon any termination of the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement, the Master Servicer or the Special Servicer will continue to be entitled to any rights that accrued prior to the date of such termination (including the right to receive all accrued and unpaid servicing and special servicing compensation through the date of termination plus reimbursement for all Advances and interest on such Advances as provided in the Pooling and Servicing Agreement).
On and after the date of termination following a Servicer Termination Event by the Master Servicer or the Special Servicer, as the case may be, the Trustee will succeed to all authority and power of the Master Servicer or the Special Servicer, as the case may be, under the Pooling and Servicing Agreement and will be entitled to the compensation arrangements to which the Master Servicer or the Special Servicer, as the case may be, would have been entitled (unless previously earned by the Master Servicer or the Special Servicer, as the case may be). If the Trustee is unwilling or unable so to act, or if the holders of Certificates evidencing at least 25% of the aggregate Voting Rights of all Certificateholders so request, or if the Rating Agencies do not provide a Rating Agency Confirmation with respect to the Trustee so acting, the Trustee must appoint, or petition a court of competent jurisdiction for the appointment of, a Mortgage Loan servicing institution to act as successor to the
387 |
Master Servicer or the Special Servicer, as applicable, under the Pooling and Servicing Agreement;provided a Rating Agency Confirmation must be obtained regarding appointment of the proposed successor at the expense of the terminated Master Servicer or Special Servicer, as applicable, or, if the expense is not so recovered, at the expense of the Issuing Entity;provided, further, that, the related Outside Controlling Note Holder will have the right to approve a successor Special Servicer with respect to any Serviced Outside Controlled Loan Combination, and prior to the occurrence and continuance of a Control Termination Event, the Controlling Class Representative will have the right to approve a successor Special Servicer with respect to the other Serviced Loans. Pending such appointment, the Trustee is obligated to act in such capacity in accordance with the Pooling and Servicing Agreement. The Trustee and any such successor may agree upon the servicing compensation to be paid;provided, however, that the servicing compensation may not be in excess of that permitted to the terminated Master Servicer or Special Servicer, as applicable, unless no successor can be obtained to perform the obligations for that compensation; andprovided, further, that, for so long as no Consultation Termination Event has occurred and is continuing, the Trustee will be required to consult with the Controlling Class Representative (and, if a Serviced Outside Controlled Loan Combination is affected, the Trustee will be required to consult with the related Outside Controlling Note Holder) prior to the appointment of a successor Master Servicer or Special Servicer at a servicing compensation in excess of that permitted to the terminated Master Servicer or Special Servicer, as applicable. Any compensation in excess of that payable to the predecessor Master Servicer or the Special Servicer may result in Realized Losses or other shortfalls on the Certificates.
The Trustee or any other successor Master Servicer assuming the obligations of the Master Servicer under the Pooling and Servicing Agreement will be entitled to the compensation to which the Master Servicer would have been entitled after the date of the assumption of the Master Servicer’s obligations. If no successor Master Servicer can be obtained to perform such obligations for such compensation, additional amounts payable to such successor Master Servicer will be treated as Realized Losses.
Notwithstanding the foregoing, (1) if any Servicer Termination Event on the part of the Master Servicer affects a Serviced Companion Loan, the related Serviced Companion Loan Holder or the rating on a class of the related Serviced Companion Loan Securities, and if the Master Servicer is not otherwise terminated, or (2) if a Servicer Termination Event on the part of the Master Servicer affects only a Serviced Companion Loan, the related Serviced Companion Loan Holder or the rating on a class of related Serviced Companion Loan Securities, then the Master Servicer may not be terminated by or at the direction of the related Serviced Companion Loan Holder or the holders of any Certificates, but upon the written direction of the related Serviced Companion Loan Holder, the Master Servicer will be required to appoint a sub-servicer that will be responsible for servicing the related Serviced Loan Combination. Also, notwithstanding the foregoing, if a Servicer Termination Event described in clauses (a), (b), (c), (d), (f) or (g) under “—Servicer Termination Events” on the part of the Special Servicer affects only a Serviced Companion Loan, a Serviced Companion Loan Holder or a rating on any Serviced Companion Loan Securities, then it will not be a Servicer Termination Event with respect to the Mortgage Pool as a whole, but the related Serviced Companion Loan Holder may terminate the Special Servicer with respect to the related Serviced Loan Combination.
Notwithstanding the foregoing discussion in this “—Rights Upon Servicer Termination Event” section, if the Master Servicer is terminated under the circumstances described above because of the occurrence of any of the Servicer Termination Events described in clause (f) or (g) under “—Servicer Termination Events” above, the Master Servicer will have the right for a period of 45 days (during which time it will continue to serve as Master Servicer), at its expense, to sell its master servicing rights with respect to the Mortgage Loans to a Master Servicer as to which the Rating Agencies have provided a Rating Agency Confirmation.
No Certificateholder will have any right under the Pooling and Servicing Agreement to institute any proceeding with respect to the Pooling and Servicing Agreement or the Mortgage Loans, unless, with respect to the Pooling and Servicing Agreement, such holder previously has given to the Trustee a written notice of a default under the Pooling and Servicing Agreement, and of the continuance of the default, and unless also the holders of at least 25% of the Voting Rights of any Class affected thereby (considering each of the Class A-S, Class B and Class C Certificates together with the Class EC Component of the same alphabetical designation as a single “Class” for such purpose) have made written request of the Trustee (with a copy to the Certificate Administrator) to institute such proceeding in its own name as Trustee under the Pooling and Servicing Agreement and have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred in connection with such proceeding, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, has neglected or refused to institute such proceeding.
388 |
The Trustee will have no obligation to make any investigation of matters arising under the Pooling and Servicing Agreement or to institute, conduct or defend any litigation under the Pooling and Servicing Agreement or in relation to it at the request, order or direction of any of the holders of Certificates, unless such holders of Certificates have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which may be incurred in connection with such action.
In addition, the Depositor may terminate each of the Master Servicer and the Special Servicer upon five business days’ notice if the Master Servicer or the Special Servicer, as the case may be, fails to comply with certain of its reporting obligations under the Pooling and Servicing Agreement.
Waivers of Servicer Termination Events
A Servicer Termination Event may be waived by the Certificateholders evidencing not less than 66-2/3% of the aggregate Voting Rights of the Certificates (and, if such Servicer Termination Event is on the part of a Special Servicer with respect to a Serviced Loan Combination only, by the related Serviced Companion Loan Holder). Notwithstanding the foregoing, (1) a Servicer Termination Event under clause (a) or (b) under “—Servicer Termination Events” above may be waived only with the consent of all of the Certificateholders of the affected Classes (considering each of the Class A-S, Class B and Class C Certificates together with the Class EC Component of the same alphabetical designation as a single “Class” for such purpose), and (2) a Servicer Termination Event under clause (h) under “—Servicer Termination Events” above may be waived only with the consent of the Depositor, together with (in the case of each of clauses (1) and (2) of this sentence) the consent of any Serviced Companion Loan Holder affected by such Servicer Termination Event. If a Servicer Termination Event on the part of the Master Servicer is waived in connection with a Serviced Loan Combination, the related Serviced Companion Loan Holder may require that the Master Servicer appoint a sub-servicer to service the related Serviced Loan Combination, which sub-servicer is the subject of a Rating Agency Confirmation.
Termination of the Special Servicer Without Cause
The Special Servicer may be removed, and a successor Special Servicer appointed, at any time, as follows:
(a) if a Control Termination Event has not occurred (or has occurred, but is no longer continuing), the Special Servicer may be removed and replaced at any time with or without cause with respect to the Serviced Loans (excluding any Serviced Outside Controlled Loan Combination and any Excluded Mortgage Loan) at the direction of the Controlling Class Representative upon satisfaction of certain conditions specified in the Pooling and Servicing Agreement (including the delivery of a Rating Agency Confirmation);
(b) if a Control Termination Event has occurred and is continuing, the Special Servicer may be removed, with respect to the Serviced Loans (excluding any Serviced Outside Controlled Loan Combination), in accordance with the procedures set forth below, at the written direction of (a) holders of Certificates (other than Class R Certificates) evidencing at least 75% of a Certificateholder Quorum or (b) holders of Non-Reduced Certificates evidencing more than 50% of the Voting Rights of each Class of Non-Reduced Certificates (considering each Class of the Class A-S, Class B and Class C Certificates together with the Class EC Component with the same alphabetical designation as a single “Class” for such purpose); and
(c) the Special Servicer may be removed and replaced at any time with or without cause solely with respect to a Serviced Outside Controlled Loan Combination at the direction of the related Outside Controlling Note Holder, upon satisfaction of certain conditions specified in the Pooling and Servicing Agreement (including delivery of a Rating Agency Confirmation) and the related Co-Lender Agreement.
Notwithstanding the foregoing, if the Special Servicer, to its knowledge, is a Borrower Party with respect to any Mortgage Loan or Loan Combination (any such Mortgage Loan or Loan Combination, an “Excluded Special Servicer Mortgage Loan”), the Special Servicer will be required to resign as Special Servicer of that Excluded Special Servicer Mortgage Loan. Prior to the occurrence and continuance of a Control Termination Event, if the Excluded Special Servicer Mortgage Loan is not also an Excluded Mortgage Loan, the Controlling Class Representative will be entitled to appoint (and replace with or without cause) a successor Special Servicer that is not a Borrower Party in accordance with the terms of the Pooling and Servicing Agreement (the “Excluded Mortgage Loan Special Servicer”) for the related Excluded Special Servicer Mortgage Loan. If an Excluded Special Servicer Mortgage Loan is also an Excluded Mortgage Loan, the largest Controlling Class Certificateholder (by Certificate Balance) that is not an Excluded Controlling Class Holder will be entitled to
389 |
appoint (and replace with or without cause) the Excluded Mortgage Loan Special Servicer for the related Excluded Special Servicer Mortgage Loan in accordance with the terms of the Pooling and Servicing Agreement. If a Control Termination Event has occurred and is continuing, neither the Controlling Class Representative nor any other Controlling Class Certificateholder will be entitled to remove or replace the Excluded Mortgage Loan Special Servicer with respect to any Excluded Special Servicer Mortgage Loan. If a Control Termination Event has occurred and is continuing and prior to the occurrence of a Consultation Termination Event, the largest Controlling Class Certificateholder that is not an Excluded Controlling Class Holder will have the right to appoint the Excluded Mortgage Loan Special Servicer. If neither the Controlling Class Representative nor any Controlling Class Certificateholder is entitled to appoint a replacement special servicer for an Excluded Special Servicer Mortgage Loan, a replacement special servicer will be appointed in the manner described below and as specified in the Pooling and Servicing Agreement.
If a Consultation Termination Event has occurred and is continuing, upon resignation of the Special Servicer with respect to an Excluded Special Servicer Mortgage Loan, at the expense of the Issuing Entity, the Certificate Administrator will be required to promptly provide written notice of such resignation to all Certificateholders by posting such notice on its internet website and the Excluded Mortgage Loan Special Servicer will be appointed upon the written direction of more than 50% of the Voting Rights of the Certificates that exercise their right to vote (provided that holders of at least 20% of the Voting Rights of the Certificates exercise their right to vote). If such Excluded Mortgage Loan Special Servicer has not been appointed pursuant to the preceding sentence within 30 days after the Special Servicer has provided its written notice of resignation, the Certificate Administrator will provide written notice to the resigning Special Servicer that such Excluded Mortgage Loan Special Servicer has not been appointed and such resigning Special Servicer will use reasonable efforts to appoint such Excluded Mortgage Loan Special Servicer.
If at any time the Special Servicer is no longer a Borrower Party with respect to an Excluded Special Servicer Mortgage Loan, (1) the related Excluded Mortgage Loan Special Servicer will be required to resign, (2) the related Mortgage Loan or Loan Combination, as the case may be, will no longer be an Excluded Special Servicer Mortgage Loan, (3) the original Special Servicer will become the special servicer again for such Mortgage Loan or Loan Combination, as the case may be, and (4) the original Special Servicer will be entitled to all special servicing compensation with respect to such Mortgage Loan or Loan Combination, as the case may be, earned during such time on and after such Mortgage Loan or Loan Combination, as the case may be, is no longer an Excluded Special Servicer Mortgage Loan.
The Excluded Mortgage Loan Special Servicer will be required to perform all of the obligations of the Special Servicer for the related Excluded Special Servicer Mortgage Loan and will be entitled to all special servicing compensation with respect to such Excluded Special Servicer Mortgage Loan earned during such time as the related Mortgage Loan is an Excluded Special Servicer Mortgage Loan. The Special Servicer will remain entitled to all special servicing compensation with respect to the Mortgage Loans and Serviced Loan Combinations that are not Excluded Special Servicer Mortgage Loans during such time.
The procedures for removing a Special Servicer if a Control Termination Event has occurred and is continuing will be as follows: upon (i) the written direction of holders of Certificates evidencing at least 25% of the Voting Rights of the Certificates (other than Class R Certificates) requesting a vote to terminate and replace the Special Servicer (with respect to all of the Serviced Loans other than any Serviced Outside Controlled Loan Combination) with a proposed successor Special Servicer, (ii) payment by such holders to the Certificate Administrator of the reasonable fees and expenses to be incurred by the Certificate Administrator in connection with administering such vote and (iii) delivery by such holders to the Certificate Administrator and the Trustee of a Rating Agency Confirmation addressing the removal and replacement of the Special Servicer (which confirmations will be obtained at the expense of such holders), the Certificate Administrator will be required to promptly provide written notice to all Certificateholders of such request by posting such notice on its internet website and by mailing at their addresses appearing in the certificate register. Upon the written direction of (a) holders of Certificates (other than the Class R Certificates) evidencing at least 75% of a Certificateholder Quorum or (b) holders of Non-Reduced Certificates evidencing more than 50% of the Voting Rights of each Class of Non-Reduced Certificates (considering each Class of the Class A-S, Class B and Class C Certificates together with the Class EC Component with the same alphabetical designation as a single “Class” for such purpose), the Trustee will be required to terminate all of the rights and obligations of the Special Servicer under the Pooling and Servicing Agreement with respect to the applicable Serviced Loans and appoint the proposed successor Special Servicer; provided that if that written direction is not provided within 180 days of the initial request for a vote to so terminate and replace the Special Servicer, then that written direction will have no force and effect. The
390 |
Certificate Administrator will include on each Distribution Date statement a statement that each Certificateholder and beneficial owner of Certificates may access such notices on the Certificate Administrator’s website and each Certificateholder and beneficial owner of Certificates may register to receive email notifications when such notices are posted on the website. Any such appointment of a successor Special Servicer with respect to the Serviced Loans (other than any Serviced Outside Controlled Loan Combination) based on a Certificateholder vote will be subject to the receipt of a Rating Agency Confirmation. The Certificate Administrator will be entitled to reimbursement from the requesting Certificateholders for the reasonable expenses of posting notices of such requests.
In addition, any time after the occurrence and during the continuance of a Consultation Termination Event, if the Operating Advisor determines that the Special Servicer is not performing its duties as required under the Pooling and Servicing Agreement or is otherwise not acting in accordance with the Servicing Standard, the Operating Advisor will have the right to recommend the replacement of the Special Servicer with respect to the Serviced Loans; provided, that the Operating Advisor may recommend the replacement of the Special Servicer with respect to a Serviced Outside Controlled Loan Combination only if the related Outside Controlling Note Holder so consents. In any such event, the Operating Advisor will be required to deliver to the Trustee and the Certificate Administrator, with a copy to the Special Servicer, a written recommendation detailing the reasons supporting its position (along with relevant information justifying its recommendation) and recommending a replacement Special Servicer meeting the applicable requirements of the Pooling and Servicing Agreement, which recommended special servicer has agreed to succeed the then-current Special Servicer with respect to the applicable Serviced Loans if appointed in accordance with the Pooling and Servicing Agreement. The Certificate Administrator will be required to promptly post a copy of such recommendation on its internet website and by mail send notice to all Certificateholders, asking them to indicate whether they wish to remove the Special Servicer. Upon the written direction (as evidenced by votes cast) of holders of Non-Reduced Certificates evidencing more than 50% of the Voting Rights of each Class of Non-Reduced Certificates (considering each Class of the Class A-S, Class B and Class C Certificates together with the Class EC Component with the same alphabetical designation as a single “Class” for such purpose) within 180 days of the initial request for a vote, and receipt by the Certificate Administrator of a Rating Agency Confirmation from each Rating Agency, the Trustee will terminate all of the rights and obligations of the Special Servicer under the Pooling and Servicing Agreement with respect to the applicable Serviced Loans, and appoint the recommended successor Special Servicer. If such written direction of the holders of the required Non-Reduced Certificates is not provided within 180 days of the request for a vote on the removal of the Special Servicer, the recommendation of the Operating Advisor to so remove and replace the Special Servicer will lapse and be of no force and effect. The reasonable fees and out-of-pocket costs and expenses associated with obtaining the Rating Agency Confirmation described above and administering the vote on removal of the Special Servicer will be an additional expense of the Issuing Entity.
In addition, the Depositor may terminate the Special Servicer upon five business days’ notice if the Special Servicer fails to comply with certain of its reporting obligations under the Pooling and Servicing Agreement.
In no event may a successor Special Servicer be a current or former Operating Advisor or Asset Representations Reviewer or any affiliate of such current or former Operating Advisor or Asset Representations Reviewer.
“Certificateholder Quorum” means the holders of Certificates evidencing at least 75% of the aggregate Voting Rights (taking into account the allocation of any Appraisal Reduction Amounts to notionally reduce the Certificate Balances of the Certificates) of all Certificates (other than the Class R Certificates), on an aggregate basis.
Resignation of the Master Servicer, the Special Servicer and the Operating Advisor
Each of the Master Servicer and the Special Servicer may resign, assign its rights and delegate its duties and obligations under the Pooling and Servicing Agreement;provided that certain conditions are satisfied including obtaining a Rating Agency Confirmation. The resigning Master Servicer or Special Servicer, as applicable, must pay all costs and expenses associated with the transfer of its duties after resignation. The Pooling and Servicing Agreement provides that the Master Servicer or the Special Servicer, as the case may be, may not otherwise resign from its obligations and duties as Master Servicer or Special Servicer, as the case may be, except upon the determination that performance of its duties is no longer permissible under applicable law andprovided that such determination is evidenced by an opinion of counsel to that effect delivered to the Trustee and the Certificate Administrator. No such resignation may become effective until the Trustee (solely with respect
391 |
to the Master Servicer or the Special Servicer) or a successor Master Servicer or Special Servicer has assumed the obligations of the Master Servicer or the Special Servicer, as applicable, under the Pooling and Servicing Agreement. The Trustee or any other successor Master Servicer or Special Servicer assuming the obligations of the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement will be entitled to the compensation to which the Master Servicer or the Special Servicer would have been entitled after the date of assumption of such obligations (other than certain Workout Fees which the prior Special Servicer will be entitled to retain and other than the excess servicing portion of the Servicing Fee which, subject to reduction in order to retain a successor, may be retained or transferred by the initial Master Servicer). If no successor Master Servicer or Special Servicer can be obtained to perform such obligations for such compensation, additional amounts payable to such successor Master Servicer or Special Servicer will result in shortfalls in distributions on the Certificates.
The Operating Advisor may resign from its duties and obligations under the Pooling and Servicing Agreement upon 30 days’ prior written notice to the parties to the Pooling and Servicing Agreement and the Controlling Class Representative; provided that certain conditions are satisfied including obtaining a Rating Agency Confirmation. No such resignation may become effective until a successor entity has assumed the obligations of the Operating Advisor under the Pooling and Servicing Agreement. The successor entity assuming the obligations of the Operating Advisor under the Pooling and Servicing Agreement will be entitled to the compensation to which the Operating Advisor would have been entitled after the date of assumption of such obligations. If no successor Operating Advisor has been appointed and accepted such appointment within 60 days after the resigning Operating Advisor’s giving of notice of resignation, the resigning Operating Advisor may petition any court of competent jurisdiction for appointment of a successor. The resigning Operating Advisor must pay all costs and expenses associated with its resignation and the transfer of its duties. If no successor Operating Advisor can be obtained to perform such obligations for such compensation, additional amounts payable to such successor Operating Advisor will result in shortfalls in distributions on the Certificates.
In addition, in the event there are no Classes of Certificates outstanding other than the Control Eligible Certificates, the Class R Certificates and, solely for purposes of receiving prepayment premiums and yield maintenance charges, the Class X-B Certificates, then all of the rights and obligations of the Operating Advisor under the Pooling and Servicing Agreement will terminate without payment of any penalty or termination fee (other than any rights or obligations that accrued prior to the date of such termination (including accrued and unpaid compensation) and other than indemnification rights arising out of events occurring prior to such termination). If the Operating Advisor is terminated pursuant to the foregoing sentence, then no replacement operating advisor will be appointed.
The Pooling and Servicing Agreement will prohibit the appointment of the Asset Representations Reviewer or one of its affiliates as successor to the Master Servicer or Special Servicer.
Qualification, Resignation and Removal of the Trustee and the Certificate Administrator
The Trustee is required to maintain a rating on its unsecured long term debt of at least (A) “A-” by Fitch Ratings, Inc., and (B) “A1” by Moody’s (or “A2” by Moody’s if the Trustee has a short term debt rating of at least “P-1” from Moody’s;provided, however, that Deutsche Bank Trust Company Americas as the initial trustee will be deemed to have met the eligibility requirements in (A) and (B) above for so long as (a) it has a rating on its long-term unsecured debt of at least “Baa2” by Moody’s and “BBB” by Fitch, (b) it has a rating on its short-term debt obligations of at least “P-2” by Moody’s and “F2” by Fitch, and (c) the master servicer has a rating on its long-term senior unsecured debt of at least “A2” by Moody’s and “A+” by Fitch (or such other rating with respect to which the applicable Rating Agency has provided a Rating Agency Confirmation). In addition, the Trustee is required to satisfy the requirements for a Trustee contemplated by clause (a)(4)(i) of Rule 3a-7 under the Investment Company Act. The Certificate Administrator is required to maintain a rating on its unsecured long term debt of at least (A) “BBB+” by Fitch Ratings, Inc., and (B) “Baa2” by Moody’s Investors Service, Inc. (or such other rating with respect to which the applicable Rating Agency has provided a Rating Agency Confirmation).
Each of the Trustee and the Certificate Administrator may resign at any time by giving written notice to, among others, the other parties to the Pooling and Servicing Agreement. However, no such resignation will be effective until a successor has been appointed. Upon such notice, the Master Servicer will appoint a successor Trustee or Certificate Administrator, as applicable. If no successor has been appointed and accepted such appointment within 90 days after the giving of such notice of resignation, the resigning Trustee or Certificate
392 |
Administrator, as applicable, may petition any court of competent jurisdiction for appointment of a successor, and such petition will be an expense of the issuing entity.
The Depositor may remove the Trustee or Certificate Administrator, as applicable (and appoint a successor) if, among other things, the Trustee or Certificate Administrator, as applicable, ceases to be eligible to continue as such under the Pooling and Servicing Agreement or if at any time the Trustee or Certificate Administrator, as applicable, becomes incapable of acting, or is adjudged bankrupt or insolvent, or a receiver of the Trustee or Certificate Administrator, as applicable, or its respective property is appointed or any public officer takes charge or control of the Trustee or Certificate Administrator, as applicable, or of its property. The holders of Certificates evidencing more than 50% of the aggregate Voting Rights allocated to all of the Certificates may remove the Trustee or Certificate Administrator, as applicable, and appoint a successor, upon prior written notice to, among others, the Depositor, the Master Servicer, the Certificate Administrator and the Trustee.
Any resignation or removal of the Trustee or Certificate Administrator, as applicable, and appointment of a successor will not become effective until (i) acceptance by the successor Trustee or Certificate Administrator, as applicable, of the appointment, and (ii) the resigning Trustee or Certificate Administrator, as applicable, files any required Form 8-K.
Notwithstanding the foregoing, upon any resignation or termination of the Trustee or Certificate Administrator, as applicable, under the Pooling and Servicing Agreement, the Trustee or Certificate Administrator, as applicable, will continue to be entitled to receive all accrued and unpaid compensation through the date of termination plus (in the case of the Trustee) reimbursement for all Advances made by it and interest on those Advances as provided in the Pooling and Servicing Agreement. The Trustee or Certificate Administrator, as applicable, will be required to bear all reasonable out-of-pocket costs and expenses of each party to the Pooling and Servicing Agreement and each Rating Agency in connection with any removal or resignation of such entity as and to the extent required under the Pooling and Servicing Agreement;provided, that if the Trustee or Certificate Administrator, as applicable, is terminated without cause by the holders of Certificates evidencing more than 50% of the aggregate Voting Rights allocated to all of the Certificates as provided in the second preceding paragraph, then such holders will be required to pay all the reasonable costs and expenses of the Trustee or Certificate Administrator, as applicable, necessary to effect the transfer of the rights and obligations (including custody of the Mortgage Loan files) of the Trustee or Certificate Administrator, as applicable, to a successor. Any successor Trustee or Certificate Administrator, as applicable, must have a combined capital and surplus of at least $50,000,000, and the ratings on its unsecured long term debt set forth above.
At any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Issuing Entity, the assets thereof or any property securing the same is located, the Depositor and the Trustee acting jointly will have the power to appoint one or more persons or entities to act (at the expense of (i) the Trustee, if the need to appoint such co-trustee(s) arises from any change in or matter relating to the identity, organization, status, power, conflicts, internal policy or other development or matter with respect to the Trustee, and/or (ii) the Issuing Entity, if the need to appoint such co-trustee(s) arises from a change in applicable law or the identity, status or power of the Issuing Entity;provided,however, that in the event the need to appoint such co-trustee(s) arises from a combination of the events described in clause (i) and clause (ii), the expense will be split evenly between the Trustee and the Issuing Entity; andprovided,further, that in the event the need to appoint such co-trustee(s) arises from none of the events described in clause (i) and clause (ii), such appointment will be at the expense of the Issuing Entity) as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Issuing Entity, and to vest in such co-trustee or separate trustee such powers, duties, obligations, rights and trusts as the Depositor and the Trustee may consider necessary or desirable. The appointment of a co-trustee or separate trustee will not relieve the Trustee of its responsibilities, obligations and liabilities under the Pooling and Servicing Agreement except as required by applicable law.
The Certificate Administrator is required to perform only those duties described in this prospectus or otherwise specifically required under the Pooling and Servicing Agreement. If no Servicer Termination Event has occurred, and after the curing or waiver of all Servicer Termination Events which may have occurred, the Trustee is required to perform only those duties described in this prospectus or otherwise specifically required under the Pooling and Servicing Agreement. Upon receipt of the various Certificates, reports or other instruments required to be furnished to it, the Trustee or the Certificate Administrator, as applicable, is required to examine such documents and to determine whether they conform on their face to the requirements of the Pooling and Servicing Agreement.
393 |
The Depositor may terminate the Certificate Administrator upon 5 business days’ notice if the Certificate Administrator fails to comply with certain of its reporting obligations under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement will prohibit the appointment of the Asset Representations Reviewer or one of its affiliates as successor to the Trustee or Certificate Administrator.
Amendment
The Pooling and Servicing Agreement may be amended without the consent of any of the holders of Certificates:
(a) to cure any ambiguity to the extent that it does not adversely affect any holders of Certificates;
(b) to correct or supplement any of its provisions which may be inconsistent with any other provisions of the Pooling and Servicing Agreement or with the description of the provisions in this prospectus, or to correct any error;
(c) to change the timing and/or nature of deposits in the Collection Account, the Excess Liquidation Proceeds Reserve Account, the Exchangeable Distribution Account, the Excess Interest Distribution Account, the Distribution Account or any REO Account;provided that (A) the Master Servicer Remittance Date may in no event be later than the business day prior to the related Distribution Date and (B) the change would not adversely affect in any material respect the interests of any Certificateholder, as evidenced by an opinion of counsel (at the expense of the party requesting the amendment);
(d) to modify, eliminate or add to any of its provisions (i) to the extent necessary to maintain the qualification of either Trust REMIC as a REMIC or the Grantor Trust as a grantor trust or to avoid or minimize the risk of imposition of any tax on the Issuing Entity;provided that the Trustee and the Certificate Administrator have received an opinion of counsel (at the expense of the party requesting the amendment) to the effect that (1) the action is necessary or desirable to maintain such qualification or to avoid or minimize such risk and (2) the action will not adversely affect in any material respect the interests of any holder of the Certificates, (ii) to restrict (or to remove any existing restrictions with respect to) the transfer of the Class R Certificates;provided that the Depositor has determined that the amendment will not give rise to any tax with respect to the transfer of the Class R Certificates to a non-permitted transferee, or (iii) to the extent necessary to comply with the Investment Company Act of 1940, as amended, the Exchange Act, Regulation AB, and/or any related regulatory actions and/or interpretations;
(e) to make any other provisions with respect to matters or questions arising under the Pooling and Servicing Agreement or any other change;provided that the amendment will not adversely affect in any material respect the interests of any Certificateholder, as evidenced by an opinion of counsel;
(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 any Rating Agency;provided that such amendment will not adversely affect in any material respect the interests of any Certificateholder; and
(g) to modify the procedures in the Pooling and Servicing Agreement relating to Rule 17g-5 under the Exchange Act (“Rule 17g-5”);provided that such modification does not increase the obligations of the Trustee, the Certificate Administrator, the Operating Advisor, the Master Servicer or the Special Servicer without such party’s consent (which consent may not be withheld unless the modification would materially adversely affect that party or materially increase that party’s obligations under the Pooling and Servicing Agreement);provided, further, that notice of such modification is provided to all parties to the Pooling and Servicing Agreement.
Notwithstanding the foregoing, no such amendment to the Pooling and Servicing Agreement contemplated by the first paragraph under this section entitled “—Amendment” will be permitted if the amendment would (i) reduce the consent or consultation rights or the right to receive information under the Pooling and Servicing Agreement of the Controlling Class Representative without the consent of the Controlling Class Representative, (ii) reduce the consultation rights or the right to receive information under the Pooling and Servicing Agreement of the Operating Advisor without the consent of the Operating Advisor, (iii) change in any manner the obligations or rights of any Sponsor under the applicable Mortgage Loan Purchase Agreement or the
394 |
Pooling and Servicing Agreement without the consent of the affected Sponsor, (iv) change in any manner the obligations or rights of any underwriter or initial purchaser of Certificates without the consent of the related underwriter or initial purchaser of Certificates, or (v) adversely affect any Serviced Companion Loan Holder in its capacity as such without its consent.
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 evidencing not less than 66⅔% of the aggregate Percentage Interests of each Class affected by the amendment 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 Serviced Loans which are required to be distributed on a Certificate of any Class without the consent of the holder of that Certificate, or that are required to be distributed to a Serviced Companion Loan Holder without its consent, (2) reduce the percentage of Certificates of any Class the holders of which are required to consent to the amendment without the consent of the holders of all Certificates of that Class then outstanding, (3) change in any manner the obligations or rights of any Sponsor under the applicable Mortgage Loan Purchase Agreement or the Pooling and Servicing Agreement without the consent of the related Sponsor, (4) change the definition of “Servicing Standard” without either (a) the consent of 100% of the Certificateholders or (b) a Rating Agency Confirmation, (5) without the consent of 100% of the Certificateholders of the Class or Classes of Certificates adversely affected thereby, change (a) the percentages of Voting Rights of Certificateholders which are required to consent to any action or inaction under the Pooling and Servicing Agreement, (b) the right of the Certificateholders to remove the Special Servicer or (c) the right of the Certificateholders to terminate the Operating Advisor, (6) adversely affect the Controlling Class Representative without the consent of 100% of the Controlling Class Certificateholders, (7) change in any manner the obligations or rights of any underwriter without the consent of the affected underwriter, or (8) adversely affect any Serviced Companion Loan Holder in its capacity as such without its consent.
Notwithstanding the foregoing, the Pooling and Servicing Agreement may not be amended without the Master Servicer, the Special Servicer, the Trustee, the Custodian (if the Trustee is then acting as Custodian) and/or the Certificate Administrator (in each case, only if requested by such party) having first received an opinion of counsel, at the expense of the person requesting the amendment (or, if the amendment is required by any Rating Agency to maintain the rating issued by it or requested by the Trustee or the Certificate Administrator for any purpose described in clause (a) or clause (b) of the first paragraph of this section entitled “—Amendment”, then at the expense of the Issuing Entity), to the effect that the amendment will not result in the imposition of a tax on any portion of the Issuing Entity (other than a tax at the highest marginal corporate tax rate on net income from foreclosure property pursuant to Code Section 860G(c)) or cause either Trust REMIC to fail to qualify as a REMIC or the Grantor Trust to fail to qualify as a grantor trust for federal income tax purposes. The party requesting an amendment to the Pooling and Servicing Agreement will be required to give each Rating Agency prior written notice of such amendment.
Certain amendments to the Pooling and Servicing Agreement may require the delivery of certain opinions of counsel at the expense of the Issuing Entity. In addition, prior to the execution of any amendment to the Pooling and Servicing Agreement, the Trustee, the Custodian (if the Trustee is then acting as Custodian), the Certificate Administrator, the Special Servicer and the Master Servicer may request and will be entitled to rely conclusively upon an opinion of counsel, at the expense of the party requesting such amendment (or, if such amendment is required by any Rating Agency to maintain the rating issued by it or requested by the Trustee or the Certificate Administrator for any purpose described in clause (a), (b), (c) or (e) (which does not modify or otherwise relate solely to the obligations, duties or rights of the Trustee or the Certificate Administrator, as applicable) of the first paragraph of this section entitled “—Amendment”, then at the expense of the Issuing Entity) stating that the execution of such amendment is authorized or permitted by the Pooling and Servicing Agreement, and that all conditions precedent to such amendment are satisfied.
Realization Upon Mortgage Loans
Specially Serviced Loans; Appraisals
Promptly upon the occurrence of an Appraisal Reduction Event with respect to a Serviced Loan, the Special Servicer will be required to use reasonable efforts to obtain an appraisal of the Mortgaged Property or REO Property, as the case may be, from an Appraiser in accordance with MAI standards (an “Updated Appraisal”).
395 |
However, the Special Servicer will not be required to obtain an Updated Appraisal of any Mortgaged Property with respect to which there exists an appraisal from an Appraiser in accordance with MAI standards which is less than nine months old, unless the Special Servicer determines that such previously obtained Appraisal is materially inaccurate. The cost of any Updated Appraisal will be advanced by, and reimbursable to, the Master Servicer as a Property Advance or will be an expense of the Issuing Entity and paid out of the Collection Account if determined to be a Nonrecoverable Advance to the extent provided in the Pooling and Servicing Agreement.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of Defaulted Loans
In connection with any foreclosure, enforcement of the related Mortgage Loan documents, or other acquisition, the cost and expenses of any such proceeding will be a Property Advance or an expense of the Issuing Entity and paid out of the Collection Account if determined to be a Nonrecoverable Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure in accordance with the laws of the state where the Mortgaged Property is located, the Special Servicer will not be required to pursue a deficiency judgment against the related borrower, if available, or any other liable party if the laws of the state do not permit such a deficiency judgment after a non-judicial foreclosure or if the Special Servicer determines, in accordance with the Servicing Standard, that the likely recovery if a deficiency judgment is obtained will not be sufficient to warrant the cost, time, expense and/or exposure of pursuing the deficiency judgment and such determination is evidenced by an officers’ certificate delivered to the Trustee, the Certificate Administrator, any related Outside Controlling Note Holder and (prior to the occurrence and continuance of a Consultation Termination Event) the Controlling Class Representative.
Notwithstanding anything in this prospectus to the contrary, the Pooling and Servicing Agreement will provide that the Special Servicer will not, on behalf of the Issuing Entity or a related Serviced Companion Loan Holder, obtain title to a Mortgaged Property as a result of foreclosure or by deed-in-lieu of foreclosure or otherwise, and will not otherwise acquire possession of, or take any other action with respect to, any Mortgaged Property if, as a result of any such action, the Trustee, the Certificate Administrator, the Issuing Entity or the holders of Certificates or a related Serviced Companion Loan Holder would be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or “operator” of, such Mortgaged Property within the meaning of the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or any comparable law, unless the Special Servicer has previously determined, based on an updated environmental assessment report prepared by an independent person who regularly conducts environmental audits, that: (i) such Mortgaged Property is in compliance with applicable environmental laws or, if not, after consultation with an environmental consultant, that it would be in the best economic interest of the Issuing Entity and, if applicable, a related Serviced Companion Loan Holder (as a collective whole) to take such actions as are necessary to bring such Mortgaged Property in compliance with applicable environmental laws and (ii) there are no circumstances present at such Mortgaged Property relating to the use, management or disposal of any hazardous materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any currently effective federal, state or local law or regulation, or that, if any such hazardous materials are present for which such action could be required, after consultation with an environmental consultant it would be in the best economic interest of the Issuing Entity and any related Serviced Companion Loan Holder (as a collective whole as if the Issuing Entity and, if applicable, such Serviced Companion Loan Holder(s) constituted a single lender (and, with respect to a Serviced AB Loan Combination, taking into account the subordinate nature of the related Subordinate Companion Loan)) to take such actions with respect to the affected Mortgaged Property as could be required by such law or regulation. If appropriate, the Special Servicer may establish a single member limited liability company with the Issuing Entity and, if applicable, a related Serviced Companion Loan Holder, as the sole owner to hold title to the Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in foreclosure or by deed-in-lieu of foreclosure, the deed or certificate of sale is required to be issued to the Trustee, to a co-trustee or to its nominee or a separate trustee or co-trustee on behalf of the Trustee, on behalf of holders of Certificates and, if applicable, the related Serviced Companion Loan Holder. Notwithstanding any such acquisition of title and cancellation of the related Serviced Loan, the related Serviced Mortgage Loan will generally be considered to be an REO Mortgage Loan held in the Issuing Entity until such time as the related REO Property is sold by the Issuing Entity.
If title to any Mortgaged Property is acquired by the Issuing Entity (directly or through a single member limited liability company established for that purpose), the Special Servicer will be required to sell the Mortgaged Property prior to the close of the third calendar year beginning after the year of acquisition, unless (1) the IRS
396 |
grants (or does not deny) an extension of time to sell the property or (2) the Special Servicer, the Certificate Administrator and the Trustee receive an opinion of independent counsel to the effect that the holding of the property by the Lower-Tier REMIC longer than the above-referenced three year period will not result in the imposition of a tax on either Trust REMIC or cause either Trust REMIC to fail to qualify as a REMIC under the Code at any time that any Certificate is outstanding. Subject to the foregoing and any other tax-related limitations, pursuant to the Pooling and Servicing Agreement, the Special Servicer will generally be required to attempt to sell any Mortgaged Property so acquired in accordance with the Servicing Standard. The Special Servicer will also be required to manage, conserve, protect and operate any Mortgaged Property acquired by the Issuing Entity in a manner which does not cause such property to fail to qualify as “foreclosure property” within the meaning of Code Section 860G(a)(8) or result in the receipt by the Issuing Entity of any income from nonpermitted assets as described in Code Section 860F(a)(2)(B). If the Lower-Tier REMIC acquires title to any Mortgaged Property, the Special Servicer, on behalf of the Lower-Tier REMIC, will retain, at the expense of the Issuing Entity, an independent contractor to manage and operate the property. The independent contractor generally will be permitted to perform construction (including renovation) on a foreclosed property only if the construction was more than 10% completed at the time default on the related Mortgage Loan became imminent. The retention of an independent contractor, however, will not relieve the Special Servicer of its obligation to manage the Mortgaged Property as required under the Pooling and Servicing Agreement.
Generally, neither Trust REMIC will be taxable on income received with respect to a Mortgaged Property acquired by the Issuing Entity to the extent that it constitutes “rents from real property,” within the meaning of Code Section 856(c)(3)(A) and Treasury regulations under the Code. Rents from real property include fixed rents and rents based on the gross receipts or sales of a tenant but do not include the portion of any rental based on the net income or profit of any tenant or sub-tenant. No determination has been made whether rent on any of the Mortgaged Properties meets this requirement. Rents from real property include charges for services customarily furnished or rendered in connection with the rental of real property, whether or not the charges are separately stated. Services furnished to the tenants of a particular building will be considered as customary if, in the geographic market in which the building is located, tenants in buildings which are of similar class are customarily provided with the service. No determination has been made whether the services furnished to the tenants of the Mortgaged Properties are “customary” within the meaning of applicable regulations. It is therefore possible that a portion of the rental income with respect to a Mortgaged Property owned by the Issuing Entity would not constitute rents from real property, or that none of such income would qualify if a separate charge is not stated for such non-customary services or they are not performed by an independent contractor. Rents from real property also do not include income from the operation of a trade or business on the Mortgaged Property, such as a hospitality property or rental income attributable to personal property leased in connection with a lease of real property if the rent attributable to personal property exceeds 15% of the total net rent for the taxable year. Any of the foregoing types of income may instead constitute “net income from foreclosure property,” which would be taxable to the Lower-Tier REMIC, at the highest marginal federal corporate rate and may also be subject to state or local taxes. The Pooling and Servicing Agreement provides that the Special Servicer will be permitted to cause the Lower-Tier REMIC to earn “net income from foreclosure property” that is subject to tax if it determines that the net after-tax benefit to Certificateholders and any related Companion Loan Holders, as a collective whole, could reasonably be expected to be greater than another method of operating or net leasing the Mortgaged Property. Because these sources of income, if they exist, are already in place with respect to the Mortgaged Properties, it is generally viewed as beneficial to Certificateholders to permit the Issuing Entity to continue to earn them if it acquires a Mortgaged Property, even at the cost of this tax. These taxes would be chargeable against the related income for purposes of determining the proceeds available for distribution to holders of Certificates. See “Material Federal Income Tax Consequences—Taxes That May Be Imposed on a REMIC—Net Income from Foreclosure Property”.
To the extent that Liquidation Proceeds collected with respect to any Mortgage Loan are less than the sum of (1) the outstanding principal balance of the Mortgage Loan, (2) interest accrued on the Mortgage Loan and (3) the aggregate amount of outstanding reimbursable expenses (including any (i) unpaid servicing compensation, (ii) unreimbursed Property Advances, (iii) accrued and unpaid interest on all Advances and (iv) additional expenses of the Issuing Entity) incurred with respect to the Mortgage Loan, the Issuing Entity will realize a loss in the amount of the shortfall. The Trustee, the Certificate Administrator, the Master Servicer and/or the Special Servicer will be entitled to reimbursement out of the Liquidation Proceeds recovered on any Mortgage Loan or Serviced Loan Combination, prior to the distribution of those Liquidation Proceeds to Certificateholders or Serviced Companion Loan Holders, of any and all amounts that represent unpaid servicing compensation in respect of the related Mortgage Loan or Serviced Loan Combination, certain unreimbursed expenses incurred with respect to the Mortgage Loan or Serviced Loan Combination and any unreimbursed Advances (including interest on Advances) made with respect to the Mortgage Loan or Serviced Loan Combination. In addition,
397 |
amounts otherwise distributable on the Certificates will be further reduced by interest payable to the Master Servicer, the Special Servicer or Trustee on these Advances.
Sale of Defaulted Mortgage Loans and REO Properties
Promptly upon a Serviced Loan becoming a Defaulted Mortgage Loan and if the Special Servicer determines in accordance with the Servicing Standard that it would be in the best interests of the Certificateholders and, in the case of a Serviced Pari Passu Loan Combination, any related Serviced Pari Passu Companion Loan Holder (as a collective whole as if such Certificateholders and, in the case of a Serviced Pari Passu Loan Combination, any related Serviced Pari Passu Companion Loan Holder, constituted a single lender) to attempt to sell such Serviced Loan, the Special Servicer will be required to use reasonable efforts to solicit offers for the Defaulted Mortgage Loan on behalf of the Certificateholders and, if applicable, any related Serviced Pari Passu Companion Loan Holder in such manner as will be reasonably likely to realize a fair price. The Special Servicer will generally be required to accept the first (and, if multiple offers are contemporaneously received, the highest) cash offer received from any person that constitutes a fair price for the Defaulted Mortgage Loan. The Special Servicer is required to notify, among others, the Controlling Class Representative (prior to the occurrence and continuance of a Consultation Termination Event), any related Outside Controlling Note Holder and the Operating Advisor (after the occurrence and during the continuance of a Control Termination Event) of any inquiries or offers received regarding the sale of any Defaulted Mortgage Loan.
The Special Servicer will be required to determine whether any cash offer constitutes a fair price for any Defaulted Mortgage Loan if the offeror is a person other than an Interested Person. In determining whether any offer from a person other than an Interested Person constitutes a fair price for any Defaulted Mortgage Loan, the Special Servicer will be required to take into account, among other factors (in addition to the results of any appraisal, updated appraisal or narrative appraisal that it may have obtained pursuant to the Pooling and Servicing Agreement within the prior nine months), the period and amount of any delinquency on the affected Mortgage Loan, the occupancy level and physical condition of the related Mortgaged Property and the state of the local economy. The cost of any appraisal obtained to determine whether any offer from a person other than an Interested Person constitutes a fair price for any Defaulted Mortgage Loan will be covered by, and will be reimbursable as, a Property Advance.
If the offeror is an Interested Person (provided that the Trustee may not be an offeror), then the Trustee will be required to determine whether the cash offer constitutes a fair price. However, no offer from an Interested Person will constitute a fair price unless (i) it is the highest offer received and (ii) at least two other offers are received from independent third parties. In determining whether any offer received from an Interested Person represents a fair price for any such Defaulted Mortgage Loan, the Trustee will be required to (at the expense of the Interested Person) designate an independent third party expert in real estate or commercial mortgage loan matters with at least five years’ experience in valuing or investing in loans similar to the subject Serviced Loan and that has been selected with reasonable care by the Trustee to determine if such cash offer constitutes a fair price for such Serviced Loan;provided, that the Trustee may not engage a third party expert whose fees exceed a commercially reasonable amount as determined by the Trustee. The reasonable costs of all appraisals, inspection reports and broker opinions of value incurred by any such third party pursuant to this paragraph will be covered by, and will be reimbursable by the Interested Person. The Trustee will be entitled to rely conclusively upon the determination of the independent third party expert designated by it as described above.
The Repurchase Price will be deemed a fair price in all events.
With respect to any Serviced Pari Passu Loan Combination (other than any such Loan Combination that is a Serviced Outside Controlled Loan Combination), pursuant to the terms of the related Co-Lender Agreement, if such Serviced Pari Passu Loan Combination becomes a Defaulted Mortgage Loan, and if the Special Servicer determines to sell the related Serviced Mortgage Loan in accordance with the discussion in this “—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” section, then the Special Servicer will be required to sell each related Serviced Pari Passu Companion Loan together with such Serviced Mortgage Loan as a single whole loan in accordance with the terms of the Pooling and Servicing Agreement, and subject to any rights of the related Directing Holder and/or the holder of any related Serviced Pari Passu Companion Loan under the Pooling and Servicing Agreement or under the related Co-Lender Agreement. Notwithstanding the foregoing, the Special Servicer will not be permitted to sell any such Serviced Pari Passu Loan Combination if it becomes a Defaulted Mortgage Loan without the written consent of each related Serviced Pari Passu Companion Loan Holder (provided that such consent is not required if the consenting party is the
398 |
borrower or an affiliate of the borrower) unless the Special Servicer has delivered to such related Serviced Pari Passu Companion Loan Holder: (a) at least 15 business days’ prior written notice of any decision to attempt to sell such Loan Combination; (b) at least ten days prior to the proposed sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the Special Servicer in connection with any such proposed sale; (c) at least ten days prior to the proposed sale date, a copy of the most recent appraisal for the subject Serviced Pari Passu Loan Combination, and any documents in the servicing file reasonably requested by such related Serviced Pari Passu Companion Loan Holder that are material to the price of the subject Serviced Pari Passu Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the Master Servicer or the Special Servicer in connection with the proposed sale;provided, that a related Serviced Pari Passu Companion Loan Holder may waive as to itself any of the delivery or timing requirements set forth in this sentence. The Controlling Class Representative and each related Serviced Pari Passu Companion Loan Holder will be permitted to submit an offer at any sale of the subject Serviced Pari Passu Loan Combination unless such person is the borrower or an agent or affiliate of the borrower. See“Description of the Mortgage Pool—The Loan Combinations” above in this prospectus.
With respect to any Serviced Pari Passu Loan Combination that is a Serviced Outside Controlled Loan Combination, pursuant to the terms of the related Co-Lender Agreement, if such Serviced Pari Passu Loan Combination becomes a Defaulted Mortgage Loan, and if the Special Servicer determines to sell the related Serviced Mortgage Loan in accordance with the discussion in this“—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” section, then the Special Servicer will be required to sell the related Serviced Pari Passu Companion Loan together with such Serviced Mortgage Loan as a single whole loan in accordance with the terms of the Pooling and Servicing Agreement, and subject to any rights of the related Directing Holder, the Controlling Class Representative and/or the holder of any related non-controlling Serviced Pari Passu Companion Loan under the Pooling and Servicing Agreement or under the related Co-Lender Agreement. Notwithstanding the foregoing, the Special Servicer will not be permitted to sell any such Serviced Pari Passu Loan Combination if it becomes a Defaulted Mortgage Loan without the written consent of the Controlling Class Representative (unless a Consultation Termination Event exists), the related Outside Controlling Note Holder and the holder of each related non-controlling Serviced Pari Passu Companion Loan (provided that such consent is not required if the consenting party is the borrower or an affiliate of the borrower) unless the Special Servicer has delivered to the Controlling Class Representative, the related Outside Controlling Note Holder and the holder of each related non-controlling Serviced Pari Passu Companion Loan: (a) at least 15 business days’ prior written notice of any decision to attempt to sell such Serviced Pari Passu Loan Combination; (b) at least ten days prior to the proposed sale date, a copy of each bid package (together with any material amendments to such bid packages) received by the Special Servicer in connection with any such proposed sale; (c) at least ten days prior to the proposed sale date, a copy of the most recent appraisal for the subject Serviced Pari Passu Loan Combination, and any documents in the servicing file reasonably requested by the Controlling Class Representative and the related Outside Controlling Note Holder that are material to the price of the subject Serviced Pari Passu Loan Combination; and (d) until the sale is completed, and a reasonable period of time (but no less time than is afforded to other offerors and the Controlling Class Representative) prior to the proposed sale date, all information and other documents being provided to other offerors and all leases or other documents that are approved by the Master Servicer or the Special Servicer in connection with the proposed sale;provided, that the Controlling Class Representative, the related Outside Controlling Note Holder and the holder of each related non-controlling Serviced Pari Passu Companion Loan may each waive as to itself any of the delivery or timing requirements set forth in this sentence. The Controlling Class Representative, the related Outside Controlling Note Holder and the holder of each related non-controlling Serviced Pari Passu Companion Loan will be permitted to submit an offer at any sale of the subject Serviced Pari Passu Loan Combination unless such person is the borrower or an agent or affiliate of the borrower. See“Description of the Mortgage Pool—The Loan Combinations” above in this prospectus.
With respect to any Serviced AB Loan Combination, pursuant to the terms of the Pooling and Servicing Agreement, if the related Serviced Mortgage Loan becomes a Defaulted Mortgage Loan, and if the Special Servicer determines to sell such Serviced Mortgage Loan in accordance with the discussion in this“—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” section, then the Special Servicer will be permitted to sell the related Serviced Subordinate Companion Loan together with such Serviced Mortgage Loan and any related Serviced Pari Passu Companion Loan as a single whole loan, provided that the Special Servicer has received prior written consent from the holder of such Subordinate Companion Loan.
399 |
If an Outside Serviced Mortgage Loan becomes the equivalent of a Defaulted Mortgage Loan and the Outside Special Servicer elects to sell any promissory note evidencing a portion of the related Outside Serviced Loan Combination, the Outside Special Servicer will be required to sell such Outside Serviced Mortgage Loan, together with the related Companion Loan(s), as a single whole loan, pursuant to the Outside Servicing Agreement. See“Description of the Mortgage Pool—The Loan Combinations—The Sheraton Denver Downtown Fee Loan Combination—Sale of Defaulted Loan Combination”, “—The Loan Combinations—The 79 Madison Avenue Loan Combination—Sale of Defaulted Loan Combination”, “—The Loan Combinations—The Austin Block 21 Loan Combination—Sale of Defaulted Loan Combination”, “—The Loan Combinations—The 600 Broadway Loan Combination—Sale of Defaulted Loan Combination”, “—The Loan Combinations—The 5 Penn Plaza Loan Combination—Sale of Defaulted Loan Combination”, and “—The Loan Combinations—The Park Place Loan Combination—Sale of Defaulted Loan Combination”.
The Special Servicer is required to use reasonable efforts to solicit offers for each REO Property related to a Serviced Mortgage Loan on behalf of the Certificateholders and any related Serviced Companion Loan Holder, if applicable, and to sell each such REO Property in the same manner as with respect to a Defaulted Mortgage Loan.
Notwithstanding any of the foregoing paragraphs, the Special Servicer will not be required to accept the highest cash offer for a Defaulted Mortgage Loan if the Special Servicer determines (in consultation with the Controlling Class Representative (unless a Consultation Termination Event exists or a Serviced Outside Controlled Loan Combination is involved) and any related Outside Controlling Note Holder (if a Serviced Outside Controlled Loan Combination is involved)), in accordance with the Servicing Standard, that rejection of such offer would be in the best interests of the Certificateholders and, in the case of a sale of a Serviced Pari Passu Loan Combination, the related Serviced Pari Passu Companion Loan Holder(s) (as a collective whole as if such Certificateholders and, if applicable, any related Serviced Pari Passu Companion Loan Holder(s) constituted a single lender), and the Special Servicer may accept a lower cash offer (from any person other than itself or an affiliate) if it determines, in its reasonable and good faith judgment, that acceptance of such offer would be in the best interests of the Certificateholders and, in the case of a Serviced Pari Passu Loan Combination, any related Serviced Pari Passu Companion Loan Holder(s) (as a collective whole as if such Certificateholders and, if applicable, any related Serviced Pari Passu Companion Loan Holder(s) constituted a single lender).
Notwithstanding any of the foregoing paragraphs, the Special Servicer will not be required to accept the highest cash offer for an REO Property if the Special Servicer determines (in consultation with the related Directing Holder (unless, if the Controlling Class Representative is the related Directing Holder, a Consultation Termination Event exists)), in accordance with the Servicing Standard, that rejection of such offer would be in the best interests of the Certificateholders and, in the case of a sale of an REO Property related to a Serviced Loan Combination, the related Serviced Companion Loan Holder(s) (as a collective whole as if such Certificateholders and, if applicable, any related Serviced Companion Loan Holder(s) constituted a single lender (and, in the case of a Serviced AB Loan Combination, taking into account the subordinate nature of the related Serviced Subordinate Companion Loan)), and the Special Servicer may accept a lower cash offer (from any person other than itself or an affiliate) if it determines, in its reasonable and good faith judgment, that acceptance of such offer would be in the best interests of the Certificateholders and, in the case of an REO Property related to a Serviced Loan Combination, any related Serviced Companion Loan Holder(s) (as a collective whole as if such Certificateholders and, if applicable, any related Serviced Companion Loan Holder(s) constituted a single lender (and, in the case of a Serviced AB Loan Combination, taking into account the subordinate nature of the related Serviced Subordinate Companion Loan)).
An “Interested Person” is the Depositor, the Master Servicer, the Special Servicer, the Operating Advisor, the Certificate Administrator, the Trustee, the Asset Representations Reviewer, the Controlling Class Representative, any Sponsor, any borrower, any holder of a related mezzanine loan, any manager of a Mortgaged Property, any independent contractor engaged by the Special Servicer or any affiliate of any of the preceding entities, and, with respect to a Defaulted Mortgage Loan that constitutes a Serviced Loan Combination, the depositor, the master servicer, the special servicer (or any independent contractor engaged by such special servicer), or the trustee for the securitization of the related Serviced Companion Loan, the related Serviced Companion Loan Holder or its representative, any holder of a related mezzanine loan, or any known affiliate of any such party described above.
400 |
Modifications, Waivers and Amendments
The Pooling and Servicing Agreement will permit (a) with respect to any Serviced Loan that is a non-Specially Serviced Loan, the Master Servicer (subject to the Special Servicer’s consent except with respect to a Master Servicer Decision), or (b) with respect to any Specially Serviced Loan, the Special Servicer, in each case subject to the consultation rights of the Operating Advisor and the consent and/or consultation rights of the related Directing Holder (if any) and, to the extent required in accordance with the related Co-Lender Agreement, any related Serviced Companion Loan Holder or its representative, to modify, waive or amend any term of any Serviced Loan if such modification, waiver or amendment (i) is consistent with the Servicing Standard and (ii) would not constitute a “significant modification” of such Serviced Loan pursuant to Treasury Regulations Section 1.860G-2(b) and would not otherwise (A) cause either Trust REMIC to fail to qualify as a REMIC or cause the Grantor Trust to fail to qualify as a grantor trust or (B) result in the imposition of a tax upon either Trust REMIC or the Issuing Entity (including but not limited to the tax on “prohibited transactions” as defined in Code Section 860F(a)(2) and the tax on contributions to a REMIC set forth in Code Section 860G(d), but not including the tax on “net income from foreclosure property” under Code Section 860G(c)).
In connection with (i) the release of a Mortgaged Property or any portion of a Mortgaged Property from the lien of the related Mortgage, or (ii) the taking of a Mortgaged Property or any portion of a Mortgaged Property by exercise of the power of eminent domain or condemnation, if the related Serviced Mortgage Loan documents require the Master Servicer or the Special Servicer, as applicable, to calculate (or require the related borrower to provide such calculation to the Master Servicer or the Special Servicer, as applicable) the loan-to-value ratio of the remaining Mortgaged Property or Mortgaged Properties or the fair market value of the real property constituting the remaining Mortgaged Property or Mortgaged Properties, for purposes of REMIC qualification of the related Serviced Mortgage Loan, then, unless then permitted by the REMIC provisions of the Code, such calculation will exclude the value of personal property and going concern value, if any. In order to meet the foregoing requirements, in the case of a release of real property collateral securing a Mortgage Loan, the Master Servicer or Special Servicer, as applicable, will be required to observe the REMIC requirements of the Code with respect to a required payment of principal if the related loan-to-value ratio immediately after the release exceeds 125% with respect to the related property.
No modification, waiver or amendment of any Co-Lender Agreement related to a Serviced Loan or an action to enforce rights with respect thereto, in each case, in a manner that materially and adversely affects the rights, duties and obligations of the Special Servicer will be permitted without the prior written consent of the Special Servicer.
The consent of the Special Servicer is required to any modification, waiver or amendment with regard to any Serviced Loan that is not a Specially Serviced Loan (other than Master Servicer Decisions, as defined below), and the Special Servicer will also be required to obtain the consent of the related Directing Holder to the extent described below under“—Directing Holder”. The Special Servicer is also required to obtain the consent of the related Directing Holder in connection with any modification, waiver or amendment with regard to any Specially Serviced Loan to the extent described below under“—Directing Holder”.
When the Special Servicer’s consent is required to a modification, waiver or amendment that the Master Servicer is recommending to be approved, the Master Servicer is required to promptly provide the Special Servicer with written notice of any request for such modification, waiver or amendment accompanied by the Master Servicer’s written recommendation and analysis and any and all information in the Master Servicer’s possession or reasonably available to it that the Special Servicer or the related Directing Holder may reasonably request to grant or withhold such consent. When the Special Servicer’s consent is required under the Pooling and Servicing Agreement, such consent will be deemed given if the Special Servicer does not respond to a request for consent within the time periods set forth in the Pooling and Servicing Agreement. With respect to all applicable Specially Serviced Loan(s) and non-Specially Serviced Loan(s), the Special Servicer will be required to obtain, prior to consenting to such a proposed action of the Master Servicer that constitutes a Major Decision, and prior to itself taking any such action that constitutes a Major Decision, the written consent of the related Controlling Note Holder (to the extent set forth in the related Co-Lender Agreement if a Serviced Outside Controlled Loan Combination is involved) or the Controlling Class Representative (if any other Serviced Loan(s) are involved and a Control Termination Event does not exist and the subject Serviced Loan is not an Excluded Mortgage Loan), as applicable, which consent will be deemed given if such related Directing Holder does not respond to a request for consent within the time periods set forth in the Pooling and Servicing Agreement.
401 |
In no event, however, will the Special Servicer be permitted to (i) extend the maturity date of a Serviced Loan beyond a date that is three years prior to the Rated Final Distribution Date, or (ii) if the Serviced Loan is secured by a ground lease, extend the maturity date of such Serviced Loan beyond a date which is 20 years or, to the extent consistent with the Servicing Standard, 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 options to extend exercisable unilaterally by the borrower.
Any modification, waiver or amendment with respect to a Serviced Loan Combination may be subject to the consent and/or consultation rights of the related Serviced Companion Loan Holder as described under “Description of the Mortgage Pool—The Loan Combinations”.
The Master Servicer or the Special Servicer, as applicable, is required to notify the Trustee, the Certificate Administrator, the Depositor, any related Serviced Companion Loan Holder, any related Outside Controlling Note Holder, the Controlling Class Representative (prior to the occurrence and continuance of a Consultation Termination Event), the Operating Advisor (after the occurrence and during the continuance of a Control Termination Event) and the 17g-5 information provider, in writing, of any modification, waiver or amendment of any term of any Serviced Loan and the date of the modification and deliver a copy to the Trustee, any related Serviced Companion Loan Holder, any related Outside Controlling Note Holder, the Controlling Class Representative (prior to the occurrence and continuance of a Consultation Termination Event) and the Operating Advisor (after the occurrence and during the continuance of a Control Termination Event), and the original to the Trustee or other custodian under the Pooling and Servicing Agreement (the “Custodian”) of the recorded agreement relating to such modification, waiver or amendment within 15 business days following the execution and recordation of the modification, waiver or amendment.
Any Modification Fees paid by any borrower to the Master Servicer or the Special Servicer with respect to a modification, consent, extension, waiver or amendment of any term of a Serviced Loan (in the case of a Serviced Loan Combination, if applicable, subject to any related Co-Lender Agreement) will be applied as described under “The Pooling and Servicing Agreement—Application of Penalty Charges and Modification Fees”.
With respect to an Outside Serviced Mortgage Loan, any modifications, waivers and amendments will be effected by the Outside Special Servicer or the Outside Servicer, as applicable, in accordance with the terms of the related Outside Servicing Agreement and the related Co-Lender Agreement. See “Description of the Mortgage Pool—The Loan Combinations” and “—Servicing of the Outside Serviced Mortgage Loans” in this prospectus. Any consent rights entitled to be exercised by the holder of such Outside Serviced Mortgage Loan with respect to modifications, waivers and amendments or certain other major decisions under the Outside Servicing Agreement, will be exercised by the Master Servicer or Special Servicer, depending on whether that Outside Serviced Mortgage Loan is then being specially serviced and depending on whether the matter would be a Master Servicer Decision, with, in the case of a matter that would be a Major Decision, the consent of the Controlling Class Representative unless a Control Termination Event exists or such Outside Serviced Mortgage Loan is an Excluded Mortgage Loan. Any consultation rights entitled to be exercised by the holder of such Outside Serviced Mortgage Loan will be exercised by the Controlling Class Representative (unless a Consultation Termination Event exists or such Outside Serviced Mortgage Loan is an Excluded Mortgage Loan).
Directing Holder
General
The related Outside Controlling Note Holder (if a Serviced Outside Controlled Loan Combination is involved) or the Controlling Class Representative (if any other Serviced Loan(s), except for Excluded Mortgage Loan(s), are involved and a Control Termination Event does not exist), as applicable, will be entitled to advise (1) the Special Servicer, with respect to the applicable Serviced Loan(s) that are Specially Serviced Loan(s) and (2) the Special Servicer, with respect to the applicable Serviced Loan(s) that are not Specially Serviced Loan(s), as to all matters for which the Master Servicer must obtain the consent or deemed consent of the Special Servicer, in each case as described below.
The provisions summarized below with respect to the Controlling Class Representative will be subject to the right of certain Controlling Class Certificateholders to “opt-out” of its Controlling Class Certificateholder rights under certain circumstances described in this prospectus, as provided for in the Pooling and Servicing Agreement.
402 |
Except as otherwise described in the succeeding paragraphs below, (a) the Master Servicer will not be permitted to take any of the following actions unless it has obtained the consent of the Special Servicer and (b) for so long as no Control Termination Event exists, the Special Servicer will not be permitted to consent to the Master Servicer’s taking any of the following actions, nor will the Special Servicer itself be permitted to take any of the following actions, as to which the related Directing Holder has objected in writing within 10 business days (or in the case of a determination of an Acceptable Insurance Default, 20 days) after receipt of the written recommendation and analysis from the Special Servicer (provided that (i) if such written objection has not been received by the Special Servicer within the 10 business days or, if applicable, 20-day period, the related Directing Holder will be deemed to have approved such action and (ii) the consent of the Controlling Class Representative will not be required in connection with a Major Decision with respect to an Excluded Mortgage Loan) (each of the following, a “Major Decision”):
(A) any proposed or actual foreclosure upon or comparable conversion (which may include acquisitions of an REO Property) of the ownership of properties securing such of the Serviced Loans as come into and continue in default;
(B) any modification, consent to a modification or waiver of any monetary term (other than Penalty Charges which the Master Servicer or the Special Servicer, as applicable, is permitted to waive pursuant to the Pooling and Servicing Agreement) or material non-monetary term (including, without limitation, (i) waiver of a Mortgage Loan event of default, (ii) a modification of the type of defeasance collateral required under the related Mortgage Loan documents such that defeasance collateral other than direct, noncallable obligations of the United States of America would be permitted, (iii) a modification that would permit a principal prepayment instead of defeasance if the related Mortgage Loan documents do not otherwise permit such principal prepayment and (iv) a modification with respect to the timing of payments and acceptance of discounted payoffs but excluding waiver of Penalty Charges) of a Serviced Loan or any extension of the maturity date or Anticipated Repayment Date, as applicable, of such Serviced Loan;
(C) any sale of a Serviced Mortgage Loan that is a Defaulted Mortgage Loan (and any related Serviced Pari Passu Companion Loan) or an REO Property (other than in connection with (i) the termination of the Issuing Entity as described under “The Pooling and Servicing Agreement—Optional Termination; Optional Mortgage Loan Purchase” and (ii) the repurchase of, or substitution for, any Mortgage Loan by the applicable Sponsor for a Material Defect as described under “The Mortgage Loan Purchase Agreements—Cures, Repurchases and Substitutions”) for less than the applicable Repurchase Price;
(D) any determination to bring an REO Property into compliance with applicable environmental laws or to otherwise address hazardous material located at an REO Property;
(E) any release of collateral or any acceptance of substitute or additional collateral for a Serviced Loan or any consent to either of the foregoing, other than immaterial condemnation actions and other similar takings, or if otherwise permitted pursuant to the specific terms of the related Serviced Loan and for which there is no lender discretion;
(F) any waiver of a “due-on-sale” or “due-on-encumbrance” clause with respect to a Mortgage Loan or, if lender consent is required, any consent to such a waiver or consent to a transfer of the Mortgaged Property or interests in the borrower or consent to the incurrence of additional debt, other than any such transfer or incurrence of debt as may be effected without the consent of the lender under the related loan agreement or related to an immaterial easement, right of way or similar agreement;
(G) approving any change of the property manager at the request of the related borrower;
(H) releases of any holdback amounts, escrow accounts, reserve accounts or letters of credit held as performance or “earn-out” holdbacks, escrows or reserves, other than those required pursuant to the specific terms of the related Serviced Loan and for which there is no lender discretion;
(I) any acceptance of an assumption agreement or any other agreement permitting transfers of interests in a borrower or guarantor releasing a borrower or guarantor from liability under a Serviced Loan other than pursuant to the specific terms of such Serviced Loan and for which there is no lender discretion;
403 |
(J) the determination of the Master Servicer pursuant to clause (g) of definition of “Servicing Transfer Event” or the Special Servicer pursuant to clause (b) or clause (g) of the definition of “Servicing Transfer Event”;
(K) following a default or an event of default with respect to a Serviced Loan, any acceleration of a Serviced Loan, or initiation of judicial, bankruptcy or similar proceedings under the related Serviced Loan documents or with respect to the related borrower or Mortgaged Property, other than a foreclosure action or the exercise of customary remedies set forth in the Mortgage Loan documents;
(L) any modification, waiver or amendment of an intercreditor agreement, Co-Lender Agreement or similar agreement with any mezzanine lender or subordinate debt holder related to a Serviced Loan, or an action to enforce rights with respect thereto;
(M) any determination of an Acceptable Insurance Default;
(N) any proposed modification or waiver of any material provision in the related Mortgage Loan documents governing the type, nature or amount of insurance coverage required to be obtained and maintained by the related borrower;
(O) any approval of any casualty insurance settlements or condemnation settlements, and any determination to apply casualty proceeds or condemnation awards to the reduction of the debt rather than to the restoration of the Mortgaged Property to the extent that the lender has discretion under the terms of the Mortgage Loan documents;
(P) consents involving leasing activities (to the extent lender approval is required under the related Mortgage Loan documents) if such lease (a) involves a ground lease or lease of an outparcel or affects an area greater than or equal to the lesser of (i) 20% of leasable space or (ii) 20,000 square feet, (b) involves a tenant or space specifically identified by name or space location in the related Mortgage Loan documents as requiring the consent of the lender for the associated activity, (c) such transaction is not a routine leasing matter for a customary lease of space for parking, office, retail, warehouse, industrial and/or manufacturing purposes or (d) such transaction relates to a Specially Serviced Loan;
(Q) the voting on any plan of reorganization, restructuring or similar plan in the bankruptcy of a borrower;
(R) approving any waiver regarding the receipt of financial statements (other than immaterial timing waivers pursuant to which such financial statements are delivered no less often than quarterly and within 60 days after the end of the calendar quarter);
(S) approving consents with respect to rights-of-way easements that materially affect the use or value of a Mortgaged Property or the borrower’s ability to make payments with respect to the related Mortgage Loans; and
(T) any approval of a budget submitted by a borrower with respect to a Mortgage Loan (to the extent lender approval is required under the related Mortgage Loan documents);
provided,however, 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 (and, with respect to any Serviced Loan Combination, the Serviced Companion Loan Holder(s)) (as a collective whole as if such Certificateholders and, if applicable, the Serviced Companion Loan Holder(s) constituted a single lender (and, with respect to a Serviced AB Loan Combination, taking into account the subordinate nature of the related Subordinate Companion Loan)), the Master Servicer or the Special Servicer, as the case may be, may take any such action without waiting for the Directing Holder’s (or, if applicable, the Special Servicer’s) response. For the avoidance of doubt, any modification, waiver, consent or amendment by the Master Servicer or the Special Servicer that is set forth above as a Major Decision will constitute a Major Decision regardless of the fact that such action is being taken in connection with a defeasance.
404 |
Notwithstanding the foregoing, if the Controlling Class Representative is the related Directing Holder, the Special Servicer is not required to obtain the consent of the Controlling Class Representative for any Major Decision following the occurrence and during the continuance of a Control Termination Event;provided, however, that after the occurrence and during the continuance of a Control Termination Event, the Special Servicer will be required to consult with the Controlling Class Representative (until the occurrence and continuance of a Consultation Termination Event) and the Operating Advisor in connection with any Major Decision and to consider alternative actions recommended by the Controlling Class Representative and the Operating Advisor, but only to the extent that consultation with, or consent of, the Controlling Class Representative would have been required prior to the occurrence and continuance of such Control Termination Event;provided that such consultation is not binding on the Special Servicer. Notwithstanding the foregoing, the Controlling Class Representative will have no consent or consultation rights with respect to Major Decisions with respect to any Excluded Mortgage Loan under the Pooling and Servicing Agreement.
In addition, each of (x) the Controlling Class Representative (with respect to each Serviced Loan other than (i) a Serviced Outside Controlled Loan Combination and (ii) an Excluded Mortgage Loan, provided that a Control Termination Event does not exist) and (y) the related Outside Controlling Note Holder (with respect to a Serviced Outside Controlled Loan Combination) may direct the Special Servicer to take, or to refrain from taking, such other actions with respect to any Serviced Loan, as such party may reasonably deem advisable. Notwithstanding the foregoing, neither the Master Servicer nor the Special Servicer will be required to take or refrain from taking any action pursuant to instructions or objections from any such party that would cause it to violate applicable law, the related Serviced Loan documents, any related Co-Lender Agreement or intercreditor agreement, the Pooling and Servicing Agreement, including the Servicing Standard, or the REMIC provisions of the Code.
The “Directing Holder” will be: (a) with respect to all of the Serviced Loans other than a Serviced Outside Controlled Loan Combination and any Excluded Mortgage Loan, the Controlling Class Representative; and (b) with respect to any Serviced Outside Controlled Loan Combination, the related Outside Controlling Note Holder.
The “Controlling Class Representative” is the Controlling Class Certificateholder (or other representative) selected by at least a majority of the Controlling Class Certificateholders, by Certificate Balance, as identified by notice to the Certificate Administrator by the applicable Controlling Class Certificateholders from time to time, with notice of such selection delivered to the Special Servicer, the Master Servicer, the Operating Advisor, and the Trustee;provided, however, that (i) absent that selection, or (ii) until a Controlling Class Representative is so selected or (iii) upon receipt of a notice from the Controlling Class Certificateholders that own Certificates representing more than 50% of the Certificate Balance of the Controlling Class, that a Controlling Class Representative is no longer designated, the Controlling Class Representative will be the Controlling Class Certificateholder that owns the largest aggregate Certificate Balance of the Controlling Class, as identified to the Certificate Administrator (who will be required to notify the Master Servicer and the Special Servicer) pursuant to the procedures set forth in the Pooling and Servicing Agreement. If, upon the occurrence of any of the events or circumstances specified in clauses (i), (ii) or (iii) above, the Controlling Class Certificateholder that owns the largest aggregate Certificate Balance of the Controlling Class has not been identified to the Certificate Administrator (and thereby the Master Servicer and the Special Servicer), then the Master Servicer and the Special Servicer will have no obligation to obtain the consent of, or consult with, any Controlling Class Representative until notified of the identity of such largest Controlling Class Certificateholder or otherwise notified of the identity of the Controlling Class Representative as provided in the Pooling and Servicing Agreement. The initial Controlling Class Representative is expected to be Eightfold Real Estate Capital Fund IV, L.P. (or its affiliate). No person may exercise any of the rights and powers of the Controlling Class Representative with respect to an Excluded Mortgage Loan.
Once a Controlling Class Representative has been selected, each of the Master Servicer, the Special Servicer, the Operating Advisor, the Depositor, the Certificate Administrator, the Asset Representations Reviewer, the Trustee and each other Certificateholder (or beneficial owner of Certificates, if applicable) will be entitled to rely on such selection unless a majority of the Certificateholders of the Controlling Class, by Certificate Balance, or such Controlling Class Representative has notified the Certificate Administrator, the Master Servicer, the Special Servicer and each other Certificateholder of the Controlling Class, in writing, of the resignation of such Controlling Class Representative or the selection of a new Controlling Class Representative. Upon receipt of written notice of, or other knowledge of, the resignation of a Controlling Class Representative, the Certificate Administrator will be required to request the Certificateholders of the Controlling Class to select a new Controlling Class Representative. Upon receipt of notice of a change in Controlling Class Representative, the Certificate
405 |
Administrator will be required to promptly forward notice thereof to each other party to the Pooling and Servicing Agreement.
A “Controlling Class Certificateholder” is each holder (or beneficial owner, if applicable) of a Certificate of the Controlling Class as determined by the Certificate Administrator from time to time.
The “Controlling Class” will be as of any time of determination the most subordinate Class of Control Eligible Certificates then outstanding that has an aggregate Certificate Balance, as notionally reduced by any Cumulative Appraisal Reduction Amounts allocable to such Class, at least equal to 25% of the initial Certificate Balance of that Class or, if no Class of Control Eligible Certificates meets the preceding requirement, the Class E Certificates;provided,however, that (at any time that the aggregate Certificate Balance of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class D Certificates and the Class A-S, Class B and Class C Trust Components has been reduced to zero without regard to the allocation of Appraisal Reduction Amounts) (a) in the case of any Class of Control Eligible Certificates to which the designation of “Controlling Class” would otherwise shift by operation of this definition, where the Certificate Balance of such Class of Control Eligible Certificates has been reduced to zero (without regard to the allocation of Cumulative Appraisal Reduction Amounts) prior to such shift, then designation of “Controlling Class” will not shift and will remain with the Class of Control Eligible Certificates currently designated as the Controlling Class, and (b) in the case of any Class of Control Eligible Certificates which is then designated the “Controlling Class”, if the Certificate Balance of such Class of Control Eligible Certificates is reduced to zero (without regard to the allocation of Cumulative Appraisal Reduction Amounts), then the designation of “Controlling Class” will shift to the Class of Control Eligible Certificates that is the most subordinate and that also has a remaining Certificate Balance. The Controlling Class as of the Closing Date will be the Class H Certificates.
The “Control Eligible Certificates” will be any of the Class E, Class F, Class G and Class H Certificates.
A “Control Termination Event” will either (a) occur when none of the Classes of Class E, Class F, Class G and Class H Certificates has an outstanding Certificate Balance (as notionally reduced by any Cumulative Appraisal Reduction Amounts then allocable to such Class) that is at least equal to 25% of the initial Certificate Balance of that Class of Certificates or (b) be deemed to occur as described below;provided,however, that a Control Termination Event will in no event exist at any time that the aggregate Certificate Balance of each Class of Certificates (other than the Control Eligible Certificates) (without regard to the allocation of Appraisal Reduction Amounts) has been reduced to zero. With respect to Excluded Mortgage Loans, a Control Termination Event will be deemed to exist.
A “Consultation Termination Event” will either (a) occur when none of the Classes of Class E, Class F, Class G and Class H Certificates has an outstanding Certificate Balance, without regard to the allocation of any Cumulative Appraisal Reduction Amounts, that is equal to or greater than 25% of the initial Certificate Balance of that Class of Certificates or (b) be deemed to occur as described below;provided,however, that a Consultation Termination Event will in no event exist at any time that the aggregate Certificate Balance of each Class of Certificates (other than the Control Eligible Certificates) (without regard to the allocation of Appraisal Reduction Amounts) has been reduced to zero. With respect to Excluded Mortgage Loans, a Consultation Termination Event will be deemed to exist.
An “Excluded Mortgage Loan” is a Mortgage Loan or Loan Combination with respect to which the Controlling Class Representative or the holder(s) of more than 50% of the Controlling Class (by Certificate Balance) is (or are) a Borrower Party.
An “Excluded Controlling Class Mortgage Loan” is a Mortgage Loan with respect to which the Controlling Class Representative or any Controlling Class Certificateholder, as applicable, is a Borrower Party.
A “Borrower Party” means either (i) a borrower, a mortgagor or a manager of a Mortgaged Property or any affiliate of any of the foregoing, or (ii) a holder or beneficial owner (or an affiliate of any holder or beneficial owner) of any Accelerated Mezzanine Loan. Solely for the purposes of the definition of “Borrower Party”, the term “affiliate” means, with respect to any specified person, (i) any other person controlling or controlled by or under common control with such specified person or (ii) any other person that owns, directly or indirectly, 25% or more of the beneficial interests in such specified person.
406 |
An “Accelerated Mezzanine Loan” means a mezzanine loan (secured by a pledge of the direct (or indirect) equity interests in a borrower under a mortgage loan or loan combination) if such mezzanine loan either (i) has been accelerated or (ii) is the subject of foreclosure proceedings against the equity collateral pledged to secure that mezzanine loan.
After the occurrence and during the continuance of a Control Termination Event, the consent rights of the Controlling Class Representative will terminate, and the Controlling Class Representative will retain consultation rights under the Pooling and Servicing Agreement with respect to certain Major Decisions and other matters with respect to the applicable Serviced Loan(s);provided,however, that the Controlling Class Representative will not be permitted to consult with respect to any Serviced AB Loan Combination while any related Subordinate Companion Loan Holder is the related Outside Controlling Note Holder.
In addition, unless a Consultation Termination Event exists, the Controlling Class Representative, except with respect to any Loan Combination that includes an Excluded Mortgage Loan, will have non-binding consultation rights with respect to (i) certain Major Decisions and other matters relating to any Serviced Outside Controlled Loan Combination and (ii) certain servicing decisions and other matters relating to any Outside Serviced Loan Combination, in each case if and to the extent that the holder of the related Split Mortgage Loan is granted consultation rights under the related Co-Lender Agreement.
After the occurrence and during the continuance of a Consultation Termination Event, the Controlling Class Representative will have no consultation or consent rights under the Pooling and Servicing Agreement and will have no right to receive any notices, reports or information (other than notices, reports or information required to be delivered to all Certificateholders) or any other rights as a Directing Holder. However, the Controlling Class Certificateholder will maintain the right to exercise its Voting Rights for the same purposes as any other Certificateholder under the Pooling and Servicing Agreement (other than with respect to Excluded Mortgage Loans).
If, with respect to any Serviced Outside Controlled Loan Combination, the related controlling note is included in a separate securitization trust, the pooling and servicing agreement, trust and servicing agreement and/or comparable agreement for the relevant securitization may impose limitations on the exercise of rights associated with that related controlling note. For example, any “controlling class representative” (or equivalent entity) for such other securitization may lose consent and consultation rights in a manner similar to that described in the prior three paragraphs with respect to the Controlling Class Representative.
Neither the Master Servicer nor the Special Servicer will be required to take or to refrain from taking any action pursuant to instructions from a Directing Holder, or due to any failure to approve an action by any such party, or due to an objection by any such party that would cause either the Master Servicer or the Special Servicer to violate applicable law, the related Mortgage Loan documents, the Pooling and Servicing Agreement (including the Servicing Standard), any related Co-Lender Agreement or intercreditor agreement or the REMIC provisions of the Code.
The Controlling Class Representative or an Outside Controlling Note Holder, as applicable, has certain rights to remove and replace the Special Servicer with respect to the related Serviced Loan(s) as described under “The Pooling and Servicing Agreement—Termination of the Special Servicer Without Cause”.
Each Certificateholder and beneficial owner of a Control Eligible Certificate is hereby deemed to have agreed by virtue of its purchase of such Certificate (or beneficial ownership interest in such Certificate) to provide its name and address to the Certificate Administrator and to notify the Certificate Administrator of the transfer of any Control Eligible Certificate (or the beneficial ownership of any Control Eligible Certificate), the selection of the Controlling Class Representative or the resignation or removal of the Controlling Class Representative. Any such Certificateholder (or beneficial owner) or its designee at any time appointed Controlling Class Representative is hereby deemed to have agreed by virtue of its purchase of a Control Eligible Certificate (or the beneficial ownership interest in a Control Eligible Certificate) to notify the Certificate Administrator when such Certificateholder (or beneficial owner) or designee is appointed Controlling Class Representative and when it is removed or resigns. Upon receipt of such notice, the Certificate Administrator will be required to notify the Special Servicer, the Master Servicer, the Operating Advisor and the Trustee of the identity of the Controlling Class Representative, any resignation or removal of the Controlling Class Representative and/or any new holder or beneficial owner of a Control Eligible Certificate. In addition, upon the request of the Master Servicer, the Special Servicer, the Operating Advisor or the Trustee, as applicable, the Certificate Administrator will be required
407 |
to provide the identity of the then-current Controlling Class and a list of the Certificateholders (or beneficial owners, if applicable, at the expense of the Issuing Entity if such expense arises in connection with an event as to which the Controlling Class Representative or the Controlling Class has consent or consultation rights pursuant to the Pooling and Servicing Agreement or in connection with a request made by the Operating Advisor in connection with its obligation under the Pooling and Servicing Agreement to deliver a copy of the Operating Advisor’s annual report to the Controlling Class Representative, and otherwise at the expense of the requesting party) of the Controlling Class to such requesting party, and each of the Master Servicer, Special Servicer, Operating Advisor and the Trustee will be entitled to rely on such the information so provided by the Certificate Administrator.
In the event of a change in the Controlling Class, the Certificate Administrator will be required to promptly contact the current holder of the Controlling Class (or its designee) or (if known to the Certificate Administrator) one of its affiliates, or, if applicable, any successor Controlling Class Representative or Controlling Class Certificateholder(s), and determine whether such entity is the holder (or beneficial owner) of at least a majority of the Controlling Class (in effect after such change in Controlling Class) by Certificate Balance. If at any time that the current holder of the Controlling Class (or its designee) or (if known to the Certificate Administrator) one of its affiliates, or any successor Controlling Class Representative or Controlling Class Certificateholder(s) is no longer the holder (or beneficial owner) of at least a majority of the Controlling Class by Certificate Balance and the Certificate Administrator has neither (i) received notice of the then-current Controlling Class Certificateholders of at least a majority of the Controlling Class by Certificate Balance nor (ii) received notice of a replacement Controlling Class Representative pursuant to the Pooling and Servicing Agreement, then a Control Termination Event and a Consultation Termination Event will be deemed to have occurred and will be deemed to continue until such time as the Certificate Administrator receives either such notice.
Notwithstanding anything to the contrary described in this prospectus, at any time when the Class E Certificates are the Controlling Class Certificates, the holder of more than 50% of the Controlling Class Certificates (by Certificate Balance) may waive its right to act as or appoint a Controlling Class Representative and to exercise any of the rights of the Controlling Class Representative or cause the exercise of any of the rights of the Controlling Class Representative set forth in the Pooling and Servicing Agreement, by irrevocable written notice delivered to the Depositor, Certificate Administrator, Trustee, Master Servicer, Special Servicer and Operating Advisor. Any such waiver will remain effective with respect to such holder and the Class E Certificates until such time as either (x) the Class E Certificates are no longer the Controlling Class of Certificates or (y) that Certificateholder has (i) sold a majority of the Class E Certificates (by Certificate Balance) to an unaffiliated third party and (ii) certified to the Depositor, Certificate Administrator, Trustee, Master Servicer, Special Servicer and Operating Advisor that (a) the transferor retains no direct or indirect voting rights with respect to the Class E Certificates that it does not own, (b) there is no voting agreement between the transferee and the transferor and (c) the transferor retains no direct or indirect economic interest in the Class E Certificates. Following any such transfer, or if the Class E Certificates are no longer the Controlling Class of Certificates, the successor holder of more than 50% of the Controlling Class of Certificates (by Certificate Balance) will again have the rights of a Controlling Class Representative as described in this prospectus without regard to any prior waiver by the predecessor Certificateholder. The successor Certificateholder will also have the right to irrevocably waive its right to act as or appoint a Controlling Class Representative or to exercise any of the rights of the Controlling Class Representative or cause the exercise of any of the rights of the Controlling Class Representative. No successor Certificateholder described above will have any consent rights with respect to any Serviced Mortgage Loan that became a Specially Serviced Loan prior to its acquisition of a majority of the Class E Certificates that had not also become a Corrected Loan prior to such acquisition until such Serviced Mortgage Loan becomes a Corrected Loan.
Whenever such an “opt-out” by a Controlling Class Certificateholder is in effect:
· | a Control Termination Event and a Consultation Termination Event will be deemed to have occurred and be continuing; and |
· | the rights of the holder of more than 50% of the Class E Certificates (by Certificate Balance), if the Class E Certificates are the Controlling Class of Certificates, to act as or appoint a Controlling Class Representative and the rights of a Controlling Class Representative will not be operative (notwithstanding whether a Control Termination Event or a Consultation Termination Event is or would otherwise then be in effect). |
408 |
With respect to an Outside Serviced Mortgage Loan, any consent or approvals on actions to be taken by the Outside Special Servicer or the Outside Servicer are governed by the terms of the Outside Servicing Agreement and the related Co-Lender Agreement, as described under “Description of the Mortgage Pool—The Loan Combinations” and “—The Loan Combinations—Servicing of the Outside Serviced Mortgage Loans”.
Limitation on Liability of the Directing Holder
The Directing Holder will not be liable to the Issuing Entity or the Certificateholders for any action taken, or for refraining from the taking of any action or for errors in judgment. However, the Controlling Class Representative 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 negligent disregard of obligations or duties.
Each Certificateholder acknowledges and agrees, by its acceptance of its Certificates, that a Directing Holder:
(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 its own interests (or, in the case of the Controlling Class Representative, 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, in the case of the Controlling Class Representative, the Controlling Class);
(d) may take actions that favor its own interests (or, in the case of the Controlling Class Representative, the interests of the holders of the Controlling Class) over the interests of the holders of one or more Classes of Certificates; and
(e) will have no liability whatsoever (other than, in the case of the Controlling Class Representative, to a Controlling Class Certificateholder) for having so acted as set forth in (a) – (d) above, and that no Certificateholder may take any action whatsoever against any Directing Holder or any affiliate, director, officer, employee, shareholder, member, partner, agent or principal of any Directing Holder for having so acted.
Under circumstances where it is authorized or required to do so by the Pooling and Servicing Agreement, the taking, or refraining from taking, of any action by the Master Servicer or the Special Servicer in accordance with the direction of or approval of a Directing Holder, which does not violate any law or the Servicing Standard or the provisions of the Pooling and Servicing Agreement, or any related Co-Lender Agreement or intercreditor agreement, will not result in any liability on the part of the Master Servicer or the Special Servicer.
Operating Advisor
General Obligations
After the occurrence and during the continuance of a Control Termination Event, subject to the restrictions and limitations described in this prospectus, the Operating Advisor will generally review the Special Servicer’s operational practices in respect of the applicable Specially Serviced Loan(s) to formulate an opinion as to whether or not those operational practices generally satisfy the Servicing Standard with respect to the resolution and/or liquidation of such Specially Serviced Loans, each in accordance with the Operating Advisor Standard. In addition, after the occurrence and during the continuance of a Control Termination Event, the Operating Advisor will consult with the Special Servicer in accordance with the Operating Advisor Standard with regard to certain matters with respect to the servicing of the applicable Specially Serviced Loan(s) to the extent described in this prospectus and set forth in the Pooling and Servicing Agreement; provided that the Operating Advisor may consult regarding a Serviced Outside Controlled Loan Combination only if and to the extent that the holder of the related Split Mortgage Loan is granted consultation rights under the related Co-Lender Agreement. The Operating Advisor will act solely as a contracting party to the extent set forth in the Pooling and Servicing Agreement and will have no fiduciary duty to any party. The Operating Advisor’s duties will be limited to its specific obligations under the Pooling and Servicing Agreement, and the Operating Advisor will have no duty or
409 |
liability to any particular Class of Certificates or any Certificateholder. The Operating Advisor is not a servicer or a sub-servicer and will not be charged with changing the outcome on any particular Specially Serviced Loan. By purchasing a Certificate, potential investors acknowledge and agree that there could be multiple strategies to resolve any Specially Serviced Loan and that the goal of the Operating Advisor’s participation is to provide additional input relating to the Special Servicer’s compliance with the Servicing Standard in making its determinations as to which strategy to execute. After the occurrence and during the continuance of a Control Termination Event, the Operating Advisor’s review of information (other than a Final Asset Status Report and information accompanying such report) or interaction with the Special Servicer related to any specific applicable Specially Serviced Loan is only to provide background information to the Operating Advisor and to allow more meaningful interaction with the Special Servicer.
Potential investors should note that the Operating Advisor is not an “advisor” for any purpose other than as specifically set forth in the Pooling and Servicing Agreement and is not an advisor to any person, including without limitation any Certificateholder. See “Risk Factors—Your Lack of Control Over the Issuing Entity and Servicing of the Mortgage Loans Can Create Risks”.
Following the occurrence and during the continuation of a Control Termination Event, the Operating Advisor will have certain consultation rights with respect to Major Decisions with respect to the applicable Serviced Loan(s) as described under “—Directing Holder” above and “—Asset Status Reports” below and “Description of the Mortgage Pool—The Loan Combinations”.
Prior to the occurrence and continuance of a Control Termination Event, the Operating Advisor is required to promptly review (i) all information available to Privileged Persons on the Certificate Administrator’s website with respect to the Special Servicer, assets on the CREFC® servicer watch list and the applicable Specially Serviced Loan(s) and (ii) each related Final Asset Status Report. Prior to the occurrence and continuance of a Control Termination Event, the Operating Advisor’s obligations will be limited to the review described in the immediately preceding sentence and generally will not involve an assessment of specific actions of the Special Servicer and, in any event, will be subject to limitations described in this prospectus or set forth in the Pooling and Servicing Agreement.
Prior to the occurrence and continuance of a Control Termination Event, the Operating Advisor will have no specific involvement with respect to collateral substitutions, assignments, workouts, modifications, consents, waivers, insurance policies, borrower substitutions, lease modifications and amendments and other similar actions that the Special Servicer may perform with respect to such Serviced Mortgage Loan under the Pooling and Servicing Agreement.
Prior to the occurrence and continuance of a Control Termination Event, the Special Servicer will deliver to the Operating Advisor each related Final Asset Status Report. Subject to the Privileged Information Exception, the Operating Advisor will be obligated to keep confidential any Privileged Information received from the Special Servicer, the related Directing Holder or any related Serviced Companion Loan Holder (or its representative) in connection with the related Directing Holder’s or such related Serviced Companion Loan Holder’s exercise of any rights under the Pooling and Servicing Agreement (including, without limitation, in connection with any asset status report) or otherwise in connection with the Mortgage Loans.
The Operating Advisor is required to keep all Privileged Information confidential and may not disclose such Privileged Information to any person (including Certificateholders other than the Controlling Class Representative), other than (1) to the extent expressly required by the Pooling and Servicing Agreement, to the other parties to the Pooling and Servicing Agreement with a notice indicating that such information is Privileged Information or (2) pursuant to a Privileged Information Exception. Notwithstanding the foregoing, the Operating Advisor will be permitted to share Privileged Information with its affiliates and any subcontractors of the Operating Advisor that agree in writing to be bound by the same confidentiality provisions applicable to the Operating Advisor. Each party to the Pooling and Servicing Agreement that receives Privileged Information from the Operating Advisor with a notice stating that such information is Privileged Information may not disclose such Privileged Information to any person without the prior written consent of the Special Servicer, any related Outside Controlling Note Holder (if a Serviced Outside Controlled Loan Combination is involved) and, unless a Consultation Termination Event has occurred and is continuing, the Controlling Class Representative other than pursuant to a Privileged Information Exception.
410 |
In addition, prior to the occurrence and continuance of a Control Termination Event, the Special Servicer will forward any Appraisal Reduction Amount with respect to, and net present value calculations used in the Special Servicer’s determination of the course of action to be taken in connection with the workout or liquidation of, a Specially Serviced Loan to the Operating Advisor after they have been finalized. The Operating Advisor will review such calculations but may not opine on, or otherwise call into question, such Appraisal Reduction Amount calculations and/or net present value calculations;provided, however, if the Operating Advisor discovers a mathematical error contained in such calculations, then the Operating Advisor will be required to notify the Special Servicer and the related Directing Holder of such error.
The “Operating Advisor Standard” means the Operating Advisor is required to act solely on behalf of the Issuing Entity and in the best interest of, and for the benefit of, the Certificateholders (as a collective whole as if such Certificateholders (and, with respect to any Serviced Pari Passu Loan Combination, any related Serviced Pari Passu Companion Loan Holder(s)) constituted a single lender), and not any particular Class of those Certificateholders (as determined by the Operating Advisor in the exercise of its good faith and reasonable judgment), but without regard to any conflict of interest arising from any relationship that the Operating Advisor or any of its affiliates may have with any of the underlying borrowers, any Sponsor, any Mortgage Loan Seller, the Depositor, the Master Servicer, the Special Servicer, the Asset Representations Reviewer, the Directing Holder, or any of their respective affiliates.
“Privileged Information” means (i) any correspondence or other communications between the related Directing Holder (and, in the case of any Serviced Loan Combinations, the Serviced Companion Loan Holder or its representative) and the Special Servicer related to any Specially Serviced Loan or the exercise of the consent or consultation rights of such Directing Holder under the Pooling and Servicing Agreement and/or any related Serviced Companion Loan Holder (or its representative) under the related Co-Lender Agreement, (ii) any strategically sensitive information that the Special Servicer has reasonably determined (and has identified as privileged or confidential information) could compromise the Issuing Entity’s position in any ongoing or future negotiations with the related borrower or other interested party, and (iii) any information subject to attorney-client privilege.
“Privileged Information Exception” means, with respect to any Privileged Information, at any time (a) such Privileged Information becomes generally available and known to the public other than as a result of a disclosure directly or indirectly by the party restricted from disclosing such Privileged Information (the “Restricted Party”), (b) it is reasonable and necessary for the Restricted Party to disclose such Privileged Information in working with legal counsel, auditors, taxing authorities or other governmental agencies, (c) such Privileged Information was already known to such Restricted Party and not otherwise subject to a confidentiality obligation and/or (d) the Restricted Party is (in the case of the Master Servicer, the Special Servicer, the Operating Advisor, the Certificate Administrator, any affected Serviced Companion Loan Holder, the Trustee and the Asset Representations Reviewer, as evidenced by an opinion of counsel (which will be an additional expense of the Issuing Entity) delivered to each of the Master Servicer, the Special Servicer, the applicable Directing Holder, the Operating Advisor, the Certificate Administrator, the Trustee and the Asset Representations Reviewer), required by law, rule, regulation, order, judgment or decree to disclose such information.
A “Final Asset Status Report” with respect to any Specially Serviced Loan, means each related asset status report, together with such other data or supporting information provided by the Special Servicer to the Operating Advisor or the related Directing Holder or any related Serviced Companion Loan Holder (or its representative), in each case, which does not include any communications (other than the related asset status report) between the Special Servicer and the related Directing Holder and/or related Serviced Companion Loan Holder (or its representative) with respect to such Specially Serviced Loan;provided that no asset status report will be considered to be a Final Asset Status Report unless any related Outside Controlling Note Holder (if a Serviced Outside Controlled Loan Combination is involved) or, prior to the occurrence and continuance of a Control Termination Event, the Controlling Class Representative (if any other Serviced Loan(s) (other than any Excluded Mortgage Loan) are involved), as applicable, has either finally approved of and consented to the actions proposed to be taken in connection therewith, or has exhausted all of its rights of approval or consent or has been deemed to have approved or consented to such action or the asset status report is otherwise implemented by the Special Servicer in accordance with the terms of the Pooling and Servicing Agreement.
After the occurrence and during the continuance of a Control Termination Event, the Special Servicer will forward any Appraisal Reduction Amount and net present value calculations with respect to a Specially Serviced Loan to the Operating Advisor and the Operating Advisor will be required to promptly recalculate and verify the
411 |
accuracy of the mathematical calculations and the corresponding application of the non-discretionary portion of the applicable formulas required to be utilized in connection with any such Appraisal Reduction Amount or net present value calculations used in the Special Servicer’s determination of the course of action to be taken in connection with the workout or liquidation of such Specially Serviced Loan prior to utilization by the Special Servicer. The Special Servicer will be required to deliver the foregoing calculations together with information and support materials (including such additional information reasonably requested by the Operating Advisor to confirm the mathematical accuracy of such calculations, but not including any Privileged Information) to the Operating Advisor. The Operating Advisor will recalculate and verify the accuracy of those calculations and, in the event the Operating Advisor does not agree with the mathematical calculations or the application of the applicable non-discretionary portions of the formula required to be utilized for such calculation, the Operating Advisor and Special Servicer will consult with each other in order to resolve any inaccuracy in the mathematical calculations or the application of the non-discretionary portions of the related formula in arriving at those mathematical calculations or any disagreement. In the event the Operating Advisor and Special Servicer are not able to resolve such matters, the Operating Advisor will promptly notify the Certificate Administrator and the Certificate Administrator will determine any necessary action to take in accordance with the Pooling and Servicing Agreement.
The ability to perform the duties of the Operating Advisor and the quality and the depth of any annual report will be dependent upon the timely receipt of information required to be delivered to the Operating Advisor and the accuracy and the completeness of such information. In addition, in no event will the Operating Advisor have the power to compel any transaction party to take or refrain from taking any action. It is possible that the lack of access to Privileged Information may limit the Operating Advisor from performing its duties under the Pooling and Servicing Agreement and, in any such case, the Operating Advisor will not be subject to liability arising from its lack of access to Privileged Information.
Annual Report
Following the occurrence and during the continuance of a Control Termination Event, based on the Operating Advisor’s review of any annual compliance statement, Assessment of Compliance, Attestation Report, asset status report and other information (other than any communications between the related Directing Holder or any related Serviced Companion Loan Holder (or its representative) and the Special Servicer that would be Privileged Information) delivered to the Operating Advisor by the Special Servicer, the Operating Advisor will (if any applicable Serviced Mortgage Loan(s) were Specially Serviced Loan(s) during, and a Control Termination Event existed as of the end of, the prior calendar year) prepare an annual report to beprovided to the Depositor, the 17g-5 Information Provider (who is required to promptly post such annual report on the Rule 17g-5 website), the Trustee and the Certificate Administrator (and made available through the Certificate Administrator’s website) within 120 days of the end of the prior calendar year and setting forth its assessment of the Special Servicer’s performance of its duties under the Pooling and Servicing Agreement on a platform-level basis with respect to the resolution and/or liquidation of such Specially Serviced Loan(s) during the prior calendar year. No annual report will be required from the Operating Advisor with respect to the Special Servicer if during the prior calendar year no asset status report was prepared by the Special Servicer in connection with a Specially Serviced Loan or REO Property. In addition, in the event the Special Servicer is replaced, the Operating Advisor’s annual report will only relate to the entity that was acting as Special Servicer as of December 31 of the prior calendar year and is continuing in such capacity through the date of such annual report. Only as used in connection with the Operating Advisor’s annual report, the term “platform-level basis” refers to the Special Servicer’s performance of its duties as they relate to the resolution and/or liquidation of Specially Serviced Loans, taking into account the Special Servicer’s specific duties under the Pooling and Servicing Agreement as well as the extent to which those duties were performed in accordance with the Servicing Standard, with reasonable consideration by the Operating Advisor of any annual compliance statement, Assessment of Compliance, Attestation Report, asset status report and other information (other than any communications between the related Directing Holder or a Serviced Companion Loan Holder (or its representative) and the Special Servicer that would be Privileged Information) delivered to the Operating Advisor by the Special Servicer pursuant to the Pooling and Servicing Agreement.
The Operating Advisor will be required to deliver any annual report produced by the Operating Advisor (at least 10 calendar days prior to its delivery to the Depositor, the Trustee and the Certificate Administrator) to (a) the Special Servicer, (b) the Controlling Class Representative (if a Serviced Loan other than a Serviced Outside Controlled Loan Combination is addressed and a Consultation Termination Event does not exist); and (c) the related Outside Controlling Note Holder (if a Serviced Outside Controlled Loan Combination is addressed). The Operating Advisor may, but will not be obligated to, revise the annual report based on any comments received from the Special Servicer or the Controlling Class Representative.
412 |
Following the occurrence and during the continuance of a Control Termination Event, in each annual report, the Operating Advisor, based on its review conducted in accordance with the Pooling and Servicing Agreement, will identify any material deviations (i) from the Servicing Standard and (ii) from the Special Servicer’s obligations under the Pooling and Servicing Agreement with respect to the resolution and liquidation of the applicable Specially Serviced Loan(s) based on the limited review required in the Pooling and Servicing Agreement. Each annual report will be required to comply with the confidentiality requirements described in this prospectus regarding Privileged Information and as otherwise set forth in the Pooling and Servicing Agreement.
Replacement of the Special Servicer
At any time after the occurrence and during the continuance of a Consultation Termination Event, if the Operating Advisor determines that the Special Servicer is not performing its duties as required under the Pooling and Servicing Agreement or is otherwise not acting in accordance with the Servicing Standard, the Operating Advisor may recommend the replacement of the Special Servicer with respect to the Serviced Loan(s) in the manner described under “—Termination of the Special Servicer Without Cause” above, subject to any related Outside Controlling Note Holder’s right to consent, as described under “—Termination of the Special Servicer Without Cause”.
Operating Advisor Termination Events
The following constitute Operating Advisor termination events under the Pooling and Servicing Agreement (each, an “Operating Advisor Termination Event”) whether any such event is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
(a) any failure by the Operating Advisor to observe or perform in any material respect any of its covenants or agreements or the material breach of its representations or warranties under the Pooling and Servicing Agreement, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure is given to the Operating Advisor by the Trustee or to the Operating Advisor and the Trustee by the holders of Certificates having greater than 25% of the aggregate Voting Rights of all then outstanding Certificates;provided, however, that with respect to any such failure which is not curable within such 30-day period, the Operating Advisor will have an additional cure period of 30 days to effect such cure so long as it has commenced to cure such failure within the initial 30-day period and has provided the Trustee and the Certificate Administrator with an officer’s certificate certifying that it has diligently pursued, and is continuing to pursue, such cure;
(b) any failure by the Operating Advisor to perform its obligations set forth in the Pooling and Servicing Agreement in accordance with the Operating Advisor Standard which failure continues unremedied for a period of 30 days after the date on which written notice of such failure is given to the Operating Advisor by any party to the Pooling and Servicing Agreement;
(c) any failure by the Operating Advisor to be an Eligible Operating Advisor, which failure continues unremedied for a period of 30 days;
(d) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, has been entered against the Operating Advisor, and such decree or order has remained in force undischarged or unstayed for a period of 60 days;
(e) the Operating Advisor consents to the appointment of a conservator or receiver or liquidator or liquidation committee in any insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation, or similar proceedings of or relating to the Operating Advisor or of or relating to all or substantially all of its property; or
(f) the Operating Advisor admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations.
413 |
Upon receipt by the Certificate Administrator of notice of the occurrence of any Operating Advisor Termination Event, the Certificate Administrator will be required to promptly provide written notice to all Certificateholders electronically by posting such notice on its internet website, unless the Certificate Administrator has received notice that such Operating Advisor Termination Event has been remedied.
Rights Upon Operating Advisor Termination Event
If an Operating Advisor Termination Event occurs, and in each and every such case, so long as such Operating Advisor Termination Event has not been remedied, then either the Trustee (i) may or (ii) upon the written direction of holders of Certificates evidencing at least 25% of the Voting Rights of each Class of Non-Reduced Certificates, will be required to, terminate all of the rights and obligations of the Operating Advisor under the Pooling and Servicing Agreement, other than rights and obligations accrued prior to such termination and other than indemnification rights (arising out of events occurring prior to such termination), by written notice to the Operating Advisor.
As soon as practicable, but in no event later than 15 business days after (i) the Operating Advisor resigns (excluding circumstances where no successor Operating Advisor is required to be appointed) or (ii) the Trustee delivers such written notice of termination to the Operating Advisor, the Trustee will appoint a successor Operating Advisor that is an Eligible Operating Advisor, which successor Operating Advisor may be an affiliate of the Trustee. If the Trustee is the successor Master Servicer or the successor Special Servicer, neither the Trustee nor any of its affiliates will be the successor Operating Advisor. The Trustee will be required to provide written notice of the appointment of a successor Operating Advisor to the Special Servicer and the Operating Advisor within one business day of such appointment. Except as described below under “—Operating Advisor—Termination of the Operating Advisor Without Cause,” the appointment of a successor Operating Advisor will not be subject to the vote, consent or approval of the holder of any Class of Certificates. Upon any termination of the Operating Advisor and appointment of a successor to the Operating Advisor, the Trustee will be required to, as soon as possible, give written notice of the termination and appointment to the Special Servicer, the Master Servicer, the Certificate Administrator, the Certificateholders, the Depositor, any related Outside Controlling Note Holder and, if a Consultation Termination Event does not exist, the Controlling Class Representative. Notwithstanding the foregoing, if the Trustee is unable to find a successor Operating Advisor within 30 days of the termination of the Operating Advisor, the Depositor will be permitted to find a replacement. Unless and until a replacement Operating Advisor is appointed, no party will act as the Operating Advisor and the provisions in the Pooling and Servicing Agreement relating to consultation with respect to the Operating Advisor will not be applicable until a replacement Operating Advisor is appointed under the Pooling and Servicing Agreement.
“Eligible Operating Advisor” means an institution (i) that is the special servicer or operating advisor on a transaction rated by any of Moody’s, Fitch, KBRA, Standard & Poor’s Ratings Services, DBRS, Inc. and/or Morningstar Credit Ratings, LLC, but has not been the special servicer or operating advisor on a transaction for which Moody’s, Fitch, KBRA, Standard & Poor’s Ratings Services, DBRS, Inc. and/or Morningstar Credit Ratings, LLC has qualified, downgraded or withdrawn its rating or ratings of, one or more classes of certificates for such transaction citing servicing concerns with the special servicer or operating advisor, as applicable, as the sole or material factor in such rating action, (ii) that can and will make the representations and warranties set forth in the Pooling and Servicing Agreement, (iii) that is not (and is not affiliated with) the Depositor, the Trustee, the Certificate Administrator, the Master Servicer, the Special Servicer, a Mortgage Loan Seller, the Controlling Class Representative, or a depositor, a trustee, a certificate administrator, a master servicer or special servicer with respect to the securitization of a Companion Loan, or any of their respective affiliates, and (iv) that has not been paid any fees, compensation or other remuneration by any Special Servicer or successor Special Servicer (x) in respect of its obligations under the Pooling and Servicing Agreement or (y) for the recommendation of the replacement of the Special Servicer or the appointment of a successor Special Servicer to become the special servicer.
Termination of the Operating Advisor Without Cause
Upon (i) the written direction of holders of Non-Reduced Certificates evidencing not less than 15% of the Voting Rights of the Non-Reduced Certificates requesting a vote to terminate and replace the Operating Advisor with a proposed successor Operating Advisor that is an Eligible Operating Advisor, and (ii) payment by such holders to the Certificate Administrator of the reasonable fees and expenses to be incurred by the Certificate Administrator in connection with administering such vote, the Certificate Administrator will promptly provide written notice to all Certificateholders and the Operating Advisor of such request by posting such notice on its internet
414 |
website, and by mailing to all Certificateholders and the Operating Advisor. Upon the written direction of holders of more than 50% of the Voting Rights of the Non-Reduced Certificates that exercise their right to vote (provided that holders of at least 50% of the Voting Rights of the Non-Reduced Certificates exercise their right to vote), the Trustee will terminate all of the rights and obligations of the Operating Advisor under the Pooling and Servicing Agreement (other than any rights or obligations that accrued prior to the date of such termination and other than indemnification rights (arising out of events occurring prior to such termination)) by written notice to the Operating Advisor, and the proposed successor Operating Advisor will be appointed. The Certificate Administrator will include on each Distribution Date statement a statement that each Certificateholder and beneficial owner of Certificates may access such notices on the Certificate Administrator’s website and each Certificateholder and beneficial owner of Certificates may register to receive email notifications when such notices are posted on the website. The Certificate Administrator will be entitled to reimbursement from the requesting Certificateholders for the reasonable expenses of posting notices of such requests.
In the event that the Operating Advisor resigns or is terminated, it will remain entitled to receive all amounts accrued and owing to it under the Pooling and Servicing Agreement as described under “—Servicing and Other Compensation and Payment of Expenses” and any rights to indemnification arising out of events occurring prior to such resignation or termination.
Asset Status Reports
The Special Servicer will be required to prepare an asset status report that is consistent with the Servicing Standard upon the earlier of (x) within 60 days after the occurrence of a Servicing Transfer Event and (y) prior to taking action with respect to any Major Decision (or making a determination not to take action with respect to a Major Decision) with respect to a Specially Serviced Loan.
Each asset status report will be (i) delivered to the related Directing Holder (but, if the Controlling Class Representative is the related Directing Holder, only prior to the occurrence and continuance of a Consultation Termination Event and only if it does not relate to an Excluded Mortgage Loan), the Operating Advisor (but only after the occurrence and during the continuance of a Control Termination Event) and, in the case of any Serviced Loan Combinations, the Serviced Companion Loan Holder, and (ii) made available to the Rating Agencies. A summary of each Final Asset Status Report will be provided to the Certificate Administrator. If any related Outside Controlling Note Holder (if a Serviced Outside Controlled Loan Combination is involved) or the Controlling Class Representative (if any other Serviced Loan(s), except for Excluded Mortgage Loans, are involved and a Control Termination Event does not exist), as applicable, does not disapprove of a related asset status report within 10 business days of receipt, the related Directing Holder will be deemed to have approved such asset status report and the Special Servicer will implement the recommended action as outlined in such asset status report;provided, however, that the Special Servicer may not take any actions that are contrary to applicable law, the Servicing Standard or the terms of the applicable Mortgage Loan documents. In addition, the related Directing Holder may object to any asset status report within 10 business days of receipt (but, if the Controlling Class Representative is the related Directing Holder, only if a Control Termination Event does not exist);provided, however, that, if the Special Servicer determines that emergency action is necessary to protect the related Mortgaged Property or the interests of the Certificateholders (and, in the case of any Serviced Loan Combinations, the related Serviced Companion Loan Holder), or if a failure to take any such action at such time would be inconsistent with the Servicing Standard, the Special Servicer may take actions with respect to the related Mortgaged Property before the expiration of the 10 business day period if the Special Servicer reasonably determines in accordance with the Servicing Standard that failure to take such actions before the expiration of the 10 business day period would materially and adversely affect the interest of the Certificateholders (and, in the case of any Serviced Loan Combinations, the related Serviced Companion Loan Holder(s)), and the Special Servicer has made a reasonable effort to contact the related Directing Holder (during the period that such Directing Holder has approval rights). The foregoing will not relieve the Special Servicer of its duties to comply with the Servicing Standard.
If the related Directing Holder disapproves such asset status report within 10 business days of receipt (and, if the Controlling Class Representative is the related Directing Holder, a Control Termination Event does not exist) and the Special Servicer has not made the affirmative determination described below, the Special Servicer will revise such asset status report as soon as practicable thereafter, but in no event later than 30 days after such disapproval. The Special Servicer will revise such asset status report until the related Directing Holder fails to disapprove such revised asset status report as described above (but, if the Controlling Class Representative is the related Directing Holder, only if a Control Termination Event does not exist) or until the Special Servicer
415 |
makes a determination, consistent with the Servicing Standard, that such objection is not in the best interests of all the Certificateholders (and, in the case of any Serviced Loan Combinations, the related Serviced Companion Loan Holder(s)). If the related Directing Holder does not approve an asset status report within 60 business days from the first submission of an asset status report, the Special Servicer is required to take such action as directed by the related Directing Holder (but, if the Controlling Class Representative is the related Directing Holder, only if a Control Termination Event does not exist),provided such action does not violate the Servicing Standard.
After the occurrence and during the continuance of a Control Termination Event, each of the Operating Advisor and (prior to the occurrence and continuance of a Consultation Termination Event) the Controlling Class Representative will be entitled to consult on a non-binding basis with the Special Servicer and propose alternative courses of action in respect of any asset status report. After the occurrence and during continuance of a Control Termination Event, the Special Servicer will be obligated to consider such alternative courses of action and any other feedback provided by (a) the Operating Advisor, or (b) (prior to the occurrence and continuance of a Consultation Termination Event) the Controlling Class Representative. With respect to a Serviced Loan Combination, if and when so provided in the related Co-Lender Agreement, any related Serviced Pari Passu Companion Loan Holder (or its representative), will be entitled to consult on a non-binding basis with the Special Servicer and propose alternative courses of action in respect of any asset status report;provided that, in the case of a Serviced Outside Controlled Loan Combination, a related Serviced Pari Passu Companion Loan Holder (or its representative) may be the related Outside Controlling Note Holder. The Special Servicer may revise the asset status reports as it deems reasonably necessary in accordance with the Servicing Standard to take into account any input and/or recommendations of the Operating Advisor (during the continuance of a Control Termination Event) and, with respect to a Serviced Loan Combination, if and when so provided in the related Co-Lender Agreement, any related Serviced Pari Passu Companion Loan Holder (or its representative) (and, during the continuance of a Control Termination Event but prior to the occurrence and continuance of a Consultation Termination Event, the Controlling Class Representative).
The asset status report is not intended to replace or satisfy any specific consent or approval right which the related Directing Holder may have.
Notwithstanding the foregoing, the Controlling Class Representative will not have any approval or consultation rights with respect to an asset status report that relates to an Excluded Mortgage Loan. Also, notwithstanding the foregoing, the Special Servicer will not be permitted to follow any advice, direction or consultation provided by the Operating Advisor or the related Directing Holder or, with respect to the Serviced Loan Combinations, the Serviced Companion Loan Holder (or its representative), that would require or cause the Special Servicer to violate any applicable law, be inconsistent with the Servicing Standard, require or cause the Special Servicer to violate provisions of the Pooling and Servicing Agreement, require or cause the Special Servicer to violate the terms of any Serviced Mortgage Loan or Serviced Loan Combination, expose any Certificateholder or any party to the Pooling and Servicing Agreement or their affiliates officers, directors or agents to any claim, suit or liability, cause either Trust REMIC to fail to qualify as a REMIC or the Grantor Trust to fail to qualify as a grantor trust for federal income tax purposes, result in the imposition of “prohibited transaction” or “prohibited contribution” tax under the REMIC provisions of the Code, or materially expand the scope of the Special Servicer’s responsibilities under the Pooling and Servicing Agreement or any Co-Lender Agreement.
The Asset Representations Reviewer
Asset Review
Asset Review Trigger
On or prior to each Distribution Date, based on the CREFC® Delinquent Loan Status Report and/or the CREFC® Loan Periodic Update File delivered by the Master Servicer for such Distribution Date, the Certificate Administrator will be required to determine if an Asset Review Trigger has occurred during the related Collection Period. If an Asset Review Trigger is determined to have occurred, the Certificate Administrator will be required to promptly provide notice to the Asset Representations Reviewer, the Master Servicer, the Special Servicer and all Certificateholders by (i) posting a notice of its determination on its internet website and (ii) including in the Distribution Report on Form 10-D relating to the Collection Period in which the Asset Review Trigger occurred notice of its determination together with a description of the events that caused the Asset Review Trigger to occur. On each Distribution Date after providing such notice to Certificateholders, the Certificate Administrator, based on information provided to it by the Master Servicer and/or the Special Servicer, will be required to determine
416 |
whether (1) any additional Mortgage Loan has become a Delinquent Loan, (2) any Mortgage Loan has ceased to be a Delinquent Loan and (3) an Asset Review Trigger has ceased to exist, and, if there is an occurrence of any of the events or circumstances identified in clauses (1), (2) and/or (3), deliver such information in a written notice (which may be via email) within two (2) business days of such determination to the Master Servicer, the Special Servicer, the Operating Advisor and the Asset Representations Reviewer. An “Asset Review Trigger” will occur when, as of the end of the applicable Collection Period, either (1) Mortgage Loans with an aggregate outstanding principal balance of 25.0% or more of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Mortgage Loans) held by the Issuing Entity are Delinquent Loans, or (2) at least 15 Mortgage Loans are Delinquent Loans and the aggregate outstanding principal balance of such Delinquent Loans constitutes at least 20.0% of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Mortgage Loans) held by the Issuing Entity.
We believe this Asset Review Trigger is appropriate considering the unique characteristics of pools of Mortgage Loans underlying CMBS. See “Risk Factors—Static Pool Data Would Not Be Indicative of the Performance of this Pool”. In particular, this pool of Mortgage Loans is not homogeneous or granular, and there are individual Mortgage Loans that each represents a significant percentage, by outstanding principal balance, of the Mortgage Pool. We believe it would not be appropriate for the delinquency of two (2) large Mortgage Loans to cause the Asset Review Trigger to be met, as that would not necessarily be indicative of the overall quality of the Mortgage Pool. As a result, the percentage based on outstanding principal balance in clause (1) of the definition of “Asset Review Trigger” was set to exceed the portion of the aggregate outstanding balance of the Mortgage Pool represented by the two (2) largest Mortgage Loans in the pool as of the Closing Date. On the other hand, a significant number of Delinquent Loans by loan count, but representing a smaller percentage of the aggregate outstanding principal balance of the Mortgage Loans than the percentage set forth in clause (1) of the definition of “Asset Review Trigger”, could indicate an issue with the quality of the Mortgage Pool. As a result, we believe it would be appropriate to have the alternative test set forth in clause (2) of the definition of “Asset Review Trigger”, namely to have the Asset Review Trigger be met if a specified number of Mortgage Loans (15) are Delinquent Loans so long as those Mortgage Loans represent at least 20.0% of the aggregate outstanding principal balance of the Mortgage Loans. With respect to the 74 prior pools of commercial mortgage loans for which CGMRC (or its predecessors) was sponsor in a public offering of CMBS with a securitization closing date on or after January 1, 2006, the highest percentage of mortgage loans, based on the aggregate outstanding principal balance of delinquent mortgage loans in an individual CMBS transaction, that were delinquent at least 60 days at the end of any reporting period between January 1, 2010 and February 29, 2016 was 36.1%; however, the average of the highest delinquency percentages for those 74 reviewed transactions (taking into account all reporting periods between January 1, 2010 and February 29, 2016 for each such transaction) based on the aggregate outstanding principal balance of delinquent mortgage loans in the identified reporting periods was 5.5%.
“Delinquent Loan” means a Mortgage Loan that is delinquent at least 60 days in respect of its Monthly Payments or balloon payment, if any, in either case such delinquency to be determined without giving effect to any grace period.
Asset Review Vote
If Certificateholders evidencing not less than 5.0% of the aggregate Voting Rights deliver to the Certificate Administrator, within 90 days after the filing of the Form 10-D reporting the occurrence of an Asset Review Trigger, a written direction requesting a vote to commence an Asset Review (an “Asset Review Vote Election”), the Certificate Administrator will be required to promptly provide written notice of such direction to all Certificateholders, and to conduct a solicitation of votes of Certificateholders regarding whether to authorize an Asset Review. In the event there is an affirmative vote to authorize an Asset Review by Certificateholders evidencing at least a majority of an Asset Review Quorum within 150 days of the receipt of the Asset Review Vote Election (an “Affirmative Asset Review Vote”), the Certificate Administrator will be required to promptly provide written notice of such Affirmative Asset Review Vote to all parties to the Pooling and Servicing Agreement, the underwriters, the Mortgage Loan Sellers, the Directing Holder and the Certificateholders (such notice to Certificateholders to be effected by posting such notice its internet website). In the event an Affirmative Asset Review Vote has not occurred within such 150-day period following the receipt of the Asset Review Vote Election, no Certificateholder may request a vote or cast a vote for an Asset Review and the Asset Representations Reviewer will not be required to review any Delinquent Loan unless and until (A) an additional Mortgage Loan has become a Delinquent Loan after the expiration of such 150-day period, (B) a new Asset Review Trigger has occurred as a result or an Asset Review Trigger is otherwise in effect, (C) the Certificate Administrator has received an Asset Review Vote Election within 90 days after the filing of a Form 10-D reporting the occurrence of
417 |
the events described in clauses (A) and (B) above, and (D) an Affirmative Asset Review Vote has occurred within 150 days after the Asset Review Vote Election described in clause (C) of this sentence. After the occurrence of any Asset Review Vote Election or an Affirmative Asset Review Vote, no Certificateholder may make any additional Asset Review Vote Election except as described in the immediately preceding sentence. Any reasonable out-of-pocket expenses incurred by the Certificate Administrator in connection with administering such vote will be paid as an expense of the Issuing Entity from the Collection Account.
An “Asset Review Quorum” means, in connection with any solicitation of votes to authorize an Asset Review as described above, the holders of Certificates evidencing at least 5.0% of the aggregate Voting Rights.
Review Materials
Upon receipt of notice from the Certificate Administrator of an Affirmative Asset Review Vote (the “Asset Review Notice”) with respect to a Delinquent Mortgage Loan, the Custodian (with respect to clauses (i) – (v) below for non-Specially Serviced Loans), the Master Servicer (with respect to clause (vi) below for Mortgage Loans that are non-Specially Serviced Loans) and the Special Servicer (with respect to Mortgage Loans that are Specially Serviced Loans) will be required to promptly (but (except with respect to clause (vi)) in no event later than 10 business days after receipt of such notice from the Certificate Administrator) provide the following materials for such Delinquent Loan, in each case to the extent in such party’s possession, to the Asset Representations Reviewer (collectively, with the Diligence Files posted to the secure data room by the Certificate Administrator, a copy of this prospectus, a copy of each related Mortgage Loan Purchase Agreement and a copy of the Pooling and Servicing Agreement, the “Review Materials”):
(i) | a copy of an assignment of the Mortgage in favor of the trustee, with evidence of recording thereon, for each Delinquent Loan that is subject to an Asset Review; |
(ii) | a copy of an assignment of any related assignment of leases (if such item is a document separate from the Mortgage) in favor of the trustee, with evidence of recording thereon, related to each Delinquent Loan that is subject to an Asset Review; |
(iii) | a copy of the assignment of all unrecorded documents relating to each Delinquent Loan that is subject to an Asset Review, if not already covered pursuant to items (i) or (ii) above; |
(iv) | a copy of all filed copies (bearing evidence of filing) or evidence of filing of any UCC financing statements related to each Delinquent Loan that is subject to an Asset Review; |
(v) | a copy of an assignment in favor of the trustee of any financing statement executed and filed in the relevant jurisdiction related to each Delinquent Loan that is subject to an Asset Review; and |
(vi) | any other related documents that are required to be part of the Review Materials and requested to be delivered by the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans) to the Asset Representations Reviewer as described below under clause (a) of“—Asset Review”. |
Notwithstanding the foregoing, the Mortgage Loan Seller will not be required to deliver any information that is proprietary to the Mortgage Loan Seller or any draft documents, privileged or internal communications, credit underwriting or due diligence analysis.
The Asset Representations Reviewer may, but is under no obligation to, consider and rely upon information furnished to it by a person that is not a party to the Pooling and Servicing Agreement or the related Mortgage Loan Seller, and will do so only if such information can be independently verified (without unreasonable effort or expense to the Asset Representations Reviewer) and is determined by the Asset Representations Reviewer in its good faith and sole discretion to be relevant to the Asset Review (any such information, “Unsolicited Information”), as described below.
418 |
Asset Review
Upon its receipt of the Asset Review Notice and access to the Diligence Files posted to the secure data room with respect to a Delinquent Loan, the Asset Representations Reviewer, as an independent contractor, will be required to commence a review of the compliance of each Delinquent Loan with the representations and warranties related to that Delinquent Loan (such review, the “Asset Review”). An Asset Review of each Delinquent Loan will consist of the application of a set of pre-determined review procedures (the “Tests”) for each representation and warranty made by the applicable Mortgage Loan Seller with respect to such Delinquent Loan. Once an Asset Review of a Mortgage Loan is completed, no further Asset Review will be required of or performed on that Mortgage Loan notwithstanding that such Mortgage Loan may continue to be a Delinquent Loan or become a Delinquent Loan again at the time when a new Asset Review Trigger occurs and a new Affirmative Asset Review Vote is obtained subsequent to the occurrence of such Asset Review Trigger.
“Asset Review Standard” means the performance by the Asset Representations Reviewer of its duties under the Pooling and Servicing Agreement in good faith subject to the express terms of the Pooling and Servicing Agreement. Except as otherwise expressly set forth in the Pooling and Servicing Agreement, all determinations or assumptions made by the Asset Representations Reviewer in connection with an Asset Review are required to be made in the Asset Representations Reviewer’s good faith discretion and judgment based on the facts and circumstances known to it at the time of such determination or assumption.
No Certificateholder will have the right to change the scope of the Asset Representations Reviewer’s review, and the Asset Representations Reviewer will not be required to review any information other than (i) the Review Materials and (ii) if applicable, Unsolicited Information.
The Asset Representations Reviewer may, absent manifest error and subject to the Asset Review Standard, (i) assume, without independent investigation or verification, that the Review Materials are accurate and complete in all material respects and (ii) conclusively rely on such Review Materials.
In connection with an Asset Review, the Asset Representations Reviewer will be required to comply with the following procedures with respect to each Delinquent Loan:
(a) Within 10 business days after the date on which the Review Materials identified in clauses (i) through (v) of the definition of “Review Materials” have been received by the Asset Representations Reviewer with respect to such Delinquent Loan or in any event within 15 days after the date on which access to the secure data room is provided to the Asset Representations Reviewer by the Certificate Administrator, in the event that the Asset Representations Reviewer reasonably determines that any Review Materials made available or delivered to the Asset Representations Reviewer are missing any documents required to complete any Test for such Delinquent Loan, the Asset Representations Reviewer will be required to promptly notify (in the manner specified in the Pooling and Servicing Agreement) the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans), as applicable, of such missing documents, and request that the Master Servicer or the Special Servicer, as applicable, promptly (but in no event later than 10 business days after receipt of notification from the Asset Representations Reviewer) deliver to the Asset Representations Reviewer such missing documents in its possession. In the event any missing documents are not provided by the Master Servicer or the Special Servicer, as applicable, within such 10-business day period, the Asset Representations Reviewer will be required to request such documents from the related Mortgage Loan Seller. The Mortgage Loan Seller will be required under the related Mortgage Loan Purchase Agreement, in accordance with its terms, to deliver any such missing documents only to the extent such documents is in the possession of the Mortgage Loan Seller.
(b) Following the events in clause (a) above, and within 45 days after the date on which access to the secure data room is provided to the Asset Representations Reviewer by the Certificate Administrator, the Asset Representations Reviewer is required to prepare a preliminary report with respect to such Delinquent Loan setting forth (i) the preliminary results of the application of the Tests, (ii) if applicable, whether the Review Materials for such Delinquent Loan are insufficient to complete any Test, (iii) a list of any applicable missing documents together with the reasons why such missing documents are necessary to complete any Test, and (iv) (if the Asset Representations Reviewer has so concluded) whether the absence of such documents will be deemed to be a failure of such Test (collectively, the “Preliminary Asset Review Report”). The Asset Representations Reviewer will provide each Preliminary Asset Review Report to the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially
419 |
Serviced Loans), who will promptly, but in no event later within 10 business days of receipt thereof, provide the Preliminary Asset Review Report to the applicable Mortgage Loan Seller. If the Preliminary Asset Review Report indicates that any of the representations and warranties fails or is deemed to fail any Test, the applicable Mortgage Loan Seller will have 90 days from receipt of the Preliminary Asset Review Report (the “Cure/Contest Period”) to remedy or otherwise refute the failure. The Mortgage Loan Seller will be required to provide any documents or any explanations to support a conclusion that a subject representation and warranty has not failed a Test to the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans), and the Master Servicer or the Special Servicer, as applicable, will be required to promptly, but in no event later than 10 business days after receipt from the related Mortgage Loan Seller, deliver to the Asset Representations Reviewer any such documents or explanations received from the Mortgage Loan Seller given to support a claim that the representation and warranty has not failed a Test or a claim that any missing documents in the Review Materials are not required to complete a Test.
(c) Within the later of (x) 60 days after the date on which access to the secure data room is provided to the Asset Representations Reviewer by the Certificate Administrator, and (y) 10 business days after the expiration of the Cure/Contest Period, the Asset Representations Reviewer will be required to complete an Asset Review with respect to each Delinquent Loan and deliver (i) a report setting forth the Asset Representations Reviewer’s findings and conclusions as to whether or not it has determined there is any evidence of a failure of any Test based on the Asset Review, together with a statement that the Asset Representations Reviewer’s findings and conclusions set forth in such report were not influenced by any third party (an “Asset Review Report”), to each party to the Pooling and Servicing Agreement, the related Mortgage Loan Seller and the Controlling Class Representative (if such the Delinquent Loan is not an Excluded Mortgage Loan), and (ii) a summary of the Asset Representations Reviewer’s conclusions included in such Asset Review Report (an “Asset Review Report Summary”) to the Trustee and Certificate Administrator. The period of time by which the Asset Review Report must be completed and delivered may be extended by up to an additional 30 days, upon written notice to the parties to the Pooling and Servicing Agreement and the applicable Mortgage Loan Seller(s), if the Asset Representations Reviewer determines pursuant to the Asset Review Standard that such additional time is required due to the characteristics of the Delinquent Loans and/or the Mortgaged Property or Mortgaged Properties. In addition, in the event that the Asset Representations Reviewer does not receive any documentation that it requested from the Master Servicer (with respect to non-Specially Serviced Loans), the Special Servicer (with respect to Specially Serviced Loans) or the applicable Mortgage Loan Seller in sufficient time to allow the Asset Representations Reviewer to complete its Asset Review and deliver an Asset Review Report, the Asset Representations Reviewer will be required to prepare the Asset Review Report solely based on the documents received by the Asset Representations Reviewer with respect to the related Delinquent Loan, and the Asset Representations Reviewer will have no responsibility to independently obtain any such documents from any party to the Pooling and Servicing Agreement or otherwise.
The Pooling and Servicing Agreement will require that the Certificate Administrator (i) include the Asset Review Report Summary in the Distribution Report on Form 10–D relating to the Collection Period in which the Asset Review Report Summary was received, and (ii) post such Asset Review Report Summary to the Certificate Administrator’s website not later than two business days after receipt of such Asset Review Report Summary from the Asset Representations Reviewer.
Inno event will the Asset Representations Reviewer be required to determine whether any Test failure constitutes a Material Defect, or whether the Issuing Entity should enforce any rights it may have against the applicable Mortgage Loan Seller, which, in each such case, will be the responsibility of the Master Servicer or the Special Servicer, as applicable. See “—Repurchase Requests; Enforcement of Mortgage Loan Seller’s Obligations Under the Mortgage Loan Purchase Agreement” below.
Eligibility of Asset Representations Reviewer
The Asset Representations Reviewer will be required to represent and warrant in the Pooling and Servicing Agreement that it is an Eligible Asset Representations Reviewer. The Asset Representations Reviewer is required to be at all times an Eligible Asset Representations Reviewer. If the Asset Representations Reviewer ceases to be an Eligible Asset Representations Reviewer, the Asset Representations Reviewer is required to immediately notify the Depositor, the Master Servicer, the Special Servicer, the Trustee, the Operating Advisor, the Certificate Administrator and the Directing Holder of such disqualification and if an Asset Representations Reviewer
420 |
Termination Event occurs as a result, immediately resign under the Pooling and Servicing Agreement as described under the “—The Asset Representations Reviewer—Resignation of Asset Representations Reviewer” below.
An “Eligible Asset Representations Reviewer” is an institution that (i) is the special servicer, operating advisor or asset representations reviewer on a transaction rated by any of Moody’s, Fitch, KBRA, Standard & Poor’s Ratings Services, DBRS, Inc. or Morningstar Credit Ratings, LLC and that has not been a special servicer, operating advisor or asset representations reviewer on a transaction for which Moody’s, Fitch, KBRA, Standard & Poor’s Ratings Services, DBRS, Inc. or Morningstar Credit Ratings, LLC has qualified, downgraded or withdrawn its rating or ratings of one or more classes of certificates for such transaction citing servicing or other relevant concerns with such special servicer, operating advisor or Asset Representations Reviewer, as applicable, as the sole or material factor in such rating action, (ii) can and will make the representations and warranties of the Asset Representations Reviewer set forth in the Pooling and Servicing Agreement, (iii) is not (and is not affiliated with) any Sponsor, any Mortgage Loan Seller, any originator, the Master Servicer, the Special Servicer, the Depositor, the Certificate Administrator, the Trustee, the Directing Holder or any of their respective affiliates, (iv) has not performed (and is not affiliated with any party hired to perform) any due diligence, loan underwriting, brokerage, borrower advisory or similar services with respect to any Mortgage Loan or any related Companion Loan prior to the Closing Date for or on behalf of any Sponsor, any Mortgage Loan Seller, any underwriter, or the Directing Holder or any of their respective affiliates, or have been paid any fees, compensation or other remuneration by any of them in connection with any such services and (v) that does not directly or indirectly, through one or more affiliates or otherwise, own any interest in any Certificates, any Mortgage Loans, any Companion Loan or any securities backed by a Companion Loan or otherwise have any financial interest in the securitization transaction to which the Pooling and Servicing Agreement relates, other than in fees from its role as Asset Representations Reviewer (or as Operating Advisor, if applicable) and except as otherwise set forth in the Pooling and Servicing Agreement.
Other Obligations of Asset Representations Reviewer
The Asset Representations Reviewer and its affiliates are required to keep confidential any Privileged Information received from any party to the Pooling and Servicing Agreement or any Sponsor under the Pooling and Servicing Agreement (including, without limitation, in connection with the review of the Mortgage Loans) and not disclose such Privileged Information to any person (including Certificateholders), other than (1) to the extent expressly required by the Pooling and Servicing Agreement in an Asset Review Report or otherwise, to the other parties to the Pooling and Servicing Agreement with a notice indicating that such information is Privileged Information or (2) pursuant to a Privileged Information Exception. Each party to the Pooling and Servicing Agreement that receives such Privileged Information from the Asset Representations Reviewer with a notice stating that such information is Privileged Information may not disclose such Privileged Information to any person without the prior written consent of the Special Servicer other than pursuant to a Privileged Information Exception.
Neither the Asset Representations Reviewer nor any of its affiliates may make any investment in any Class of Certificates; provided,however, that such prohibition will not apply to (i) riskless principal transactions effected by a broker dealer affiliate of the Asset Representations Reviewer or (ii) investments by an affiliate of the Asset Representations Reviewer if the Asset Representations Reviewer and such affiliate maintain policies and procedures that (A) segregate personnel involved in the activities of the Asset Representations Reviewer under the Pooling and Servicing Agreement from personnel involved in such affiliate’s investment activities and (B) prevent such affiliate and its personnel from gaining access to information regarding the Issuing Entity and the Asset Representations Reviewer and its personnel from gaining access to such affiliate’s information regarding its investment activities.
Delegation of Asset Representations Reviewer’s Duties
The Asset Representations Reviewer may delegate its duties to agents or subcontractors in accordance with the Pooling and Servicing Agreement, however, the Asset Representations Reviewer will remain obligated and primarily liable for any Asset Review required in accordance with the provisions of the Pooling and Servicing Agreement without diminution of such obligation or liability by virtue of such delegation or arrangements or by virtue of indemnification from any person acting as its agents or subcontractor to the same extent and under the same terms and conditions as if the Asset Representations Reviewer alone were performing its obligations under the Pooling and Servicing Agreement.
421 |
Asset Representations Reviewer Termination Events
The following constitute Asset Representations Reviewer termination events under the Pooling and Servicing Agreement (each, an “Asset Representations Reviewer Termination Event”) whether any such event is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
· | any failure by the Asset Representations Reviewer to observe or perform in any material respect any of its covenants or agreements or the material breach of any of its representations or warranties under the Pooling and Servicing Agreement, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure is given to the Asset Representations Reviewer by the Trustee or to the Asset Representations Reviewer and the Trustee by the holders of Certificates evidencing at least 25% of the Voting Rights; |
· | any failure by the Asset Representations Reviewer to perform its obligations set forth in the Pooling and Servicing Agreement in accordance with the Asset Review Standard in any material respect, which failure continues unremedied for a period of 30 days after the date written notice of such failure is given to the Asset Representations Reviewer by any party to the Pooling and Servicing Agreement; |
· | any failure by the Asset Representations Reviewer to be an Eligible Asset Representations Reviewer, which failure continues unremedied for a period of 30 days; |
· | a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, has been entered against the Asset Representations Reviewer, and such decree or order has remained in force undischarged or unstayed for a period of 60 days; |
· | the Asset Representations Reviewer consents to the appointment of a conservator or receiver or liquidator or liquidation committee in any insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation, or similar proceedings of or relating to the Asset Representations Reviewer or of or relating to all or substantially all of its property; or |
· | the Asset Representations Reviewer admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations. |
Upon receipt by the Certificate Administrator of written notice of the occurrence of any Asset Representations Reviewer Termination Event, the Certificate Administrator will be required to promptly provide written notice to all Certificateholders electronically by posting such notice on its internet website and by mail, unless the Certificate Administrator has received notice that such Asset Representations Reviewer Termination Event has been remedied.
Rights Upon Asset Representations Reviewer Termination Event
If an Asset Representations Reviewer Termination Event occurs, and in each and every such case, so long as such Asset Representations Reviewer Termination Event has not been remedied, then either the Trustee (i) may or (ii) upon the written direction of Certificateholders evidencing at least 25% of the Voting Rights (without regard to the application of any Appraisal Reduction Amounts) will be required to, terminate all of the rights and obligations of the Asset Representations Reviewer under the Pooling and Servicing Agreement, other than rights and obligations accrued prior to such termination and other than indemnification rights (arising out of events occurring prior to such termination), by written notice to the Asset Representations Reviewer. The Asset Representations Reviewer is required to bear all reasonable costs and expenses of each other party to the Pooling and Servicing Agreement in connection with its termination for cause.
422 |
Termination of the Asset Representations Reviewer Without Cause
Upon (i) the written direction of Certificateholders evidencing not less than 25% of the Voting Rights (without regard to the application of any Appraisal Reduction Amounts) requesting a vote to terminate and replace the Asset Representations Reviewer with a proposed successor Asset Representations Reviewer that is an Eligible Asset Representations Reviewer, and (ii) payment by such holders to the Certificate Administrator of the reasonable fees and expenses to be incurred by the Certificate Administrator in connection with administering such vote, the Certificate Administrator will promptly provide notice of such request to all Certificateholders and the Asset Representations Reviewer by posting such notice on its internet website, and by mailing such notice to all Certificateholders (at the addresses set forth in the certificate register) and the Asset Representations Reviewer. Upon the written direction of Certificateholders evidencing at least 75% of a Certificateholder Quorum, the Trustee will be required to terminate all of the rights and obligations of the Asset Representations Reviewer under the Pooling and Servicing Agreement (other than any rights or obligations that accrued prior to the date of such termination and other than indemnification rights (arising out of events occurring prior to such termination)) by written notice to the Asset Representations Reviewer, and the proposed successor Asset Representations Reviewer will be appointed. In the event that holders of the Certificates entitled to at least 75% of a Certificateholder Quorum elect to remove the Asset Representations Reviewer without cause and appoint a successor, the successor Asset Representations Reviewer will be responsible for all expenses necessary to effect the transfer of responsibilities from its predecessor.
Resignation of Asset Representations Reviewer
The Asset Representations Reviewer may at any time resign by giving written notice to the other parties to the Pooling and Servicing Agreement. In addition, the Asset Representations Reviewer will at all times be an Eligible Asset Representations Reviewer, and will be required to resign if it fails to be an Eligible Asset Representations Reviewer (and such failure results in an Asset Representations Reviewer Termination Event) by giving written notice to the other parties. Upon such notice of resignation, the Depositor will be required to promptly appoint a successor Asset Representations Reviewer that is an Eligible Asset Representations Reviewer. No resignation of the Asset Representations Reviewer will be effective until a successor Asset Representations Reviewer that is an Eligible Asset Representations Reviewer has been appointed and accepted the appointment. If no successor Asset Representations Reviewer has been so appointed and accepted the appointment within 30 days after the notice of resignation, the resigning Asset Representations Reviewer may petition any court of competent jurisdiction for the appointment of a successor Asset Representations Reviewer that is an Eligible Asset Representations Reviewer. The resigning Asset Representations Reviewer must pay all costs and expenses associated with the transfer of its duties.
Asset Representations Reviewer Compensation
Certain fees will be payable to the Asset Representations Reviewer, and the Asset Representations Reviewer will be entitled to be reimbursed for certain expenses, as described under “—Servicing and Other Compensation and Payment of Expenses—Asset Representations Reviewer Compensation”.
Repurchase Requests; Enforcement of Mortgage Loan Seller’s Obligations Under the Mortgage Loan Purchase Agreement
In the event that anInitial Requesting Certificateholder delivers a written request to a party to the Pooling and Servicing Agreement that a Mortgage Loan be repurchased by the applicable Mortgage Loan Seller alleging the existence of a Material Defect with respect to such Mortgage Loan and setting forth the basis for such allegation (a “Certificateholder Repurchase Request”), the receiving party will be required to promptly forward that Certificateholder Repurchase Request to the Enforcing Servicer, and the Enforcing Servicer will be required to promptly forward that Certificateholder Repurchase Request to the applicable Mortgage Loan Seller and each other party to the Pooling and Servicing Agreement. An “Initial Requesting Certificateholder” is the first Certificateholder or Certificate Owner to deliver a Certificateholder Repurchase Request as described above with respect to a Mortgage Loan, and there may not be more than one Initial Requesting Certificateholder with respect to any Mortgage Loan.
In the event that any of the Depositor, the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator or the Operating Advisor (solely in its capacity as Operating Advisor) determines that a Mortgage Loan should be repurchased or replaced due to a Material Defect, or has knowledge of a Material Defect with
423 |
respect to a Mortgage Loan, then such party will be required to deliver prompt written notice of such Material Defect, identifying the applicable Mortgage Loan and setting forth the basis for such allegation (a “Pooling and Servicing Agreement Party Repurchase Request” and, each of a Certificateholder Repurchase Request or a Pooling and Servicing Agreement Party Repurchase Request, a “Repurchase Request”), to the Enforcing Servicer and the Enforcing Servicer will be required to promptly forward such Pooling and Servicing Agreement Party Repurchase Request to the applicable Mortgage Loan Seller and each other party to the Pooling and Servicing Agreement.
“Enforcing Servicer” means the Master Servicer (in the case of Mortgage Loans that are not Specially Serviced Loans) or the Special Servicer (in the case of Mortgage Loans that are Specially Serviced Loans). If the Master Servicer is the Enforcing Servicer, the Master Servicer may (but will not be obligated to) consult with the Special Servicer and (for so long as no Consultation Termination Event has occurred) the Directing Holder regarding any Proposed Course of Action.
Subject to the provisions described below under “—Dispute Resolution Provisions”, the Enforcing Servicer will be required to act as the Enforcing Party and enforce the rights of the Issuing Entity against the related Mortgage Loan Seller with respect to each Repurchase Request. However, if a Resolution Failure occurs with respect to a Repurchase Request, the provisions described below under “—Resolution of a Repurchase Request” will apply. In connection with a Repurchase Request, the “Enforcing Party” will be (i) in the event one or more Requesting Certificateholders has delivered a Final Dispute Resolution Election Notice with respect thereto pursuant to the terms of the Pooling and Servicing Agreement, with respect to the mediation or arbitration that arises out of such Final Dispute Resolution Election Notice, such Requesting Certificateholders, or (ii) in all other cases, the Enforcing Servicer.
The Enforcing Servicer will be required to enforce the obligations of the Mortgage Loan Sellers under the Mortgage Loan Purchase Agreements pursuant to the terms of the Pooling and Servicing Agreement and the Mortgage Loan Purchase Agreements. These obligations include obligations resulting from a Material Defect. Subject to the provisions of the applicable Mortgage Loan Purchase Agreement relating to the dispute resolutions as described under “—Dispute Resolution Provisions” below, such enforcement, including, without limitation, the legal prosecution of claims, if any, will be required to be carried out in such form, to such extent and at such time as Enforcing Servicer would require were it, in its individual capacity, the owner of the affected Mortgage Loan, and in accordance with the Servicing Standard.
Within 30 days after receipt of an Asset Review Report with respect to any Mortgage Loan, the Enforcing Servicer will be required to determine, based on the Servicing Standard, whether there exists a Material Defect with respect to such Mortgage Loan. If the Enforcing Servicer determines that a Material Defect exists, the Enforcing Servicer will be required to enforce the obligations of the applicable Mortgage Loan Seller under the Mortgage Loan Purchase Agreement with respect to such Material Defect as discussed in the preceding paragraph, subject to the terms of the Mortgage Loan Purchase Agreement. See “—The Asset Representations Reviewer—Asset Review” above.
Any costs incurred by the Enforcing Servicer with respect to the enforcement of the obligations of a Mortgage Loan Seller under the applicable Mortgage Loan Purchase Agreement will be deemed to be Servicing Advances, to the extent not recovered from the Mortgage Loan Seller or the Requesting Certificateholder. See “The Mortgage Loan Purchase Agreements—Dispute Resolution Provisions”.
Dispute Resolution Provisions
Resolution of a Repurchase Request
In the event the Repurchase Request is not Resolved within 180 days after the Mortgage Loan Seller receives the Repurchase Request (a “Resolution Failure”), then the provisions described below in this “—Resolution of a Repurchase Request” section will apply. Receipt of the Repurchase Request will be deemed to occur 2 business days after the Repurchase Request is sent to the related Mortgage Loan Seller in a commercially reasonable manner. “Resolved” means, with respect to a Repurchase Request, that (i) the related Material Defect has been cured, (ii) the related Mortgage Loan has been repurchased in accordance with the related Mortgage Loan Purchase Agreement, (iii) a mortgage loan has been substituted for the related Mortgage Loan in accordance with the related Mortgage Loan Purchase Agreement, (iv) the applicable Mortgage Loan Seller has made a Loss of Value Payment, (v) a contractually binding agreement has been entered into between
424 |
the Enforcing Servicer, on behalf of the Issuing Entity, and the related Mortgage Loan Seller that settles the related Mortgage Loan Seller’s obligations under the related Mortgage Loan Purchase Agreement, or (vi) the related Mortgage Loan is no longer property of the Issuing Entity as a result of a sale or other disposition in accordance with the Pooling and Servicing Agreement. The fact that a Repurchase Request has been Resolved pursuant to clause (vi) above will not preclude the Enforcing Servicer from exercising any of its rights related to a Material Defect in the manner and timing otherwise set forth in the Pooling and Servicing Agreement, in the related Mortgage Loan Purchase Agreement or as provided by law.
After a Resolution Failure occurs with respect to a Repurchase Request regarding a Mortgage Loan (whether the Repurchase Request was initiated by an Initial Requesting Certificateholder or by a party to the Pooling and Servicing Agreement), the Enforcing Servicer will be required to send a notice (a “Proposed Course of Action Notice”) to the Initial Requesting Certificateholder, if any, to the address specified in the Initial Requesting Certificateholder’s Repurchase Request, and to the Certificate Administrator who will make such notice available to all other Certificateholders and Certificate Owners (by posting such notice on the Certificate Administrator’s website) indicating the Enforcing Servicer’s intended course of action with respect to the Repurchase Request. If (a) the Enforcing Servicer’s intended course of action with respect to the Repurchase Request does not involve pursuing further action to exercise rights against the applicable Mortgage Loan Seller with respect to the Repurchase Request, or (b) the Enforcing Servicer’s intended course of action is to pursue further action to exercise rights against the related Mortgage Loan Seller with respect to the Repurchase Request but a Requesting Certificateholder does not agree with the course of action selected by the Enforcing Servicer, and, in the case of clause (a) or (b), a Requesting Certificateholder wishes to exercise its right to refer the matter to mediation (including nonbinding arbitration) or arbitration, as discussed below under “—Mediation and Arbitration Provisions”,then a Requesting Certificateholder may deliver to the Enforcing Servicer a written notice (a “Preliminary Dispute Resolution Election Notice”) within 30 days from the date the Proposed Course of Action Notice was posted on the certificate administrator’s website (the “Dispute Resolution Cut-off Date”) indicating its intent to exercise its right to refer the matter to either mediation or arbitration.
A “Requesting Certificateholder” means (i) the Initial Requesting Certificateholder, if any, or (ii) any other Certificateholder or Certificate Owner that, in each case, is exercising its rights under this “—Dispute Resolution” section to refer a matter involving a Repurchase Request to either mediation or arbitration.
If no Requesting Certificateholder delivers a Preliminary Dispute Resolution Election Notice prior to the Dispute Resolution Cut-off Date, then no Certificateholder or Certificate Owner will have the right to refer the Repurchase Request to mediation or arbitration, and theEnforcing Servicer will be the sole party obligated and entitled to determine a course of action, including, but not limited to, enforcing the Issuing Entity’s rights against the related Mortgage Loan Seller, subject to any consent or consultation rights of the Directing Holder.
Promptly and in any event within 10 business days following receipt of a Preliminary Dispute Resolution Election Notice from a Requesting Certificateholder, theEnforcing Servicer will be required to consult with each Requesting Certificateholder regarding such Requesting Certificateholder’s intention to elect either mediation (including nonbinding arbitration) or arbitration as the dispute resolution method with respect to the Repurchase Request (the “Dispute Resolution Consultation”) so that such Requesting Certificateholder may consider the views of the Enforcing Servicer as to the claims underlying the Repurchase Request and possible dispute resolution methods, such discussions to occur and be completed no later than 10 business days following the Dispute Resolution Cut-off Date. The Enforcing Servicer will be entitled to establish procedures the Enforcing Servicer deems to be in accordance with the Servicing Standard relating to the timing and extent of such consultations. No later than 5 business days after completion of the Dispute Resolution Consultation, a Requesting Certificateholder may provide a final notice to the Enforcing Servicer indicating its decision to exercise its right to refer the matter to either mediation or arbitration (“Final Dispute Resolution Election Notice”).
If, following the Dispute Resolution Consultation, no Requesting Certificateholder timely delivers a Final Dispute Resolution Election Notice to theEnforcing Servicer, then no Certificateholder or Certificate Owner will have any further right to refer the Repurchase Request to mediation or arbitration, and the Enforcing Servicer will be the sole party obligated and entitled to determine a course of action, including, but not limited to, enforcing the Issuing Entity’s rights against the related Mortgage Loan Seller, subject to any consent or consultation rights of the Directing Holder.
If a Requesting Certificateholder timely delivers a Final Dispute Resolution Election Notice to theEnforcing Servicer, then such Requesting Certificateholder will become the Enforcing Party and must promptly submit the
425 |
matter to mediation (including nonbinding arbitration) or arbitration. If there is more than one Requesting Certificateholder that timely delivers a Final Dispute Resolution Election Notice, then such Requesting Certificateholders will collectively become the Enforcing Party, and the holder or holders of a majority of the Voting Rights among such Requesting Certificateholders will be entitled to make all decisions relating to such mediation or arbitration (including whether to refer the matter to mediation (including non-binding arbitration) or arbitration). If, however, no Requesting Certificateholder commences arbitration or mediation pursuant to the terms of the Pooling and Servicing Agreement within 30 days after delivery of its Final Dispute Resolution Election Notice to the Enforcing Servicer, then (i) the rights of a Requesting Certificateholder to act as the Enforcing Party will terminate and no Certificateholder or Certificate Owner will have any further right to elect to refer the matter to mediation or arbitration, (ii) if the Proposed Course of Action Notice indicated that the Enforcing Servicer will take no further action with respect to the Repurchase Request, then the related Material Defect will be deemed waived for all purposes under the Pooling and Servicing Agreement and related Mortgage Loan Purchase Agreement, and (iii) if the Proposed Course of Action Notice had indicated a course of action other than the course of action under clause (ii), then the Enforcing Servicer will be the sole party obligated and entitled to determine a course of action including, but not limited to, enforcing the Issuing Entity’s rights against the related Mortgage Loan Seller.
Notwithstanding the foregoing, the dispute resolution provisions described under this heading “—Resolution of a Repurchase Request” will not apply, and the Enforcing Servicer will be the sole party entitled to enforce the Issuing Entity’s rights against the related Mortgage Loan Seller, if the Enforcing Servicer has commenced litigation with respect to the Repurchase Request, or determines in accordance with the Servicing Standard that it is in the best interest of Certificateholders to commence litigation with respect to the Repurchase Request to avoid the running of any applicable statute of limitations.
In the event a Requesting Certificateholder becomes the Enforcing Party, the Enforcing Servicer, on behalf of the Issuing Entity, will remain a party to any proceedings against the related Mortgage Loan Seller as further described below. For the avoidance of doubt, the Depositor, the Mortgage Loan Sellers and any of their respective affiliates will not be entitled to be a Requesting Certificateholder.
The Requesting Certificateholders are entitled to elect either mediation or arbitration with respect to a Repurchase Request in their sole discretion; provided, however, no Requesting Certificateholder may elect to then utilize the alternative method in the event that the initial method is unsuccessful, and no other Certificateholder or Certificate Owner may elect either arbitration or mediation in the event a mediation or arbitration is undertaken with respect to such Repurchase Request.
Mediation and Arbitration Provisions
If the Enforcing Party elects mediation (including nonbinding arbitration) or arbitration, the mediation or arbitration will be administered by a nationally recognized arbitration or mediation organization selected by the applicable Mortgage Loan Seller. A single mediator or arbitrator will be selected by the mediation or arbitration organization from a list of neutrals maintained by it according to its mediation or arbitration rules then in effect. The mediator or arbitrator must be impartial, an attorney admitted to practice in the State of New York and have at least 15 years of experience in commercial litigation and, if possible, commercial real estate finance or commercial mortgage-backed securitization matters.
The expenses of any mediation will be allocated among the parties to the mediation, including, if applicable, between the Enforcing Party and Enforcing Servicer, as mutually agreed by the parties as part of the mediation.
In any arbitration, the arbitrator will be required to resolve the dispute in accordance with the Mortgage Loan Purchase Agreement and Pooling and Servicing Agreement, and may not modify or change those agreements in any way or award remedies not consistent with those agreements. The arbitrator will not have the power to award punitive or consequential damages. In its final determination, the arbitrator will determine and award the costs of the arbitration to the parties to the arbitration in its reasonable discretion.In the event a Requesting Certificateholder is the Enforcing Party, the Requesting Certificateholder will be required to pay any expenses allocated to the Enforcing Party in the arbitration proceedings or any expenses that the Enforcing Party agrees to bear in the mediation proceedings.
The final determination of the arbitrator will be final and non-appealable, except for actions to confirm or vacate the determination permitted under federal or state law, and may be entered and enforced in any court with
426 |
jurisdiction over the parties and the matter. By selecting arbitration, the Enforcing Party would be waiving its right to sue in court, including the right to a trial by jury.
In the event a Requesting Certificateholder is the Enforcing Party, the agreement with the arbitrator or mediator, as the case may be, will be required under the Pooling and Servicing Agreement to contain an acknowledgment that the Issuing Entity, or the Enforcing Servicer on its behalf, will be a party to any arbitration or mediation proceedings solely for the purpose of being the beneficiary of any award in favor of the Enforcing Party;provided that the degree and extent to which the Enforcing Servicer actively prepares for and participates in such proceeding will be determined by such Enforcing Servicer in consultation with the Directing Holder (provided that if the Controlling Class Representative is the Directing Holder, no Consultation Termination Event has occurred and is continuing and an Excluded Mortgage Loan is not involved), and in accordance with the Servicing Standard. All amounts recovered by the Enforcing Party will be required to be paid to the Issuing Entity, or the Enforcing Servicer on its behalf, and deposited in the Collection Account.The agreement with the arbitrator or mediator, as the case may be, will provide that in the event a Requesting Certificateholder is allocated any related costs and expenses pursuant to the terms of the arbitrator’s decision or the agreement reached in mediation, neither the Issuing Entity nor the Enforcing Servicer acting on its behalf will be responsible for any such costs and expenses allocated to the Requesting Certificateholder.
The Issuing Entity (or the Enforcing Servicer or a trustee, acting on its behalf), the Depositor or any Mortgage Loan Seller will be permitted to redact any personally identifiable customer information included in any information provided for purposes of any mediation or arbitration. Each party to the proceedings will be required to agree to keep confidential the details related to the Repurchase Request and the dispute resolution identified in connection with such proceedings;provided,however, the Certificateholders will be permitted to communicate prior to the commencement of any such proceedings to the extent described under “Description of the Certificates—Certificateholder Communication”.
For avoidance of doubt, in no event will the exercise of any right of a Requesting Certificateholder to refer a Repurchase Request to mediation or arbitration or to participate in such mediation or arbitration affect in any manner the ability of the Special Servicer to perform its obligations with respect to a Specially Serviced Loan (including without limitation, a liquidation, foreclosure, negotiation of a loan modification or workout, acceptance of a discounted pay off or deed-in-lieu of foreclosure, or bankruptcy or other litigation) or the exercise of any rights of a Directing Holder.
Any out-of-pocket expenses required to be borne by or allocated to the Enforcing Servicer in a mediation or arbitration will be reimbursable as trust fund expenses.
Rating Agency Confirmations
The Pooling and Servicing Agreement will provide that, notwithstanding the terms of the related Serviced Mortgage Loan documents or other provisions of the Pooling and Servicing Agreement, if any action under the Serviced Mortgage Loan documents or the Pooling and Servicing Agreement requires a Rating Agency Confirmation from each of the Rating Agencies as a condition precedent to such action, if the party (the “Requesting Party”) required to obtain such Rating Agency Confirmation has made a request to any Rating Agency for such Rating Agency Confirmation and if, within 10 business days of such request being posted to the Rule 17g-5 website established under the Pooling and Servicing Agreement, any Rating Agency has not granted such request, rejected such request or provided a Rating Agency Declination (as defined below), then (i) such Requesting Party will be required to promptly request the related Rating Agency Confirmation again and (ii) if there is no response to such second Rating Agency Confirmation request from the applicable Rating Agency within five business days of such second request, whether in the form of granting or rejecting such Rating Agency Confirmation request or providing a Rating Agency Declination, then:
(x) with respect to any condition in any Serviced Mortgage Loan document requiring a Rating Agency Confirmation or any other matter under the Pooling and Servicing Agreement relating to the servicing of the Serviced Mortgage Loans (other than as set forth in clause (y) or (z) below), the Requesting Party (or, if the Requesting Party is the related borrower, then the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans and REO Properties), as applicable) will be required to determine (with the consent of the related Directing Holder, unless, in the case of the Controlling Class Representative, a Control Termination Event has occurred and is continuing (but in each case only in the case of actions that would otherwise be Major Decisions), which consent will be pursued by
427 |
the Special Servicer and deemed given if the related Directing Holder does not respond within seven Business Days of receipt of a request from the Special Servicer to consent to the Requesting Party’s determination), in accordance with its duties under the Pooling and Servicing Agreement and in accordance with the Servicing Standard, whether or not such action would be in accordance with the Servicing Standard, and if the Requesting Party (or, if the Requesting Party is the related borrower, then the Master Servicer or the Special Servicer, as applicable) makes such determination, then the requirement for a Rating Agency Confirmation will not apply (provided, however, with respect to defeasance, release or substitution of any collateral relating to any Serviced Mortgage Loan, any applicable Rating Agency Confirmation requirement in the Serviced Mortgage Loan documents will not apply, even without the determination referred to in this clause (x) by the Requesting Party (or, if the Requesting Party is the related borrower, then the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans and REO Properties), as applicable);provided, that the Master Servicer (with respect to non-Specially Serviced Loans) or the Special Servicer (with respect to Specially Serviced Loans and REO Properties), as applicable, will in any event review the other conditions required under the related Serviced Mortgage Loan documents with respect to such defeasance, release or substitution and confirm to its satisfaction in accordance with the Servicing Standard that such conditions (other than the requirement for a Rating Agency Confirmation) have been satisfied);
(y) with respect to a replacement of the Master Servicer or the Special Servicer, such condition will be considered satisfied if:
(1) | (a) the applicable replacement master servicer or special servicer, as applicable, has confirmed in writing that it was appointed to act as the master servicer or special servicer, as applicable, on a transaction level basis on the closing date of a commercial mortgage loan securitization with respect to which Moody’s rated one or more classes of securities and one or more of such classes of securities are still outstanding and rated by Moody’s and (b) Moody’s has not cited servicing concerns of the applicable replacement master servicer or special servicer, as applicable, as the sole or material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in any other CMBS transaction serviced by the applicable servicer prior to the time of determination, if Moody’s is the non-responding Rating Agency; |
(2) | the applicable replacement master servicer has a master servicer rating of at least “CMS3” from Fitch or the applicable replacement special servicer has a special servicer rating of at least “CSS3” from Fitch, if Fitch is the non-responding Rating Agency; and |
(3) | KBRA has not cited servicing concerns of the applicable replacement master servicer or special servicer as the sole or material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in any other CMBS transaction serviced by the applicable servicer prior to the time of determination, if KBRA is the non-responding Rating Agency, as applicable; and |
(z) with respect to a replacement or successor of the Operating Advisor, such condition will be deemed to be waived with respect to any non-responding Rating Agency so long as such Rating Agency has not cited concerns regarding the replacement operating advisor as the sole or material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in any other CMBS transaction with respect to which the replacement operating advisor acts as trust advisor or operating advisor prior to the time of determination.
For all other matters or actions (a) not specifically discussed above in clauses (x), (y), or (z) above, and (b) that are not the subject of a Rating Agency Declination, the applicable Requesting Party will be required to obtain a Rating Agency Confirmation from each of the Rating Agencies. In the event an action otherwise requires a Rating Agency Confirmation from each of the Rating Agencies, in absence of such Rating Agency Confirmation, we cannot assure you that any Rating Agency will not downgrade, qualify or withdraw its ratings as a result of any such action taken by the Master Servicer or the Special Servicer in accordance with the procedures discussed above.
428 |
“Rating Agency Confirmation” means, with respect to any matter, confirmation in writing (which may be in electronic form) by each applicable Rating Agency that a proposed action, failure to act or other event specified in this prospectus will not in and of itself result in the downgrade, withdrawal or qualification of the then-current rating assigned to any Class of Certificates (if then rated by the Rating Agency);provided that upon receipt of a written waiver or acknowledgment from any applicable Rating Agency indicating its decision not to review or declining to review the matter for which the Rating Agency Confirmation is sought (such written notice, a “Rating Agency Declination”), the requirement to receive a Rating Agency Confirmation from the applicable Rating Agency with respect to such matter will be deemed to have been satisfied.
In addition, the Pooling and Servicing Agreement will provide that, notwithstanding the terms of the related Serviced Mortgage Loan documents, the other provisions of the Pooling and Servicing Agreement or the related Co-Lender Agreement, with respect to any Serviced Companion Loan Securities, if any action relating to the servicing and administration of the related Serviced Loan or any related REO Property requires delivery of a Rating Agency Confirmation as a condition precedent to such action pursuant to the Pooling and Servicing Agreement, then such action will also require delivery of a rating agency confirmation as a condition precedent to such action from each rating agency that was or will be engaged by a party to the securitization of the Serviced Companion Loan to assign a rating to such Serviced Companion Loan Securities. The requirement to obtain a rating agency confirmation with respect to any Serviced Companion Loan Securities will be subject to, and will be permitted to be waived by the Master Servicer and the Special Servicer on, and will be deemed not to apply on, the same terms and conditions applicable to obtaining Rating Agency Confirmations, as described above and in the Pooling and Servicing Agreement.
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 Certificate Administrator and required to be paid following the earlier of (1) the final payment (or related Advance) or other liquidation of the last Mortgage Loan and REO Property, (2) the voluntary exchange of all the then outstanding Certificates (other than the Class R certificates) as described below under “—Optional Termination; Optional Mortgage Loan Purchase” or (3) the purchase or other liquidation of all of the assets of the Issuing Entity as described under “—Optional Termination; Optional Mortgage Loan Purchase” below. Written notice of termination of the Pooling and Servicing Agreement will be given by the Certificate Administrator to each Certificateholder, each Rating Agency and the 17g-5 Information Provider (who will promptly post such notice to the 17g-5 Information Provider’s website), and the final distribution will be made only upon surrender and cancellation of the applicable Certificates at the office of the Certificate Registrar or other location specified in the notice of termination.
Optional Termination; Optional Mortgage Loan Purchase
The holders of the Controlling Class representing greater than 50% of the Certificate Balance of the Controlling Class, and if the Controlling Class does not exercise its option, the Special Servicer and, if the Special Servicer does not exercise its option, the Master Servicer and, if none of the Controlling Class Certificateholders, the Special Servicer or the Master Servicer exercises its option, the holders of the Class R Certificates, representing greater than a 50% Percentage Interest of the Class R Certificates, will have the option to purchase all of the Mortgage Loans (in the case of any Serviced Loan Combinations, subject to certain rights of the related Serviced Companion Loan Holder provided for in the related Co-Lender Agreement) and all property acquired in respect of any Mortgage Loan remaining in the Issuing Entity, and thereby effect termination of the Issuing Entity and early retirement of the then outstanding Certificates, on any Distribution Date on which the aggregate Stated Principal Balance of the Mortgage Loans remaining in the Issuing Entity is less than 1% of the aggregate Stated Principal Balance of such Mortgage Loans as of the Cut-off Date. The purchase price payable upon the exercise of such option on such a Distribution Date will be an amount equal to (i) the sum of (A) the aggregate Repurchase Price (excluding the amount described in clause (vi) of the definition of “Repurchase Price”) of all the Mortgage Loans (exclusive of REO Mortgage Loans) included in the Issuing Entity, (B) the appraised value of the Issuing Entity’s portion of each REO Property, if any, included in the Issuing Entity, as determined by the Special Servicer (such appraisals in clause (i)(B) to be obtained by the Special Servicer and prepared by an Appraiser in accordance with MAI standards) and (C) the reasonable out-of-pocket expenses of the Master Servicer (unless the Master Servicer is the purchaser of such Mortgage Loans), the Special Servicer (unless the Special Servicer is the purchaser of such Mortgage Loans), the Trustee and the Certificate Administrator, as applicable, with respect to such termination,minus (ii) solely in the case where the Master Servicer or the Special Servicer is effecting such purchase, the aggregate amount of unreimbursed Advances, if any, made by the purchasing
429 |
Master Servicer or Special Servicer, together with any interest accrued and payable to the purchasing Master Servicer or Special Servicer, as applicable, in respect of such Advances and any unpaid Servicing Fees or Special Servicing Fees, as applicable, remaining outstanding (which items will be deemed to have been paid or reimbursed to the purchasing Master Servicer or Special Servicer, as applicable, in connection with such purchase). We cannot assure you that payment of the Certificate Balance, if any, of each outstanding Class of Certificatesplus accrued interest would be made in full in the event of such a termination of the Issuing Entity.
The Issuing Entity may also be terminated upon the exchange of all then outstanding Certificates (excluding the Class R Certificates) for the Mortgage Loans and each REO Property (or interests in the Mortgage Loans and each REO Property) remaining in the Issuing Entity at any time the aggregate of the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB and Class D Certificates and the Class A-S, Class B and Class C Trust Components (and, correspondingly, the Class A-S, Class B, Class EC and Class C Certificates) and the Notional Amounts of the Class X-A, Class X-B and Class X-D Certificates have been reduced to zero and the Master Servicer is paid a fee specified in the Pooling and Servicing Agreement, but all the holders of such Classes of outstanding Regular Certificates would have to voluntarily participate in such exchange.
Servicing of the Outside Serviced Mortgage Loans
General
Each Outside Serviced Mortgage Loan, and any related REO Property, will be serviced under the applicable Outside Servicing Agreement. Accordingly, the applicable Outside Servicer will generally make servicing advances and remit collections on the respective Outside Serviced Mortgage Loan to or on behalf of the Issuing Entity. However, the Master Servicer will generally be obligated to compile reports that include information on the Outside Serviced Mortgage Loans, and make P&I Advances with respect to the Outside Serviced Mortgage Loans, subject to their non-recoverability determination. The servicing arrangements under the Outside Servicing Agreements differ or would be expected to differ in certain respects from the servicing arrangements under the Pooling and Servicing Agreement.
In addition, pursuant to the Pooling and Servicing Agreement, except as expressly addressed in the Pooling and Servicing Agreement, with respect to each Outside Serviced Mortgage Loan:
· | The Master Servicer, the Special Servicer, the Operating Advisor, the Certificate Administrator and the Trustee under the Pooling and Servicing Agreement will have no obligation or authority to (a) supervise the applicable Outside Servicer, the applicable Outside Special Servicer, the applicable Outside Trustee or any other party to the applicable Outside Servicing Agreement or (b) make Property Advances with respect to such Outside Serviced Mortgage Loan. Any obligation of the Master Servicer to provide information to the Trustee or any other person with respect to the Outside Serviced Mortgage Loans is dependent on their receipt of the corresponding information from the applicable Outside Servicer or the applicable Outside Special Servicer. |
· | If the Trustee receives a request (and, if the Master Servicer, the Special Servicer or the Certificate Administrator receives such request, such party will be required to promptly forward such request to the Trustee) from any party to the applicable Outside Servicing Agreement for consent to or approval of a modification, waiver or amendment of the applicable Outside Servicing Agreement and/or the related Co-Lender Agreement, or the adoption of any servicing agreement that is the successor to and/or in replacement of the applicable Outside Servicing Agreement in effect as of the Closing Date or a change in servicer under the applicable Outside Servicing Agreement, then the Trustee will grant such consent or approval if (a) the Trustee has received a prior Rating Agency Confirmation from each Rating Agency (payable at the expense of the party making such request for consent or approval to the Trustee, if a Certificateholder or a party to the Pooling and Servicing Agreement, and otherwise from the Collection Account) with respect to such consent or approval, and (b) unless a Control Termination Event has occurred and is continuing, the Trustee has obtained the consent of the Controlling Class Representative prior to granting any such consent. |
· | If the Trustee, Certificate Administrator or Custodian receives notice of a termination event under the applicable Outside Servicing Agreement, then the Trustee, Certificate Administrator or Custodian, as applicable, will be required to notify the Master Servicer, and the Master Servicer will be required to |
430 |
act in accordance with the instructions of (prior to the occurrence of a Control Termination Event) the Controlling Class Representative in accordance with the applicable Outside Servicing Agreement with respect to such termination event (provided that the Master Servicer will only be required to comply with such instructions if such instructions are in accordance with the applicable Outside Servicing Agreement and not inconsistent with the Pooling and Servicing Agreement);provided that, if such instructions are not provided within the time period specified in the Pooling and Servicing Agreement or if a Control Termination Event exists or if the Master Servicer is not permitted by the applicable Outside Servicing Agreement to follow such instructions, then the Master Servicer will be required to take such action or inaction (to the extent permitted by the applicable Outside Servicing Agreement), as directed by Certificateholders evidencing at least 25% of the aggregate of all Voting Rights within a reasonable period of time that does not exceed such response time as is afforded under the applicable Outside Servicing Agreement. Subject to the foregoing, during the continuation of any termination event with respect to the related Outside Servicer or Outside Special Servicer under the applicable Outside Servicing Agreement, each of the Trustee, the Certificate Administrator, the Master Servicer and the Special Servicer will have the right (but not the obligation) to take all actions to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Trust (including the institution and prosecution of all judicial, administrative and other proceedings and the filings of proofs of claim and debt in connection therewith). The reasonable costs and expenses incurred by the Master Servicer, the Special Servicer, the Certificate Administrator or the Trustee in connection with such enforcement will be paid by the Master Servicer out of the Collection Account. |
· | Each of the Trustee, the Certificate Administrator, the Master Servicer and the Special Servicer will be required to reasonably cooperate with the Master Servicer, the Special Servicer or the Controlling Class Representative (if no Control Termination Event Exists), as applicable, to facilitate the exercise by such party of any consent or approval rights set forth in the Pooling and Servicing Agreement; provided, however, the Trustee, the Certificate Administrator, the Master Servicer and the Special Servicer will have no right or obligation to exercise any consent or consultation rights or obtain a Rating Agency Confirmation on behalf of the Controlling Class Representative. |
Servicing of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan
Each of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan and any related REO Property are being serviced under the CGCMT 2016-GC36 Pooling and Servicing Agreement.
The servicing arrangements under the CGCMT 2016-GC36 Pooling and Servicing Agreement with respect to the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination are expected to be generally similar to, but differ in certain respects from, the servicing arrangements under the Pooling and Servicing Agreement that are described in this prospectus with respect to Serviced Loan Combinations (as if there were Serviced Loan Combinations in the Issuing Entity and such descriptions were applicable to any such Serviced Loan Combinations). In that regard, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between the CGCMT 2016-GC36 Pooling and Servicing Agreement and the Pooling and Servicing Agreement:
· | Pursuant to the CGCMT 2016-GC36 Pooling and Servicing Agreement, the liquidation fee, the special servicing fee and the workout fee with respect to the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan will be similar to the corresponding fees payable under the Pooling and Servicing Agreement and will be payable in the amounts described under “—Servicing and Other Compensation and Payment of Expenses—Fees and Expenses” in this prospectus. |
· | The CGCMT 2016-GC36 Master Servicer will earn a primary servicing fee calculated at (i) 0.00250% per annum with respect to the Sheraton Denver Downtown Fee Mortgage Loan; (ii) 0.00750% per annum with respect to the Austin Block 21 Mortgage Loan (including 0.00500% to be paid to the related subservicer); (iii) 0.00250% per annum with respect to the 5 Penn Plaza Mortgage Loan; and (iv) 0.02000% with respect to the Park Place Mortgage Loan. |
431 |
· | No party to the CGCMT 2016-GC36 Pooling and Servicing Agreement will be required to make P&I Advances with respect to any of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan. |
· | The CGCMT 2016-GC36 Master Servicer is obligated to make property protection advances with respect to each of the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination. If the CGCMT 2016-GC36 Master Servicer determines that a property protection advance it made with respect to any such Loan Combination or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed (with interest at the prime rate), first from collections on, and proceeds of, the related Mortgage Loan and Companion Loans, on a pro rata basis (based on each such loan’s outstanding principal balance), and then from general collections of the Issuing Entity, from general collections of the CGCMT 2016-GC36 issuing entity and from general collections of any issuing entity related to the securitization of any related Pari Passu Companion Loan not included in the CGCMT 2016-GC36 Securitization, on a pro rata basis (based on the respective outstanding principal balances of the related Mortgage Loan and Pari Passu Companion Loans). |
· | Items with respect to each of the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination that are the equivalent of Ancillary Fees, Penalty Charges, Assumption Fees and/or Modification Fees and that are allocated as additional servicing compensation, may be allocated between the CGCMT 2016-GC36 Master Servicer and the CGCMT 2016-GC36 Special Servicer in proportions that are different from the proportions allocated between the Master Servicer and the Special Servicer in the case of Mortgage Loans serviced under the Pooling and Servicing Agreement. |
· | The CGCMT 2016-GC36 Special Servicer will be required to take actions with respect to each of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan if such Mortgage Loan becomes the equivalent of a Defaulted Mortgage Loan, which actions are substantially similar to the actions described under“—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus. |
· | The servicing provisions relating to performing inspections and collecting operating information under the CGCMT 2016-GC36 Pooling and Servicing Agreement are substantially similar to those of the Pooling and Servicing Agreement. |
· | The requirement of the CGCMT 2016-GC36 Master Servicer to make compensating interest payments in respect of the Sheraton Denver Downtown Fee Mortgage Loan, the Austin Block 21 Mortgage Loan, the 5 Penn Plaza Mortgage Loan and the Park Place Mortgage Loan is similar to the requirement of the Master Servicer to make Compensating Interest Payments in respect of the Serviced Mortgage Loans under the Pooling and Servicing Agreement. |
· | The CGCMT 2016-GC36 Master Servicer and CGCMT 2016-GC36 Special Servicer (a) have rights related to resignation substantially similar to those of the Master Servicer and the Special Servicer and (b) are subject to servicer termination events substantially similar to those in the Pooling and Servicing Agreement, as well as the rights related thereto. |
· | No items with respect to any of the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination that are the equivalent of Ancillary Fees, Assumption Fees, Modification Fees and/or Penalty Charges will be allocated to the Master Servicer or the Special Servicer as additional servicing compensation or otherwise applied in accordance with the Pooling and Servicing Agreement except to the extent that such items are received by the Issuing Entity with respect to the related Mortgage Loan. |
· | The equivalent of Penalty Charges with respect to each of Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination will be allocated in accordance with the related Co-Lender Agreement. |
432 |
See “Description of the Mortgage Pool—The Loan Combinations—The 5 Penn Plaza Loan Combination—Application of Penalty Charges” ,“Description of the Mortgage Pool—The Loan Combinations—The Sheraton Denver Downtown Fee Loan Combination—Application of Penalty Charges”, “Description of the Mortgage Pool—The Loan Combinations—The Austin Block 21 Loan Combination—Application of Penalty Charges”, “Description of the Mortgage Pool—The Loan Combinations—The 5 Penn Plaza Loan Combination—Application of Penalty Charges”, “Description of the Mortgage Pool—The Loan Combinations—The Park Place Loan Combination—Application of Penalty Charges” in this prospectus. |
· | The specific types of actions constituting major decisions under the CGCMT 2016-GC36 Pooling and Servicing Agreement differ in certain respects from those actions that constitute Major Decisions under the Pooling and Servicing Agreement, and therefore the specific types of servicer actions with respect to which the applicable outside controlling class representative will be permitted to consent will correspondingly differ. |
· | The liability of the parties to the CGCMT 2016-GC36 Pooling and Servicing Agreement will be limited in a manner similar, but not necessarily identical, to the liability of the parties to the Pooling and Servicing Agreement. |
· | Collections on the Sheraton Denver Downtown Fee Loan Combination, the Austin Block 21 Loan Combination, the 5 Penn Plaza Loan Combination and the Park Place Loan Combination will be maintained under the CGCMT 2016-GC36 Pooling and Servicing Agreement in a manner similar, but not necessarily identical, to collections on the Serviced Mortgage Loans and the Serviced Loan Combinations under the Pooling and Servicing Agreement, provided that rating requirements for accounts and permitted investments may vary under those two pooling and servicing agreements. |
· | The CGCMT 2016-GC36 Pooling and Servicing Agreement differs from the Pooling and Servicing Agreement in certain respects relating to one or more of the following: timing, control or consultation triggers or thresholds, terminology, allocation of ministerial duties between multiple servicers or other service providers, certificateholder or investor voting or consent thresholds, master servicer and special servicer termination events and the circumstances under which approvals, consents, consultation, notices or rating agency confirmations may be required. |
The CGCMT 2016-GC36 Special Servicer may be removed as described under “Description of the Mortgage Pool—The Loan Combinations—The Sheraton Denver Downtown Fee Loan Combination—Special Servicer Appointment Rights”, “Description of the Mortgage Pool—The Loan Combinations—The Austin Block 21 Loan Combination—Special Servicer Appointment Rights”, “Description of the Mortgage Pool—The Loan Combinations —The5 Penn Plaza Loan Combination—Special Servicer Appointment Rights”and“Description of the Mortgage Pool—The Loan Combinations —The Park Place Loan Combination—Special Servicer Appointment Rights” in thisprospectus.
The CGCMT 2016-GC36 Depositor, the CGCMT 2016-GC36 Master Servicer, the CGCMT 2016-GC36 Special Servicer, the CGCMT 2016-GC36 Certificate Administrator, the CGCMT 2016-GC36 Trustee, the CGCMT 2016-GC36 Operating Advisor, the CGCMT 2016-GC36 Asset Representations Reviewer and various related persons and entities will be entitled to be indemnified by the Issuing Entity for the Issuing Entity’s pro rata share of certain losses and liabilities incurred by such party in accordance with the terms and conditions of the related Co-Lender Agreement.
See also “Description of the Mortgage Pool—The Loan Combinations—TheSheraton Denver Downtown Fee Loan Combination”, “Description of the Mortgage Pool—The Loan Combinations—TheAustin Block 21 Loan Combination”, “Description of the Mortgage Pool—The Loan Combinations—The5Penn Plaza Loan Combination”, and “Description of the Mortgage Pool—The Loan Combinations—The Park Place Loan Combination” in this prospectus.
Prospective investors are encouraged to review the full provisions of the CGCMT 2016-GC36 Pooling and Servicing Agreement, which is available online at www.sec.gov or by requesting a copy from the underwriters.
433 |
Servicing of the 79 Madison Avenue Mortgage Loan
The 79 Madison Avenue Mortgage Loan and any related REO Property are being serviced under the CGCMT 2016-P3 Pooling and Servicing Agreement.
The servicing arrangements under the CGCMT 2016-P3 Pooling and Servicing Agreement with respect to the 79 Madison Avenue Loan Combination will be generally similar to, but differ in certain respects from, the servicing arrangements under the Pooling and Servicing Agreement that are described in this prospectus with respect to Serviced Loan Combinations (as if there were Serviced Loan Combinations in the Issuing Entity and such descriptions were applicable to any such Loan Combinations). In that regard, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between the CGCMT 2016-P3 Pooling and Servicing Agreement and the Pooling and Servicing Agreement:
· | Pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement, the liquidation fee, the special servicing fee and the workout fee with respect to the 79 Madison Avenue Mortgage Loan will be similar to the corresponding fees payable under the Pooling and Servicing Agreement and will be payable in the amounts described under “—Servicing and Other Compensation and Payment of Expenses—Fees and Expenses” in this prospectus. |
· | The CGCMT 2016-P3 Servicer will earn a primary servicing fee with respect to the 79 Madison Avenue Mortgage Loan that is to be calculated at 0.00250% per annum. |
· | No party to the CGCMT 2016-P3 Pooling and Servicing Agreement will be required to make P&I Advances with respect to the 79 Madison Avenue Mortgage Loan. |
· | The CGCMT 2016-P3 Servicer is obligated to make property protection advances with respect to the 79 Madison Avenue Loan Combination. If the CGCMT 2016-P3 Servicer determines that a property protection advance it made with respect to the 79 Madison Avenue Loan Combination or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed (with interest at the prime rate), first from collections on, and proceeds of, the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan, on a pro rata basis (based on each such loan’s outstanding principal balance), and then from general collections of the Issuing Entity and from general collections of the CGCMT 2016-P3 issuing entity, on a pro rata basis (based on the respective outstanding principal balances of the 79 Madison Avenue Mortgage Loan and the 79 Madison Avenue Pari Passu Companion Loan). |
· | Items with respect to the 79 Madison Avenue Loan Combination that are the equivalent of Ancillary Fees, Penalty Charges, Assumption Fees and/or Modification Fees and that are allocated as additional servicing compensation, may be allocated between the CGCMT 2016-P3 Master Servicer and the CGCMT 2016-P3 Special Servicer in proportions that are different from the proportions allocated between the Master Servicer and the Special Servicer in the case of Mortgage Loans serviced under the Pooling and Servicing Agreement. |
· | The CGCMT 2016-P3 Special Servicer will be required to take actions with respect to the 79 Madison Avenue Mortgage Loan if such Mortgage Loan becomes the equivalent of a Defaulted Mortgage Loan, which actions will be substantially similar to the actions described under“—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus. |
· | With respect to the 79 Madison Avenue Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information are substantially similar to those of the Pooling and Servicing Agreement. |
· | The requirement of the CGCMT 2016-P3 Servicer to make compensating interest payments in respect of the 79 Madison Avenue Mortgage Loan is similar to the requirement of the Master Servicer to make Compensating Interest Payments in respect of the Serviced Mortgage Loans under the Pooling and Servicing Agreement. |
434 |
· | The CGCMT 2016-P3 Servicer and CGCMT 2016-P3 Special Servicer (a) have rights related to resignation substantially similar to those of the Master Servicer and the Special Servicer and (b) are subject to servicer termination events substantially similar to those in the Pooling and Servicing Agreement, as well as the rights related thereto. |
· | No items with respect to the 79 Madison Avenue Loan Combination that are the equivalent of Ancillary Fees, Assumption Fees, Modification Fees and/or Penalty Charges will be allocated to the Master Servicer or the Special Servicer as additional servicing compensation or otherwise applied in accordance with the Pooling and Servicing Agreement except to the extent that such items are received by the Issuing Entity with respect to the 79 Madison Avenue Mortgage Loan. |
· | The equivalent of Penalty Charges with respect to the 79 Madison Avenue Loan Combination will be allocated in accordance with the related Co-Lender Agreement. See “Description of the Mortgage Pool—The Loan Combinations—The 79 Madison Avenue Loan Combination—Application of Penalty Charges” in this prospectus. |
· | The specific types of actions constituting major decisions under the CGCMT 2016-P3 Pooling and Servicing Agreement differ in certain respects from those actions that constitute Major Decisions under the Pooling and Servicing Agreement, and therefore the specific types of servicer actions with respect to which the applicable outside controlling class representative will be permitted to consent will correspondingly differ. |
· | The liability of the parties to the CGCMT 2016-P3 Pooling and Servicing Agreement will be limited in a manner similar, but not necessarily identical, to the liability of the parties to the Pooling and Servicing Agreement. |
· | Collections on the 79 Madison Avenue Loan Combination will be maintained under the CGCMT 2016-P3 Pooling and Servicing Agreement in a manner similar, but not necessarily identical, to collections on the Serviced Mortgage Loans and the Serviced Loan Combinations under the Pooling and Servicing Agreement, provided that rating requirements for accounts and permitted investments may vary under those two pooling and servicing agreements. |
· | The CGCMT 2016-P3 Pooling and Servicing Agreement differs from the Pooling and Servicing Agreement in certain respects relating to one or more of the following: timing, control or consultation triggers or thresholds, terminology, allocation of ministerial duties between multiple servicers or other service providers, certificateholder or investor voting or consent thresholds, master servicer and special servicer termination events and the circumstances under which approvals, consents, consultation, notices or rating agency confirmations may be required. |
The CGCMT 2016-P3 Special Servicer may be removed as described under “Description of the Mortgage Pool—The Loan Combinations—The 79 Madison Avenue Loan Combination—Special Servicer Appointment Rights” in thisprospectus.
The CGCMT 2016-P3 Depositor, the CGCMT 2016-P3 Master Servicer, the CGCMT 2016-P3 Special Servicer, the CGCMT 2016-P3 Certificate Administrator, the CGCMT 2016-P3 Trustee, the CGCMT 2016-P3 Operating Advisor, the CGCMT 2016-P3 Asset Representations Reviewer and various related persons and entities will be entitled to be indemnified by the Issuing Entity for the Issuing Entity’s pro rata share of certain losses and liabilities incurred by such party in accordance with the terms and conditions of the related Co-Lender Agreement.
See also “Description of the Mortgage Pool—The Loan Combinations—The 79 Madison Avenue Loan Combination” in this prospectus.
Prospective investors are encouraged to review the full provisions of the CGCMT 2016-P3 Pooling and Servicing Agreement, which is available online at www.sec.gov or by requesting a copy from the underwriters.
435 |
Servicing of the 600 Broadway Mortgage Loan
The 600 Broadway Mortgage Loan and any related REO Property will initially be serviced under the CGCMT 2016-P3 Pooling and Servicing Agreement until the 600 Broadway Companion Loan Securitization Date, after which the 600 Broadway Mortgage Loan will be serviced under the 600 Broadway Pooling and Servicing Agreement. During such time as the related 600 Broadway Loan Combination is serviced pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement, the CGCMT 2016-P3 Master Servicer will be required to make property protection advances and remit collections on the 600 Broadway Mortgage Loan to or on behalf of the Issuing Entity. On and after the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Servicer is likewise expected to make property protection advances and remit collections on the 600 Broadway Mortgage Loan to or on behalf of the Issuing Entity. However, no party to the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement will be required to make P&I Advances with respect to the 600 Broadway Mortgage Loan. The servicing arrangements under the CGCMT 2016-P3 Pooling and Servicing Agreement with respect to the 600 Broadway Loan Combination will be, and the servicing arrangements for the 600 Broadway Pooling and Servicing Agreement with respect to the 600 Broadway Loan Combination are expected to be, similar but may differ in certain respects from the servicing arrangements under the Pooling and Servicing Agreement.
In that regard:
· | Pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement and the expected terms of the 600 Broadway Pooling and Servicing Agreement, the liquidation fee, the special servicing fee and the workout fee with respect to the 600 Broadway Mortgage Loan will be similar to, but not necessarily the same as, the corresponding fees payable under the Pooling and Servicing Agreement and will be similarly payable as described under “The Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Special Servicing Compensation” in this prospectus. |
· | The CGCMT 2016-P3 Master Servicer under the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement, and the master servicer under the expected terms of the 600 Broadway Pooling and Servicing Agreement (the “600 Broadway Servicer”), as applicable, will be obligated to make the equivalent of Property Advances with respect to the 600 Broadway Loan Combination. Pursuant to the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement and the expected terms of the 600 Broadway Pooling and Servicing Agreement (as applicable), the CGCMT 2016-P3 Master Servicer or the 600 Broadway Servicer (as applicable) will be entitled to reimbursement of any such property protection advance with respect to the 600 Broadway Loan Combination (with interest thereon at a prime rate), first, from amounts that would have been allocable to the 600 Broadway Mortgage Loan and the 600 Broadway Pari Passu Companion Loans, on a pro rata basis (based on each such loan’s outstanding principal balance), and then, if the property protection advance is nonrecoverable, from general collections on all of the mortgage loans included in the CGCMT 2016-P3 Securitization or the securitization of the 600 Broadway Controlling Pari Passu Companion Loan (as applicable) and will be required to seek reimbursement from the Issuing Entity (as holder of the 600 Broadway Mortgage Loan) for the Issuing Entity’s pro rata share. |
· | The CGCMT 2016-P3 Master Servicer will earn, and the 600 Broadway Servicer is expected to earn, a primary servicing fee with respect to the 600 Broadway Mortgage Loan (while it is an Outside Serviced Mortgage Loan) that is to be calculated at 0.00250% per annum. |
· | Items with respect to the 600 Broadway Loan Combination that are the equivalent of Ancillary Fees, Penalty Charges, Assumption Fees and/or Modification Fees and that are allocated as additional servicing compensation of the Master Servicer and the Special Servicer, may be allocated pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement (as applicable) between the CGCMT 2016-P3 Master Servicer or the 600 Broadway Servicer (as applicable) and the CGCMT 2016-P3 Special Servicer or the special servicer under the 600 Broadway Pooling and Servicing Agreement (the “600 Broadway Special Servicer”) (as applicable) in proportions that are different from the proportions allocated between the Master Servicer and the Special Servicer in the case of Mortgage Loans serviced under the Pooling and Servicing Agreement. |
436 |
· | The CGCMT 2016-P3 Special Servicer under the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement, or the 600 Broadway Special Servicer under the expected terms of the 600 Broadway Pooling and Servicing Agreement, as applicable, will be required to take actions with respect to the 600 Broadway Mortgage Loan if it becomes the equivalent of a Defaulted Mortgage Loan, which actions are generally expected to be similar to the actions described under “—Realization Upon Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus. |
· | With respect to the 600 Broadway Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement are, and pursuant to the expected terms of the 600 Broadway Pooling and Servicing Agreement are expected to be, generally similar to those of the Pooling and Servicing Agreement. |
· | The requirement of the CGCMT 2016-P3 Master Servicer under the terms of the CGCMT 2016-P3 Pooling and Servicing Agreement and the 600 Broadway Servicer under the expected terms of the 600 Broadway Pooling and Servicing Agreement, as applicable, to make the equivalent of Compensating Interest Payments in respect of the 600 Broadway Mortgage Loan is, or is expected to be, as applicable, similar to the requirement of the Master Servicer to make Compensating Interest Payments in respect of the Serviced Mortgage Loans under the Pooling and Servicing Agreement as described under “Description of the Offered Certificates—Distributions—Prepayment Interest Shortfalls” in this prospectus. |
· | The CGCMT 2016-P3 Master Servicer or the 600 Broadway Servicer (as applicable) and the CGCMT 2016-P3 Special Servicer or the 600 Broadway Special Servicer (as applicable) under the CGCMT 2016-P3 Pooling and Servicing Agreement or the expected terms of the 600 Broadway Pooling and Servicing Agreement (as applicable) (a) will have rights related to resignation generally similar to those of the Master Servicer and the Special Servicer and (b) will be subject to servicer termination events generally similar to those in the Pooling and Servicing Agreement, as well as the rights related thereto. |
· | No items with respect to the 600 Broadway Loan Combination that are the equivalent of Ancillary Fees, Assumption Fees, Modification Fees and/or Penalty Charges will be allocated to the Master Servicer or the Special Servicer as additional servicing compensation or otherwise applied in accordance with the Pooling and Servicing Agreement except to the extent that such items are received by the Issuing Entity with respect to the 600 Broadway Mortgage Loan. |
· | Penalty Charges with respect to the 600 Broadway Loan Combination will be allocated in accordance with the 600 Broadway Co-Lender Agreement. |
· | The rating agencies rating the securities issued pursuant to the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement (as applicable) may vary from the rating agencies rating the Certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events) to be different under the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement (as applicable) than under the Pooling and Servicing Agreement. |
· | The specific types of actions constituting “major decisions” under the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement (as applicable) may differ in certain respects from those actions that constitute Major Decisions under the Pooling and Servicing Agreement, and therefore the specific types of servicer actions with respect to which the applicable outside controlling class representative will be permitted to consent may correspondingly differ. |
· | The liability of the parties to the CGCMT 2016-P3 Pooling and Servicing Agreement or the 600 Broadway Pooling and Servicing Agreement (as applicable) is expected to be limited in a manner similar, but not necessarily identical, to the liability of the parties to the Pooling and Servicing Agreement. |
437 |
· | Collections on the 600 Broadway Loan Combination will be maintained under the CGCMT 2016-P3 Pooling and Servicing Agreement or, under the expected terms of the 600 Broadway Pooling and Servicing Agreement (as applicable) in a manner similar, but not necessarily identical, to collections on the Serviced Mortgage Loans and the Serviced Loan Combinations under the Pooling and Servicing Agreement, provided that rating requirements for accounts and permitted investments may vary under those two pooling and servicing agreements. |
· | The CGCMT 2016-P3 Pooling and Servicing Agreement and the 600 Broadway Pooling and Servicing Agreement may differ from the Pooling and Servicing Agreement in certain respects relating to one or more of the following: timing, control or consultation triggers or thresholds, terminology, allocation of ministerial duties between multiple servicers or other service providers or certificateholder or investor voting or consent thresholds, master servicer and special servicer termination events and the circumstances under which approvals, consents, consultation, notices or rating agency confirmations may be required. |
The CGCMT 2016-P3 Special Servicer or the 600 Broadway Special Servicer, as the case may be, may be removed at any time, with or without cause, by the holder of the 600 Broadway Controlling Pari Passu Companion Loan (which, prior to the securitization of the 600 Broadway Controlling Companion Loan, is German American Capital Corporation, and which, following the securitization of the 600 Broadway Controlling Pari Passu Companion Loan, is expected to be the outside controlling class representative under the 600 Broadway Pooling and Servicing Agreement) pursuant to the terms of the 600 Broadway Co-Lender Agreement and, following the 600 Broadway Companion Loan Securitization Date, the 600 Broadway Pooling and Servicing Agreement. It is expected that such outside controlling class representative’s rights to remove the 600 Broadway Special Servicer under the 600 Broadway Pooling and Servicing Agreement will be generally similar, but not necessarily identical, to those rights held by the Controlling Class Representative under the Pooling and Servicing Agreement.
The CGCMT 2016-P3 Master Servicer or the 600 Broadway Servicer (as the case may be) and the CGCMT 2016-P3 Special Servicer or the 600 Broadway Special Servicer (as the case may be) and various related persons and entities will be entitled to be indemnified by the Issuing Entity for the Issuing Entity’s pro rata share of certain losses and liabilities incurred by such party in accordance with the terms and conditions of the 600 Broadway Co-Lender Agreement.
Based on a publicly available preliminary prospectus for the DBJPM 2016-C1 Securitization, it is anticipated that the 600 Broadway Controlling Pari Passu Companion Loan will be contributed to such securitization transaction, that the 600 Broadway Companion Loan Securitization Date is scheduled to occur prior to the Closing Date for this securitization transaction and that the pooling and servicing agreement for such securitization transaction will be the 600 Broadway Pooling and Servicing Agreement.
See also “Description of the Mortgage Pool—The Loan Combinations—The 600 Broadway Loan Combination” in this prospectus.
Prospective investors are encouraged to review (i) the full provisions of the CGCMT 2016-P3 Pooling and Servicing Agreement, which is available online at www.sec.gov or by requesting a copy from the underwriters, and (ii) after the 600 Broadway Companion Loan Securitization Date, the full provisions of the 600 Broadway Pooling and Servicing Agreement, which is expected to be available online at www.sec.gov or by requesting a copy from the underwriters following the closing of the DBJPM 2016-C1 Securitization, which is expected to occur on or about April 19, 2016.
Use of Proceeds
The Depositor expects to receive from this offering approximately 113.76% of the aggregate principal balance of the Offered Certificates, plus accrued interest from April 1, 2016, before deducting expenses payable by the Depositor. Certain of the net proceeds from the sale of the Offered Certificates, together with the net proceeds from the sale of the other certificates not being offered by this prospectus, will be used by the Depositor to pay the purchase price for the Mortgage Loans and to pay certain other related expenses.
438 |
Yield, Prepayment and Maturity Considerations
Yield
The yield to maturity on the Offered Certificates will depend upon the price paid by the related investors, the rate and timing of the distributions in reduction of the Certificate Balance or Notional Amount of the related Class of Offered Certificates, the extent to which prepayment premiums and yield maintenance charges allocated to the related Class of Offered Certificates are collected, and the rate, timing and severity of losses on the Mortgage Loans and the extent to which such losses are allocable in reduction of the Certificate Balance or Notional Amount of the related Class of Offered Certificates, as well as prevailing interest rates at the time of payment or loss realization.
The rate of distributions in reduction of (or otherwise resulting in the reduction of) the Certificate Balance or Notional Amount of any Class of Offered Certificates, the aggregate amount of distributions on any Class of Offered Certificates and the yield to maturity of any Class of Offered Certificates will be directly related to the rate of payments of principal (both scheduled and unscheduled) on the Mortgage Loans and the amount and timing of borrower defaults and the severity of losses occurring upon a default. While voluntary prepayments of the Mortgage Loans are generally prohibited during applicable prepayment lockout periods, effective prepayments may occur if a sufficiently significant portion of a Mortgaged Property is lost due to casualty or condemnation. Certain of the Mortgage Loans require prepayment in connection with an economic holdback or earnout if the related borrower does not satisfy certain criteria set forth in the related Mortgage Loan documents. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Voluntary Prepayments” for a discussion of prepayment restrictions. In addition, such distributions in reduction of Certificate Balances of the respective Classes of Offered Certificates that are Principal Balance Certificates (or that otherwise result in the reduction of the respective Notional Amounts of the Offered Certificates that are Interest-Only Certificates) may result from repurchases of, or substitutions for, Mortgage Loans made by the Mortgage Loan Sellers due to missing or defective documentation or breaches of representations and warranties with respect to the Mortgage Loans as described under “The Mortgage Loan Purchase Agreements”, purchases of the Mortgage Loans in the manner described under “The Pooling and Servicing Agreement—Termination; Retirement of Certificates”, the exercise of purchase options by the holder of a subordinate companion loan or mezzanine loan, if any, or the sale or other liquidation of a defaulted Mortgage Loan. To the extent a Mortgage Loan requires payment of a prepayment premium or yield maintenance charge in connection with a voluntary prepayment, any such prepayment premium or yield maintenance charge generally is not due in connection with a prepayment due to casualty or condemnation, is not included in the purchase price of a Mortgage Loan purchased or repurchased due to a breach of a representation or warranty or otherwise, and may not be enforceable or collectible upon a default.
The Certificate Balance or Notional Amount of any Class of Offered Certificates may be reduced without distributions of principal as a result of the occurrence and allocation of Realized Losses, reducing the maximum amount distributable in respect of principal on the Offered Certificates that are Principal Balance Certificates as well as the amount of interest that would have accrued on the Offered Certificates in the absence of such reduction. In general, a Realized Loss occurs when the principal balance of a Mortgage Loan is reduced without an equal distribution to applicable Certificateholders in reduction of the Certificate Balances of the Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) and the Trust Components (and, therefore, the Exchangeable Certificates and the Class EC Certificates). Realized Losses may occur in connection with a default on a Mortgage Loan, acceptance of a discounted payoff, the liquidation of the related Mortgaged Properties, a reduction in the principal balance of a Mortgage Loan by a bankruptcy court or pursuant to a modification, a recovery by the Master Servicer, Special Servicer or Trustee of a Nonrecoverable Advance or the incurrence of certain unanticipated or default-related costs and expenses (including interest on Advances, Workout Fees, Liquidation Fees and Special Servicing Fees and any comparable items with respect to the Outside Serviced Mortgage Loans). Any reduction of the Certificate Balance of a Class of Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) or a Trust Component (and, therefore, the applicable Class of Exchangeable Certificates and the Class EC Certificates) as a result of the application of Realized Losses may also reduce the Notional Amount of a Class of Interest-Only Certificates. Realized Losses will be allocated to the respective Classes of the Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) and the Trust Components (and, therefore, the Exchangeable Certificates and the Class EC Certificates) in reverse distribution priority and as more particularly described in “Description of the Certificates—Subordination; Allocation of Realized Losses”.
439 |
Certificateholders are not entitled to receive distributions of Monthly Payments when due except to the extent they are either covered by an Advance or actually received. Consequently, any defaulted Monthly Payment for which no such Advance is made will tend to extend the weighted average lives of the Offered Certificates, whether or not a permitted extension of the due date of the related Mortgage Loan has been completed.
The rate of payments (including voluntary and involuntary prepayments) on the Mortgage Loans will be influenced by a variety of economic, geographic, social and other factors, including the level of mortgage interest rates and the rate at which borrowers default on their Mortgage Loans. The terms of the Mortgage Loans (in particular, amortization terms, the term of any prepayment lock-out period, the extent to which prepayment premiums or yield maintenance charges are due with respect to any principal prepayments, the right of the mortgagee to apply condemnation and casualty proceeds or reserve funds to prepay the Mortgage Loan, the extent to which a partial principal prepayment is required in connection with the release of a portion of the real estate collateral for a Mortgage Loan, and the availability of certain rights to defease all or a portion of the Mortgage Loan) may affect the rate of principal payments on Mortgage Loans, and consequently, the yields to maturity of the respective Classes of Offered Certificates. For example, certain Mortgage Loans may permit prepayment of the Mortgage Loan without a lockout period. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Voluntary Prepayments” and Annex A to this prospectus for a description of prepayment lock-out periods, prepayment premiums and yield maintenance charges.
Principal prepayments on the Mortgage Loans could also affect the yield on any Class of Offered Certificates with (or the yield on the Class EC Certificates if any Trust Component has) a Pass-Through Rate that is limited by, based upon or equal to the WAC Rate. The Pass-Through Rates on those Classes of Offered Certificates and Trust Components may be adversely affected as a result of a decrease in the WAC Rate even if principal prepayments do not occur.
With respect to the Class A-AB Certificates, the extent to which the Class A-AB Scheduled Principal Balances are achieved and the sensitivity of the Class A-AB 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 and Class A-4 Certificates remain outstanding. In particular, once such other Classes of Offered Certificates are no longer outstanding, any remaining portion on any Distribution Date of the Principal Distribution Amount will be distributed to the Class A-AB Certificates until the Certificate Balance of the Class A-AB Certificates is reduced to zero. As such, the Class A-AB Certificates will become more sensitive to the rate of prepayments on the Mortgage Loans than they were when the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates were outstanding.
Any changes in the weighted average lives of your Certificates may adversely affect your yield. The timing of changes in the rate of prepayment on the Mortgage Loans may significantly affect the actual yield to maturity experienced by an investor even if the average rate of principal payments experienced over time is consistent with such investor’s expectation. In general, the earlier a prepayment of principal on the Mortgage Loans, the greater the effect on such investor’s yield to maturity. As a result, the effect on such investor’s yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Offered Certificates would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments.
In addition, the rate and timing of delinquencies, defaults, the application of liquidation proceeds and other involuntary payments such as condemnation proceeds or insurance proceeds, losses and other shortfalls on Mortgage Loans will affect distributions on the Offered Certificates and their timing. See “Risk Factors—Your Yield May Be Affected by Defaults, Prepayments and Other Factors”. In general, these factors may be influenced by economic and other factors that cannot be predicted with any certainty. Accordingly, you may find it difficult to predict the effect that these factors might have on the yield to maturity of your Offered Certificates.
In addition, if the Master Servicer, the Special Servicer or the Trustee is reimbursed out of general collections on the Mortgage Loans included in the Issuing Entity for any advance that it has determined is not recoverable out of collections on the related Mortgage Loan, then to the extent that this reimbursement is made from collections of principal on the Mortgage Loans in the Issuing Entity, that reimbursement will reduce the amount of principal available to be distributed on the Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) and Trust Components (and, therefore, the Exchangeable Certificates and the Class EC Certificates) and will result in a reduction of the Certificate Balance of a Class of Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) or Trust Component (and, therefore,
440 |
the applicable Class of Exchangeable Certificates and the Class EC Certificates). See “Description of the Certificates—Distributions”. Likewise, if the Master Servicer, the Special Servicer or the Trustee is reimbursed out of principal collections on the Mortgage Loans for any Workout-Delayed Reimbursement Amounts, that reimbursement will reduce the amount of principal available to be distributed on the Principal Balance Certificates (exclusive of the Exchangeable Certificates and the Class EC Certificates) or Trust Components (and, therefore, the Exchangeable Certificates and the Class EC Certificates) on that Distribution Date. This reimbursement would have the effect of reducing current payments of principal on the Offered Certificates that are Principal Balance Certificates and extending the weighted average lives of the respective Classes of those Offered Certificates. See “Description of the Certificates—Distributions”.
If you own Offered Certificates that are Principal Balance Certificates, then prepayments resulting in a shortening of the weighted average lives of your Certificates may be made at a time of low interest rates when you may be unable to reinvest the resulting payments of principal on your Certificates at a rate comparable to the effective yield anticipated by you in making your investment in the Offered Certificates, while delays and extensions resulting in a lengthening of the weighted average lives may occur at a time of high interest rates when you may have been able to reinvest principal payments that would otherwise have been received by you at higher rates.
No representation is made as to the rate of principal payments on the Mortgage Loans or as to the yield to maturity of any Class of Offered Certificates. An investor is urged to make an investment decision with respect to any Class of Offered Certificates based on the anticipated yield to maturity of such Class of Offered Certificates resulting from its purchase price and such investor’s own determination as to anticipated Mortgage Loan prepayment rates under a variety of scenarios. The extent to which any Class of Offered Certificates is purchased at a discount or a premium and the degree to which the timing of payments on such Class of Offered Certificates is sensitive to prepayments will determine the extent to which the yield to maturity of such Class of Offered Certificates may vary from the anticipated yield. An investor should carefully consider the associated risks, including, in the case of any Offered Certificates purchased at a discount, the risk that a slower than anticipated rate of principal payments on the Mortgage Loans could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of any Offered Certificates purchased at a premium, the risk that a faster than anticipated rate of principal payments on the Mortgage Loans could result in an actual yield to such investor that is lower than the anticipated yield.
In general, with respect to any Class of Offered Certificates that is purchased at a premium, if principal distributions occur at a rate faster than anticipated at the time of purchase, the investor’s actual yield to maturity will be lower than that assumed at the time of purchase. Conversely, if a Class of Offered Certificates is purchased at a discount and principal distributions occur at a rate slower than that assumed at the time of purchase, the investor’s actual yield to maturity will be lower than that assumed at the time of purchase.
An investor should consider the risk that rapid rates of prepayments on the Mortgage Loans, and therefore of amounts distributable in reduction of the Certificate Balances of the Offered Certificates that are Principal Balance Certificates may coincide with periods of low prevailing interest rates. During such periods, the effective interest rates on securities in which an investor may choose to reinvest such amounts distributed to it may be lower than the applicable Pass-Through Rate. Conversely, slower rates of prepayments on the Mortgage Loans, and therefore, of amounts distributable in reduction of the Certificate Balances of the Offered Certificates that are Principal Balance Certificates may coincide with periods of high prevailing interest rates. During such periods, the amount of principal distributions resulting from prepayments available to an investor in any Offered Certificates that are Principal Balance Certificates for reinvestment at such high prevailing interest rates may be relatively small.
The effective yield to holders of Offered Certificates will be lower than the yield otherwise produced by the applicable Pass-Through Rate and applicable purchase prices because while interest will accrue during each Interest Accrual Period, the distribution of such interest will not be made until the Distribution Date immediately following such Interest Accrual Period, and principal paid on any Distribution Date will not bear interest during the period from the end of such Interest Accrual Period to the Distribution Date that follows.
In addition, although the related borrower under any ARD Loan may have certain incentives to prepay such ARD Loan on its Anticipated Repayment Date, we cannot assure you that such borrower will be able to prepay such ARD Loan on its Anticipated Repayment Date. The failure of the related borrower to prepay an ARD Loan on its Anticipated Repayment Date will not be an event of default under the terms of such ARD Loan, and
441 |
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 such borrower’s failure to pay Excess Interest, other than requests for collection, until the scheduled maturity of such ARD Loan;provided that the Master Servicer or the Special Servicer, as the case may be, may take action to enforce the Issuing Entity’s right to apply excess cash flow to principal in accordance with the terms of the related ARD Loan documents.
Yield on the Class X-A and Class X-B Certificates
The yield to maturity of the Class X-A Certificates will be highly sensitive to the rate and timing of reductions made to the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificates and the Class A-S Trust Component, including by reason of prepayments and principal losses on the Mortgage Loans and other factors described above. The yield to maturity of the Class X-B Certificates will be highly sensitive to the rate and timing of reductions made to the Certificate Balance of the Class B Trust Component, including by reason of prepayments and principal losses on the Mortgage Loans and other factors described above. Investors in the Class X-A and Class X-B Certificates should fully consider the associated risks, including the risk that an extremely rapid rate of prepayment or other liquidation of the Mortgage Loans could result in the failure of such investors to recoup fully their initial investments.
Any optional termination of the Issuing Entity by any party entitled to effect such termination would result in prepayment in full of the Certificates and would have an adverse effect on the yield of the Class X-A and/or Class X-B 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-A and/or Class X-B Certificates and any other Certificates purchased at premium might not fully recoup their initial investment. See “The Pooling and Servicing Agreement—Optional Termination; Optional Mortgage Loan Purchase”.
Weighted Average Life of the Offered Certificates
Weighted average life refers to the average amount of time from the date of issuance of a security until each dollar of principal of such security will be repaid to the investor (or, in the case of an interest-only security, each dollar of its notional amount is reduced to zero). The weighted average life of an Offered Certificate will be influenced by, among other things, the rate at which principal payments (including scheduled payments, principal prepayments and payments made pursuant to any applicable policies of insurance) on the Mortgage Loans are made and applied to pay principal (or, in the case of a Class X-A or Class X-B Certificate, reduce the notional amount) of such Offered Certificate. The Principal Distribution Amount for each Distribution Date will be distributable as described in “Description of the Certificates—Distributions—Priority of Distributions”. Principal payments on the Mortgage Loans may be in the form of scheduled amortization or prepayments (for this purpose, the term prepayment includes prepayments, partial prepayments and liquidations due to a default or other dispositions of the Mortgage Loans).
Calculations reflected in the following tables assume that the Mortgage Loans have the characteristics shown on Annex A to this prospectus (together with the footnotes thereto), and are based on the following additional assumptions (“Modeling Assumptions”): (i) each Mortgage Loan is assumed to prepay at the indicated level of constant prepayment rate (“CPR”), in accordance with a prepayment scenario in which prepayments occur after expiration of any applicable lock-out period, defeasance period and/or period during which voluntary prepayments must be accompanied by a yield maintenance charge or a fixed prepayment premium, (ii) there are no delinquencies, (iii) scheduled interest and principal payments, including balloon payments, on the Mortgage Loans are timely received on their respective Due Dates, (iv) no prepayment premiums or yield maintenance charges are collected, (v) no party exercises its right of optional termination of the issuing entity described in this prospectus, (vi) no Mortgage Loan is required to be repurchased from the Issuing Entity, (vii) the Administrative Fee Rate is the respective rate set forth on Annex A to this prospectus as the “Administrative Fee Rate” with respect to such Mortgage Loan, (viii) there are no Excess Prepayment Interest Shortfalls, other shortfalls unrelated to defaults or Appraisal Reduction Amounts allocated to any Class of Certificates, (ix) distributions on the Certificates are made on the tenth day (each assumed to be a business day) of each month, commencing in May 2016, (x) the Certificates will be issued on April 26, 2016, (xi) the Pass-Through Rate with respect to each Class of Offered Certificates (exclusive of the Class EC Certificates) and Trust Component is as described under “Description of the Certificates—Distributions—Pass-Through Rates”, (xii) the ARD Loans (if any) prepay in full on their respective Anticipated Repayment Dates, (xiii) all prepayments are assumed to be voluntary prepayments and will not include liquidation proceeds, condemnation proceeds, insurance proceeds, proceeds from the purchase of a Mortgage Loan from the Issuing Entity or any prepayment that is accepted by the Master Servicer
442 |
or the Special Servicer pursuant to a workout, settlement or loan modification, (xiv) with respect to any Mortgage Loans that require prepayment in connection with an economic holdback or earnout, the related borrower will satisfy certain criteria set forth in the related Mortgage Loan documents and the related holdback or earnout will not be used to prepay the Mortgage Loan, (xv) the Exchangeable Certificates and the Class EC Certificates are, in the case of each Class thereof, issued at its respective maximum initial Certificate Balance, (xvi) the initial Certificate Balances or Notional Amounts of the respective Classes of Certificates and Trust Components (or, in the case of the respective Classes of Exchangeable Certificates and the Class EC Certificates, the maximum Certificate Balances of such Certificates) are as set forth in the table (together with the footnotes thereto) under “Certificate Summary”, and (xvii) no Exchangeable Certificates and Class EC Certificates have been exchanged, except with respect to the decrement tables and price/yield tables below and the Assumed Final Distribution Dates relating to the respective Classes of Exchangeable Certificates and the Class EC Certificates, in which case we assume that the maximum Certificate Balance of each Class of those Certificates was issued on the Closing Date.
The following tables indicate the percentage of the initial Certificate Balance of each Class of Offered Certificates (other than the Class X-A and Class X-B Certificates) that would be outstanding after each of the dates shown under each of the indicated prepayment assumptions and the corresponding weighted average life, first principal payment date and last principal payment date of each such Class of Offered Certificates. The tables have been prepared on the basis of, among others, the Modeling Assumptions. To the extent that the Mortgage Loans or the Certificates have characteristics that differ from those assumed in preparing the tables, the respective Classes of the Offered Certificates that are Principal Balance Certificates may mature earlier or later than indicated by the tables. The Mortgage Loans will not prepay at any constant rate, and it is highly unlikely that the Mortgage Loans will prepay in a manner consistent with the assumptions described in this prospectus. For this reason and because the timing of principal payments is critical to determining weighted average lives, the weighted average lives of the applicable Offered Certificates are likely to differ from those shown in the tables, even if all of the Mortgage Loans prepay at the indicated percentages of CPR or prepayment scenario over any given time period or over the entire life of the Offered Certificates. 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 shorten or extend the weighted average lives) shown in the following tables. Investors are urged to conduct their own analyses of the rates at which the Mortgage Loans may be expected to prepay.
443 |
Percentages of the Initial Certificate Balance of
the Class A-1 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance
or fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | |||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR |
Closing Date | 100% | 100% | 100% | 100% | 100% |
April 2017 | 86% | 86% | 86% | 86% | 86% |
April 2018 | 70% | 70% | 70% | 70% | 70% |
April 2019 | 49% | 49% | 49% | 49% | 49% |
April 2020 | 20% | 20% | 20% | 20% | 20% |
April 2021 and thereafter | 0% | 0% | 0% | 0% | 0% |
Weighted Average Life (in years) | 2.73 | 2.73 | 2.72 | 2.72 | 2.72 |
First Principal Payment Date | May 2016 | May 2016 | May 2016 | May 2016 | May 2016 |
Last Principal Payment Date | December 2020 | November 2020 | October 2020 | October 2020 | September 2020 |
Percentages of the Initial Certificate Balance of
the Class A-2 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance
or fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | |||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR |
Closing Date | 100% | 100% | 100% | 100% | 100% |
April 2017 | 100% | 100% | 100% | 100% | 100% |
April 2018 | 100% | 100% | 100% | 100% | 100% |
April 2019 | 100% | 100% | 100% | 100% | 100% |
April 2020 | 100% | 100% | 100% | 100% | 100% |
April 2021 and thereafter | 0% | 0% | 0% | 0% | 0% |
Weighted Average Life (in years) | 4.76 | 4.76 | 4.75 | 4.73 | 4.56 |
First Principal Payment Date | December 2020 | November 2020 | October 2020 | October 2020 | September 2020 |
Last Principal Payment Date | April 2021 | April 2021 | April 2021 | April 2021 | April 2021 |
Percentages of the Initial Certificate Balance of
the Class A-3 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | |||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR |
Closing Date | 100% | 100% | 100% | 100% | 100% |
April 2017 | 100% | 100% | 100% | 100% | 100% |
April 2018 | 100% | 100% | 100% | 100% | 100% |
April 2019 | 100% | 100% | 100% | 100% | 100% |
April 2020 | 100% | 100% | 100% | 100% | 100% |
April 2021 | 100% | 100% | 100% | 100% | 100% |
April 2022 | 100% | 100% | 100% | 100% | 100% |
April 2023 | 100% | 100% | 100% | 100% | 100% |
April 2024 | 100% | 100% | 100% | 100% | 100% |
April 2025 | 100% | 100% | 100% | 100% | 100% |
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% |
Weighted Average Life (in years) | 9.61 | 9.57 | 9.53 | 9.47 | 9.31 |
First Principal Payment Date | September 2025 | June 2025 | June 2025 | June 2025 | June 2025 |
Last Principal Payment Date | January 2026 | January 2026 | January 2026 | December 2025 | September 2025 |
444 |
Percentages of the Initial Certificate Balance of
the Class A-4 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | |||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR |
Closing Date | 100% | 100% | 100% | 100% | 100% |
April 2017 | 100% | 100% | 100% | 100% | 100% |
April 2018 | 100% | 100% | 100% | 100% | 100% |
April 2019 | 100% | 100% | 100% | 100% | 100% |
April 2020 | 100% | 100% | 100% | 100% | 100% |
April 2021 | 100% | 100% | 100% | 100% | 100% |
April 2022 | 100% | 100% | 100% | 100% | 100% |
April 2023 | 100% | 100% | 100% | 100% | 100% |
April 2024 | 100% | 100% | 100% | 100% | 100% |
April 2025 | 100% | 100% | 100% | 100% | 100% |
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% |
Weighted Average Life (in years) | 9.71 | 9.71 | 9.71 | 9.69 | 9.47 |
First Principal Payment Date | January 2026 | January 2026 | January 2026 | December 2025 | September 2025 |
Last Principal Payment Date | January 2026 | January 2026 | January 2026 | January 2026 | November 2025 |
Percentages of the Initial Certificate Balance of
the Class A-AB Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | |||||||||||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | ||||||||
Closing Date | 100% | 100% | 100% | 100% | 100% | ||||||||
April 2017 | 100% | 100% | 100% | 100% | 100% | ||||||||
April 2018 | 100% | 100% | 100% | 100% | 100% | ||||||||
April 2019 | 100% | 100% | 100% | 100% | 100% | ||||||||
April 2020 | 100% | 100% | 100% | 100% | 100% | ||||||||
April 2021 | 100% | 100% | 100% | 100% | 100% | ||||||||
April 2022 | 79% | 79% | 79% | 79% | 79% | ||||||||
April 2023 | 56% | 56% | 56% | 56% | 56% | ||||||||
April 2024 | 33% | 33% | 33% | 33% | 33% | ||||||||
April 2025 | 8% | 8% | 8% | 8% | 8% | ||||||||
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | ||||||||
Weighted Average Life (in years) | 7.24 | 7.24 | 7.24 | 7.24 | 7.24 | ||||||||
First Principal Payment Date | April 2021 | April 2021 | April 2021 | April 2021 | April 2021 | ||||||||
Last Principal Payment Date | September 2025 | September 2025 | September 2025 | September 2025 | September 2025 |
Percentages of the Initial Certificate Balance of
the Class A-S Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | |||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR |
Closing Date | 100% | 100% | 100% | 100% | 100% |
April 2017 | 100% | 100% | 100% | 100% | 100% |
April 2018 | 100% | 100% | 100% | 100% | 100% |
April 2019 | 100% | 100% | 100% | 100% | 100% |
April 2020 | 100% | 100% | 100% | 100% | 100% |
April 2021 | 100% | 100% | 100% | 100% | 100% |
April 2022 | 100% | 100% | 100% | 100% | 100% |
April 2023 | 100% | 100% | 100% | 100% | 100% |
April 2024 | 100% | 100% | 100% | 100% | 100% |
April 2025 | 100% | 100% | 100% | 100% | 100% |
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% |
Weighted Average Life (in years) | 9.71 | 9.71 | 9.71 | 9.71 | 9.54 |
First Principal Payment Date | January 2026 | January 2026 | January 2026 | January 2026 | November 2025 |
Last Principal Payment Date | February 2026 | January 2026 | January 2026 | January 2026 | November 2025 |
445 |
Percentages of the Initial Certificate Balance of
the Class B Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | ||||||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||
Closing Date | 100% | 100% | 100% | 100% | 100% | |||
April 2017 | 100% | 100% | 100% | 100% | 100% | |||
April 2018 | 100% | 100% | 100% | 100% | 100% | |||
April 2019 | 100% | 100% | 100% | 100% | 100% | |||
April 2020 | 100% | 100% | 100% | 100% | 100% | |||
April 2021 | 100% | 100% | 100% | 100% | 100% | |||
April 2022 | 100% | 100% | 100% | 100% | 100% | |||
April 2023 | 100% | 100% | 100% | 100% | 100% | |||
April 2024 | 100% | 100% | 100% | 100% | 100% | |||
April 2025 | 100% | 100% | 100% | 100% | 100% | |||
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||
Weighted Average Life (in years) | 9.79 | 9.77 | 9.73 | 9.71 | 9.54 | |||
First Principal Payment Date | February 2026 | January 2026 | January 2026 | January 2026 | November 2025 | |||
Last Principal Payment Date | February 2026 | February 2026 | February 2026 | January 2026 | November 2025 |
Percentages of the Initial Certificate Balance of
the Class EC Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | ||||||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||
Closing Date | 100% | 100% | 100% | 100% | 100% | |||
April 2017 | 100% | 100% | 100% | 100% | 100% | |||
April 2018 | 100% | 100% | 100% | 100% | 100% | |||
April 2019 | 100% | 100% | 100% | 100% | 100% | |||
April 2020 | 100% | 100% | 100% | 100% | 100% | |||
April 2021 | 100% | 100% | 100% | 100% | 100% | |||
April 2022 | 100% | 100% | 100% | 100% | 100% | |||
April 2023 | 100% | 100% | 100% | 100% | 100% | |||
April 2024 | 100% | 100% | 100% | 100% | 100% | |||
April 2025 | 100% | 100% | 100% | 100% | 100% | |||
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||
Weighted Average Life (in years) | 9.76 | 9.75 | 9.74 | 9.72 | 9.54 | |||
First Principal Payment Date | January 2026 | January 2026 | January 2026 | January 2026 | November 2025 | |||
Last Principal Payment Date | February 2026 | February 2026 | February 2026 | February 2026 | November 2025 |
Percentages of the Initial Certificate Balance of
the Class C Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance or
fixed prepayment premiums - otherwise at indicated CPR
Prepayment Assumption (CPR) | ||||||||
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||
Closing Date | 100% | 100% | 100% | 100% | 100% | |||
April 2017 | 100% | 100% | 100% | 100% | 100% | |||
April 2018 | 100% | 100% | 100% | 100% | 100% | |||
April 2019 | 100% | 100% | 100% | 100% | 100% | |||
April 2020 | 100% | 100% | 100% | 100% | 100% | |||
April 2021 | 100% | 100% | 100% | 100% | 100% | |||
April 2022 | 100% | 100% | 100% | 100% | 100% | |||
April 2023 | 100% | 100% | 100% | 100% | 100% | |||
April 2024 | 100% | 100% | 100% | 100% | 100% | |||
April 2025 | 100% | 100% | 100% | 100% | 100% | |||
April 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||
Weighted Average Life (in years) | 9.79 | 9.79 | 9.79 | 9.77 | 9.54 | |||
First Principal Payment Date | February 2026 | February 2026 | February 2026 | January 2026 | November 2025 | |||
Last Principal Payment Date | February 2026 | February 2026 | February 2026 | February 2026 | November 2025 |
446 |
Price/Yield Tables
The tables set forth below show the corporate bond equivalent (“CBE”) yield with respect to each Class of Offered Certificates under the Modeling Assumptions. Purchase prices set forth below for each Class of Offered Certificates are expressed in 32nds and interpreted as a percentage (i.e., 100-12 is 100-12/32%) of the initial Certificate Balance or Notional Amount, as applicable, of such Class of Offered Certificates, before adding accrued interest.
The yields set forth in the following tables were calculated by determining the monthly discount rates which, when applied to the assumed stream of cash flows to be paid on each Class of Offered Certificates, would cause the discounted present value of such assumed stream of cash flows as of the Closing Date to equal the assumed purchase prices,plus accrued interest at the applicable Pass-Through Rate as described in the Modeling Assumptions, from and including the first day of the applicable Interest Accrual Period for the initial Distribution Date to but excluding the Closing Date, and converting such monthly rates to semi-annual corporate bond equivalent rates. Such calculation does not take into account variations that may occur in the interest rates at which investors may be able to reinvest funds received by them as reductions of the Certificate Balances of the respective Classes of Offered Certificates that are Principal Balance Certificates and consequently does not purport to reflect the return on any investment in such Classes of Offered Certificates when such reinvestment rates are considered.
Pre-Tax Yield to Maturity (CBE) for the Class A-1 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 3.592% | 3.594% | 3.595% | 3.596% | 3.597% | |||||
96-00 | 3.187% | 3.188% | 3.189% | 3.190% | 3.191% | |||||
97-00 | 2.788% | 2.789% | 2.790% | 2.790% | 2.791% | |||||
98-00 | 2.395% | 2.395% | 2.396% | 2.396% | 2.396% | |||||
99-00 | 2.007% | 2.007% | 2.008% | 2.008% | 2.008% | |||||
100-00 | 1.625% | 1.625% | 1.625% | 1.625% | 1.625% | |||||
101-00 | 1.249% | 1.248% | 1.248% | 1.248% | 1.248% | |||||
102-00 | 0.877% | 0.877% | 0.876% | 0.876% | 0.875% | |||||
103-00 | 0.511% | 0.510% | 0.509% | 0.509% | 0.508% | |||||
104-00 | 0.150% | 0.149% | 0.148% | 0.147% | 0.146% | |||||
105-00 | -0.206% | -0.208% | -0.209% | -0.210% | -0.211% |
Pre-Tax Yield to Maturity (CBE) for the Class A-2 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 3.163% | 3.165% | 3.167% | 3.171% | 3.210% | |||||
96-00 | 2.929% | 2.930% | 2.932% | 2.935% | 2.966% | |||||
97-00 | 2.697% | 2.698% | 2.700% | 2.702% | 2.725% | |||||
98-00 | 2.469% | 2.469% | 2.470% | 2.472% | 2.487% | |||||
99-00 | 2.243% | 2.243% | 2.243% | 2.244% | 2.252% | |||||
100-00 | 2.019% | 2.019% | 2.019% | 2.019% | 2.019% | |||||
101-00 | 1.798% | 1.798% | 1.798% | 1.797% | 1.789% | |||||
102-00 | 1.580% | 1.579% | 1.578% | 1.577% | 1.561% | |||||
103-00 | 1.364% | 1.363% | 1.362% | 1.359% | 1.336% | |||||
104-00 | 1.150% | 1.149% | 1.147% | 1.144% | 1.114% | |||||
105-00 | 0.939% | 0.938% | 0.935% | 0.932% | 0.894% |
447 |
Pre-Tax Yield to Maturity (CBE) for the Class A-3 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 3.686% | 3.688% | 3.691% | 3.694% | 3.704% | |||||
96-00 | 3.558% | 3.560% | 3.562% | 3.564% | 3.572% | |||||
97-00 | 3.431% | 3.433% | 3.434% | 3.436% | 3.442% | |||||
98-00 | 3.306% | 3.307% | 3.308% | 3.309% | 3.313% | |||||
99-00 | 3.182% | 3.183% | 3.183% | 3.184% | 3.186% | |||||
100-00 | 3.060% | 3.060% | 3.060% | 3.060% | 3.060% | |||||
101-00 | 2.939% | 2.939% | 2.938% | 2.938% | 2.936% | |||||
102-00 | 2.820% | 2.819% | 2.818% | 2.817% | 2.813% | |||||
103-00 | 2.702% | 2.700% | 2.699% | 2.697% | 2.691% | |||||
104-00 | 2.585% | 2.583% | 2.581% | 2.579% | 2.571% | |||||
105-00 | 2.469% | 2.467% | 2.464% | 2.462% | 2.452% |
Pre-Tax Yield to Maturity (CBE) for the Class A-4 Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 3.956% | 3.956% | 3.956% | 3.957% | 3.969% | |||||
96-00 | 3.827% | 3.827% | 3.827% | 3.828% | 3.837% | |||||
97-00 | 3.700% | 3.700% | 3.700% | 3.700% | 3.707% | |||||
98-00 | 3.574% | 3.574% | 3.574% | 3.574% | 3.579% | |||||
99-00 | 3.450% | 3.450% | 3.450% | 3.450% | 3.452% | |||||
100-00 | 3.327% | 3.327% | 3.327% | 3.327% | 3.327% | |||||
101-00 | 3.205% | 3.205% | 3.205% | 3.205% | 3.203% | |||||
102-00 | 3.085% | 3.085% | 3.085% | 3.085% | 3.080% | |||||
103-00 | 2.967% | 2.967% | 2.967% | 2.966% | 2.959% | |||||
104-00 | 2.849% | 2.849% | 2.849% | 2.848% | 2.839% | |||||
105-00 | 2.733% | 2.733% | 2.733% | 2.732% | 2.721% |
Pre-Tax Yield to Maturity (CBE) for the Class A-AB Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 3.913% | 3.913% | 3.913% | 3.913% | 3.913% | |||||
96-00 | 3.748% | 3.748% | 3.748% | 3.748% | 3.748% | |||||
97-00 | 3.584% | 3.584% | 3.584% | 3.584% | 3.584% | |||||
98-00 | 3.423% | 3.423% | 3.423% | 3.423% | 3.423% | |||||
99-00 | 3.263% | 3.263% | 3.263% | 3.263% | 3.263% | |||||
100-00 | 3.106% | 3.106% | 3.106% | 3.106% | 3.106% | |||||
101-00 | 2.950% | 2.950% | 2.950% | 2.950% | 2.950% | |||||
102-00 | 2.796% | 2.796% | 2.796% | 2.796% | 2.796% | |||||
103-00 | 2.644% | 2.644% | 2.644% | 2.644% | 2.644% | |||||
104-00 | 2.494% | 2.494% | 2.494% | 2.494% | 2.494% | |||||
105-00 | 2.345% | 2.345% | 2.345% | 2.345% | 2.345% |
448 |
Pre-Tax Yield to Maturity (CBE) for the Class X-A Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
11-24 | 7.525% | 7.499% | 7.464% | 7.413% | 7.079% | |||||
12-00 | 6.995% | 6.968% | 6.933% | 6.881% | 6.542% | |||||
12-08 | 6.482% | 6.454% | 6.418% | 6.366% | 6.022% | |||||
12-16 | 5.984% | 5.956% | 5.920% | 5.867% | 5.518% | |||||
12-24 | 5.502% | 5.473% | 5.437% | 5.383% | 5.029% | |||||
13-00 | 5.034% | 5.005% | 4.968% | 4.913% | 4.555% | |||||
13-08 | 4.579% | 4.550% | 4.512% | 4.457% | 4.095% | |||||
13-16 | 4.137% | 4.108% | 4.070% | 4.014% | 3.647% | |||||
13-24 | 3.708% | 3.678% | 3.639% | 3.583% | 3.212% | |||||
14-00 | 3.290% | 3.259% | 3.221% | 3.163% | 2.788% | |||||
14-08 | 2.883% | 2.852% | 2.813% | 2.755% | 2.376% |
Pre-Tax Yield to Maturity (CBE) for the Class X-B Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
5-12 | 6.913% | 6.877% | 6.821% | 6.771% | 6.501% | |||||
5-16 | 6.375% | 6.338% | 6.281% | 6.231% | 5.956% | |||||
5-20 | 5.854% | 5.817% | 5.759% | 5.708% | 5.429% | |||||
5-24 | 5.351% | 5.313% | 5.255% | 5.202% | 4.919% | |||||
5-28 | 4.864% | 4.826% | 4.766% | 4.713% | 4.426% | |||||
6-00 | 4.392% | 4.353% | 4.293% | 4.239% | 3.948% | |||||
6-04 | 3.934% | 3.895% | 3.834% | 3.779% | 3.484% | |||||
6-08 | 3.490% | 3.451% | 3.388% | 3.333% | 3.035% | |||||
6-12 | 3.059% | 3.019% | 2.956% | 2.900% | 2.598% | |||||
6-16 | 2.640% | 2.600% | 2.536% | 2.479% | 2.173% | |||||
6-20 | 2.233% | 2.192% | 2.127% | 2.070% | 1.761% |
Pre-Tax Yield to Maturity (CBE) for the Class A-S Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 4.229% | 4.230% | 4.230% | 4.230% | 4.239% | |||||
96-00 | 4.099% | 4.099% | 4.099% | 4.099% | 4.106% | |||||
97-00 | 3.970% | 3.970% | 3.970% | 3.970% | 3.975% | |||||
98-00 | 3.842% | 3.842% | 3.842% | 3.842% | 3.846% | |||||
99-00 | 3.716% | 3.716% | 3.716% | 3.716% | 3.718% | |||||
100-00 | 3.592% | 3.592% | 3.592% | 3.592% | 3.591% | |||||
101-00 | 3.469% | 3.469% | 3.469% | 3.469% | 3.467% | |||||
102-00 | 3.347% | 3.347% | 3.347% | 3.347% | 3.343% | |||||
103-00 | 3.227% | 3.227% | 3.227% | 3.227% | 3.221% | |||||
104-00 | 3.108% | 3.108% | 3.108% | 3.108% | 3.101% | |||||
105-00 | 2.990% | 2.990% | 2.990% | 2.990% | 2.981% |
449 |
Pre-Tax Yield to Maturity (CBE) for the Class B Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 4.912% | 4.913% | 4.915% | 4.916% | 4.925% | |||||
96-00 | 4.778% | 4.779% | 4.780% | 4.781% | 4.788% | |||||
97-00 | 4.645% | 4.646% | 4.647% | 4.648% | 4.653% | |||||
98-00 | 4.514% | 4.515% | 4.515% | 4.516% | 4.519% | |||||
99-00 | 4.385% | 4.385% | 4.385% | 4.386% | 4.387% | |||||
100-00 | 4.257% | 4.257% | 4.257% | 4.257% | 4.257% | |||||
101-00 | 4.131% | 4.131% | 4.130% | 4.130% | 4.128% | |||||
102-00 | 4.006% | 4.006% | 4.005% | 4.004% | 4.000% | |||||
103-00 | 3.883% | 3.882% | 3.881% | 3.880% | 3.874% | |||||
104-00 | 3.761% | 3.760% | 3.758% | 3.757% | 3.750% | |||||
105-00 | 3.640% | 3.639% | 3.637% | 3.636% | 3.627% |
Pre-Tax Yield to Maturity (CBE) for the Class EC Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 4.902% | 4.903% | 4.903% | 4.904% | 4.913% | |||||
96-00 | 4.768% | 4.768% | 4.769% | 4.769% | 4.776% | |||||
97-00 | 4.635% | 4.635% | 4.636% | 4.636% | 4.641% | |||||
98-00 | 4.504% | 4.504% | 4.504% | 4.504% | 4.507% | |||||
99-00 | 4.374% | 4.375% | 4.375% | 4.374% | 4.375% | |||||
100-00 | 4.246% | 4.246% | 4.246% | 4.246% | 4.245% | |||||
101-00 | 4.120% | 4.120% | 4.120% | 4.119% | 4.116% | |||||
102-00 | 3.995% | 3.995% | 3.994% | 3.994% | 3.989% | |||||
103-00 | 3.871% | 3.871% | 3.871% | 3.870% | 3.863% | |||||
104-00 | 3.749% | 3.749% | 3.748% | 3.747% | 3.738% | |||||
105-00 | 3.628% | 3.628% | 3.627% | 3.626% | 3.615% |
Pre-Tax Yield to Maturity (CBE) for the Class C Certificates at the Specified CPRs
0% CPR during lockout, defeasance and/or yield maintenance | ||||||||||
Assumed Price (32nds) | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
95-00 | 5.705% | 5.705% | 5.705% | 5.706% | 5.720% | |||||
96-00 | 5.566% | 5.566% | 5.566% | 5.567% | 5.577% | |||||
97-00 | 5.428% | 5.428% | 5.428% | 5.429% | 5.437% | |||||
98-00 | 5.292% | 5.292% | 5.292% | 5.292% | 5.298% | |||||
99-00 | 5.158% | 5.158% | 5.158% | 5.158% | 5.161% | |||||
100-00 | 5.025% | 5.025% | 5.025% | 5.025% | 5.026% | |||||
101-00 | 4.894% | 4.894% | 4.894% | 4.894% | 4.892% | |||||
102-00 | 4.764% | 4.764% | 4.764% | 4.764% | 4.760% | |||||
103-00 | 4.636% | 4.636% | 4.636% | 4.636% | 4.629% | |||||
104-00 | 4.510% | 4.510% | 4.510% | 4.509% | 4.500% | |||||
105-00 | 4.385% | 4.385% | 4.385% | 4.384% | 4.373% |
We cannot assure you that the Mortgage Loans will prepay at any particular rate. Moreover, the various remaining termsto maturity of the Mortgage Loans could produce slower or faster principal distributions than indicated in the preceding tables at the various percentages of CPR and under the various prepayment scenarios specified, even if the weighted average remaining term to maturity of the Mortgage Loans is as assumed. Investors are urged to make their investment decisions based on their determinations as to anticipated rates of prepayment under a variety of scenarios.
450 |
Material Federal Income Tax Consequences
General
The following is a general discussion of the anticipated material United States federal income tax consequences of the purchase, ownership and disposition of the Offered Certificates. The discussion below does not purport to address all federal income tax consequences that may be applicable to particular categories of investors (such as banks, insurance companies, securities dealers, foreign persons, tax-exempt investors, investors whose functional currency is not the U.S. dollar, U.S. expatriates and investors that hold the Offered Certificates as part of a “straddle,” integrated transaction or “conversion transaction”), some of which may be subject to special rules. The authorities on which this discussion is based are subject to change or differing interpretations, and any such change or interpretation could apply retroactively. This discussion reflects the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), as well as regulations (the “REMIC Regulations”) promulgated by the U.S. Department of the Treasury. Investors are encouraged to consult their own tax advisors in determining the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of the Offered Certificates.
Two (2) separate real estate mortgage investment conduit (“REMIC”) elections will be made with respect to designated portions of the Issuing Entity (the “Lower-Tier REMIC” and the “Upper-Tier REMIC”, and, together, the “Trust REMICs”). The Lower-Tier REMIC will hold the Mortgage Loans and certain other assets and will issue (i) one or more uncertificated classes of regular interests (the “Lower-Tier Regular Interests”) to the Upper-Tier REMIC and (ii) a residual interest represented by the Class R Certificates as the sole class of “residual interests” in the Lower-Tier REMIC.
The Upper-Tier REMIC will hold the Lower-Tier Regular Interests and will issue (i) the Class A-1, Class A-2, Class A-3, Class A-4, Class A-AB, Class X-A, Class X-B, Class D, Class X-D, Class E, Class F, Class G and Class H Certificates and each Trust Component, each representing a regular interest in the Upper-Tier REMIC (the “Regular Interests”) and (ii) a residual interest represented by the Class R Certificates as the sole class of “residual interests” in the Upper-Tier REMIC.
Assuming (i) the making of appropriate elections, (ii) compliance with the Pooling and Servicing Agreement, each Outside Servicing Agreement and each Co-Lender Agreement without waiver, (iii) continued qualification of each REMIC formed under each Outside Servicing Agreement, and (iv) compliance with any changes in the law, including any amendments to the Code or applicable Treasury regulations thereunder, in the opinion of Orrick, Herrington & Sutcliffe LLP, special tax counsel to the Depositor, for federal income tax purposes (a) each Trust REMIC will qualify as a REMIC, (b) each of the Lower-Tier Regular Interests will qualify as a “regular interest” in the Lower-Tier REMIC, (c) each of the Regular Interests will qualify as a “regular interest” in the Upper-Tier REMIC and (d) the Class R Certificates will represent ownership of the sole class of “residual interests” in each Trust REMIC, in each case within the meaning of the REMIC provisions of the Code. However, qualification as a REMIC requires ongoing compliance with certain conditions. See “—Qualification as a REMIC” below.
In addition, in the opinion of Orrick, Herrington & Sutcliffe LLP, special tax counsel to the Depositor, (i) the portions of the Issuing Entity consisting ofthe Trust Components and the Exchangeable Distribution Account will be treated as a grantor trust (the “Grantor Trust”) for federal income tax purposes under subpart E, part I of subchapter J of the Code, and (ii) the Class EC Certificates and each Class of Exchangeable Certificates will represent undivided beneficial interests in their respective Percentage Interests of the related Trust Component or Trust Components and related amounts in the Exchangeable Distribution Account.
Qualification as a REMIC
In order for each Trust REMIC to qualify as a REMIC, there must be ongoing compliance on the part of such Trust REMIC with the requirements set forth in the Code. Each Trust REMIC must fulfill an asset test, which requires that no more than ade minimis portion of the assets of such Trust REMIC, as of the close of the third calendar month beginning after the Closing Date (which for purposes of this discussion is the date of the issuance of the Regular Interests, the “Startup Day”) and at all times thereafter, may consist of assets other than “qualified mortgages” and “permitted investments.” The REMIC Regulations provide a safe harbor pursuant to which thede minimis requirements will be met if at all times the aggregate adjusted basis of the nonqualified assets is less than 1% of the aggregate adjusted basis of all such Trust REMIC’s assets. Each Trust REMIC also must provide “reasonable arrangements” to prevent its residual interest from being held by “disqualified organizations” or their
451 |
agents and must furnish applicable tax information to transferors or agents that violate this restriction. The Pooling and Servicing Agreement will provide that no legal or beneficial interest in the Class R Certificates may be transferred or registered unless certain conditions, designed to prevent violation of this restriction, are met. Consequently, it is expected that each Trust REMIC will qualify as a REMIC at all times that any of the Certificates are outstanding.
A qualified mortgage is any obligation that is principally secured by an interest in real property and that is either transferred to a REMIC on its startup day or is purchased by a REMIC within a three month period thereafter pursuant to a fixed price contract in effect on the REMIC’s startup day. Qualified mortgages include (i) mortgage loans or split note interests in mortgage loans, such as the Mortgage Loans;provided that, in general, (a) the fair market value of the real property security (including buildings and structural components of the real property security)(reduced by (1) the amount of any lien on the real property security that is senior to the mortgage loan and (2) a proportionate amount of any lien on the real property security that is in parity with the mortgage loan) is at least 80% of the aggregate principal balance of such mortgage loan either at origination or as of the REMIC’s startup day (a loan-to-value ratio of not more than 125% with respect to the real property security) or (b) substantially all the proceeds of the mortgage loan or the underlying mortgages were used to acquire, improve or protect an interest in real property that, at the date of origination, was the only security for the mortgage loan, and (ii) regular interests in another REMIC, such as the Lower-Tier Regular Interests that will be held by the Upper-Tier REMIC. If a mortgage loan was not in fact principally secured by real property or is otherwise not a qualified mortgage, it must be disposed of within 90 days of discovery of such defect, or otherwise ceases to be a qualified mortgage after such 90-day period.
Permitted investments include “cash flow investments”, “qualified reserve assets” and “foreclosure property”. A cash flow investment is an investment, earning a return in the nature of interest, of amounts received on or with respect to qualified mortgages for a temporary period, not exceeding 13 months, until the next scheduled distribution to holders of interests in the REMIC. A qualified reserve asset is any intangible property held for investment that is part of any reasonably required reserve maintained by the REMIC to provide for payments of expenses of the REMIC or amounts due on its regular or residual interests in the event of defaults (including delinquencies) on the qualified mortgages, lower than expected reinvestment returns, prepayment interest shortfalls and certain other contingencies. The Trust REMICs will not hold any qualified reserve assets. Foreclosure property is real property acquired by a REMIC in connection with the default or imminent default of a qualified mortgage and maintained by the REMIC in compliance with applicable rules and personal property that is incidental to such real property;provided that the mortgage loan sellers had no knowledge or reason to know, as of the startup day of the REMIC, that such a default had occurred or would occur. Foreclosure property may generally not be held after the close of the third calendar year beginning after the date the REMIC acquires such property, with one extension that may be granted by the Internal Revenue Service (“IRS”).
A mortgage loan held by a REMIC will fail to be a qualified mortgage if it is “significantly modified” unless default is “reasonably foreseeable” or where the servicer believes there is a “significant risk of default”upon maturity of the mortgage loan or at an earlier date, and that by making such modification the risk of default is substantially reduced. A mortgage loan held by a REMIC will not be considered to have been “significantly modified” following the release of the lien on a portion of the real property collateral if (a) the release is pursuant to a defeasance permitted under the mortgage loan documents that occurs more than two years after the startup day of the REMIC or (b) following the release the loan-to-value ratio for the mortgage loan is not greater than 125% with respect to the real property security. Furthermore, if the release is not pursuant to a defeasance and following the release the loan-to-value ratio for the mortgage loan is greater than 125%, the mortgage loan will continue to be a qualified mortgage if the release is part of a “qualified paydown transaction” in accordance with Revenue Procedure 2010-30.
In addition to the foregoing requirements, the various interests in a REMIC also must meet certain requirements. All of the interests in a REMIC must be either of the following: (i) one or more classes of regular interests or (ii) a single class of residual interests on which distributions, if any, are madepro rata. A regular interest is an interest in a REMIC that is issued on the REMIC’s startup day with fixed terms, is designated as a regular interest, and unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and provides that interest payments (or other similar amounts), if any, at or before maturity either are payable based on a fixed rate or a qualified variable rate, or consist of a specified, nonvarying portion of the interest payments on the qualified mortgages. The rate on the specified portion may be a fixed rate, a variable rate, or the difference between one fixed or qualified variable rate and another fixed or qualified variable rate. The specified principal amount of a regular interest that provides for interest payments consisting of a specified,
452 |
nonvarying portion of interest payments on qualified mortgages may be zero. An interest in a REMIC may be treated as a regular interest even if payments of principal with respect to such interest are subordinated to payments on other regular interests or the residual interest in the REMIC, and are dependent on the absence of defaults or delinquencies on qualified mortgages or permitted investments, lower than reasonably expected returns on permitted investments, expenses incurred by the REMIC or Prepayment Interest Shortfalls. A residual interest is an interest in a REMIC other than a regular interest that is issued on the REMIC’s startup day that is designated as a residual interest. Accordingly, each of the Lower-Tier Regular Interests will constitute a class of regular interests in the Lower-Tier REMIC, each class of the Regular Interests will constitute a class of regular interests in the Upper-Tier REMIC, and the Class R Certificates will represent the sole class of residual interests in each Trust REMIC.
If an entity fails to comply with one or more of the ongoing requirements of the Code for status as a REMIC during any taxable year, the Code provides that the entity or applicable portion of it will not be treated as a REMIC for such year and thereafter. In this event, any entity with debt obligations with two or more maturities, such as the Trust REMICs, may be treated as a separate association taxable as a corporation under Treasury regulations, and the Certificates may be treated as equity interests in that association. The Code, however, authorizes the Treasury Department to issue regulations that address situations where failure to meet one or more of the requirements for REMIC status occurs inadvertently and in good faith. Investors should be aware, however, that the Conference Committee Report to the Tax Reform Act of 1986 (the “1986 Act”) indicates that the relief may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of a REMIC’s income for the period of time in which the requirements for REMIC status are not satisfied.
Status of Offered Certificates
Except as provided below, OfferedCertificates held by a real estate investment trust will constitute “real estate assets” within the meaning of Code Section 856(c)(5)(B), and interest (including original issue discount) on the Offered Certificates will be considered “interest on obligations secured by mortgages on real property or on interests in real property” within the meaning of Code Section 856(c)(3)(B) in the same proportion that, for both purposes, the assets of the Issuing Entity would be so treated. For the purposes of the foregoing determinations, the Trust REMICs will be treated as a single REMIC. If at all times 95% or more of the assets of the Issuing Entity qualify for each of the foregoing treatments, the Offered Certificates will qualify for the corresponding status in their entirety. For purposes of Code Section 856(c)(5)(B), payments of principal and interest on the Mortgage Loans that are reinvested pending distribution to holders of Offered Certificates qualify for such treatment. It is unclear, however, whether property acquired by foreclosure held pending sale, and amounts in reserve accounts, would be considered to be part of the Mortgage Loans, or whether these assets otherwise would receive the same treatment as the Mortgage Loans for purposes of the above-referenced sections of the Code. Offered Certificates held by a domestic building and loan association will be treated as assets described in Code Section 7701(a)(19)(C)(xi) to the extent that the Mortgage Loans are treated as “loans . . . secured by an interest in real property which is . . . residential real property” or “loans secured by an interest in educational, health, or welfare institutions or facilities, including structures designed or used primarily for residential purposes for students, residents, and persons under care, employees, or members of the staff of such institutions or facilities” within the meaning of Code Section 7701(a)(19)(C) (such as certain multifamily dwellings, but not other commercial properties), and otherwise will not qualify for this treatment. Certificateholders should consult their own tax advisors regarding the extent to which their Offered Certificates will qualify for this treatment. In addition, Mortgage Loans that have been defeased with government securities will not qualify for the foregoing treatments. Offered Certificates held by certain financial institutions will constitute an “evidence of indebtedness” within the meaning of Code Section 582(c)(1). Offered Certificates will be “qualified mortgages” within the meaning of Code Section 860G(a)(3) for another REMIC if transferred to that REMIC within a prescribed time period in exchange for regular or residual interests in that REMIC.
Taxation of the Regular Interests
General
Each class of Regular Interests (whether held directly or indirectly) will represent one or more regular interests in the Upper-Tier REMIC. The Regular Interests will represent newly originated debt instruments issued by the Upper-Tier REMIC, and not ownership interests in the Trust REMICs or their assets, for federal income tax purposes. In general, interest, original issue discount and market discount on a Regular Interest will be treated as ordinary income to the holder of a Regular Interest (a “Regular Interestholder”), and principal payments on a
453 |
Regular Interest will be treated as a return of capital to the extent of the Regular Interestholder’s basis in the Regular Interest. Regular Interestholders must use the accrual method of accounting with regard to the Regular Interests, regardless of the method of accounting otherwise used by such Regular Interestholders. For purposes of the following discussion, the treatment described below applies to a Class EC Certificateholder’s interest in the Trust Components and also applies to a Class A-S, Class B and Class C Certificateholder’s interest in the related Trust Component. See “—Taxation of Class EC and Exchangeable Certificates” below.
Original Issue Discount
Holders of Regular Interests issued with original issue discount generally must include original issue discount in ordinary income for federal income tax purposes as it accrues in accordance with the constant yield method, which takes into account the compounding of interest, in advance of receipt of the cash attributable to such income. The following discussion is based in part on temporary and final Treasury regulations (the “OID Regulations”) under Code Sections 1271 through 1273 and 1275 and in part on the provisions of the Conference Committee Report to the 1986 Act. Regular Interestholders should be aware, however, that the OID Regulations do not adequately address certain issues relevant to prepayable securities, such as the Regular Interests. To the extent such issues are not addressed in the OID Regulations, the Certificate Administrator will apply the methodology described in the Conference Committee Report to the 1986 Act. No assurance can beprovided,however, that the IRS will not take a different position as to those matters not currently addressed by the OID Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing the IRS to apply or depart from the OID Regulations if necessary or appropriate to ensure a reasonable tax result in light of the applicable statutory provisions. A tax result will not be considered unreasonable under the anti-abuse rule, however, in the absence of a substantial effect on the present value of a taxpayer’s tax liability. Investors are advised to consult their own tax advisors as to the discussion in this prospectus and the appropriate method for reporting interest and original issue discount with respect to the Regular Interests.
Each Regular Interest will be treated as an installment obligation for purposes of determining the original issue discount includible in a Regular Interestholder’s income. The total amount of original issue discount on a Regular Interest is the excess of the “stated redemption price at maturity” of the Regular Interest over its “issue price”. The issue price of a class of Regular Interests is the first price at which a substantial amount of Regular Interests of such class is sold to investors (excluding bond houses, brokers and underwriters). Although unclear under the OID Regulations, the Certificate Administrator will treat the issue price of Regular Interests for which there is no substantial sale for cash as of the issue date as the fair market value of such Regular Interests as of the issue date. The issue price of the Regular Interests also includes the amount paid by an initial Regular Interestholder for accrued interest that relates to a period prior to the issue date of such class of Regular Interests. The stated redemption price at maturity of a Regular Interest is the sum of all payments to be made on the Regular Interest other than any qualified stated interest payments. Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate or a qualified variable rate;provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the obligation. Because there is no penalty or default remedy in the case of nonpayment of interest with respect to a Regular Interest, it is possible that no interest on any class of Regular Interests will be treated as qualified stated interest. However, because the Mortgage Loans provide for remedies in the event of default, the Certificate Administrator will treat all payments of stated interest on the Regular Interests (other than the Class X-A and Class X-B Certificates) as qualified stated interest (other than accrued interest distributed on the first Distribution Date for the number of days that exceed the interval between the Closing Date and the first Distribution Date). Based on the foregoing, it is anticipated that the Class C Trust Component will be issued with original issue discount for federal income tax purposes.
It is anticipated that the Certificate Administrator will treat the Class X-A and Class X-B Certificates as having no qualified stated interest. Accordingly, such classes will be considered to be issued with original issue discount in an amount equal to the excess of all distributions of interest expected to be received on such classes over their respective issue prices (including interest accrued prior to the Closing Date). Any “negative” amounts of original issue discount on such classes attributable to rapid prepayments with respect to the Mortgage Loans will not be deductible currently. The holder of a Class X-A or Class X-B Certificate may be entitled to a deduction for a loss, which may be a capital loss, to the extent it becomes certain that such holder will not recover a portion of its basis in such class, assuming no further prepayments. In the alternative, it is possible that rules similar to the “noncontingent bond method” of the contingent interest rules of the OID Regulations may be promulgated with respect to such classes. Unless and until required otherwise by applicable authority, it is not anticipated that the contingent interest rules will apply.
454 |
Under ade minimis rule, original issue discount on a Regular Interest will be considered to bede minimis if such original issue discount is less than 0.25% of the stated redemption price at maturity of the Regular Interest multiplied by the weighted average maturity of the Regular Interest. For this purpose, the weighted average maturity of the Regular Interest is computed as the sum of the amounts determined by multiplying the number of full years (i.e., rounding down for partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each distribution included in the stated redemption price at maturity of the Regular Interest and the denominator of which is the stated redemption price at maturity or anticipated repayment date of the Regular Interest. The Conference Committee Report to the 1986 Act provides that the schedule of such distributions should be determined in accordance with the assumed rate of prepayment on the Mortgage Loans used in pricing the transaction,i.e., 0% CPR;provided, that it is assumed that any ARD Loan will prepay in full on its Anticipated Repayment Date (the “Prepayment Assumption”). See “Yield, Prepayment and Maturity Considerations—Weighted Average Life of the Offered Certificates”. Holders generally must reportde minimis original issue discountpro rata as principal payments are received, and such income will be capital gain if the Regular Interest is held as a capital asset. Under the OID Regulations, however, Regular Interestholders may elect to accrue allde minimis original issue discount, as well as market discount and premium, under the constant yield method. See “—Taxation of the Regular Interests—Election to Treat All Interest Under the Constant Yield Method” below.
A holder of a Regular Interest issued with original issue discount generally must include in gross income for any taxable year the sum of the “daily portions”, as defined below, of the original issue discount on the Regular Interest accrued during an accrual period for each day on which it holds the Regular Interest, including the date of purchase but excluding the date of disposition. With respect to each such Regular Interest, a calculation will be made of the original issue discount that accrues during each successive full accrual period that ends on the day prior to each Distribution Date with respect to the Regular Interests, assuming that prepayments and extensions with respect to the Mortgage Loans will be made in accordance with the Prepayment Assumption. The original issue discount accruing in a full accrual period will be the excess, if any, of (i) the sum of (a) the present value of all of the remaining distributions to be made on the Regular Interest as of the end of that accrual period and (b) the distributions made on the Regular Interest during the accrual period that are included in the Regular Interest’s stated redemption price at maturity, over (ii) the adjusted issue price of the Regular Interest at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence is calculated based on (i) the yield to maturity of the Regular Interest as of the Startup Day, (ii) events (including actual prepayments) that have occurred prior to the end of the accrual period, and (iii) the assumption that the remaining payments will be made in accordance with the original Prepayment Assumption. For these purposes, the adjusted issue price of a Regular Interest at the beginning of any accrual period equals the issue price of the Regular Interest, increased by the aggregate amount of original issue discount with respect to the Regular Interest that accrued in all prior accrual periods and reduced by the amount of distributions included in the Regular Interest’s stated redemption price at maturity that were made on the Regular Interest that were attributable to such prior periods. The original issue discount accruing during any accrual period (as determined in this paragraph) will then be divided by the number of days in the period to determine the daily portion of original issue discount for each day in the period.
Under the method described above, the daily portions of original issue discount required to be included as ordinary income by a Regular Interestholder (other than a holder of a Class X-A or Class X-B Certificate) generally will increase to take into account prepayments on the Regular Interests as a result of prepayments on the Mortgage Loans that exceed the Prepayment Assumption, and generally will decrease (but not below zero for any period) if the prepayments are slower than the Prepayment Assumption. Due to the unique nature of interest-only Certificates, the preceding sentence may not apply in the case of the Class X-A or Class X-B Certificates.
Acquisition Premium
A purchaser of a Regular Interest at a cost, excluding any portion of that cost attributable to accrued qualified stated interest, greater than its adjusted issue price and less than its remaining stated redemption price at maturity will be required to include in gross income the daily portions of the original issue discount on the Regular Interest reducedpro rata by a fraction, the numerator of which is the excess of the cost over the adjusted issue price and the denominator of which is the excess of the remaining stated redemption price at maturity over the adjusted issue price. Alternatively, such a purchaser may elect to treat all such acquisition premium under the constant yield method, as described under the heading “—Taxation of the Regular Interests—Election to Treat All Interest Under the Constant Yield Method” below.
455 |
Market Discount
A purchaser of a Regular Interest also may be subject to the market discount rules of Code Sections 1276 through 1278. Under these Code sections and the principles applied by the OID Regulations in the context of original issue discount, “market discount” is the amount by which the purchaser’s original basis in the Regular Interest (i) is exceeded by the remaining outstanding principal payments and non-qualified stated interest payments due on the Regular Interest, or (ii) in the case of a Regular Interest having original issue discount, is exceeded by the adjusted issue price of the Regular Interest at the time of purchase. Such purchaser generally will be required to recognize ordinary income to the extent of accrued market discount on such Regular Interest as distributions includible in its stated redemption price at maturity are received, in an amount not exceeding any such distribution. Such market discount would accrue in a manner to be provided in Treasury regulations and should take into account the Prepayment Assumption. The Conference Committee Report to the 1986 Act provides that until such regulations are issued, such market discount would accrue, at the election of the holder, either (i) on the basis of a constant interest rate or (ii) in the ratio of interest accrued for the relevant period to the sum of the interest accrued for such period plus the remaining interest after the end of such period, or, in the case of classes issued with original issue discount, in the ratio of original issue discount accrued for the relevant period to the sum of the original issue discount accrued for such period plus the remaining original issue discount after the end of such period. Such purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Interest as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial distributions in reduction of the stated redemption price at maturity were received. Such purchaser will be required to defer deduction of a portion of the excess of the interest paid or accrued on indebtedness incurred to purchase or carry the Regular Interest over the interest (including original issue discount) distributable on the Regular Interest. The deferred portion of such interest expense in any taxable year generally will not exceed the accrued market discount on the Regular Interest for such year. Any such deferred interest expense is, in general, allowed as a deduction not later than the year in which the related market discount income is recognized or the Regular Interest is disposed of. As an alternative to the inclusion of market discount in income on the foregoing basis, the Regular Interestholder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by such Regular Interestholder in that taxable year or thereafter, in which case the interest deferral rule will not apply. See “—Taxation of the Regular Interests—Election to Treat All Interest Under the Constant Yield Method” below regarding making the election under Code Section 171 and an alternative manner in which such election may be deemed to be made.
Market discount with respect to a Regular Interest will be considered to bede minimis if such market discount is less than 0.25% of the remaining stated redemption price at maturity of such Regular Interest multiplied by the weighted average maturity of the Regular Interest remaining after the date of purchase. For this purpose, the weighted average maturity is determined by multiplying the number of full years (i.e., rounding down for partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each such distribution included in the stated redemption price at maturity of the Regular Interest and the denominator of which is the total stated redemption price at maturity of the Regular Interest. It appears thatde minimis market discount would be reportedpro rata as principal payments are received. Treasury regulations implementing the market discount rules have not yet been proposed, and investors should therefore consult their own tax advisors regarding the application of these rules as well as the advisability of making any of the elections with respect to such rules. Investors should also consult Revenue Procedure 92-67 concerning the elections to include market discount in income currently and to accrue market discount on the basis of the constant yield method.
Premium
A Regular Interest purchased upon initial issuance or in the secondary market at a cost, excluding any portion of that cost attributable to accrued qualified stated interest, greater than its remaining stated redemption price at maturity generally is considered to be purchased at a premium. If the Regular Interestholder holds such Regular Interest as a “capital asset” within the meaning of Code Section 1221, the Regular Interestholder may elect under Code Section 171 to amortize such premium under the constant yield method. See “—Taxation of the Regular Interests—Election to Treat All Interest Under the Constant Yield Method” below regarding making the election under Code Section 171 and an alternative manner in which the Code Section 171 election may be deemed to be made. Final Treasury regulations under Code Section 171 do not, by their terms, apply to prepayable obligations such as the Regular Interests. The Conference Committee Report to the 1986 Act indicates a Congressional intent that the same rules that will apply to the accrual of market discount on
456 |
installment obligations will also apply to amortizing bond premium under Code Section 171 on installment obligations such as the Regular Interests, although it is unclear whether the alternatives to the constant interest method described above under “—Taxation of the Regular Interests—Market Discount” are available. Amortizable bond premium will be treated as an offset to interest income on a Regular Interest rather than as a separate deduction item. It is anticipated that the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-AB Certificatesand the Class A-S and Class B Trust Components will be issued at a premium for federal income tax purposes.
Election to Treat All Interest Under the Constant Yield Method
A holder of a debt instrument such as a Regular Interest may elect to treat all interest that accrues on the instrument using the constant yield method, with none of the interest being treated as qualified stated interest. For purposes of applying the constant yield method to a debt instrument subject to such an election, (i) “interest” includes stated interest, original issue discount,de minimis original issue discount, market discount andde minimis market discount, as adjusted by any amortizable bond premium or acquisition premium and (ii) the debt instrument is treated as if the instrument were issued on the holder’s acquisition date in the amount of the holder’s adjusted basis immediately after acquisition. It is unclear whether, for this purpose, the initial Prepayment Assumption would continue to apply or if a new prepayment assumption as of the date of the holder’s acquisition would apply. A holder generally may make such an election on an instrument by instrument basis or for a class or group of debt instruments. However, if the holder makes such an election with respect to a debt instrument with amortizable bond premium or with market discount, the holder is deemed to have made elections to amortize bond premium or to report market discount income currently as it accrues under the constant yield method, respectively, for all premium bonds held or acquired or market discount bonds acquired by the holder on the first day of the year of the election or thereafter. The election is made on the holder’s federal income tax return for the year in which the debt instrument is acquired and is irrevocable except with the approval of the IRS. Investors are encouraged to consult their tax advisors regarding the advisability of making such an election.
Treatment of Losses
Holders of the Regular Interests will be required to report income with respect to the Regular Interests on the accrual method of accounting, without giving effect to delays or reductions in distributions attributable to defaults or delinquencies on the Mortgage Loans, except to the extent it can be established that such losses are uncollectible. Accordingly, a Regular Interestholder may have income, or may incur a diminution in cash flow as a result of a default or delinquency, but may not be able to take a deduction (subject to the discussion below) for the corresponding loss until a subsequent taxable year. In this regard, investors are cautioned that while they generally may cease to accrue interest income if it reasonably appears that the interest will be uncollectible, the IRS may take the position that original issue discount must continue to be accrued in spite of its uncollectibility until the debt instrument is disposed of in a taxable transaction or becomes worthless in accordance with the rules of Code Section 166. The following discussion may not apply to holders of interest-only Regular Interests. Under Code Section 166, it appears that holders of Regular Interests that are corporations or that otherwise hold the Regular Interests in connection with a trade or business should in general be allowed to deduct as an ordinary loss any such loss sustained (and not previously deducted) during the taxable year on account of such Regular Interests becoming wholly or partially worthless, and that, in general, holders of Regular Interests that are not corporations and do not hold the Regular Interests in connection with a trade or business will be allowed to deduct as a short term capital loss any loss with respect to principal sustained during the taxable year on account of such Regular Interests becoming wholly worthless (i.e., when the principal balance thereof has been reduced to zero). Such non-corporate holders of Regular Interests may be allowed a bad debt deduction at such time as the principal balance of such Regular Interests is reduced to reflect losses on the Mortgage Loans below such holder’s basis in the Regular Interests. The IRS, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect such losses only after the classes of Regular Interests have been otherwise retired. The IRS could also assert that losses on a class of Regular Interests are deductible based on some other method that may defer such deductions for all holders, such as reducing future cash flow for purposes of computing original issue discount. This may have the effect of creating “negative” original issue discount that, with the possible exception of the method discussed in the following sentence, would be deductible only against future positive original issue discount or otherwise upon termination of the applicable class. Although not free from doubt, a holder of Regular Interests with negative original issue discount may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such holder was entitled, assuming no further prepayments. Notwithstanding the foregoing, it is not clear whether holders of interest-only Regular Interests, such as the Class X-A and Class X-B Certificates, will be allowed any deductions under Code Section 166 for bad debt losses. Regular Interestholders are urged to consult their own tax advisors
457 |
regarding the appropriate timing, amount and character of any loss sustained with respect to such Regular Interests. Special loss rules are applicable to banks and thrift institutions, including rules regarding reserves for bad debts. Such taxpayers are advised to consult their tax advisors regarding the treatment of losses on the Regular Interests.
Prepayment Premiums and Yield Maintenance Charges
Prepayment premiums and yield maintenance charges actually collectedon the Mortgage Loans will be distributed among the holders of the respective Classes of Certificates as described under “Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums”. It is not entirely clear under the Code when the amount of prepayment premiums or yield maintenance charges so allocated should be taxed to holders of Offered Certificates, but it is not expected, for federal income tax reporting purposes, that prepayment premiums and yield maintenance charges will be treated as giving rise to any income to holders of Offered Certificates prior to the Master Servicer’s actual receipt of a prepayment premium or yield maintenance charge. Prepayment premiums and yield maintenance charges, if any, may be treated as ordinary income, although authority exists for treating such amounts as capital gain if they are treated as paid upon the retirement or partial retirement of a certificate. The IRS may disagree with these positions. Certificateholders should consult their own tax advisors concerning the treatment of prepayment premiums and yield maintenance charges.
Sale or Exchange of Regular Interests
If a Regular Interestholder sells or exchanges a Regular Interest, such Regular Interestholder will recognize gain or loss equal to the difference, if any, between the amount received and its adjusted basis in the Regular Interest. The adjusted basis of a Regular Interest generally will equal the cost of the Regular Interest to the seller, increased by any original issue discount or market discount previously included in the seller’s gross income with respect to the Regular Interest and reduced by amounts included in the stated redemption price at maturity of the Regular Interest that were previously received by the seller, by any amortized premium, and by any deductible losses on the Regular Interest.
In addition to the recognition of gain or loss on actual sales, Code Section 1259 requires the recognition of gain, but not loss, upon the constructive sale of an appreciated financial position. A constructive sale of an appreciated financial position occurs if a taxpayer enters into a transaction or series of transactions that have the effect of substantially eliminating the taxpayer’s risk of loss and opportunity for gain with respect to the financial instrument. Debt instruments that entitle the holder to a specified principal amount, pay interest at a fixed or variable rate, and are not convertible into the stock of the issuer or a related party, cannot be the subject of a constructive sale for this purpose. Because most Regular Interests meet this exception, Code Section 1259 will not apply to most Regular Interests. However, Regular Interests that have no, or a disproportionately small, amount of principal, can be the subject of a constructive sale.
Except as described above with respect to market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a Regular Interest realized by an investor that holds the Regular Interest as a capital asset will be capital gain or loss and will be long term or short term depending on whether the Regular Interest has been held for the long term capital gain holding period (more than one year). Such gain will be treated as ordinary income: (i) if the Regular Interest is held as part of a “conversion transaction” as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the Regular Interestholder’s net investment in the conversion transaction at 120% of the appropriate applicable federal rate under Code Section 1274(d) in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as part of such transaction; (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates; or (iii) to the extent that such gain does not exceed the excess, if any, of (a) the amount that would have been includible in the gross income of the Regular Interestholder if his yield on such Regular Interest were 110% of the applicable federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of such Regular Interestholder with respect to the Regular Interest. In addition, gain or loss recognized from the sale of a Regular Interest by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Long-term capital gains of certain non-corporate taxpayers generally are subject to a lower maximum tax rate than ordinary income of such taxpayers for property held for more than one year. The maximum tax rate for corporations is the same with respect to both ordinary income and capital gains.
458 |
Taxation of Class EC and Exchangeable Certificates
The portion of the Issuing Entity consisting of the Trust Components and the Exchangeable Distribution Account will be classified as a grantor trust under subpart E, part I of subchapter J of the Code, and the Class EC Certificates and each Class of Exchangeable Certificates will evidence undivided beneficial ownership of all or a portion of the related Trust Component or Trust Components. The holder of a Class EC Certificate generally must account separately for its interest in each Trust Component as a separate Regular Interest. See “—Taxation of the Regular Interests” above. A purchaser of a Class EC Certificate must allocate its basis in such certificate among the Trust Components represented by such certificate in accordance with their relative fair market values as of the time of acquisition. Similarly, on the sale of a Class EC Certificate, the holder must allocate the amount received on the sale among the Trust Components represented by such Certificate in accordance with their relative fair market values as of the time of sale.
The exchange of the requisite proportions of the Class A-S, Class B and Class C Certificates for the Class EC Certificates, and the exchange of the Class EC Certificates for the requisite proportions of the Class A-S, Class B and Class C Certificates will not be taxable.
Under the OID Regulations, if two or more debt instruments are issued in connection with the same transaction or related transaction (determined based on all the facts and circumstances), those debt instruments are treated as a single debt instrument for purposes of the provisions of the Code applicable to original issue discount, unless an exception applies. Under this rule, if a Class EC Certificate represents beneficial ownership of two or more Trust Components, those Trust Components could be treated as a single debt instrument for original issue discount purposes. In addition, if the two or more Trust Components underlying a Class EC Certificate were aggregated for original issue discount purposes and a beneficial owner of such certificate were to (i) exchange that certificate for separate Exchangeable Certificates, (ii) sell one of those separate Exchangeable Certificates and (iii) retain one or more of the remaining separate Exchangeable Certificates, the beneficial owner might be treated as having engaged in a “coupon stripping” or “bond stripping” transaction within the meaning of Code Section 1286. Under Code Section 1286, a beneficial owner of a Class EC Certificate that engages in a coupon stripping or bond stripping transaction must allocate its basis in the certificate between the separate Exchangeable Certificates sold and the separate Exchangeable Certificates retained in proportion to the relative fair market values of the related Trust Component or Trust Components as of the date of the stripping transaction. The beneficial owner then must recognize gain or loss on the separate Exchangeable Certificates sold using its basis allocable to the related Trust Component or Trust Components. Also, the beneficial owner then must treat the Trust Component or Trust Components relating to the separate Exchangeable Certificates retained as a newly issued debt instrument that was purchased for an amount equal to the beneficial owner’s basis allocable to that Trust Component or Trust Components. Accordingly, the beneficial owner must accrue interest and original issue discount with respect to the separate Exchangeable Certificates retained based on the beneficial owner’s basis in the related Trust Component or Trust Components.
As a result, when compared to treating each Trust Component underlying a Class EC Certificate as a separate debt instrument, aggregating the Trust Components underlying a Class EC Certificate could affect the timing and character of income recognized by a beneficial owner of a Class EC Certificate. Moreover, if Code Section 1286 were to apply to a beneficial owner of a Class EC Certificate, much of the information necessary to perform the related calculations for information reporting purposes generally would not be available to the Certificate Administrator. Because it may not be clear whether the aggregation rule in the OID Regulations applies to the Class EC Certificates and due to the Certificate Administrator’s lack of information necessary to report computations that might be required by Code Section 1286, the Certificate Administrator will treat each Trust Component underlying a Class EC Certificate as a separate debt instrument for information reporting purposes. Prospective investors should note that, if the two or more Trust Components underlying a Class EC Certificate were aggregated, the timing of accruals of original issue discount applicable to a Class EC Certificate could be different than that reported to holders and the IRS. Prospective investors are advised to consult their own tax advisors regarding any possible tax consequences to them if the IRS were to assert that the Trust Components underlying the Class EC Certificates should be aggregated for original issue discount purposes.
Prospective beneficial owners of Class EC Certificates and/or Exchangeable Certificates should consult their own tax advisors as to the appropriate method of accounting for their interest in those Certificates.
459 |
Taxes That May Be Imposed on a REMIC
Prohibited Transactions
Income from certain transactions by any Trust REMIC, called prohibited transactions, will not be part of the calculation of income or loss includible in the federal income tax returns of holders of the Class R Certificates, but rather will be taxed directly to the Trust REMIC at a 100% rate. Prohibited transactions generally include (i) the disposition of a qualified mortgage other than for (a) substitution within two years of the REMIC’s startup day for a defective (including a defaulted) obligation (or repurchase in lieu of substitution of a defective (including a defaulted) obligation at any time) or for any qualified mortgage within three months of the REMIC’s startup day, (b) foreclosure, default or imminent default of a qualified mortgage, (c) bankruptcy or insolvency of the REMIC, or (d) a qualified (complete) liquidation, (ii) the receipt of income from assets that are not the type of mortgages or investments that the REMIC is permitted to hold, (iii) the receipt of compensation for services or (iv) the receipt of gain from disposition of cash flow investments other than pursuant to a qualified liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction to sell REMIC property to prevent a default on regular interests as a result of a default on qualified mortgages or to facilitate a qualified liquidation or a clean-up call. The REMIC Regulations indicate that the modification of a mortgage loan generally will not be treated as a disposition if it is occasioned by a default or reasonably foreseeable default, an assumption of a mortgage loan or the waiver of a “due-on-sale” or “due-on-encumbrance” clause. It is not anticipated that the Trust REMICs will engage in any prohibited transactions.
Contributions to a REMIC After the Startup Day
In general, a REMIC will be subject to a tax at a 100% rate on the value of any property contributed to the REMIC after its startup day. Exceptions are provided for cash contributions to the REMIC (i) during the three months following its startup day, (ii) made to a qualified reserve fund by a holder of a Class R certificate, (iii) in the nature of a guarantee, (iv) made to facilitate a qualified liquidation or clean-up call, and (v) as otherwise permitted in Treasury regulations yet to be issued. It is not anticipated that there will be any taxable contributions to the Trust REMICs.
Net Income from Foreclosure Property
The Lower-Tier REMIC will be subject to federal income tax at the highest corporate rate on “net income from foreclosure property”, determined by reference to the rules applicable to real estate investment trusts. Generally, property acquired by foreclosure or deed-in-lieu of foreclosure would be treated as “foreclosure property” until the close of the third calendar year beginning after the Lower-Tier REMIC’s acquisition of a REO Property, with a possible extension. Net income from foreclosure property generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust.
In order for a foreclosed property to qualify as foreclosure property, any operation of the foreclosed property by the Lower-Tier REMIC generally must be conducted through an independent contractor. Further, such operation, even if conducted through an independent contractor, may give rise to “net income from foreclosure property”, taxable at the highest corporate rate. Payment of such tax by the Lower-Tier REMIC would reduce amounts available for distribution to Certificateholders.
The Special Servicer will be required to determine generally whether the operation of foreclosed property in a manner that would subject the Lower-Tier REMIC to such tax would be expected to result in higher after-tax proceeds than an alternative method of operating such property that would not subject the Lower-Tier REMIC to such tax.
Bipartisan Budget Act of 2015
On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015 (the “2015 Budget Act”), which includes new audit rules affecting entities treated as partnerships, their partners and the persons that are authorized to represent entities treated as partnerships in IRS audits and related procedures. Under the 2015 Budget Act, these rules will also apply to REMICs, the holders of their residual interests and the trustees authorized to represent REMICs in IRS audits and related procedures (“tax matters persons”). These
460 |
new audit rules are scheduled to become effective for taxable years beginning with 2018 and will apply to both new and existing REMICs.
In addition to other changes, under the 2015 Budget Act, (1) unless a REMIC elects otherwise, taxes arising from IRS audit adjustments are required to be paid by the REMIC rather than by its residual interest holders, (2) a REMIC appoints one person to act as its sole representative in connection with IRS audits and related procedures and that representative’s actions, including agreeing to adjustments to REMIC taxable income, will be binding on residual interest holders to a greater degree than a tax matters person’s actions under the current rules and (3) if the IRS makes an adjustment to a REMIC’s taxable year, the holders of residual interests for the audited taxable year may have to take the adjustment into account for the taxable year in which the adjustment is made rather than for the audited taxable year and otherwise may have to take the adjustment into account in different and potentially less advantageous ways than under current rules.
The parties responsible for the tax administration of the Trust REMICs described herein will have the authority to utilize, and will be directed to utilize, any exceptions available under the new provisions (including any changes) and IRS regulations so that a Trust REMIC’s residual interest holders, to the fullest extent possible, rather than the Trust REMIC itself, will be liable for any taxes arising from audit adjustments to the Trust REMIC’s taxable income. It is unclear how any such exceptions may affect the procedural rules available to challenge any audit adjustment that would otherwise be available in the absence of any such exceptions. The new rules are complex and likely will be clarified and possibly revised before going into effect. Residual interest holders should discuss with their own tax advisors the possible effect of the new rules on them.
Taxation of Certain Foreign Investors
Interest, including original issue discount, distributable to Regular Interestholders that are nonresident aliens, foreign corporations or other Non-U.S. Tax Persons will be considered “portfolio interest” and, therefore, generally will not be subject to a 30% United States withholding tax;provided that such Non-U.S. Tax Person (i) is not a “10 percent shareholder” within the meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation described in Code Section 881(c)(3)(C) with respect to the Trust REMICs and (ii) provides the Certificate Administrator, or the person that would otherwise be required to withhold tax from such distributions under Code Section 1441 or 1442, with an appropriate statement, signed under penalties of perjury, identifying the beneficial owner and stating, among other things, that the beneficial owner of the Regular Interest is a Non-U.S. Tax Person. The appropriate documentation includes IRS Form W-8BEN-E or W-8BEN, if the Non-U.S. Tax Person is an entity (such as a corporation) or individual, respectively, eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; IRS Form W-8ECI if the Non-U.S. Tax Person is eligible for an exemption on the basis of its income from the Regular Interest being effectively connected to a United States trade or business; IRS Form W-8BEN-E or W-8IMY if the Non-U.S. Tax Person is a trust, depending on whether such trust is classified as the beneficial owner of the Regular Interest; and Form W-8IMY, with supporting documentation as specified in the Treasury regulations, required to substantiate exemptions from withholding on behalf of its partners, if the Non-U.S. Tax Person is a partnership. With respect to IRS Forms W-8BEN, W-8BEN-E, W-8IMY and W-8ECI, each (other than IRS Form W-8IMY) expires after three full calendar years or as otherwise provided by applicable law. An intermediary (other than a partnership) must provide IRS Form W-8IMY, revealing all required information, including its name, address, taxpayer identification number, the country under the laws of which it is created, and certification that it is not acting for its own account. A “qualified intermediary” must certify that it has provided, or will provide, a withholding statement as required under Treasury regulations Section 1.1441-1(e)(5)(v), but need not disclose the identity of its account holders on its IRS Form W-8IMY, and may certify its account holders’ status without including each beneficial owner’s certification. A “non-qualified intermediary” must additionally certify that it has provided, or will provide, a withholding statement that is associated with the appropriate IRS Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its beneficial owners. The term “intermediary” means a person acting as a custodian, a broker, nominee or otherwise as an agent for the beneficial owner of a Regular Interest. A “qualified intermediary” is generally a foreign financial institution or clearing organization or a non-U.S. branch or office of a U.S. financial institution or clearing organization that is a party to a withholding agreement with the IRS.
If such statement, or any other required statement, is not provided, 30% withholding will apply unless reduced or eliminated pursuant to an applicable tax treaty or unless the interest on the Regular Interest is effectively connected with the conduct of a trade or business within the United States by such Non-U.S. Tax Person. In the latter case, such Non-U.S. Tax Person will be subject to United States federal income tax at
461 |
regular rates. Investors that are Non-U.S. Tax Persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Regular Interest.
The term “U.S. Tax Person” means a citizen or resident of the United States, a corporation, partnership (except to the extent provided in the applicable Treasury regulations) or other entity created or organized in or under the laws of the United States, any State or the District of Columbia, including any entity treated as a corporation or partnership for federal income tax purposes, an estate that is subject to U.S. federal income tax regardless of the source of income, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such U.S. Tax Persons have the authority to control all substantial decisions of such trust (or, to the extent provided in the applicable Treasury regulations, certain trusts in existence on August 20, 1996 that have elected to be treated as U.S. Tax Persons). The term “Non-U.S. Tax Person” means a person other than a U.S. Tax Person.
FATCA
Under the “Foreign Account Tax Compliance Act” (“FATCA”) provisions of the Hiring Incentives to Restore Employment Act, a 30% withholding tax is generally imposed on certain payments, including U.S.-source interest and, beginning on January 1, 2019, and gross proceeds from the disposition of debt obligations that give rise to U.S.-source interest to “foreign financial institutions” and certain other foreign financial entities if those foreign entities fail to comply with the requirements of FATCA. The Certificate Administrator will be required to withhold amounts under FATCA on payments made to holders who are subject to the FATCA requirements and who fail to provide the Certificate Administrator with proof that they have complied with such requirements. Prospective investors should consult their tax advisors regarding the applicability of FATCA to their Certificates.
Backup Withholding
Distributions made on the Certificates, and proceeds from the sale of the Certificates to or through certain brokers, may be subject to a “backup” withholding tax under Code Section 3406 on “reportable payments” (including interest distributions, original issue discount and, under certain circumstances, principal distributions) unless the Certificateholder is a U.S. Tax Person and provides IRS Form W-9 with the correct taxpayer identification number; in the case of the Regular Interests, is a Non-U.S. Tax Person and provides IRS Form W-8BEN or W-8BEN-E, as applicable, identifying the Non-U.S. Tax Person and stating that the beneficial owner is not a U.S. Tax Person; or can be treated as an exempt recipient within the meaning of Treasury regulations Section 1.6049-4(c)(1)(ii). Any amounts to be withheld from distribution on the Certificates would be refunded by the IRS or allowed as a credit against the Certificateholder’s federal income tax liability. Information reporting requirements may also apply regardless of whether withholding is required. Holders are urged to contact their own tax advisors regarding the application to them of backup withholding and information reporting.
Information Reporting
Holders who are individuals (and certain domestic entities that are formed or availed of for purposes of holding, directly or indirectly, “specified foreign financial assets”) may be subject to certain foreign financial asset reporting obligations with respect to their Certificates held through a financial account maintained by a foreign financial institution if the aggregate value of their Certificates and their other “specified foreign financial assets” exceeds $50,000. Significant penalties can apply if a holder fails to disclose its specified foreign financial assets. Holders are urged to consult their own tax advisors with respect to this and other reporting obligations with respect to their Certificates.
3.8% Medicare Tax on “Net Investment Income”
Certain non-corporate U.S. holders will be subject to an additional 3.8% tax on all or a portion of their “net investment income”, which may include the interest payments and any gain realized with respect to the Certificates, to the extent of their net investment income that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married individual filing a separate return. The 3.8% Medicare tax is determined in a different manner than the regular income tax. U.S. holders should consult their tax advisors with respect to their consequences with respect to the 3.8% Medicare tax.
462 |
Reporting Requirements
Each Trust REMIC will be required to maintain its books on a calendar year basis and to file federal income tax returns in a manner similar to a partnership. The form for such returns is IRS Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return. The Trustee will be required to sign each Trust REMIC’s returns.
Reports of accrued interest, original issue discount, if any, and information necessary to compute the accrual of any market discount on the Regular Interests will be made annually to the IRS and to individuals, estates, non-exempt and non-charitable trusts, and partnerships that are either Regular Interestholders or beneficial owners that own Regular Interests through a broker or middleman as nominee. All brokers, nominees and all other nonexempt Regular Interestholders (including corporations, non-calendar year taxpayers, securities or commodities dealers, placement agents, real estate investment trusts, investment companies, common trusts, thrift institutions and charitable trusts) may request such information for any calendar quarter by telephone or in writing by contacting the person designated in IRS Publication 938 with respect to the Trust REMIC. Holders through nominees must request such information from the nominee.
Treasury regulations require that, in addition to the foregoing requirements, information must be furnished annually to the Regular Interestholders and filed annually with the IRS concerning the percentage of each Trust REMIC’s assets meeting the qualified asset tests described under “—Qualification as a REMIC” above.
The Certificate Administrator will be required to file IRS Form 1099 (or any successor form) with the IRS with respect to holders of Class EC Certificates and Exchangeable Certificates who are not “exempt recipients” (a term that includes corporations, trusts, securities dealers, middlemen and certain other non-individuals) and do not hold such Certificates through a middleman, to report the Issuing Entity’s gross income and, in certain circumstances, unless the Certificate Administrator reports under the safe harbor as described in the last sentence of this paragraph, if any assets of the Issuing Entity were disposed of or Certificates are sold in secondary market sales, the portion of the gross proceeds relating to the assets of the Issuing Entity that are attributable to such holder. The same requirements would be imposed on middlemen holding such Certificates on behalf of the related holders. Under certain circumstances, the Certificate Administrator may report under the safe harbor for widely-held mortgage trusts, as such term is defined under Treasury regulations Section 1.671-5. The Certificate Administrator will also be required to make available information regarding interest income and information necessary to compute any original issue discount to (i) exempt recipients (including middlemen) and non-calendar year taxpayers, upon request, in accordance with the requirements of the related Treasury regulations and (ii) certificateholders who do not hold their Certificates through a middleman. The information must be provided to parties specified inclause (i) on or before the later of the 30th day after the close of the calendar year to which the request relates and 14 days after the receipt of the request. The information must be provided to parties specified inclause (ii) on or before March 15 of the calendar year for which the statement is being furnished.
Tax Return Disclosure and Investor List Requirements
Treasury regulations directed at potentially abusive tax shelter activity appear to apply to transactions not conventionally regarded as tax shelters. The regulations require taxpayers to report certain disclosures on IRS Form 8886 if they participate in a “reportable transaction.” Organizers and sellers of the transaction are required to maintain records including investor lists containing identifying information and to furnish those records to the IRS upon demand. A transaction may be a “reportable transaction” based upon any of several indicia, one or more of which may be present with respect to an investment in the Certificates. There are significant penalties for failure to comply with these disclosure requirements. Investors in Certificates are encouraged to consult their own tax advisors concerning any possible disclosure obligation with respect to their investment, and should be aware that we and other participants in the transaction intend to comply with such disclosure and investor list maintenance requirements as we and they determine apply to us and them with respect to the transaction.
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE MANNER OF THEIR APPLICATION TO THE ISSUING ENTITY AND CERTIFICATEHOLDERS, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
463 |
Certain State, Local and Other Tax Considerations
In addition to the federal income tax consequences described in “Material Federal Income Tax Consequences” above, purchasers of Certificates should consider the state, local and other tax consequences of the acquisition, ownership, and disposition of the Certificates.State, local and other tax laws may differ substantially from the corresponding federal law, and this discussion does not purport to describe any aspect of the tax laws of any state, locality or foreign jurisdiction.
It is possible that one or more jurisdictions may attempt to tax nonresident holders of Certificates solely by reason of the location in that jurisdiction of the Depositor, the Trustee, the Certificate Administrator, the Sponsors, a related borrower or a mortgaged property or on some other basis, may require nonresident holders of Certificates to file returns in such jurisdiction or may attempt to impose penalties for failure to file such returns; and it is possible that any such jurisdiction will ultimately succeed in collecting such taxes or penalties from nonresident holders of Certificates. No assurance can be given that holders of Certificates will not be subject to tax in any particular state, local or other taxing jurisdiction.
Holders are urged to consult their own tax advisors with respect to the various state and local, and any other, tax consequences of an investment in the Certificates.
ERISA Considerations
General
The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes various requirements on—
· | ERISA Plans, and |
· | persons that are fiduciaries with respect to ERISA Plans, |
in connection with the investment of the assets of an ERISA Plan. For purposes of this discussion, “ERISA Plans” include corporate pension and profit sharing plans that are subject to Title I of ERISA as well as separate accounts and collective investment funds, including as applicable, insurance company general accounts, in which other ERISA Plans are invested.
Governmental plans and, if they have not made an election under Section 410(d) of the Internal Revenue Code, church plans are not subject to ERISA requirements. However, those plans may be subject to provisions of other applicable federal or state law that are materially similar to the provisions of ERISA or the Internal Revenue Code discussed in this section. Any of those plans which is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code, moreover, is subject to the prohibited transaction rules in Section 503 of the Internal Revenue Code.
ERISA imposes general fiduciary requirements on a fiduciary that is investing the assets of an ERISA Plan, including—
· | investment prudence and diversification, and |
· | compliance with the investing ERISA Plan’s governing documents. |
Section 406 of ERISA also prohibits a broad range of transactions involving the assets of an ERISA Plan and a “party in interest” within the meaning of Section 3(14) of ERISA (a “Party in Interest”) with respect to that ERISA Plan, unless a statutory or administrative exemption applies. Section 4975 of the Internal Revenue Code contains similar prohibitions applicable to transactions involving the assets of a “plan” subject to Section 4975 of the Internal Revenue Code and “disqualified persons” with respect to such plan. For ease of reference, the term “Party in Interest” should be read to include such “disqualified persons” under Section 4975 of the Code. For purposes of this discussion, Plans include ERISA Plans as well as individual retirement accounts, Keogh plans and other plans subject to Section 4975 of the Internal Revenue Code, including entities, funds or accounts deemed to hold “plan assets” thereof.
464 |
The types of transactions between Plans and Parties in Interest that are prohibited include:
· | sales, exchanges or leases of property; |
· | loans or other extensions of credit; and |
· | the furnishing of goods and services. |
Parties in Interest that participate in a prohibited transaction may be subject to an excise tax imposed under Section 4975 of the Internal Revenue Code or a penalty imposed under Section 502(i) of ERISA, unless a statutory or administrative exemption is available. In addition, the persons involved in the prohibited transaction may have to cancel the transaction and pay an amount to the affected Plan for any losses realized by that Plan or profits realized by those persons. In addition, an individual retirement account involved in the prohibited transaction may be disqualified which would result in adverse tax consequences to the owner of the account.
An investor who is—
· | a fiduciary of a Plan, or |
· | any other person investing “plan assets” of any Plan, |
is encouraged to carefully review with their legal advisors whether the purchase or holding of an Offered Certificate would be a “prohibited transaction” or would otherwise be impermissible under ERISA or Section 4975 of the Code as discussed in this prospectus.
If a Plan acquires an Offered Certificate, the underlying assets of the trust fund will be deemed for purposes of ERISA to be assets of the investing Plan, unless certain exceptions apply. See “—Plan Asset Regulations” below. However, we cannot predict in advance, nor can there be any continuing assurance, whether those exceptions may be applicable because of the factual nature of the rules set forth in the plan asset regulations under U.S. Department of Labor Reg. Section 2510.3-101, as modified by Section 3(42) of ERISA (the “Plan Asset Regulations”). For example, one of the exceptions in the Plan Asset Regulations states that the underlying assets of an entity will not be considered “plan assets” if less than 25% of the value of each class of equity interests is held by “benefit plan investors,” which include Plans and entities whose underlying assets include plan assets by reason of a Plan’s investment in such entity, but this exception will be tested immediately after each acquisition of an Offered Certificate, whether upon initial issuance or in the secondary market. Because there are no relevant restrictions on the purchase and transfer of the Offered Certificates by Plans, it cannot be assured that benefit plan investors will own less than 25% of each Class of the Offered Certificates.
If one of the exceptions in the Plan Asset Regulations applies, the prohibited transaction provisions of ERISA and Section 4975 of the Code will not apply to transactions involving the Issuing Entity’s underlying assets. However, if any of the managers or co-manager, the mortgagors, the Trustee, the servicers or other parties providing services to the Issuing Entity is a party in interest or a disqualified person with respect to the Plan, the acquisition or holding of Offered Certificates by that Plan could result in a prohibited transaction, unless the Underwriter Exemption, as discussed below, or some other exemption is available.
Plan Asset Regulations
A Plan’s investment in Offered Certificates may cause the underlying mortgage assets and other assets of the trust to be deemed assets of that Plan. The Plan Asset Regulations provide that when a Plan acquires an equity interest in an entity, the assets of that Plan include both that equity interest and an undivided interest in each of the underlying assets of the entity, unless an exception applies. One exception is that the equity participation in the entity by benefit plan investors, which include employee benefit plans subject to Part 4 of Title I of ERISA, any plan to which Section 4975 of the Internal Revenue Code applies and any entity whose underlying assets include plan assets by reason of the plan’s investment in such entity, is not significant. The equity participation by benefit plan investors will be significant on any date if 25% or more of the value of any class of equity interests in the entity is held by benefit plan investors. The percentage owned by benefit plan investors is determined by excluding the investments of the following persons (other than benefit plan investors):
465 |
1. | those with discretionary authority or control over the assets of the entity, |
2. | those who provide investment advice directly or indirectly for a fee with respect to the assets of the entity, and |
3. | those who are affiliates of the persons described in the preceding clauses 1. and 2. |
In the case of one of our trusts, investments by us, by an underwriter, by the Trustee, the Master Servicer, the Special Servicer or any other party with discretionary authority over the trust assets, or by the affiliates of these persons, will be excluded.
A fiduciary of an investing Plan is any person who—
· | has discretionary authority or control over the management or disposition of the assets of that Plan, or |
· | provides investment advice with respect to the assets of that Plan for a fee. |
If the mortgage and other assets included in one of our trusts are Plan assets, then any party exercising management or discretionary control regarding those assets, such as the Trustee, Master Servicer or Special Servicer, or affiliates of any of these parties, may be¾
· | deemed to be a fiduciary with respect to the investing Plan, and |
· | subject to the fiduciary responsibility provisions of ERISA. |
In addition, if the mortgage and other assets included in one of our trusts are Plan assets, then the operation of that trust may involve prohibited transactions under ERISA or Section 4975 of the Internal Revenue Code. For example, if a borrower with respect to a Mortgage Loan in that trust is a Party in Interest to an investing Plan, then the purchase by that Plan of Offered Certificates evidencing interests in that trust could be a prohibited loan between that Plan and the Party in Interest.
The Plan Asset Regulations provide that where a Plan purchases a “guaranteed governmental mortgage pool certificate,” the assets of that Plan include the certificate but do not include any of the mortgages underlying the certificate. The Plan Asset Regulations include in the definition of a “guaranteed governmental mortgage pool certificate” some Certificates issued and/or guaranteed by Freddie Mac, Ginnie Mae, Fannie Mae or Farmer Mac. Accordingly, even if these types of mortgaged-backed securities were deemed to be assets of a Plan, the underlying mortgages would not be treated as assets of that Plan. Private label mortgage participations, mortgage pass-through Certificates or other mortgage-backed securities are not “guaranteed governmental mortgage pool Certificates” within the meaning of the Plan Asset Regulations.
In addition, the acquisition or holding of Offered Certificates by or on behalf of a Plan could give rise to a prohibited transaction if we or the Trustee, Master Servicer or Special Servicer or any underwriter, sub-servicer, tax administrator, manager, borrower or obligor under any credit enhancement mechanism, or one of their affiliates, is or becomes a Party in Interest with respect to an investing Plan.
If you are the fiduciary of a Plan, you are encouraged consult your counsel and review the ERISA discussion in this prospectus before purchasing any Offered Certificates.
Prohibited Transaction Exemptions
If you are a Plan fiduciary, then, in connection with your deciding whether to purchase any of the Offered Certificates on behalf of, or with assets of, a Plan, you should consider the availability of one of the following prohibited transaction class exemptions issued by the U.S. Department of Labor:
· | Prohibited Transaction Class Exemption 90-1, which exempts particular transactions between insurance company separate accounts and Parties in Interest; |
466 |
· | Prohibited Transaction Class Exemption 91-38, which exempts particular transactions between bank collective investment funds and Parties in Interest; |
· | Prohibited Transaction Class Exemption 84-14, which exempts particular transactions effected on behalf of a Plan by a “qualified professional asset manager;” |
· | Prohibited Transaction Class Exemption 95-60, which exempts particular transactions between insurance company general accounts and Parties in Interest; and |
· | Prohibited Transaction Class Exemption 96-23, which exempts particular transactions effected on behalf of an ERISA Plan by an “in-house asset manager.” |
We cannot provide any assurance that any of these class exemptions will apply with respect to any particular investment by or on behalf of a Plan in any Class of Offered Certificates. Furthermore, even if any of them were deemed to apply, that particular class exemption may not apply to all transactions that could occur in connection with the investment.
Underwriter Exemption
The U.S. Department of Labor has granted to certain underwriters individual administrative exemptions from application of certain of the prohibited transaction provisions of ERISA and Section 4975 of the Internal Revenue Code.
The U.S. Department of Labor issued an individual prohibited transaction exemption to a predecessor of Citigroup Global Markets Inc., Prohibited Transaction Exemption (“PTE”) 91-23 (April 18, 1991), and a substantially identical prohibited transaction exemption to Goldman, Sachs & Co., PTE 89-88 (October 17, 1989), both as amended by PTE 2013-08 (July 9, 2013) (collectively, the “Underwriter Exemption”). Subject to the satisfaction of conditions set forth in the Underwriter Exemption, it generally exempts from the application of the prohibited transaction provisions of Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed on these prohibited transactions under Sections 4975(a) and (b) of the Internal Revenue Code, specified transactions relating to, among other things—
· | the servicing and operation of pools of real estate loans, such as the mortgage pool, and |
· | the purchase, sale and holding of mortgage pass-through Certificates, such as the Offered Certificates, that are underwritten by an underwriter under the Underwriter Exemption. |
The Underwriter Exemption sets forth five general conditions which, among others, must be satisfied for a transaction involving the purchase, sale and holding of an Offered Certificate to be eligible for exemptive relief under the exemption. The conditions are as follows:
· | first, the acquisition of the certificate by a Plan must be on terms that are at least as favorable to the Plan as they would be in an arm’s-length transaction with an unrelated party; |
· | second, at the time of its acquisition by the Plan, the certificate must be rated in one of the four highest generic rating categories by at least one NRSRO that meets the requirements in the Underwriter Exemption (“Exemption Rating Agency”); |
· | third, the Trustee cannot be an affiliate of any other member of the Restricted Group (other than an underwriter); |
· | fourth, the following must be true— |
1. | the sum of all payments made to and retained by the underwriters must represent not more than reasonable compensation for underwriting the relevant Class of Certificates, |
467 |
2. | the sum of all payments made to and retained by us in connection with the assignment of Mortgage Loans to the Issuing Entity must represent not more than the fair market value of the obligations, and |
3. | the sum of all payments made to and retained by the Master Servicer, the Special Servicer or any sub-servicer must represent not more than reasonable compensation for that person’s services under the Pooling and Servicing Agreement and reimbursement of that person’s reasonable expenses in connection therewith; and |
· | fifth, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D under the Securities Act of 1933, as amended. |
It is a condition to the issuance of the Offered Certificates that they receive the ratings as required by the Underwriter Exemption, and we believe that each of the Ratings Agencies meets the requirements to be an Exemption Rating Agency; consequently, the second general condition set forth above will be satisfied with respect to the Offered Certificates as of the Closing Date. In addition, the third general condition set forth above will be satisfied with respect to the Offered Certificates as of the Closing Date. We believe that the fourth general condition will be satisfied with respect to the Offered Certificates. A fiduciary of a Plan contemplating purchasing any of the Offered Certificates, whether in the initial issuance of the Offered Certificates or in the secondary market, must make its own determination that the first and fifth conditions set forth above will be satisfied with respect to such Certificates. A fiduciary of a Plan contemplating purchasing any of the Offered Certificates in the secondary market must make its own determination that at the time of such acquisition, such Certificates continue to satisfy the second general condition set forth above.
“Restricted Group” means, collectively, the following persons and entities: the Trustee; the underwriters; the Depositor; the Master Servicer; the Special Servicer; any sub-servicers; the Sponsors; each borrower, if any, with respect to Mortgage Loans constituting more than 5% of the total unamortized principal balance of the mortgage pool as of the date of initial issuance of the Offered Certificates; and any and all affiliates of any of the aforementioned persons.
In order to meet the requirements to be an Exemption Rating Agency, the credit rating agency:
1. | Must be recognized by the SEC as a NRSRO, |
2. | Must have indicated on its most recently filed SEC Form NRSRO that it rates “issuers of asset-backed securities,” and |
3. | Must have had, within the 12 months prior to the initial issuance of the securities, at least 3 “qualified ratings engagements” which are defined as (A) a rating engagement requested by an issuer or underwriter in connection with the initial offering of the securities, (B) which is made public to investors generally and (C) for which the rating agency is compensated, and (D) which involves the offering of securities of the type that would be granted relief under the Exemption. |
The Underwriter Exemption also requires that the Issuing Entity meet the following requirements:
· | the trust fund must consist solely of assets of the type that have been included in other investment pools; |
· | Certificates evidencing interests in those other investment pools must have been rated in one of the four highest generic categories by at least one Exemption Rating Agency; and |
· | Certificates evidencing interests 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 an Offered Certificate. |
The Depositor expects that the conditions to the applicability of the Underwriter Exemption described above generally will be met with respect to the Offered Certificates, other than those conditions which are dependent on
468 |
facts unknown to the Depositor or which it cannot control, such as those relating to the circumstances of the Plan purchaser or the Plan fiduciary making the decision to purchase Offered Certificates.
Under the Underwriter Exemption, the loan-to-value ratio of any underlying Mortgage Loan held in the trust may not exceed 100% at the date of initial issuance of the Offered Certificates, based on the outstanding principal balance of the Mortgage Loan and the fair market value of the mortgaged property as of the Closing Date. It is possible that, if the fair market value of any of the Mortgage Loans has declined since origination, this requirement may not be satisfied. This possibility is greater for the seasoned loans than it is for the other Mortgage Loans.
If the general conditions of the Underwriter Exemption are satisfied, it may provide an exemption from the restrictions imposed by Sections 406(a) and 407(a) of ERISA, as well as the excise taxes imposed by Sections 4975(a) and (b) of the Internal Revenue Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection with—
· | the direct or indirect sale, exchange or transfer of an Offered Certificate acquired by a Plan upon initial issuance from us when we are, or a Mortgage Loan Seller, the Trustee, the Master Servicer, the Special Servicer, any sub-servicer, any provider of credit support, underwriter or borrower is, a Party in Interest with respect to the investing Plan, |
· | the direct or indirect acquisition or disposition in the secondary market of an Offered Certificate by a Plan, and |
· | the continued holding of an Offered Certificate 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 a Plan sponsored by any member of the Restricted Group, if such acquisition or holding is by any person who has discretionary authority or renders investment advice with respect to the assets of that Plan.
If the specific conditions of the Underwriter Exemption set forth below are also satisfied, the Underwriter Exemption may provide an additional exemption from the restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in connection with:
· | the direct or indirect sale, exchange or transfer of Offered Certificates in the initial issuance of securities between the Issuing Entity or an underwriter and a Plan when the person who has discretionary authority or renders investment advice with respect to the investment of Plan assets in the securities is: (1) a borrower with respect to 5% or less of the fair market value of the Issuing Entity’s assets or (2) an affiliate of such a person,provided that: (a) the Plan is not sponsored by a member of the Restricted Group; (b) the Plan’s investment in each Class of Certificates does not exceed 25% of the outstanding securities of such class; (c) after the Plan’s acquisition of the Certificates, no more than 25% of the assets over which the fiduciary has investment authority are invested in securities of the Issuing Entity containing assets which are sold or serviced by the same entity; and (d) in the case of initial issuance (but not secondary market transactions), at least 50% of each Class of Certificates in which Plans have invested and at least 50% of the aggregate interests in the Issuing Entity are acquired by persons independent of the Restricted Group; |
· | the direct or indirect acquisition or disposition in the secondary market of Offered Certificates by a Plan or with Plan assetsprovided that the conditions in clauses (2)(a), (b) and (c) of the prior bullet are met; and |
· | the continued holding of Offered Certificates acquired by a Plan or with Plan assets in an initial issuance or secondary market transaction meeting the foregoing requirements. |
We cannot assure you that all of the conditions for this additional exemption will be met. In particular, during periods of adverse conditions in the market for CMBS, there is an increased likelihood that (i) 50% or more of one or more Classes of Offered Certificates will be sold in the initial issuance to members of the Restricted Group and
469 |
(ii) 50% or more of the aggregate interest in the Issuing Entity will be acquired by members of the Restricted Group. Plans with respect to which a borrower or an affiliate of a borrower has investment discretion are advised to consult with counsel before acquiring any Offered Certificates.
Further, if the general conditions of the Underwriter Exemption, as well as other conditions set forth in the Underwriter Exemption are satisfied, it 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 Internal Revenue Code, for transactions in connection with the servicing, management and operation of the trust fund.
Lastly, if the general conditions of the Underwriter Exemption are satisfied, it may also provide an exemption from the restrictions imposed by Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a) and (b) of the Code, by reason of Sections 4975(c)(1)(A) through (D) of the Code, if the restrictions are deemed to otherwise apply merely because a person is deemed to be a party in interest or a disqualified person with respect to an investing plan by virtue of—
· | providing services to the Plan, |
· | having a specified relationship to this person, or |
· | solely as a result of the Plan’s ownership of Offered Certificates. |
Before purchasing an Offered Certificate, a fiduciary of a Plan should itself confirm that the general and other conditions set forth in the Underwriter Exemption, and the other requirements set forth in the Underwriter Exemption, would be satisfied at the time of the purchase.
Exempt Plans
A governmental plan as defined in Section 3(32) of ERISA is not subject to ERISA or Section 4975 of the Internal Revenue Code. However, a governmental plan may be subject to a federal, state or local law which is, to a material extent, similar to the fiduciary or prohibited transaction provisions of ERISA or the Code (“Similar Law”). A fiduciary of a governmental plan should make its own determination as to the need for and the availability of any exemptive relief under any Similar Law.
Insurance Company General Accounts
Section 401(c) of ERISA provides that the fiduciary and prohibited transaction provisions of ERISA and the Internal Revenue Code do not apply to transactions involving an insurance company general account where the assets of the general account are not Plan assets. A Department of Labor regulation issued under Section 401(c) of ERISA provides guidance for determining, in cases where insurance policies supported by an insurer’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets are ERISA Plan assets. That regulation generally provides that, if the specified requirements are satisfied with respect to insurance policies issued on or before December 31, 1998, the assets of an insurance company general account will not be Plan assets.
Any assets of an insurance company general account which support insurance policies issued to a Plan after December 31, 1998, or issued to a Plan on or before December 31, 1998 for which the insurance company does not comply with the requirements set forth in the Department of Labor regulation under Section 401(c) of ERISA, may be treated as Plan assets. In addition, because Section 401(c) of ERISA and the regulation issued under Section 401(c) of ERISA do not relate to insurance company separate accounts, separate account assets are still treated as Plan assets, invested in the separate account. If you are an insurance company and are contemplating the investment of general account assets in Offered Certificates, you are encouraged consult your legal counsel as to the applicability of Section 401(c) of ERISA.
Ineligible Purchasers
Even if an exemption is otherwise available, Certificates in a particular offering generally may not be purchased with the assets of a Plan that is sponsored by or maintained by an underwriter, the Depositor, the
470 |
Trustee, the trust, the Master Servicer, the Special Servicer or any of their respective affiliates. Offered Certificates generally may not be purchased with the assets of a Plan if the Depositor, the Trustee, the trust fund, a Master Servicer, the Special Servicer, a Mortgage Loan Seller, or any of their respective affiliates or any employees thereof: (a) has investment discretion with respect to the investment of such Plan assets; or (b) has authority or responsibility to give or regularly gives investment advice with respect to such Plan assets for a fee, pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to such Plan assets and that such advice will be based on the particular investment needs of the Plan. A party with the discretion, authority or responsibility is described in clause (a) or (b) of the preceding sentence is a fiduciary with respect to a Plan, and any such purchase might result in a “prohibited transaction” under ERISA and the Internal Revenue Code.
Further Warnings
The fiduciary of a Plan should consider that the rating of a security may change. If the rating of an Offered Certificate declines below the lowest permitted rating, the Offered Certificate will no longer be eligible for relief under the Underwriter Exemption (although a Plan that had purchased the Offered Certificate when it had a permitted investment grade rating would not be required by the Underwriter Exemption to dispose of the Offered Certificate). If the Offered Certificate meets the requirements of the Underwriter Exemption, other than those relating to rating, such Offered Certificate may be eligible to be purchased by an insurance company general account pursuant to Sections I and III of Prohibited Transaction Class Exemption (or PTCE) 95-60.
Each beneficial owner of an Offered Certificate or any interest therein will be deemed to have represented, by virtue of its acquisition or holding of such Offered Certificate or interest therein, that either (i) it is not a Plan or an entity using assets of a Plan, (ii) it has acquired and is holding the Offered Certificates in reliance on the Underwriter Exemption, and that it understands that there are certain conditions to the availability of the Underwriter Exemption, including that the Offered Certificates must be rated, at the time of purchase, not lower than BBB- by an Exemption Rating Agency and that such Offered Certificate is so rated or (iii)(1) it is an insurance company, (2) the source of funds used to acquire or hold the certificate or interest therein is an “insurance company general account,” as such term is defined in PTCE 95-60 and (3) the conditions in Sections I and III of PTCE 95-60 have been satisfied.
Any fiduciary of a Plan considering whether to purchase an Offered Certificate on behalf of that Plan is encouraged to consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to the investment, in particular the fiduciary of a Plan should consider whether the purchase of an Offered Certificate satisfies the ERISA restrictions concerning prudence and diversification of the investment of the assets of that Plan.
The sale of Offered Certificates to a Plan is in no way a representation or warranty by us or any of the underwriters that—
· | the investment meets all relevant legal requirements with respect to investments by Plans generally or by any particular Plan, or |
· | the investment is appropriate for Plans generally or for any particular Plan. |
Consultation with Counsel
If you are a fiduciary for or any other person investing assets of a Plan and you intend to purchase Offered Certificates on behalf of or with assets of that Plan, you should:
· | consider your general fiduciary obligations under ERISA, and |
· | consult with your legal counsel as to— |
1. | the potential applicability of ERISA and Section 4975 of the Internal Revenue Code to that investment, and |
2. | the availability of any prohibited transaction exemption in connection with that investment. |
471 |
Tax Exempt Investors
A Plan that is exempt from federal income taxation under Section 501 of the Internal Revenue Code will be subject to federal income taxation to the extent that its income is “unrelated business taxable income” within the meaning of Section 512 of the Internal Revenue Code. All excess inclusions of a REMIC allocated to a REMIC residual certificate held by a tax-exempt Plan will be considered unrelated business taxable income and will be subject to federal income tax.
See “Material Federal Income Tax Consequences”.
Legal Investment
No Class of Offered Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”).
The appropriate characterization of the Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase the Offered Certificates, is subject to significant interpretative uncertainties. Except as may be specified above with regard to the status of the Offered Certificates as “mortgage related securities” or not as “mortgage related securities” for purposes of SMMEA, no representations are made as to the proper characterization of any Class of Offered Certificates for legal investment, financial institution regulatory or other purposes or as to the ability of particular investors to purchase any Class of Offered Certificates under applicable legal investment restrictions.
Further, any rating of a Class of Offered Certificates below an “investment grade” rating (i.e., lower than the top four rating categories) by any nationally recognized statistical rating organization, as defined in Section 3(a)(62) of the Exchange Act (“NRSRO”) engaged to rate that Class or issuing an unsolicited rating, and whether initially or as a result of a ratings downgrade, may adversely affect the ability of an investor to purchase or retain, or otherwise impact the regulatory characteristics of, that Class of Certificates. These uncertainties (and any unfavorable future determinations concerning the legal investment or financial institution regulatory characteristics of the Offered Certificates) may adversely affect the liquidity and market value of the Offered Certificates.
The uncertainties described above (and any unfavorable future determinations concerning the legal investment or financial institution regulatory characteristics of the Offered Certificates) may adversely affect the liquidity and market value of the Offered Certificates. Accordingly, 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: (a) the Offered Certificates of any Class constitute legal investments or are subject to investment, capital or other regulatory restrictions; and (b) if applicable, SMMEA has been overridden in any jurisdiction relevant to you.
The Issuing Entity will be relying on an exclusion or exemption under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the Issuing Entity. The Issuing Entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act. The Volcker Rule generally prohibits “banking entities” (which is broadly defined to include U.S. banks and bank holding companies and many non-U.S. banking entities, together with their respective subsidiaries and other affiliates) from (i) engaging in proprietary trading, (ii) acquiring or retaining an ownership interest in or sponsoring a “covered fund” and (iii) entering into certain relationships with such funds. Under the Volcker Rule, unless otherwise jointly determined by specified federal regulators, a “covered fund” does not include an issuer that may rely on an exclusion or exemption from the definition of “investment company” under the Investment Company Act other than the exclusions contained in Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act. The Volcker Rule became effective on July 21, 2012, and final regulations implementing the Volcker Rule were adopted on December 10, 2013, with conformance required by July 21, 2015 (or by July 21, 2016 in respect of investments in and relationships with covered funds that were in place prior to December 31, 2013, with the possibility of a further one-year extension). Although prior to the deadlines for conformance, banking entities were or are required to make good-faith efforts to conform their activities and investments to the Volcker Rule, the general effects of the Volcker Rule remain uncertain. Any prospective investor in the Offered Certificates, including a U.S. or foreign bank or a subsidiary or other affiliate thereof, should consult its own legal advisors regarding such matters and other effects of the Volcker Rule.
472 |
Certain Legal Aspects of the Mortgage Loans
The following discussion contains general summaries of select legal aspects of Mortgage Loans secured by multifamily and commercial properties in the United States. Because these legal aspects are governed by applicable state law, which may differ substantially from state to state, the summaries do not purport to be complete, to reflect the laws of any particular state, or to encompass the laws of all jurisdictions in which the security for the Mortgage Loans underlying the Offered Certificates is situated.
New York.Four (4) of the Mortgaged Properties, representing security for 18.9% of the Initial Pool Balance are located in New York.
Mortgage loans in New York are generally secured by mortgages on the related real estate. Foreclosure of a mortgage is accomplished in judicial proceedings. After an action for foreclosure is commenced, and if the lender secures a ruling that is entitled to foreclosure ordinarily by motion for summary judgment, the court then appoints a referee to compute the amount owed together with certain costs, expenses and legal fees of the action. The lender then moves to confirm the referee’s report and enter a final judgment of foreclosure and sale. Public notice of the foreclosure sale, including the amount of the judgment, is given for a statutory period of time, after which the mortgaged real estate is sold by a referee at public auction. There is no right of redemption after the foreclosure of sale. In certain circumstances, deficiency judgments may be obtained. Under mortgages containing a statutorily sanctioned covenant, the lender has a right to have a receiver appointed without notice and without regard to the adequacy of the mortgaged real estate as security for the amount owned.
Colorado. Two (2) of the Mortgaged Properties, representing security for 10.8% of the Initial Pool Balance are located in Colorado.
Mortgage loans in Colorado are typically secured by a deed of trust to the public trustee. Mortgages and deeds of trust to a private trustee, both of which require a judicial foreclosure, are valid but used infrequently. As a result, the process described below relates only to mortgage loans secured by a deed of trust to the public trustee. Following a default, the foreclosure is commenced by filing with the appropriate public trustee of the county in which the property is located a notice of election and demand for sale. Within ten (10) working days following the receipt of the notice, the public trustee records the notice of election and demand for sale with the clerk and recorder of the county, and commences publication of the notice of sale once a week for five (5) consecutive weeks. During the publication period a summary proceeding is brought in the district court to obtain an order authorizing sale from the court. The issues before the court are generally limited to whether a default has occurred under the indebtedness or the security instrument and any other issues required to be examined pursuant to the Servicemembers Civil Relief Act. A court order authorizing the sale is a prerequisite to the public trustee’s sale. Under Colorado law, the borrower, a guarantor or a holder of a junior encumbrance is entitled to cure the default if the default is solely monetary, and if a notice of the intent to cure is filed with the public trustee or sheriff conducting the sale at least fifteen (15) days prior to the scheduled foreclosure sale. At the scheduled foreclosure sale the property is sold by the public trustee to the highest bidder, who is usually the foreclosing lender. An uncontested public trustee foreclosure procedure, not including the redemption periods and the issuance of a public trustee’s deed, typically takes approximately one hundred ten (110) to one hundred twenty-five (125) days to complete for non-agricultural property and approximately two hundred fifteen (215) to two hundred thirty (230) days to complete for agricultural property. Neither the owner, nor any other person who is liable for a deficiency, has any redemption period following the foreclosure sale. However, a holder of a lien that is junior to the one being foreclosed, if any, does have a redemption period following the foreclosure sale. The price for redemption is the sum for which the property was sold at the foreclosure sale, with interest from the date of the sale, plus any taxes or other charges authorized with interest on such charges from the date paid. Interest is chargeable at the default rate specified in the instrument or if no default rate is specified, at the regular rate specified. In order to recover a deficiency, the holder of the indebtedness must bid, at minimum, its good faith estimate of the fair market value of the property being sold.
Texas. Four (4) of the Mortgaged Properties, representing security for 10.0% of the Initial Pool Balance are located in Texas.
Commercial mortgage loans in Texas are generally secured by deeds of trust on the related real estate. Foreclosure of a deed of trust in Texas may be accomplished by either a non-judicial trustee’s sale under a specific power-of-sale provision set forth in the deed of trust or by judicial foreclosure. Due to the relatively short period of time involved in a non-judicial foreclosure, the judicial foreclosure process is rarely used in Texas. A
473 |
judicial foreclosure action must be initiated, and a non-judicial foreclosure must be completed, within four (4) years from the date the cause of action accrues. The cause of action for the unpaid balance of the indebtedness accrues upon the maturity of the indebtedness (by acceleration or otherwise). Unless expressly waived in the deed of trust, the lender must provide the debtor with a written demand for payment, a notice of intent to accelerate the indebtedness, and a notice of acceleration prior to commencing any foreclosure action. It is customary practice in Texas for the demand for payment to be combined with the notice of intent to accelerate the indebtedness. In addition, with respect to a non-judicial foreclosure sale and notwithstanding any waiver by debtor to the contrary, the lender is statutorily required to (i) provide each debtor obligated to pay the indebtedness a notice of foreclosure sale via certified mail, postage prepaid and addressed to each debtor at such debtor’s last known address at least twenty-one (21) days before the date of the foreclosure sale; (ii) post a notice of foreclosure sale at the courthouse of each county in which the property is located; and (iii) file a notice of foreclosure sale with the county clerk of each county in which the property is located. Such twenty-one (21) day period includes the entire calendar day on which the notice is deposited with the United States mail and excludes the entire calendar day of the foreclosure sale. The statutory foreclosure notice may be combined with the notice of acceleration of the indebtedness and must contain the location of the foreclosure sale and a statement of the earliest time at which the foreclosure sale will begin. To the extent the note or deed of trust contains additional notice requirements, the lender must comply with such requirements in addition to the statutory requirements set forth above. The trustee’s sale must be performed pursuant to the terms of the deed of trust and must take place between the hours of 10 a.m. and 4 p.m. on the first Tuesday of the month, in the area designated for such sales by the county commissioners’ court of the county in which the property is located, and must begin at the time set forth in the notice of foreclosure sale or not later than three (3) hours after that time. If the property is located in multiple counties, the sale may occur in any county in which a portion of the property is located. Under Texas law, the debtor does not have the right to redeem the property after foreclosure. Any action for deficiency must be brought within two (2) years of the foreclosure sale. If the foreclosure sale price is less than the fair market value of the property, the debtor or any obligor (including any guarantor) may be entitled to an offset against the deficiency in the amount by which the fair market value of the property, less the amount of any claim, indebtedness, or obligation of any kind that is secured by a lien or encumbrance on the real property that was not extinguished by the foreclosure, exceeds the foreclosure sale price.
General
Each Mortgage Loan underlying the Offered Certificates will be evidenced by a note or bond and secured by an instrument granting a security interest in real property. The instrument granting a security interest in real property may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state in which that real property is located. Mortgages, deeds of trust and deeds to secure debt are often collectively referred to in this prospectus as “mortgages.” A mortgage creates a lien upon, or grants a title interest in, the real property covered by the mortgage, and represents the security for the repayment of the indebtedness customarily evidenced by a promissory note. The priority of the lien created or interest granted will depend on—
· | the terms of the mortgage, |
· | the terms of separate subordination agreements or intercreditor agreements with others that hold interests in the real property, |
· | the knowledge of the parties to the mortgage, and |
· | in general, the order of recordation of the mortgage in the appropriate public recording office. |
However, the lien of a recorded mortgage will generally be subordinate to later-arising liens for real estate taxes and assessments and other charges imposed under governmental police powers.
Types of Mortgage Instruments
There are two parties to a mortgage—
· | a mortgagor, who is the owner of the encumbered interest in the real property, and |
474 |
· | a mortgagee, who is the lender. |
In general, the mortgagor is also the borrower.
In contrast, a deed of trust is a three-party instrument. The parties to a deed of trust are—
· | the trustor, who is the equivalent of a mortgagor, |
· | the trustee to whom the real property is conveyed, and |
· | the beneficiary for whose benefit the conveyance is made, who is the lender. |
Under a deed of trust, the trustor grants the property, irrevocably until the debt is paid, in trust and generally with a power of sale, to the trustee to secure repayment of the indebtedness evidenced by the related note.
A deed to secure debt typically has two parties. Under a deed to secure debt, the grantor, who is the equivalent of a mortgagor, conveys title to the real property to the grantee, who is the lender, generally with a power of sale, until the debt is repaid.
Where the borrower is a land trust, there would be an additional party because legal title to the property is held by a land trustee under a land trust agreement for the benefit of the borrower. At origination of a Mortgage Loan involving a land trust, the borrower may execute a separate undertaking to make payments on the mortgage note. In no event is the land trustee personally liable for the mortgage note obligation.
The mortgagee’s authority under a mortgage, the trustee’s authority under a deed of trust and the grantee’s authority under a deed to secure debt are governed by:
· | the express provisions of the related instrument, |
· | the law of the state in which the real property is located, |
· | various federal laws, and |
· | in some deed of trust transactions, the directions of the beneficiary. |
Installment Contracts
The Mortgage Loans underlying your Offered Certificates may consist of installment contracts. Under an installment contract the seller retains legal title to the property and enters into an agreement with the purchaser for payment of the purchase price, plus interest, over the term of the installment contract. Only after full performance by the borrower of the contract is the seller obligated to convey title to the real estate to the purchaser. During the period that the installment contract is in effect, the purchaser is generally responsible for maintaining the property in good condition and for paying real estate taxes, assessments and hazard insurance premiums associated with the property.
The seller’s enforcement of an installment contract varies from state to state. Generally, installment contracts provide that upon a default by the purchaser, the purchaser loses his or her right to occupy the property, the entire indebtedness is accelerated, and the purchaser’s equitable interest in the property is forfeited. The seller in this situation does not have to foreclose in order to obtain title to the property, although in some cases a quiet title action is in order if the purchaser has filed the installment contract in local land records and an ejectment action may be necessary to recover possession. In a few states, particularly in cases of purchaser default during the early years of an installment contract, the courts will permit ejectment of the purchaser and a forfeiture of his or her interest in the property.
However, most state legislatures have enacted provisions by analogy to mortgage law protecting borrowers under installment contracts from the harsh consequences of forfeiture. Under those statutes, a judicial or nonjudicial foreclosure may be required, the seller may be required to give notice of default and the borrower may be granted some grace period during which the contract may be reinstated upon full payment of the default
475 |
amount and the purchaser may have a post-foreclosure statutory redemption right. In other states, courts in equity may permit a purchaser with significant investment in the property under an installment contract for the sale of real estate to share in the proceeds of sale of the property after the indebtedness is repaid or may otherwise refuse to enforce the forfeiture clause. Nevertheless, generally speaking, the seller’s procedures for obtaining possession and clear title under an installment contract for the sale of real estate in a given state are simpler and less time-consuming and costly than are the procedures for foreclosing and obtaining clear title to a mortgaged property.
Leases and Rents
A mortgage that encumbers an income-producing property often contains an assignment of rents and leases and/or may be accompanied by a separate assignment of rents and leases. Under an assignment of rents and leases, the borrower assigns to the lender the borrower’s right, title and interest as landlord under each lease and the income derived from each lease. However, the borrower retains a revocable license to collect the rents, provided there is no default and the rents are not directly paid to the lender.
If the borrower defaults, the license terminates and the lender is entitled to collect the rents. Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents.
In most states, hotel and motel room rates are considered accounts receivable under the UCC. Room rates are generally pledged by the borrower as additional security for the loan when a Mortgage Loan is secured by a hotel or motel. In general, the lender must file financing statements in order to perfect its security interest in the room rates and must file continuation statements, generally every five years, to maintain that perfection. Mortgage loans secured by hotels or motels may be included in the trust even if the security interest in the room rates was not perfected or the requisite UCC filings were allowed to lapse. A lender will generally be required to commence a foreclosure action or otherwise take possession of the property in order to enforce its rights to collect the room rates following a default, even if the lender’s security interest in room rates is perfected under applicable nonbankruptcy law.
In the bankruptcy setting, the lender will be stayed from enforcing its rights to collect hotel and motel room rates. However, the room rates will constitute cash collateral and cannot be used by the bankrupt borrower—
· | without a hearing or the lender’s consent, or |
· | unless the lender’s interest in the room rates is given adequate protection. |
For purposes of the foregoing, the adequate protection may include a cash payment for otherwise encumbered funds or a replacement lien on unencumbered property, in either case equal in value to the amount of room rates that the bankrupt borrower proposes to use. See “—Bankruptcy Issues” below.
Personalty
Some types of income-producing real properties, such as hotels, motels and nursing homes, may include personal property, which may, to the extent it is owned by the borrower and not previously pledged, constitute a significant portion of the property’s value as security. The creation and enforcement of liens on personal property are governed by the UCC. Accordingly, if a borrower pledges personal property as security for a Mortgage Loan, the lender generally must file UCC financing statements in order to perfect its security interest in the personal property and must file continuation statements, generally every five years, to maintain that perfection. Mortgage loans secured in part by personal property may be included in one of our trusts even if the security interest in the personal property was not perfected or the requisite UCC filings were allowed to lapse.
Foreclosure
General
Foreclosure is a legal procedure that allows the lender to recover its mortgage debt by enforcing its rights and available legal remedies under the mortgage. If the borrower defaults in payment or performance of its
476 |
obligations under the note or mortgage, the lender has the right to institute foreclosure proceedings to sell the real property security at public auction to satisfy the indebtedness.
Foreclosure Procedures Vary From State to State.
The two primary methods of foreclosing a mortgage are—
· | judicial foreclosure, involving court proceedings, and |
· | nonjudicial foreclosure under a power of sale granted in the mortgage instrument. |
Other foreclosure procedures are available in some states, but they are either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are interposed. A foreclosure action sometimes requires several years to complete.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having jurisdiction over the mortgaged property. Generally, a lender initiates the action by the service of legal pleadings upon—
· | all parties having a subordinate interest of record in the real property, and |
· | all parties in possession of the property, under leases or otherwise, whose interests are subordinate to the mortgage. |
Delays in completion of the foreclosure may occasionally result from difficulties in locating necessary parties, including defendants. When the lender’s right to foreclose is contested, the legal proceedings can be time-consuming. The court generally issues a judgment of foreclosure and appoints a referee or other officer to conduct a public sale of the mortgaged property upon successful completion of a judicial foreclosure proceeding. The proceeds of that public sale are used to satisfy the judgment. The procedures that govern these public sales vary from state to state.
Equitable and Other Limitations on Enforceability of Particular Provisions.
United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions. These principles are generally designed to relieve borrowers from the effects of mortgage defaults perceived as harsh or unfair. Relying on these principles, a court may:
· | alter the specific terms of a loan to the extent it considers necessary to prevent or remedy an injustice, undue oppression or overreaching; |
· | require the lender to undertake affirmative actions to determine the cause of the borrower’s default and the likelihood that the borrower will be able to reinstate the loan; |
· | require the lender to reinstate a loan or recast a payment schedule in order to accommodate a borrower that is suffering from a temporary financial disability; or |
· | limit the right of the lender to foreclose in the case of a nonmonetary default, such as¾ |
1. | a failure to adequately maintain the mortgaged property, or |
2. | an impermissible further encumbrance of the mortgaged property. |
Some courts have addressed the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that a borrower receive notice in addition to statutorily-prescribed minimum notice. For the most part, these cases have—
477 |
· | upheld the reasonableness of the notice provisions, or |
· | found that a public sale under a mortgage providing for a power of sale does not involve sufficient state action to trigger constitutional protections. |
In addition, some states may have statutory protection such as the right of the borrower to reinstate its Mortgage Loan after commencement of foreclosure proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale.
In states permitting nonjudicial foreclosure proceedings, foreclosure of a deed of trust is generally accomplished by a nonjudicial trustee’s sale under a power of sale typically granted in the deed of trust. A power of sale may also be contained in any other type of mortgage instrument if applicable law so permits. A power of sale under a deed of trust allows a nonjudicial public sale to be conducted generally following—
· | a request from the beneficiary/lender to the trustee to sell the property upon default by the borrower, and |
· | notice of sale is given in accordance with the terms of the deed of trust and applicable state law. |
In some states, prior to a nonjudicial public sale, the trustee under the deed of trust must—
· | record a notice of default and notice of sale, and |
· | send a copy of those notices to the borrower and to any other party who has recorded a request for a copy of them. |
In addition, in some states, the trustee must provide notice to any other party having an interest of record in the real property, including junior lienholders. A notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers. Some states require a reinstatement period during which the borrower or junior lienholder may have the right to cure the default by paying the entire actual amount in arrears, without regard to the acceleration of the indebtedness, plus the lender’s expenses incurred in enforcing the obligation. In other states, the borrower or the junior lienholder has only the right to pay off the entire debt to prevent the foreclosure sale. Generally, state law governs the procedure for public sale, the parties entitled to notice, the method of giving notice and the applicable time periods.
Public Sale.
A third party may be unwilling to purchase a mortgaged property at a public sale because of—
· | the difficulty in determining the exact status of title to the property due to, among other things, redemption rights that may exist, and |
· | the possibility that physical deterioration of the property may have occurred during the foreclosure proceedings. |
Potential buyers may also be reluctant to purchase mortgaged property at a foreclosure sale as a result of the 1980 decision of the United States Court of Appeals for the Fifth Circuit inDurrett v. Washington National Insurance Co., 621 F.2d 2001 (5th Cir. 1980) and other decisions that have followed its reasoning. The court inDurrett held that even a non-collusive, regularly conducted foreclosure sale was a fraudulent transfer under the Bankruptcy Code and, thus, could be rescinded in favor of the bankrupt’s estate, if (1) the foreclosure sale was held while the debtor was insolvent and not more than one year prior to the filing of the bankruptcy petition and (2) the price paid for the foreclosed property did not represent “fair consideration”, which is “reasonably equivalent value” under the Bankruptcy Code. Although the reasoning and result ofDurrett in respect of the Bankruptcy Code was rejected by the United States Supreme Court inBFP v. Resolution Trust Corp., 511 U.S. 531 (1994), the case could nonetheless be persuasive to a court applying a state fraudulent conveyance law which has provisions similar to those construed inDurrett. Therefore, it is common for the lender to purchase the mortgaged property for an amount equal to the secured indebtedness and accrued and unpaid interest plus the expenses of
478 |
foreclosure, in which event the borrower’s debt will be extinguished, or for a lesser amount in order to preserve its right to seek a deficiency judgment if such is available under state law and under the terms of the Mortgage Loan documents. Thereafter, subject to the borrower’s right in some states to remain in possession during a redemption period, the lender will become the owner of the property and have both the benefits and burdens of ownership, including the obligation to pay debt service on any senior mortgages, to pay taxes, to obtain casualty insurance and to make such repairs as are necessary to render the property suitable for sale. Frequently, the lender employs a third-party management company to manage and operate the property. The costs of operating and maintaining a property may be significant and may be greater than the income derived from that property. The costs of management and operation of those mortgaged properties which are hotels, motels, restaurants, nursing or convalescent homes, hospitals or casinos may be particularly significant because of the expertise, knowledge and, with respect to certain property types, regulatory compliance, required to run those operations and the effect which foreclosure and a change in ownership may have on the public’s and the industry’s, including franchisors’, perception of the quality of those operations. The lender also will commonly obtain the services of a real estate broker and pay the broker’s commission in connection with the sale or lease of the property. Depending upon market conditions, the ultimate proceeds of the sale of a property may not equal the lender’s investment in the property. Moreover, a lender commonly incurs substantial legal fees and court costs in acquiring a mortgaged property through contested foreclosure and/or bankruptcy proceedings. Because of the expenses associated with acquiring, owning and selling a mortgaged property, a lender could realize an overall loss on a Mortgage Loan even if the mortgaged property is sold at foreclosure, or resold after it is acquired through foreclosure, for an amount equal to the full outstanding principal amount of the loan plus accrued interest.
Furthermore, an increasing number of states require that any environmental contamination at certain types of properties be cleaned up before a property may be resold. In addition, a lender may be responsible under federal or state law for the cost of cleaning up a mortgaged property that is environmentally contaminated. See “—Environmental Considerations” below.
The holder of a junior mortgage that forecloses on a mortgaged property does so subject to senior mortgages and any other prior liens. In addition, it may be obliged to keep senior Mortgage Loans current in order to avoid foreclosure of its interest in the property. Furthermore, if the foreclosure of a junior mortgage triggers the enforcement of a due-on-sale clause contained in a senior mortgage, the junior mortgagee could be required to pay the full amount of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption.
The purposes of a foreclosure action are—
· | to enable the lender to realize upon its security, and |
· | to bar the borrower, and all persons who have interests in the property that are subordinate to that of the foreclosing lender, from exercising their equity of redemption. |
The doctrine of equity of redemption provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may redeem the property by paying the entire debt with interest. Those having an equity of redemption must generally be made parties to the foreclosure proceeding in order for their equity of redemption to be terminated.
The equity of redemption is a common-law, nonstatutory right which should be distinguished from post-sale statutory rights of redemption. In some states, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property after sale under a deed of trust or foreclosure of a mortgage. In some states, statutory redemption may occur only upon payment of the foreclosure sale price. In other states, redemption may be permitted if the former borrower pays only a portion of the sums due. A statutory right of redemption will diminish the ability of the lender to sell the foreclosed property because the exercise of a right of redemption would defeat the title of any purchaser through a foreclosure. Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired. In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee’s sale under a deed of trust.
479 |
One Action and Security First Rules.
Some states (including California) have laws that prohibit more than one “judicial action” to enforce a mortgage obligation secured by a mortgage on real property or an interest therein, and some courts have construed the term “judicial action” broadly. In addition, some states (including California) require that the lender proceed first against any real property security for such mortgage obligation before proceeding directly upon the secured obligation itself. In the case where either a cross-collateralized, cross-defaulted or a multi-property Mortgage Loan is secured by real properties located in multiple states, the Special Servicer may be required to foreclose first on properties located in states where such “one action” and/or “security first” rules apply (and where non-judicial foreclosure is permitted) before foreclosing on properties located in the states where judicial foreclosure is the only permitted method of foreclosure. Otherwise, a second action in a state with “one action” rules might be precluded because of a prior first action, even if such first action occurred in a state without “one action” rules. Moreover, while the consequences of breaching these rules will vary from jurisdiction to jurisdiction, as a general matter, a lender who proceeds in violation of these rules may run the risk of forfeiting collateral and/or even the right to enforce the underlying obligation. In addition, under certain circumstances, a lender with respect to a real property located in a “one action” or “security first” jurisdiction may be precluded from obtaining a deficiency judgment against the borrower following foreclosure or sale under a deed of trust (unless there has been a judicial foreclosure). Finally, in some jurisdictions, the benefits of such laws may be available not just to the underlying obligor, but also to any guarantor of the underlying obligation, thereby limiting the ability of the lender to recover against a guarantor without first complying with the applicable anti-deficiency statutes.
Anti-Deficiency Legislation.
Some or all of the Mortgage Loans underlying the Offered Certificates are nonrecourse loans. Recourse in the case of a default on a non-recourse Mortgage Loan will generally be limited to the underlying real property and any other assets that were pledged to secure the Mortgage Loan. However, even if a Mortgage Loan by its terms provides for recourse to the borrower’s other assets, a lender’s ability to realize upon those assets may be limited by state law. For example, in some states, a lender cannot obtain a deficiency judgment against the borrower following foreclosure or sale pursuant to the “power of sale” under a deed of trust. A deficiency judgment is a personal judgment against the former borrower equal to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. Other state statutes may require the lender to exhaust the security afforded under a mortgage before bringing a personal action against the borrower. In some states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting the security, but in doing so, the lender may be deemed to have elected a remedy and thus may be precluded from foreclosing upon the security. Consequently, lenders will usually proceed first against the security in states where an election of remedy provision exists. Other statutory provisions limit any deficiency judgment to the excess of the outstanding debt over the fair market value of the property at the time of the sale. These other statutory provisions are intended to protect borrowers from exposure to large deficiency judgments that might otherwise result from below-market bids at the foreclosure sale. In some states, exceptions to the anti-deficiency statues are provided for in certain instances where the value of the lender’s security has been impaired by acts or omissions of the borrower such as for waste upon the property. Finally, some statutes may preclude deficiency judgments altogether with respect to certain kinds of obligations such as purchase-money indebtedness. In some jurisdictions the courts have extended the benefits of this legislation to the guarantors of the underlying obligation as well.
Leasehold Considerations.
Some or all of the Mortgage Loans underlying the Offered Certificates may be secured by a mortgage on the borrower’s leasehold interest under a ground lease. Leasehold Mortgage Loans are subject to some risks not associated with Mortgage Loans secured by a lien on the fee estate of the borrower. The most significant of these risks is that if the borrower’s leasehold were to be terminated upon a lease default, the leasehold mortgagee would lose its security. This risk may be lessened if the ground lease:
· | requires the lessor to give the leasehold mortgagee notices of lessee defaults and an opportunity to cure them, |
· | permits the leasehold estate to be assigned to and by the leasehold mortgagee or the purchaser at a foreclosure sale, and |
480 |
· | contains other protective provisions typically required by prudent lenders to be included in a ground lease. |
Some Mortgage Loans underlying the Offered Certificates, however, may be secured by ground leases which do not contain these provisions.
In addition, where a lender has as its security both the fee and leasehold interest in the same property, the grant of a mortgage lien on its fee interest by the land owner/ground lessor to secure the debt of a borrower/ground lessee may be subject to challenge as a fraudulent conveyance. Among other things, a legal challenge to the granting of the liens may focus on the benefits realized by the land owner/ground lessor from the loan. If a court concluded that the granting of the mortgage lien was an avoidable fraudulent conveyance, it might take actions detrimental to the holders of the offered certificates, including, under certain circumstances, invalidating the mortgage lien on the fee interest of the land owner/ground lessor.
Cooperative Shares. Some or all of the Mortgage Loans underlying the Offered Certificates may be secured by a security interest on the borrower’s ownership interest in shares, and the proprietary leases belonging to those shares, allocable to cooperative dwelling units that may be vacant or occupied by nonowner tenants. Loans secured in this manner are subject to some risks not associated with Mortgage Loans secured by a lien on the fee estate of a borrower in real property. Loans secured in this manner typically are subordinate to the mortgage, if any, on the cooperative’s building. That mortgage, if foreclosed, could extinguish the equity in the building and the proprietary leases of the dwelling units derived from ownership of the shares of the cooperative. Further, transfer of shares in a cooperative is subject to various regulations as well as to restrictions under the governing documents of the cooperative. The shares may be canceled in the event that associated maintenance charges due under the related proprietary leases are not paid. Typically, a recognition agreement between the lender and the cooperative provides, among other things, that the lender may cure a default under a proprietary lease.
Under the laws applicable in many states, “foreclosure” on cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the UCC and the security agreement relating to the shares. Article 9 of the UCC requires that a sale be conducted in a commercially reasonable manner, which may be dependent upon, among other things, the notice given the debtor and the method, manner, time, place and terms of the sale. Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender’s security interest. A recognition agreement, however, generally provides that the lender’s right to reimbursement is subject to the right of the cooperative corporation to receive sums due under the proprietary leases. If there are proceeds remaining, the lender must account to the tenant-stockholder for the surplus. Conversely, if a portion of the indebtedness remains unpaid, the tenant-stockholder is generally responsible for the deficiency.
In the case of foreclosure on a building converted from a rental building to a building owned by a cooperative under a non-eviction plan, some states require that a purchaser at a foreclosure sale take the property subject to rent control and rent stabilization laws that apply to certain tenants who elected to remain in the building but who did not purchase shares in the cooperative when the building was so converted.
Bankruptcy Issues
Automatic Stay.
Operation of the Bankruptcy Code and related state laws may interfere with or affect the ability of a lender to realize upon collateral or to enforce a deficiency judgment. For example, under the Bankruptcy Code, virtually all actions, including foreclosure actions and deficiency judgment proceedings, to collect a debt are automatically stayed upon the filing of the bankruptcy petition. Often, no interest or principal payments are made during the course of the bankruptcy case. The delay caused by an automatic stay and its consequences can be significant. Also, under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a junior lienor may stay the senior lender from taking action to foreclose out the junior lien.
481 |
Modification of Lender’s Rights.
Under the Bankruptcy Code, the amount and terms of a Mortgage Loan secured by a lien on property of the debtor may be modified provided that substantive and procedural safeguards protective of the lender are met. A bankruptcy court may, among other things—
· | reduce the secured portion of the outstanding amount of the loan to the then-current value of the property, thereby leaving the lender a general unsecured creditor for the difference between the then-current value of the property and the outstanding balance of the loan; |
· | reduce the amount of each scheduled payment, by means of a reduction in the rate of interest and/or an alteration of the repayment schedule, with or without affecting the unpaid principal balance of the loan; |
· | extend or shorten the term to maturity of the loan; |
· | permit the bankrupt borrower to cure the subject loan default by paying the arrearage over a number of years; or |
· | permit the bankrupt borrower, through its rehabilitative plan, to reinstate the loan payment schedule even if the lender has obtained a final judgment of foreclosure prior to the filing of the debtor’s petition. |
Other types of significant modifications to the terms of the mortgage may be acceptable to the bankruptcy court, such as making distributions to the mortgage holder of property other than cash, or the substitution of collateral which is the “indubitable equivalent” of the real property subject to the mortgage or the subordination of the mortgage to liens securing new debt (provided that the lender’s secured claim is “adequately protected” as such term is defined and interpreted under the Bankruptcy Code), depending on the particular facts and circumstances of the specific case.
A trustee in a bankruptcy proceeding may in some cases be entitled to collect its costs and expenses in preserving or selling the mortgaged property ahead of payment to the lender. In certain circumstances, a debtor in bankruptcy may have the power to grant liens senior to the lien of a mortgage, and analogous state statutes and general principles of equity may also provide the borrower with means to halt a foreclosure proceeding or sale and to force a restructuring of a Mortgage Loan on terms a lender would not otherwise accept. Moreover, the laws of certain states also give priority to certain tax liens and mechanics liens over the lien of a mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that actions of the mortgagees have been unreasonable, the lien of the related mortgage may be subordinated to the claims of unsecured creditors. Federal bankruptcy law also may interfere with the ability of the Master Servicer or Special Servicer, as applicable, for one of our trusts to enforce lockbox requirements.
Leases and Rents.
Federal bankruptcy law may also interfere with or affect the ability of a secured lender to enforce the borrower’s assignment of rents and leases related to the mortgaged property. Federal bankruptcy law provides generally that rights and obligations under an unexpired lease of the debtor/lessee may not be terminated or modified at any time after the commencement of a case under the Bankruptcy Code solely on the basis of a provision in the lease to that effect or because of certain other similar events. This prohibition on so called “ipso facto clauses” could limit the ability of the Master Servicer or Special Servicer, as applicable, for one of our trusts to exercise certain contractual remedies with respect to any related leases. In addition, a lender may be stayed from enforcing the assignment under the Bankruptcy Code, and the legal proceedings necessary to resolve the issue could be time-consuming, and result in delays in the lender’s receipt of the rents. Rents and leases may also escape an assignment thereof (i) if the assignment is not fully perfected under state law prior to commencement of the bankruptcy proceeding, (ii) to the extent such rents and leases are used by the borrower to maintain the mortgaged property, or for other court authorized expenses, (iii) to the extent other collateral may be substituted for the rents and leases, (iv) to the extent the bankruptcy court determines that the lender is adequately protected or (v) to the extent the court determines, based on the equities of the case, that the post-petition rents are not subject to the lender’s pre-petition security interest.
482 |
Under the Bankruptcy Code, a security interest in real property acquired before the commencement of the bankruptcy case does not extend to income received after the commencement of the bankruptcy case unless such income is a proceed, product or rent of such property. Therefore, to the extent a business conducted on the mortgaged property creates accounts receivable rather than rents or results from payments under a license rather than payments under a lease, a valid and perfected pre-bankruptcy lien on such accounts receivable or license income generally would not continue as to post-bankruptcy accounts receivable or license income. The Bankruptcy Code has been amended to mitigate this problem with respect to fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels or other lodging facilities. A lender’s perfected pre-petition security interest in leases, rents and hotel revenues continues in the post-petition leases, rents and hotel, motel and other lodging property revenues, unless a bankruptcy court orders to the contrary “based on the equities of the case.” The equities of a particular case may permit the discontinuance of security interests in post petition leases and rents. Unless a court orders otherwise, however, rents and other revenues from the related lodging property generated after the date the bankruptcy petition is filed will constitute “cash collateral” under the Bankruptcy Code. Debtors may only use cash collateral upon obtaining the lender’s consent or a prior court order finding that the lender’s interest in such mortgaged property and the cash collateral is “adequately protected” as such term is defined and interpreted under the Bankruptcy Code. In addition to post-petition rents, any cash held by a lender in a lockbox or reserve account generally, upon the commencement of the bankruptcy case, would also constitute “cash collateral” under the Bankruptcy Code. So long as the lender is adequately protected, a debtor’s use of cash collateral may be for its own benefit or for the benefit of any affiliated entity group that is also subject to bankruptcy proceedings, including use as collateral for new debt. It should be noted, however, that the court may find that the lender has no security interest in either pre-petition or post-petition revenues if the court finds that the loan documents do not contain language covering accounts, room rents, or other forms of personalty necessary for a security interest to attach to such revenues.
In addition to the inclusion of hotel revenues within the definition of cash collateral as noted above, recent amendments to the Bankruptcy Code provide that a pre-petition security interest in rents or hotel revenues is designed to overcome those cases holding that a security interest in rents is unperfected under the laws of some states until the lender has taken some further action, such as commencing foreclosure or obtaining a receiver prior to activation of the assignment of rents.
Lease Assumption or Rejection by Tenant.
A borrower’s ability to make payment on a Mortgage Loan may be impaired by the commencement of a bankruptcy case relating to the tenant under a lease of the related property. Under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a tenant results in a stay in bankruptcy against the commencement or continuation of any state court proceeding for—
· | past due rent, |
· | accelerated rent, |
· | damages, or |
· | a summary eviction order with respect to a default under the lease that occurred prior to the filing of the tenant’s bankruptcy petition. |
In addition, the Bankruptcy Code generally provides that a trustee or debtor-in-possession may, subject to approval of the court:
· | assume the lease and either retain it or assign it to a third party, or |
· | reject the lease. |
If the lease is assumed, the trustee, debtor-in-possession or assignee, if applicable, must cure any defaults under the lease, compensate the lessor for its losses and provide the lessor with adequate assurance of future performance. These remedies may be insufficient, and any assurances provided to the lessor may be inadequate. If the lease is rejected, the lessor will be treated, except potentially to the extent of any security
483 |
deposit, as an unsecured creditor with respect to its claim for damages for termination of the lease. The Bankruptcy Code also limits a lessor’s damages for lease rejection to:
· | the unpaid rent due under the lease, without acceleration, for the period prior to the filing of the bankruptcy petition or any earlier repossession by the landlord, or surrender by the tenant, of the leased premises, plus |
· | the rent reserved by the lease, without acceleration, for the greater of one year and 15%, not to exceed three years, of the term of the lease following the filing of the bankruptcy petition or any earlier repossession by the landlord, or surrender by the tenant, of the leased premises. |
Lease Rejection by Lessor – Tenant’s Right.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as debtor in possession, rejects an unexpired lease of real property, the lessee may treat the lease as terminated by the rejection or, in the alternative, the lessee may remain in possession of the leasehold for the balance of the term and for any renewal or extension of the term that is enforceable by the lessee under applicable non-bankruptcy law. The Bankruptcy Code provides that if a lessee elects toremain in possession after a rejection of a lease, the lessee may offset against rents reserved under the lease for the balance of the term after the date of rejection of the lease, and the related renewal or extension of the lease, any damages occurring after that date caused by the nonperformance of any obligation of the lessor under the lease after that date. To the extent that the contractual obligation remains enforceable against the lessee, the lessee would not be able to avail itself of the rights of offset generally afforded to lessees of real property under the Bankruptcy Code.
Ground Lessee or Ground Lessor.
Bankruptcy risk is associated with an insolvency proceeding under the Bankruptcy Code of either a borrower ground lessee or a ground lessor. In general, upon the bankruptcy of a lessor or a lessee under a lease of nonresidential real property, including a ground lease, that has not been terminated prior to the bankruptcy filing date, the debtor entity has the statutory right to assume or reject the lease. Given that the Bankruptcy Code generally invalidates clauses that terminate contracts automatically upon the filing by one of the parties of a bankruptcy petition or that are conditioned on a party’s insolvency, following the filing of a bankruptcy petition, a debtor would ordinarily be required to perform its obligations under such lease until the debtor decides whether to assume or reject the lease. The Bankruptcy Code provides certain additional protections with respect to non-residential real property leases, such as establishing a specific timeframe in which a debtor must determine whether to assume or reject the lease. The bankruptcy court may extend the time to perform for up to 60 days for cause shown. Even if the agreements were terminated prior to bankruptcy, a bankruptcy court may determine that the agreement was improperly terminated and therefore remains part of the debtor’s bankruptcy estate. The debtor also can seek bankruptcy court approval to assume and assign the lease to a third party, and to modify the lease in connection with such assignment. In order to assume the lease, the debtor or assignee generally will have to cure outstanding defaults and provide “adequate assurance of future performance” in addition to satisfying other requirements imposed under the Bankruptcy Code. Under the Bankruptcy Code, subject to certain exceptions, once a lease is rejected by a debtor lessee, it is deemed breached, and the non-debtor lessor will have a claim for lease rejection damages, as described above.
If the ground lessor files for bankruptcy, it may determine until the confirmation of its plan of reorganization whether to reject the ground lease. On request of any party to the lease, the bankruptcy court may order the debtor to determine within a specific period of time whether to assume or reject the lease or to comply with the terms of the lease pending its decision to assume or reject. In the event of rejection, the non-debtor lessee will have the right to treat the lease as terminated by virtue of its terms, applicable nonbankruptcy law, or any agreement made by the lessee. The non-debtor lessee may also, if the lease term has begun, retain its rights under the lease, including its rights to remain in possession of the leased premises under the rent reserved in the lease for the balance of the term of the lease (including renewals). The term “lessee” includes any “successor, assign or mortgagee permitted under the terms of such lease”. If, pre-petition, the ground lessor had specifically granted the leasehold mortgagee such right, the leasehold mortgagee may have the right to succeed to the lessee/borrower’s position under the lease.
In the event of concurrent bankruptcy proceedings involving the ground lessor and the lessee/borrower, actions by creditors against the borrower/lessee debtor would be subject to the automatic stay, and a lender may
484 |
be unable to enforce both the bankrupt lessee’s/borrower’s pre-petition agreement to refuse to treat a ground lease rejected by a bankrupt lessor as terminated and any agreement by the ground lessor to grant the lender a new lease upon such termination. In such circumstances, a lease could be terminated notwithstanding lender protection provisions contained in that lease or in the mortgage. A lender could lose its security unless the lender holds a fee mortgage or the bankruptcy court, as a court of equity, allows the mortgagee to assume the ground lessee’s obligations under the ground lease and succeed to the ground lessee’s position. Although consistent with the Bankruptcy Code, such position may not be adopted by the bankruptcy court.
Further, in an appellate decision by the United States Court of Appeals for the Seventh Circuit (Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir, 2003)), the court ruled with respect to an unrecorded lease of real property that where a statutory sale of leased property occurs under the Bankruptcy Code upon the bankruptcy of a landlord, that sale terminates a lessee’s possessory interest in the property, and the purchaser assumes title free and clear of any interest, including any leasehold estates. Pursuant to the Bankruptcy Code, a lessee may request the bankruptcy court to prohibit or condition the statutory sale of the property so as to provide adequate protection of the leasehold interest; however, the court ruled that, at least where a memorandum of lease had not been recorded, this provision does not ensure continued possession of the property, but rather entitles the lessee to compensation for the value of its leasehold interest, typically from the sale proceeds. As a result, we cannot assure you that, in the event of a statutory sale of leased property pursuant to the Bankruptcy Code, the lessee would be able to maintain possession of the property under the ground lease. In addition, we cannot assure you that a leasehold mortgagor and/or a leasehold mortgagee (to the extent it has standing to intervene) would be able to recover the full value of the leasehold interest in bankruptcy court.
Because of the possible termination of the related ground lease, whether arising from a bankruptcy, the expiration of a lease term or an uncured defect under the related ground lease, lending on a leasehold interest in a real property is riskier than lending on the fee interest in the property.
Single-Purpose Entity Covenants and Substantive Consolidation.
Although the borrowers under the Mortgage Loans included in a trust fund may be special purpose entities, special purpose entities can become debtors in bankruptcy under various circumstances. For example, in the bankruptcy case of In re General Growth Properties, Inc. 409 B.R. 43 (Bankr. S.D.N.Y. 1999), notwithstanding that such subsidiaries were special purposeentities with independent directors, numerous property-level, special purpose subsidiaries were filed for bankruptcy protection by their parent entity. Nonetheless, the United States Bankruptcy Court for the Southern District of New York denied various lenders’ motions to dismiss the special purpose entity subsidiaries’ cases as bad faith filings. In denying the motions, the bankruptcy court stated that the fundamental and bargained for creditor protections embedded in the special purpose entity structures at the property level would remain in place during the pendency of the chapter 11 cases. Those protections included adequate protection of the lenders’ interest in their collateral and protection against the substantive consolidation of the property-level debtors with any other entities.
The moving lenders in the General Growth case had argued that the 20 property-level bankruptcy filings were premature and improperly sought to restructure the debt of solvent entities for the benefit of equity holders. However, the Bankruptcy Code does not require that a voluntary debtor be insolvent or unable to pay its debts currently in order to be eligible for relief and generally a bankruptcy petition will not be dismissed for bad faith if the debtor has a legitimate rehabilitation objective. Accordingly, after finding that the relevant debtors were experiencing varying degrees of financial distress due to factors such as cross defaults, a need to refinance in the near term (i.e., within 1 to 4 years), and other considerations, the bankruptcy court noted that it was not required to analyze in isolation each debtor’s basis for filing. In the court’s view, the critical issue was whether a parent company that had filed its bankruptcy case in good faith could include in the filing subsidiaries that were necessary for the parent’s reorganization. As demonstrated in the General Growth Properties bankruptcy case, although special purpose entities are designed to mitigate the bankruptcy risk of a borrower, special purpose entities can become debtors in bankruptcy under various circumstances.
Generally, pursuant to the doctrine of substantive consolidation, a bankruptcy court, in the exercise of its broad equitable powers, has the authority to order that the assets and liabilities of a borrower be substantively consolidated withthose of an affiliate (i.e., even a non-debtor), including for the purposes of making distributions under a plan of reorganization or liquidation. Thus, property that is ostensibly the property of a borrower may become subject to the bankruptcy case of an affiliate, the automatic stay applicable to such bankrupt affiliate may be extended to a borrower, and the rights of creditors of a borrower may become impaired. Substantive
485 |
consolidation is generally viewed as an equitable remedy that could result in an otherwise solvent company becoming subject to the bankruptcy proceedings of an insolvent affiliate, making the solvent company’s assets available to repay the debts of affiliated companies. A court has the discretion to order substantive consolidation in whole or in part and may include non-debtor affiliates of the bankrupt entity in the proceedings. The interrelationship among a borrower and other affiliates may pose a heightened risk of substantive consolidation and other bankruptcy risks in the event that any one or more of them were to become a debtor under the Bankruptcy Code. In the event of the bankruptcy of the applicable parent entities of any borrower, the assets of such borrower may be treated as part of the bankruptcy estates of such parent entities. In addition, in the event of the institution of voluntary or involuntary bankruptcy proceedings involving a borrower and certain of its affiliates, to serve judicial economy, it is likely that a court would jointly administer the respective bankruptcy proceedings. Furthermore, with respect to any affiliated borrowers, creditors of a common parent in bankruptcy may seek to substantively consolidate the assets of such borrowers with those of the parent.
Sales Free and Clear of Liens.
Under Sections 363(b) and (f) of the Bankruptcy Code, a trustee, or a borrower as debtor in possession, may, despite the provisions of the related mortgage to the contrary, sell the related mortgaged property free and clear of all liens, which liens would then attach to the proceeds of such sale. Such a sale may be approved by a bankruptcy court even if the proceeds are insufficient to pay the secured debt in full.
Post-Petition Credit.
Pursuant to Section 364 of the Bankruptcy Code, a bankruptcy court may, under certain circumstances, authorize a debtor to obtain credit after the commencement of a bankruptcy case, secured among other things, by senior, equal or junior liens on property that is already subject to a lien. In the bankruptcy case of General Growth Properties, the debtors initially sought approval of a debtor-in-possession loan to the corporate parent entities guaranteed by the property-level special purpose entities and secured by second liens on their properties. Although the debtor-in-possession loan ultimately did not include these subsidiary guarantees and second liens, we cannot assure you that, in the event of a bankruptcy of a Sponsor of a borrower, such Sponsor would not seek approval of a similar debtor-in-possession loan, or that a bankruptcy court would not approve a debtor-in-possession loan that included such subsidiary guarantees and second liens on such subsidiaries’ properties.
Avoidance Actions.
In a bankruptcy or similar proceeding involving a borrower, action may be taken seeking the recovery as a preferential transfer of any payments made by such borrower under a Mortgage Loan or to avoid the granting of the liens in the transaction in the first instance, or any replacement liens that arise by operation of law or the security agreement. Payments on long term debt may be protected from recovery as preferences if they qualify for the “ordinary course” exception under the Bankruptcy Code or if certain of the other defenses in the Bankruptcy Code are applicable. Whether any particular payment would be protected depends upon the facts specific to a particular transaction.
In addition, in a bankruptcy or similar proceeding involving any borrower, an action may be taken to avoid the transaction (or any component of the transaction, such as joint and several liability on a Mortgage Loan) as an actual or constructive fraudulent conveyance under state or federal law.
Generally, under federal law and most state fraudulent conveyance statutes, the incurrence of an obligation or the transfer of property by a person will be subject to avoidance if it was made with actual intent to hinder, delay or defraud creditors, as evidenced by certain “badges” of fraud. It also will be subject to avoidance under certain circumstances as a constructive fraudulent transfer if the transferor did not receive fair consideration or reasonably equivalent value in exchange for such obligation or transfer and (i) was insolvent or was rendered insolvent by such obligation or transfer, (ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the transferor constituted unreasonably small capital, or (iii) intended to, or believed that it would, incur debts that would be beyond the transferor’s ability to pay as such debts matured. The measure of insolvency will vary depending on the law of the applicable jurisdiction. However, an entity will generally be considered insolvent if the present fair salable value of its assets is less than (x) the sum of its debts or (y) the amount that would be required to pay its probable liabilities on its existing debts as they become absolute and matured. Accordingly, cross-collateralization arrangements could be challenged as fraudulent transfers by creditors of a borrower in an action brought outside a bankruptcy case or, if the borrower
486 |
were to become a debtor in a bankruptcy case, by the borrower as a debtor in possession or its bankruptcy trustee. Among other things, a legal challenge to the granting of liens may focus on the benefits realized by the borrower from the Mortgage Loan proceeds, in addition to the overall cross-collateralization. A lien or other property transfer granted by a borrower to secure repayment of a loan could be avoided if a court were to determine that (i) such borrower was insolvent at the time of granting the lien, was rendered insolvent by the granting of the lien, was left with inadequate capital, or was not able to pay its debts as they matured and (ii) the borrower did not, when it allowed its property to be encumbered by a lien securing the entire indebtedness represented by the loan, receive fair consideration or reasonably equivalent value for pledging such property.
Management Agreements.
It is likely that any management agreement relating to the mortgaged properties constitutes an “executory contract” for purposes of the Bankruptcy Code. Federal bankruptcy law provides generally that rights and obligations under an executory contract of a debtor may not be terminated or modified at any time after the commencement of a case under the Bankruptcy Code solely on the basis of a provision in such contract to such effect or because of certain other similar events. This prohibition on so-called “ipso facto” clauses could limit the ability of the related borrower (or the trustee as its assignee) to exercise certain contractual remedies with respect to a management agreement relating to any such mortgaged property. In addition, the Bankruptcy Code provides that a trustee in bankruptcy or debtor-in-possession may, subject to approval of the court, (a) assume an executory contract and (i) retain it or (ii) unless applicable law excuses a party other than the debtor from accepting performance from or rendering performance to an entity other than the debtor, assign it to a third party (notwithstanding any other restrictions or prohibitions on assignment) or (b) reject such contract. In a bankruptcy case of the related property manager, if the related management agreement(s) were to be assumed, the trustee in bankruptcy on behalf of such property manager, or such property manager as debtor-in-possession, or the assignee, if applicable, must cure any defaults under such agreement(s), compensate the borrower for its losses and provide the borrower with “adequate assurance” of future performance. Such remedies may be insufficient, however, as the related borrower may be forced to continue under a management agreement with a manager that is a poor credit risk or an unfamiliar manager if a management agreement was assigned (if applicable state law does not otherwise prevent such an assignment), and any assurances provided to the borrower may, in fact, be inadequate. If a management agreement is rejected, such rejection generally constitutes a breach of the executory contract immediately before the date of the filing of the petition. As a consequence, the related borrower generally would have only an unsecured claim against the related property manager for damages resulting from such breach, which could adversely affect the security for the Offered Certificates.
Certain of the Borrowers May Be Partnerships.
The laws governing limited partnerships in certain states provide that the commencement of a case under the Bankruptcy Code with respect to a general partner will cause a person to cease to be a general partner of the limited partnership, unless otherwise provided in writing in the limited partnership agreement. This provision may be construed as an “ipso facto” clause and, in the event of the general partner’s bankruptcy, may not be enforceable. Certain limited partnership agreements of the borrowers may provide that the commencement of a case under the Bankruptcy Code with respect to the related general partner constitutes an event of withdrawal (assuming the enforceability of the clause is not challenged in bankruptcy proceedings or, if challenged, is upheld) that might trigger the dissolution of the limited partnership, the winding up of its affairs and the distribution of its assets, unless (i) at the time there was at least one other general partner and the written provisions of the limited partnership permit the business of the limited partnership to be carried on by the remaining general partner and that general partner does so or (ii) the written provisions of the limited partnership agreement permit the limited partners to agree within a specified time frame (often 60 days) after the withdrawal to continue the business of the limited partnership and to the appointment of one or more general partners and the limited partners do so. In addition, the laws governing general partnerships in certain states provide that the commencement of a case under the Bankruptcy Code or state bankruptcy laws with respect to a general partner of the partnerships triggers the dissolution of the partnership, the winding up of its affairs and the distribution of its assets. Those state laws, however, may not be enforceable or effective in a bankruptcy case. Limited liability companies may be subjected to similar treatment as that described in this prospectus with respect to limited partnerships. The dissolution of a borrower, the winding up of its affairs and the distribution of its assets could result in an acceleration of its payment obligation under the borrower’s Mortgage Loan.
In addition, the bankruptcy of the general or limited partner of a borrower that is a partnership, or the bankruptcy of a member of a borrower that is a limited liability company or the bankruptcy of a shareholder of a
487 |
borrower that is a corporation may provide the opportunity in the bankruptcy case of the partner, member or shareholder to obtain an order from a court consolidating the assets and liabilities of the partner, member or shareholder with those of the mortgagor pursuant to the doctrines of substantive consolidation or piercing the corporate veil. In such a case, the respective mortgaged property, for example, would become property of the estate of the bankrupt partner, member or shareholder. Not only would the mortgaged property be available to satisfy the claims of creditors of the partner, member or shareholder, but an automatic stay would apply to any attempt by the Master Servicer or Special Servicer to exercise remedies with respect to the mortgaged property. However, such an occurrence should not affect the Trustee’s status as a secured creditor with respect to the borrower or its security interest in the mortgaged property.
A borrower that is a limited partnership, in many cases, may be required by the loan documents to have a special purpose entity as its sole general partner, and a borrower that is a general partnership, in many cases, may be required by the loan documents to have as its general partners only entities that are special purpose entities. A borrower that is a limited liability company may be required by the loan documents to have a special purpose member or a springing member. Borrowers that are tenants-in-common may be required by the loan documents to be special purpose entities. These provisions are designed to mitigate the risk of the dissolution or bankruptcy of the borrower partnership or its general partner, a borrower limited liability company or its member (if applicable), or a borrower that is a tenant-in-common. However, we cannot assure you that any borrower partnership or its general partner, or any borrower limited liability company or its member (if applicable), or a borrower that is a tenant-in-common, will not dissolve or become a debtor under the Bankruptcy Code.
Environmental Considerations
General.
A lender may be subject to environmental risks when taking a security interest in real property. Of particular concern may be properties that are or have been used for industrial, manufacturing, military or disposal activity. Those environmental risks include the possible diminution of the value of a contaminated property or, as discussed below, potential liability for clean-up costs or other remedial actions that could exceed the value of the property or the amount of the lender’s loan. In some circumstances, a lender may decide to abandon a contaminated real property as collateral for its loan rather than foreclose and risk liability for clean-up costs.
Environmental Assessments.
Environmental reports are generally prepared for mortgaged properties that will be included in the mortgage pool. At the time the Mortgage Loans were originated, it is possible that no environmental assessment or a very limited environmental assessment of the mortgaged properties was conducted.
Superlien Laws.
Under the laws of certain states, failure to perform any investigative and/or remedial action required or demanded by the state of any condition or circumstance that (i) may pose an imminent or substantial endangerment to the human health or welfare or the environment, (ii) may result in a release or threatened release of any hazardous material or hazardous substance, or (iii) may give rise to any environmental claim or demand (each condition or circumstance, an “Environmental Condition”), may give rise to a lien on the property to ensure the reimbursement of investigative and/or remedial costs incurred by the federal or state government. In several states, the lien has priority over the lien of an existing mortgage against the property. In any case, the value of a mortgaged property as collateral for a Mortgage Loan could be adversely affected by the existence of an Environmental Condition.
CERCLA.
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, imposes strict liability on present and past “owners” and “operators” of contaminated real property for the costs of clean-up. A secured lender may be liable as an “owner” or “operator” of a contaminated mortgaged property if agents or employees of the lender have participated in the management of the property or the operations of the borrower. Liability may exist even if the lender did not cause or contribute to the contamination and regardless of whether the lender has actually taken possession of the contaminated mortgaged property through foreclosure, deed-in-lieu of foreclosure or otherwise. Moreover, liability is not limited to the original or unamortized principal
488 |
balance of a loan or to the value of the property securing a loan. Excluded from CERCLA’s definition of “owner” or “operator,” however, is a person who, without participating in the management of the facility, holds indicia of ownership primarily to protect his security interest. This is the so called “secured creditor exemption.”
The Asset Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the “Lender Liability Act”) amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption. The Lender Liability Act offers substantial protection to lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption. In order for a lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower. The Lender Liability Act provides that “merely having the capacity to influence, or unexercised right to control” operations does not constitute participation in management. A lender will lose the protection of the secured creditor exemption only if—
· | it exercises decision-making control over a borrower’s environmental compliance and hazardous substance handling and disposal practices, or |
· | assumes day-to-day management of operational functions of a mortgaged property. |
The Lender Liability Act also provides that a lender will continue to have the benefit of the secured creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosure, provided that the lender seeks to sell that property at the earliest practicable commercially reasonable time on commercially reasonable terms.
CERCLA does not apply to petroleum products, and the secured creditor exclusion does not govern liability for cleanup costs under federal laws other than CERCLA, in particular Subtitle I of the federal Resource Conservation and Recovery Act (“RCRA”), which regulates underground petroleum storage tanks, except heating oil tanks. The EPA has adopted a lender liability rule for underground storage tanks (USTs) under Subtitle I of RCRA. Under that rule a lender with a security interest in an UST or real property containing an UST is not liable as an “owner” or “operator” so long as the lender does not engage in decision making control of the use, storage, filing or dispensing of petroleum contained in the UST, exercise control over the daily operation of the UST, or engage in petroleum production, refining or marketing. Moreover, under the Lender Liability Act, the protections accorded to lenders under CERCLA are also accorded to holders of security interests in underground petroleum storage tanks. It should be noted, however, that liability for cleanup of petroleum contamination may be governed by state law, which may not provide for any specific protection for secured creditors, or alternatively, may not impose liability on secured creditors at all.
Other Federal and State Laws.
Many states have statutes similar to CERCLA, and not all those statutes provide for a secured creditor exemption. In addition, under federal law, there is potential liability relating to hazardous wastes and underground storage tanks under the federal Resource Conservation and Recovery Act.
Some federal, state and local laws, regulations and ordinances govern the management, removal, encapsulation or disturbance of asbestos-containing materials. These laws, as well as common law standards, may¾
· | impose liability for releases of or exposure to asbestos-containing materials, and |
· | provide for third parties to seek recovery from owners or operators of real properties for personal injuries associated with those releases. |
Federal law requires owners of residential housing constructed prior to 1978 to disclose to potential residents or purchasers any known information in their possession regarding the presence of lead-based paint or lead-based paint-related hazards and will impose treble damages for any failure to disclose. In addition, the ingestion of lead-based paint chips or dust particles by children can result in lead poisoning. If lead-based paint hazards exist at a property, then the owner of that property may be held liable for injuries and for the costs of removal or encapsulation of the lead-based paint.
489 |
In a few states, transfers of some types of properties are conditioned upon cleanup of contamination prior to transfer. In these cases, a lender that becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure or otherwise, may be required to clean up the contamination before selling or otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes of action related to hazardous environmental conditions on a property, such as actions based on nuisance or on toxic tort resulting in death, personal injury or damage to property. While it may be more difficult to hold a lender liable under common law causes of action, unanticipated or uninsured liabilities of the borrower may jeopardize the borrower’s ability to meet its loan obligations or may decrease the re-sale value of the collateral.
Federal, state and local environmental regulatory requirements change often. It is possible that compliance with a new regulatory requirement could impose significant compliance costs on a borrower. These costs may jeopardize the borrower’s ability to meet its loan obligations.
Additional Considerations.
The cost of remediating hazardous substance contamination at a property can be substantial. If a lender becomes liable, it can bring an action for contribution against the owner or operator who created the environmental hazard. However, that individual or entity may be without substantial assets. Accordingly, it is possible that the costs could become a liability of the trust and occasion a loss to the certificateholders. Furthermore, such action against the borrower may be adversely affected by the limitations on recourse in the related loan documents. Similarly, in some states anti-deficiency legislation and other statutes requiring the lender to exhaust its security before bringing a personal action against the borrower trustor (see “—Foreclosure—Anti-Deficiency Legislation” above) may curtail the lender’s ability to recover from its borrower the environmental clean-up and other related costs and liabilities incurred by the lender.
If the operations on a foreclosed property are subject to environmental laws and regulations, the lender will be required to operate the property in accordance with those laws and regulations. This compliance may entail substantial expense, especially in the case of industrial or manufacturing properties.
The Pooling and Servicing Agreement will provide that the Master Servicer or the Special Servicer acting on behalf of the Issuing Entity, may not acquire title to, or possession of, a Mortgaged Property, take over its operation or take any other action that might subject the Issuing Entity to liability under CERCLA or comparable laws unless the Master Servicer or Special Servicer has previously determined, based upon a Phase I environmental site assessment (as described below) or other specified environmental assessment prepared by a person who regularly conducts the environmental assessments, that the mortgaged property is in compliance with applicable environmental laws and that there are no circumstances relating to use, management or disposal of any hazardous materials for which investigation, monitoring, containment, clean up or remediation could be required under applicable environmental laws, or that it would be in the best economic interest of the Issuing Entity to take any actions as are necessary to bring the Mortgaged Property into compliance with those laws or as may be required under the laws. A Phase I environmental site assessment generally involves identification of recognized environmental conditions (as defined in Guideline E1527-00 of the American Society for Testing and Materials Guidelines) and/or historic recognized environmental conditions (as defined in Guideline E1527-00 of the American Society for Testing and Materials Guidelines) based on records review, site reconnaissance and interviews, but does not involve a more intrusive investigation such as sampling or testing of materials. This requirement is intended to preclude enforcement of the security for the related Mortgage Loan until a satisfactory environmental assessment is obtained or any legally required remedial action is taken, reducing the likelihood that the Issuing Entity will become liable for any Environmental Condition affecting a mortgaged property, but making it more difficult to realize on the security for the Mortgage Loan. However, we cannot assure you that any environmental assessment obtained by the Master Servicer or the Special Servicer will detect all possible Environmental Conditions or that the other requirements of the Pooling and Servicing Agreement, even if fully observed by the Master Servicer and the Special Servicer will in fact insulate the Issuing Entity from liability for Environmental Conditions.
In addition, a lender may be obligated to disclose environmental conditions on a property to government entities and/or to prospective buyers, including prospective buyers at a foreclosure sale or following foreclosure. This disclosure may decrease the amount that prospective buyers are willing to pay for the affected property,
490 |
sometimes substantially and thereby decrease the ability of the lender to recover its investment in a loan upon foreclosure.
Due-On-Sale and Due-On-Encumbrance Provisions
Some or all of the Mortgage Loans underlying the Offered Certificates may contain due-on-sale and due-on-encumbrance clauses that purport to permit the lender to accelerate the maturity of the loan if the borrower transfers or encumbers the mortgaged property. In recent years, court decisions and legislative actions placed substantial restrictions on the right of lenders to enforce these clauses in many states. However, the Garn-St Germain Depository Institutions Act of 1982 generally preempts state laws that prohibit the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to the limitations prescribed in that Act and the regulations promulgated thereunder. The inability to enforce a due-on-sale clause may result in transfer of the related mortgaged property to an uncreditworthy person, which could increase the likelihood of default, which may affect the average life of the Mortgage Loans and the number of Mortgage Loans which may extend to maturity.
The Pooling and Servicing Agreement provides that if any Mortgage Loan contains a provision in the nature of a “due on sale” clause, which by its terms provides that: (i) the Mortgage Loan will (or may at the mortgagee’s option) become due and payable upon the sale or other transfer of an interest in the related mortgaged property; or (ii) the Mortgage Loan may not be assumed without the consent of the related mortgagee in connection with any sale or other transfer, then, for so long as the Mortgage Loan is included in the Issuing Entity, the Master Servicer or Special Servicer, on behalf of the Trustee, will be required to take actions as it deems to be in the best interest of the certificateholders in accordance with the servicing standard set forth in the Pooling and Servicing Agreement, and may waive or enforce any due on sale clause contained in the related Mortgage Loan, in each case subject to any consent rights of the Special Servicer (in the case of an action by the Master Servicer) and the controlling class representative.
In addition, under federal bankruptcy law, due-on-sale clauses may not be enforceable in bankruptcy proceedings and may, under certain circumstances, be eliminated in any modified mortgage resulting from the bankruptcy proceeding.
Junior Liens; Rights of Holders of Senior Liens
The trust may include Mortgage Loans secured by junior liens, while the loans secured by the related senior liens may not be included in that trust. The primary risk to holders of Mortgage Loans secured by junior liens is the possibility that adequate funds will not be received in connection with a foreclosure of the related senior liens to satisfy fully both the senior loans and the junior loan.
In the event that a holder of a senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied as follows:
· | first, to the payment of court costs and fees in connection with the foreclosure; |
· | second, to real estate taxes; |
· | third, in satisfaction of all principal, interest, prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens; and |
· | last, in satisfaction of all principal, interest, prepayment and acceleration penalties, if any, and any other sums due and owing to the holder of the junior Mortgage Loan. |
Subordinate Financing
Some Mortgage Loans underlying Offered Certificates may not restrict the ability of the borrower to use the mortgaged property as security for one or more additional loans, or the restrictions may be unenforceable. Where a borrower encumbers a mortgaged property with one or more junior liens, the senior lender is subjected to the following additional risks:
491 |
· | the borrower may have difficulty servicing and repaying multiple loans; |
· | if the subordinate financing permits recourse to the borrower, as is frequently the case, and the senior loan does not, a borrower may have more incentive to repay sums due on the subordinate loan; |
· | acts of the senior lender that prejudice the junior lender or impair the junior lender’s security, such as the senior lender’s agreeing to an increase in the principal amount of or the interest rate payable on the senior loan, may create a superior equity in favor of the junior lender; |
· | if the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender; and |
· | the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender. |
Default Interest and Limitations on Prepayments
Notes and mortgages may contain provisions that obligate the borrower to pay a late charge or additional interest if payments are not timely made. They may also contain provisions that prohibit prepayments for a specified period and/or condition prepayments upon the borrower’s payment of prepayment premium, fee or charge. In some states, there are or may be specific limitations upon the late charges that a lender may collect from a borrower for delinquent payments. Some states also limit the amounts that a lender may collect from a borrower as an additional charge if the loan is prepaid. In addition, the enforceability of provisions that provide for prepayment premiums, fees and charges upon an involuntary prepayment is unclear under the laws of many states. Some state statutory provisions may also treat certain prepayment premiums, fees and charges as usurious if in excess of statutory limits. See “—Applicability of Usury Laws” below.
Further, some of the Mortgage Loans underlying the Offered Certificates may not require the payment of specified fees as a condition to prepayment or these requirements have expired, and to the extent some Mortgage Loans do require these fees, these fees may not necessarily deter borrowers from prepaying their Mortgage Loans.
Applicability of Usury Laws
State and federal usury laws limit the interest that lenders are entitled to receive on a Mortgage Loan. In determining whether a given transaction is usurious, courts may include charges in the form of “points” and “fees” as “interest”, but may exclude payments in the form of “reimbursement of foreclosure expenses” or other charges found to be distinct from “interest”. If, however, the amount charged for the use of the money loaned is found to exceed a statutorily established maximum rate, the loan is generally found usurious regardless of the form employed or the degree of overcharge. Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“Title V”) provides that state usury limitations will not apply to various types of residential, including multifamily, first Mortgage Loans originated by particular lenders after March 31, 1980. Title V authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law. In addition, even where Title V is not rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on Mortgage Loans covered by Title V. Some states have taken action to reimpose interest rate limits and/or to limit discount points or other charges.
Statutes differ in their provisions as to the consequences of a usurious loan. One group of statutes requires the lender to forfeit the interest due above the applicable limit or imposes a specified penalty. Under this statutory scheme, the borrower may cancel the recorded mortgage or deed of trust upon paying its debt with lawful interest, and the lender may foreclose, but only for the debt plus lawful interest. A second group of statutes is more severe. A violation of this type of usury law results in the invalidation of the transaction, permitting the borrower to cancel the recorded mortgage or deed of trust without any payment or prohibiting the lender from foreclosing.
492 |
Americans with Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and rules promulgated thereunder, in order to protect individuals with disabilities, owners of public accommodations, such as hotels, restaurants, shopping centers, hospitals, schools and social service center establishments, must remove architectural and communication barriers which are structural in nature from existing places of public accommodation to the extent “readily achievable.” In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, the altered portions are readily accessible to and usable by disabled individuals. The “readily achievable” standard takes into account, among other factors, the financial resources of the affected property owner, landlord or other applicable person. In addition to imposing a possible financial burden on the borrower in its capacity as owner or landlord, the ADA may also impose requirements on a foreclosing lender who succeeds to the interest of the borrower as owner or landlord. Furthermore, because the “readily achievable” standard may vary depending on the financial condition of the owner or landlord, a foreclosing lender that is financially more capable than the borrower of complying with the requirements of the ADA may be subject to more stringent requirements than those to which the borrower is subject.
Servicemembers Civil Relief Act
Under the terms of the Servicemembers Civil Relief Act, a borrower who enters military service after the origination of the borrower’s Mortgage Loan, including a borrower who was in reserve status and is called to active duty after origination of the Mortgage Loan, may not be charged interest, including fees and charges, above an annual rate of 6% during the period of the borrower’s active duty status, unless a court orders otherwise upon application of the lender. The Relief Act applies to individuals who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service or the National Oceanic and Atmospheric Administration assigned to duty with the military. Because the Relief Act applies to individuals who enter military service, including reservists who are called to active duty, after origination of the related Mortgage Loan, no information can be provided as to the number of loans with individuals as borrowers that may be affected by the Relief Act.
Application of the Relief Act would adversely affect, for an indeterminate period of time, the ability of a Master Servicer or Special Servicer to collect full amounts of interest on an affected Mortgage Loan. Any shortfalls in interest collections resulting from the application of the Relief Act would result in a reduction of the amounts payable to the holders of the Certificates, and would not be covered by advances or any form of credit support provided in connection with the Certificates. In addition, the Relief Act imposes limitations that would impair the ability of a Master Servicer or Special Servicer to foreclose on an affected Mortgage Loan during the borrower’s period of active duty status and, under some circumstances, during an additional three month period after the active duty status ceases.
In addition, pursuant to the laws of various states, under certain circumstances, payments on Mortgage Loans by residents in such states who are called into active duty with the National Guard or the reserves will be deferred. These state laws may also limit the ability of the Master Servicer to foreclose on the related mortgaged property. This could result in delays or reductions in payment and increased losses on the Mortgage Loans that would be borne by certificateholders.
Anti-Money Laundering, Economic Sanctions and Bribery
Many jurisdictions have adopted wide-ranging anti-money laundering, economic and trade sanctions, and anti-corruption and anti-bribery laws, and regulations (collectively, the “Requirements”). Any of the Depositor, the Issuing Entity, the underwriters, the Master Servicer, the Special Servicer, the Trustee or the Certificate Administrator could be requested or required to obtain certain assurances from prospective investors intending to purchase Offered Certificates and to retain such information or to disclose information pertaining to them to governmental, regulatory or other authorities or to financial intermediaries or engage in due diligence or take other related actions in the future. It is the policy of the Depositor, the Issuing Entity, the underwriters, the Master Servicer, the Special Servicer, the Trustee and the Certificate Administrator to comply with the Requirements to which they are or may become subject and to interpret such Requirements broadly in favor of disclosure. Failure to honor any request by the Depositor, the Issuing Entity, the underwriters, the Master Servicer, the Special Servicer, the Trustee or the Certificate Administrator to provide requested information or take such other actions as may be necessary or advisable for the Depositor, the Issuing Entity, the underwriters, the Master Servicer, the
493 |
Special Servicer, the Trustee or the Certificate Administrator to comply with any Requirements, related legal process or appropriate requests (whether formal or informal) may result in, among other things, a forced sale to another investor of such investor’s Offered Certificates. In addition, each of the Depositor, the Issuing Entity, the underwriters, the Master Servicer, the Special Servicer, the Trustee and the Certificate Administrator intends to comply with the U.S. Bank Secrecy Act, the USA Patriot Act and any other anti-money laundering and anti-terrorism, economic and trade sanctions, and anti-corruption or anti-bribery laws, and regulations of the United States and other countries, and will disclose any information required or requested by authorities in connection therewith.
Potential Forfeiture of Assets
Federal law provides that assets (including property purchased or improved with assets) derived from criminal activity or otherwise tainted, or used in the commission of certain offenses are subject to the blocking requirements of economic sanctions laws and regulations, and can be blocked and/or seized by and ordered forfeited to the United States of America. The offenses that can trigger such a blocking and/or seizure and forfeiture include, among others, violations of the Racketeer Influenced and Corrupt Organizations Act, the Bank Secrecy Act, the anti-money-laundering, anti-terrorism, economic sanctions, and anti-bribery laws and regulations, including the USA Patriot Act and the regulations issued pursuant to the USA Patriot Act, as well as the narcotic drug laws. Under procedures contained in the Comprehensive Crime Control Act of 1984, the government may seize the property even before conviction. The government must publish notice of the forfeiture proceeding and may give notice to all parties “known to have an alleged interest in the property,” including the holders of Mortgage Loans.
A lender may avoid forfeiture of its interest in the property if it establishes that—
· | its mortgage was executed and recorded before commission of the illegal conduct from which the assets used to purchase or improve the property were derived or before the commission of any other crime upon which the forfeiture is based, or |
· | the lender, at the time of execution of the mortgage, “did not know or was reasonably without cause to believe that the property was subject to forfeiture.” |
However, there is no assurance that such defense will be successful.
Ratings
It is a condition to the issuance of each Class of Offered Certificates that it receives an investment grade credit rating from one or more NRSROs engaged by the Depositor to rate the Offered Certificates (each such NRSRO engaged by the Depositor to rate the Offered Certificates, a “Rating Agency” and, collectively, the “Rating Agencies”). Typically, the four highest rating categories, within which there may be sub-categories or gradations indicating relative standing, signify investment grade.
We are not obligated to maintain any particular rating with respect to any Class of Offered Certificates. Changes affecting the Mortgage Loans, the Mortgaged Properties, the Sponsors, the Certificate Administrator, the Trustee, the Operating Advisor, the Master Servicer, the Special Servicer, any Outside Servicer, any Outside Special Servicer or another person may have an adverse effect on the ratings of the Offered Certificates, and thus on the liquidity, market value and regulatory characteristics of the Offered Certificates, although such adverse changes would not necessarily be an event of default under the applicable Mortgage Loan.
A securities rating on mortgage pass-through Certificates addresses credit risk and the likelihood of full and timely payment to the applicable certificateholders of all distributions of interest at the applicable pass-through rate on the Certificates in question on each distribution date and, except in the case of interest-only Certificates, the ultimate payment in full of the certificate balance of each Class of Certificates in question on a date that is not later than the rated final distribution date with respect to such Class of Certificates. A rating takes into consideration, among other things, the credit quality of the Mortgage Pool, structural and legal aspects associated with the Certificates in question, and the extent to which the payment stream from the Mortgage Pool is adequate to make payments required under the Certificates in question. A securities rating on mortgage pass-through Certificates does not, however, represent any assessment of or constitute a statement regarding—
494 |
· | whether the price paid for those Certificates is fair; |
· | whether those Certificates are a suitable investment for any particular investor; |
· | the tax attributes of those Certificates or of the trust; |
· | the yield to maturity or, if they have principal balances, the average life of those Certificates; |
· | the likelihood, timing or frequency of prepayments (whether voluntary or involuntary) of principal on the underlying Mortgage Loans; |
· | the degree to which the amount or frequency of prepayments on the underlying Mortgage Loans might differ from those originally anticipated; |
· | the allocation of prepayment interest shortfalls or whether any compensating interest payments will be made; |
· | whether or to what extent the interest payable on those Certificates may be reduced in connection with interest shortfalls resulting from the timing of voluntary prepayments; |
· | the likelihood that any amounts other than interest at the related mortgage interest rates and principal will be received with respect to the underlying Mortgage Loans; |
· | the likelihood or frequency of yield maintenance charges, assumption fees or penalty charges; or |
· | if those Certificates provide solely or primarily for payments of interest, whether the holders, despite receiving all payments of interest to which they are entitled, would ultimately recover their initial investments in those Certificates. |
See “Risk Factors—Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates;Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued;Ratings May Affect ERISA Eligibility;Ratings May Be Downgraded”.
In addition, a securities rating on mortgage pass-through Certificates does not represent an assessment of the yield to maturity that investors may experience or the possibility that the holders of interest-only Certificates might not fully recover their initial investments in the event of delinquencies or defaults or rapid prepayments on the underlying Mortgage Loans (including both voluntary and involuntary prepayments) or the application of any realized losses. In the event that the holders of such Certificates do not fully recover their investment as a result of rapid principal prepayments on the Mortgage Loans, all amounts “due” to such holders will nevertheless have been paid, and such result is consistent with the securities ratings assigned to such Certificates. The Notional Amount of the Class X-A Certificates may be reduced by the allocation of realized losses and prepayments, whether voluntary or involuntary, to the Class A-1, Class A-2, Class A-3, Class A-4 and/or Class A-AB Certificates and/or the Class A-S Trust Component. The Notional Amount of the Class X-B Certificates may be reduced by the allocation of realized losses and prepayments, whether voluntary or involuntary, to the Class B Trust Component. The securities ratings do not address the timing or magnitude of reductions of such Notional Amount, but only the obligation to distribute interest timely on each such Notional Amount as so reduced from time to time. Therefore, the securities ratings of the Class X-A and Class X-B Certificates should be evaluated independently from similar ratings on other types of securities.
NRSROs that were not engaged by the Depositor to rate the Offered Certificates may nevertheless issue unsolicited credit ratings on one or more Classes of Offered Certificates, relying on information they receive pursuant to Rule 17g-5 or otherwise. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from any ratings assigned by the Rating Agencies. The issuance of unsolicited ratings by any NRSRO on a Class of the Offered Certificates that are lower than the ratings assigned by the Rating Agencies may adversely impact the liquidity, market value and regulatory characteristics of that Class.
As part of the process of obtaining ratings for the Offered Certificates, the Depositor had initial discussions with and submitted certain materials to five NRSROs, including the Rating Agencies. Based on preliminary
495 |
feedback from those NRSROs at that time, the Depositor selected the Rating Agencies to rate the Offered Certificates and not the other NRSROs, due in part to their initial subordination levels for the various Classes of the Certificates. In the case of one of the Rating Agencies, the Depositor has requested ratings for only certain Classes of the Offered Certificates, due in part to the initial subordination levels provided by such Rating Agency for the various Classes of the Offered Certificates. Had the Depositor selected alternative NRSROs to rate the Offered Certificates, we cannot assure you as to the ratings that such other NRSROs would have ultimately assigned to the Offered Certificates. Although unsolicited ratings may be issued by any NRSRO, an NRSRO might be more likely to issue an unsolicited rating if it was not selected after having provided preliminary feedback to the Depositor. Had the Depositor requested each of the Rating Agencies to rate all Classes of the Offered Certificates, we cannot assure you as to the ratings that any such engaged NRSRO would have ultimately assigned to the Classes of Offered Certificates that it did not rate.
Furthermore, the SEC may determine that any or all of the Rating Agencies no longer qualifies as an NRSRO or is no longer qualified to rate the Offered Certificates, and that determination may also have an adverse effect on the liquidity, market value and regulatory characteristics of the Offered Certificates.
Certain actions provided for in the loan agreements require, as a condition to taking such action, that a Rating Agency Confirmation be obtained from each Rating Agency. In certain circumstances, this condition may be deemed to have been met or waived without such a Rating Agency Confirmation being obtained. See the definition of “Rating Agency Confirmation” in this prospectus. In the event such an action is taken without a Rating Agency Confirmation being obtained, we cannot assure you that the applicable Rating Agency will not downgrade, qualify or withdraw its ratings as a result of the taking of such action. If you invest in the Offered Certificates, pursuant to the Pooling and Servicing Agreement your acceptance of Offered Certificates will constitute an acknowledgment and agreement with the procedures relating to Rating Agency Confirmations described under the definition of “Rating Agency Confirmation” in this prospectus.
Any rating of 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 agreements between Depositor and each Rating Agency, the Rating Agencies will provide ongoing ratings surveillance with respect to the Offered Certificates for as long as they remain issued and outstanding. The Depositor is responsible for the fees paid to the Rating Agencies to rate and to provide ongoing rating surveillance with respect to the Offered Certificates.
496 |
Plan of Distribution (Underwriter Conflicts of Interest)
Citigroup Global Markets Inc., Goldman, Sachs & Co., Academy Securities, Inc. and the Depositor have entered into an underwriting agreement with respect to the Offered Certificates (the “Underwriting Agreement”), pursuant to which the Depositor has agreed to sell to the underwriters, and the underwriters have severally but not jointly agreed to purchase from the Depositor, the respective Certificate Balance or Notional Amount, as applicable, of each Class of Offered Certificates set forth below. In connection with the offering contemplated by this prospectus, Citigroup Global Markets Inc. and Goldman, Sachs & Co. are acting as co-lead managers and joint bookrunners with respect to approximately 76.46% and 23.54%, respectively, of the total principal balance of the Offered Certificates, and Academy Securities, Inc. is acting as co-manager.
Class | Citigroup Global Markets Inc. | Goldman, Sachs & Co. | Academy Securities, Inc. | ||||||
Class A-1 | $ | 16,815,112 | $ | 5,177,888 | $ | 0 | |||
Class A-2 | $ | 14,889,169 | $ | 4,584,831 | $ | 0 | |||
Class A-3 | $ | 133,799,144 | $ | 41,200,856 | $ | 0 | |||
Class A-4 | $ | 173,846,375 | $ | 53,532,625 | $ | 0 | |||
Class A-AB | $ | 32,465,024 | $ | 9,996,976 | $ | 0 | |||
Class X-A | $ | 402,356,964 | $ | 123,898,036 | $ | 0 | |||
Class X-B | $ | 25,894,340 | $ | 7,973,660 | $ | 0 | |||
Class A-S | $ | 30,542,140 | $ | 9,404,860 | $ | 0 | |||
Class B | $ | 25,894,340 | $ | 7,973,660 | $ | 0 | |||
Class EC | $ | 0 | $ | 0 | $ | 0 | |||
Class C | $ | 25,229,931 | $ | 7,769,069 | $ | 0 |
The Depositor estimates that its share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $6,400,000.
The Underwriting Agreement provides that the obligations of the underwriters will be subject to certain conditions precedent and that the underwriters will be obligated to purchase all Offered Certificates if any are purchased. In the event of a default by any underwriter, the Underwriting Agreement provides that, in certain circumstances, purchase commitments of the non-defaulting underwriter(s) may be increased or the Underwriting Agreement may be terminated.
The Depositor and the Sponsors have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act. The parties to the Pooling and Servicing Agreement have also severally agreed to indemnify the underwriters, and the underwriters, severally and not jointly, have agreed to indemnify the Depositor and controlling persons of the Depositor, against certain liabilities, including liabilities under the Securities Act, and have agreed to contribute to payments required to be made in respect of these liabilities.
The Depositor has been advised by the underwriters that they propose to offer the Offered Certificates to the public from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined at the time of sale. Proceeds to the Depositor from the sale of Offered Certificates will be approximately 113.76% of the initial aggregate principal balance of the Offered Certificates, plus accrued interest on the Offered Certificates from April 1, 2016, before deducting expenses payable by the Depositor. The underwriters may effect the transactions by selling the Offered Certificates to or through dealers, and the dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the underwriters.In connection with the purchase and sale of the Offered Certificates, the underwriters and dealers may be deemed to have received compensation from the Depositor in the form of underwriting discounts and commissions.
We anticipate that the Offered Certificates will be sold primarily to institutional investors. Purchasers of Offered Certificates, including dealers, may, depending on the facts and circumstances of those purchases, be deemed to be “underwriters” within the meaning of the Securities Act in connection with reoffers and resales by them of Offered Certificates. If you purchase Offered Certificates, you should consult with your legal advisors in this regard prior to any reoffer or resale. The Offered Certificates are a new issue of securities with no established trading market. Although the Depositor has been advised by the underwriters that they intend to make a market in the Offered Certificates, they are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Offered Certificates. Further, we cannot assure you that a secondary market for the Offered Certificates will develop or, if
497 |
it does develop, that it will continue.See“Risk Factors—The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline”.
The primary source of ongoing information available to investors concerning the Offered Certificates will be the monthly statements discussed under“Description of the Certificates—Reports to Certificateholders; Certain Available Information” in this prospectus, which will include information as to the outstanding principal balance or notional amount, as applicable, of the Offered Certificates and the status of the applicable form of credit enhancement. Except as described under “Description of the Certificates—Reports to Certificateholders; Certain Available Information” in this prospectus, we cannot assure you that any additional information regarding the Offered Certificates will be available through any other source. In addition, we are not aware of any source through which price information about the Offered Certificates will be generally available on an ongoing basis. The limited nature of that information regarding the Offered Certificates may adversely affect the liquidity of the Offered Certificates, even if a secondary market for the Offered Certificates becomes available.
Citigroup Global Markets Inc., one of the underwriters, is an affiliate of the Depositor, Citibank, N.A. (the Certificate Administrator) and CGMRC (a Sponsor, an Originator and the current holder of one of the Park Place Pari Passu Companion Loans). Goldman, Sachs & Co., one of the underwriters, is an affiliate of GSMC (a Sponsor and an Originator). See “Risk Factors—Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned with Your Interests” and “—Interests and Incentives of the Underwriter Entities May Not Be Aligned with Your Interests” in this prospectus.
A substantial portion of the net proceeds of this offering (after the payment of underwriting compensation and transaction expenses) is intended to be directed to affiliates of Citigroup Global Markets Inc., one of the underwriters and one of the co-lead managers and joint bookrunners for this offering, and Goldman, Sachs & Co., one of the underwriters and one of the co-lead managers and joint bookrunners for this offering. That flow of funds will occur by means of the collective effect of the payment by the underwriters to the Depositor of the purchase price for the Offered Certificates and (i) the payment by the Depositor to CGMRC, an affiliate of Citigroup Global Markets Inc., in its capacity as a Sponsor, of the purchase price for the CGMRC Mortgage Loans, and (ii) the payment by the Depositor to GSMC, an affiliate of Goldman, Sachs & Co., in its capacity as a Sponsor, of the purchase price for the GSMC Mortgage Loans. See “Transaction Parties—The Sponsors and the Mortgage Loan Sellers”. In addition, (i) proceeds received by Rialto in connection with the contribution of the Rialto Mortgage Loans to this securitization transaction will be applied, among other things, to directly or indirectly reacquire any such Mortgage Loans that are financed with, and to make payments to, Goldman Sachs Bank USA, an affiliate of GSMC, a Sponsor and an Originator, and Goldman, Sachs & Co., one of the underwriters, as the repurchase agreement counterparty; and (ii) proceeds received by KGS in connection with the contribution of the KGS Mortgage Loans to this securitization transaction will be applied, among other things, to directly or indirectly reacquire any such Mortgage Loans that are financed with, and to make payments to, Citibank, the Certificate Administrator and an affiliate of CGMRC, a Sponsor and an Originator, and Citigroup Global Markets Inc., one of the underwriters, as the repurchase agreement counterparty.
As a result of the circumstances described above, Citigroup Global Markets Inc. and Goldman, Sachs & Co. have a “conflict of interest” within the meaning of Rule 5121 of the consolidated rules of The Financial Industry Regulatory Authority, Inc. In addition, other circumstances exist that result in the underwriters or their affiliates having conflicts of interest, notwithstanding that such circumstances may not constitute a “conflict of interest” within the meaning of such Rule 5121. See “Risk Factors—Interests and Incentives of the Underwriter Entities May Not Be Aligned with Your Interests.”
Incorporation of Certain Information by Reference
All reports filed or caused to be filed by the depositor with respect to the issuing entity before the termination of this offering pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended, that relate to the Offered Certificates (other than Annual Reports on Form 10-K) will be deemed to be incorporated by reference into this prospectus, except that if anOutside Servicing Agreement is entered into after termination of this offering, any Current Report on Form 8-K filed after termination of this offering that includes as an exhibit such Outside Servicing Agreement will be deemed to be incorporated by reference into this prospectus.
The Depositor will provide or cause to be provided without charge to each person to whom this prospectus is delivered in connection with this offering (including beneficial owners of the Offered Certificates), upon written or oral request of that person, a copy of any or all documents or reports incorporated in this prospectus by reference,
498 |
in each case to the extent the documents or reports relate to the Offered Certificates, other than the exhibits to those documents (unless the exhibits are specifically incorporated by reference in those documents). Requests to the Depositor should be directed in writing to its principal executive offices at 390 Greenwich Street, 7th Floor, New York, New York 10013, or by telephone at (212) 816-6000.
Where You Can Find More Information
The Depositor has filed a Registration Statement on Form SF-3 (SEC File No. 333-207132) (the “Registration Statement”) relating to multiple series of CMBS, including the Offered Certificates, with the SEC. This prospectus will form a part of the Registration Statement, but the Registration Statement includes additional information. Copies of the Registration Statement and other materials filed with or furnished to the SEC, including Distribution Reports on Form 10-D, Annual Reports on Form 10-K, Current Reports on Form 8-K, Forms ABS-15G, and any amendments to these reports may be read and copied at the Public Reference Section of the SEC, 100 F Street N.W., Washington, D.C. 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site at “http://www.sec.gov” at which you can view and download copies of this prospectus through the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The SEC maintains computer terminals providing access to the EDGAR system at each of the offices referred to above.
The Depositor has met the registrant requirements of Section I.A.1. of the General Instructions to the Registration Statement.
Copies of all reports of the Issuing Entity on Forms 10-D, 10-K and 8-K will also be made available on the website of the Certificate Administrator as soon as reasonably practicable after these materials are electronically filed with or furnished to the SEC through the EDGAR system.
Financial Information
The Issuing Entity will be newly formed and will not have engage in any business activities or have any assets or obligations prior to the issuance of the Offered Certificates. Accordingly, no financial statements with respect to the Issuing Entity are included in this prospectus.
The Depositor has determined that its financial statements will not be material to the offering of the Offered Certificates.
Legal Matters
The validity of the Offered Certificates and certain federal income tax matters will be passed upon for the Depositor by Orrick, Herrington & Sutcliffe LLP, New York, New York. Certain legal matters will be passed upon for the underwriters by Mayer Brown LLP, Charlotte, North Carolina.
499 |
Index of Certain Defined Terms
17g-5 Information Provider | 329 |
1986 Act | 453 |
2010 PD Amending Directive | 12 |
2015 Budget Act | 460 |
30/360 Basis | 311 |
5 Penn Plaza Loan Combination | 198 |
5 Penn Plaza Mortgage Loan | 198 |
5 Penn Plaza Pari Passu Companion Loan | 198 |
5 Penn Plaza Pari Passu Companion Loans | 198 |
600 Broadway Certificateholders | 212 |
600 Broadway Companion Loan Securitization Date | 211 |
600 Broadway Controlling Class Representative | 213 |
600 Broadway Controlling Pari Passu Companion Loan | 198 |
600 Broadway Directing Holder | 213 |
600 Broadway Loan Combination | 198 |
600 Broadway Mortgage Loan | 198 |
600 Broadway Pari Passu Companion Loan | 198 |
600 Broadway Pari Passu Companion Loans | 198 |
600 Broadway Pooling and Servicing Agreement | 198 |
600 Broadway Servicer | 436 |
600 Broadway Special Servicer | 436 |
79 Madison Avenue Loan Combination | 197 |
79 Madison Avenue Mortgage Loan | 197 |
79 Madison Avenue Pari Passu Companion Loan | 197 |
AB Loan Combination | 146 |
AB Modified Loan | 379 |
Accelerated Mezzanine Loan | 407 |
Acceptable Insurance Default | 350 |
Accredited Investor | 14 |
ACL Music Venue Component | 190 |
Actual/360 Basis | 184 |
Adjacent Building Lease | 181 |
Administrative Fee Rate | 368 |
ADR | 148 |
Advance Rate | 355 |
Advances | 354 |
Affected Investor | 68 |
Affirmative Asset Review Vote | 417 |
AIFMD | 68 |
Allocated Cut-off Date Loan Amount | 148 |
AMI | 158 |
Ancillary Fees | 363 |
Annual Debt Service | 149 |
Anticipated Repayment Date | 184 |
Appraisal Date | 149 |
Appraisal Reduction Amount | 377 |
Appraisal Reduction Event | 376 |
Appraised Value | 149 |
Appraised-Out Class | 380 |
Appraiser | 378 |
ARD | 149 |
ARD Loan | 184 |
Assessment of Compliance | 382 |
Asset Representations Reviewer | 295 |
Asset Representations Reviewer Asset Review Fee | 369 |
Asset Representations Reviewer Ongoing Fee | 369 |
Asset Representations Reviewer Ongoing Fee Rate | 369 |
Asset Representations Reviewer Termination Event | 422 |
Asset Representations Reviewer Upfront Fee | 369 |
Asset Review | 419 |
Asset Review Notice | 418 |
Asset Review Quorum | 418 |
Asset Review Report | 420 |
Asset Review Report Summary | 420 |
Asset Review Standard | 419 |
Asset Review Trigger | 417 |
Asset Review Vote Election | 417 |
Assumed Final Distribution Date | 317 |
Assumption Fees | 364 |
Attestation Report | 382 |
AUL | 169 |
Austin Block 21 Loan Combination | 197 |
Austin Block 21 Mortgage Loan | 197 |
Austin Block 21 Pari Passu Companion Loan | 197 |
Available Funds | 305 |
Balloon Balance | 149 |
Balloon Mortgage Loans | 184 |
Bankruptcy Code | 70 |
Base Interest Fraction | 317 |
BCBS | 69 |
Beds | 155 |
Berkadia | 279 |
Berkadia Event of Default | 283 |
Berkadia Parties | 282 |
Berkadia Primary Servicer Termination Event | 288 |
BNY Mellon | 147, 233 |
BNY Mellon Data Tape | 235 |
BNY Mellon Deal Team | 234 |
BNY Mellon Mortgage Loans | 147, 234 |
BNY Member | 234 |
Borrower Delayed Reimbursements | 363 |
Borrower Party | 406 |
B-Piece Buyer | 134 |
CBE | 447 |
CDI 202.01 | 70 |
Certificate Administrator | 272 |
Certificate Balance | 301 |
Certificate Owner | 325 |
Certificate Summary | 10 |
Certificateholder | 324 |
Certificateholder Quorum | 391 |
Certificateholder Repurchase Request | 423 |
Certificates | 300 |
Certifying Certificateholder | 333 |
CGCMT 2016-GC36 Asset Representations Reviewer | 200 |
500 |
CGCMT 2016-GC36 Certificate Administrator | 200 |
CGCMT 2016-GC36 Controlling Class Representative | 201 |
CGCMT 2016-GC36 Depositor | 200 |
CGCMT 2016-GC36 Master Servicer | 200 |
CGCMT 2016-GC36 Operating Advisor | 200 |
CGCMT 2016-GC36 Pooling and Servicing Agreement | 197 |
CGCMT 2016-GC36 Securitization | 197 |
CGCMT 2016-GC36 Special Servicer | 200 |
CGCMT 2016-GC36 Trustee | 200 |
CGCMT 2016-P3 Asset Representations Reviewer | 204 |
CGCMT 2016-P3 Certificate Administrator | 204 |
CGCMT 2016-P3 Controlling Class Representative | 205 |
CGCMT 2016-P3 Depositor | 204 |
CGCMT 2016-P3 Master Servicer | 204 |
CGCMT 2016-P3 Operating Advisor | 204 |
CGCMT 2016-P3 Pooling and Servicing Agreement | 197 |
CGCMT 2016-P3 Securitization | 197 |
CGCMT 2016-P3 Special Servicer | 204 |
CGCMT 2016-P3 Trustee | 204 |
CGMRC | 147, 226 |
CGMRC Data File | 227 |
CGMRC Mortgage Loans | 147 |
CGMRC Securitization Database | 227 |
Citibank | 272 |
Class | 300 |
Class A-AB Scheduled Principal Balance | 307 |
Class A-S Percentage Interest | 302 |
Class A-S Trust Component | 302 |
Class A-S-Exchange Percentage Interest | 302 |
Class B Percentage Interest | 302 |
Class B Trust Component | 302 |
Class B-Exchange Percentage Interest | 302 |
Class C Percentage Interest | 302 |
Class C Trust Component | 302 |
Class C-Exchange Percentage Interest | 302 |
Class EC Component | 302 |
Class EC Component A-S | 302 |
Class EC Component B | 302 |
Class EC Component C | 303 |
Class X Certificates | 300 |
Class X Strip Rate | 311 |
Clearstream | 331 |
Clearstream Participants | 332 |
Closing Date | 148, 300 |
CMBS | 67, 226, 234, 290 |
Code | 54, 451 |
Co-Lender Agreement | 199 |
Collateral Deficiency Amount | 379 |
Collection Account | 358 |
Collection Period | 306 |
Collective Investment Scheme | 11 |
Communication Request | 334 |
Companion Loan | 146 |
Companion Loan Holder | 344 |
Companion Loan Rating Agency | 387 |
Compensating Interest Payment | 318 |
Consent Fees | 362 |
Consultation Termination Event | 406 |
Control Eligible Certificates | 381, 406 |
Control Termination Event | 406 |
Controlling Class | 406 |
Controlling Class Certificateholder | 406 |
Controlling Class Representative | 405 |
Controlling Note Holder | 199 |
Corrected Loan | 350 |
CPR | 442 |
CREC | 169 |
CREFC® | 322 |
CREFC®Intellectual Property Royalty License Fee | 368 |
CREFC®Intellectual Property Royalty License Fee Rate | 368 |
CREFC®Reports | 322 |
Crossed Group | 150 |
Cross-Over Date | 310 |
CRR | 68 |
Cumulative Appraisal Reduction Amount | 379, 380 |
Cure/Contest Period | 420 |
Custodian | 271, 402 |
Cut-off Date | 146 |
Cut-off Date Balance | 146 |
Cut-off Date DSCR | 151 |
Cut-off Date Loan-to-Value Ratio | 150 |
Cut-off Date LTV Ratio | 150 |
DBJPM 2016-C1 Securitization | 198 |
DBNTC | 271 |
DBTCA | 271 |
Debt Service Coverage Ratio | 151 |
Debt Yield on Underwritten NCF | 151 |
Debt Yield on Underwritten Net Cash Flow | 151 |
Debt Yield on Underwritten Net Operating Income | 151 |
Debt Yield on Underwritten NOI | 151 |
Defaulted Mortgage Loan | 366 |
Defeasance | E-1-10 |
Defeasance Deposit | 189 |
Defeasance Loans | 188 |
Defeasance Lock Out Period | 188 |
Defeasance Option | 188 |
Defective Mortgage Loan | 341 |
Definitive Certificate | 331 |
Delinquent Loan | 417 |
Depositaries | 331 |
Depositor | 148, 269 |
Determination Date | 304 |
Diligence File | 336 |
Directing Holder | 405 |
Disclosable Special Servicer Fees | 367 |
Dispute Resolution Consultation | 425 |
Dispute Resolution Cut-off Date | 425 |
Distribution Account | 358 |
Distribution Date | 304 |
Document Defect | 335 |
501 |
Dodd-Frank Act | 69 |
DSCP | 168 |
DSCR | 151 |
DTC | 331 |
DTC Participants | 331 |
DTC Rules | 332 |
Due Date | 184, 306 |
Due Diligence Questionnaire | 228 |
Due Diligence Requirement | 68 |
Due Period | 306 |
EDGAR | 499 |
EEA | 68 |
Eligible Asset Representations Reviewer | 421 |
Eligible Operating Advisor | 414 |
Enforcing Party | 424 |
Enforcing Servicer | 424 |
Environmental Condition | 488, E-1-12 |
ERISA | 464 |
ESA | 167, E-1-12 |
Euroclear | 331 |
Euroclear Operator | 333 |
Euroclear Participants | 333 |
Excess Interest | 185 |
Excess Interest Distribution Account | 358 |
Excess Liquidation Proceeds Reserve Account | 359 |
Excess Modification Fees | 363 |
Excess Penalty Charges | 364 |
Excess Prepayment Interest Shortfall | 319 |
Exchange Act | 225 |
Exchange Date | 304 |
Exchangeable Certificates | 300 |
Exchangeable Distribution Account | 359 |
Exchangeable Proportion | 303 |
Excluded Controlling Class Holder | 137, 328 |
Excluded Controlling Class Mortgage Loan | 406 |
Excluded Information | 328 |
Excluded Mortgage Loan | 406 |
Excluded Mortgage Loan Special Servicer | 389 |
Excluded Special Servicer Mortgage Loan | 389 |
Exemption Rating Agency | 467 |
FATCA | 462 |
FDEP | 168 |
FDIA | 120 |
FDIC | 120, 273 |
FDIC Safe Harbor | 121 |
FETL | 15 |
FIEL | 15 |
Final Asset Status Report | 411 |
Final Dispute Resolution Election Notice | 425 |
Financial Promotion Order | 11 |
FIRREA | 253 |
Fitch | 276, 293, 387 |
Form 8-K | 225 |
FPO Persons | 11 |
FSCMA | 15 |
FSMA | 11 |
Garage Renovation | 170 |
GC36 Berkadia Primary Serviced Loans | 279 |
GC37 Berkadia Primary Serviced Loans | 279 |
GC37 Berkadia Primary Serviced Mortgage Loans | 285 |
GC37 Berkadia Primary Servicing Agreement | 285 |
Goldman Originator | 260 |
Grantor Trust | 451 |
Ground Lease | E-1-10 |
GS Bank | 120 |
GSMC | 147, 239 |
GSMC Data Tape | 240 |
GSMC Deal Team | 240 |
GSMC Mortgage Loans | 147 |
Hard Lockbox | 151 |
High Net Worth Companies, Unincorporated Associations, Etc. | 11 |
IKB Action | 272 |
Indirect Participants | 331 |
Initial Pool Balance | 146 |
Initial Rate | 184 |
Initial Requesting Certificateholder | 423 |
In-Place Cash Management | 152 |
Institutional Investor | 14 |
Insurance Rating Requirements | E-1-4 |
Interest Accrual Amount | 312 |
Interest Accrual Period | 312 |
Interest Distribution Amount | 311 |
Interest Only Mortgage Loans | 184 |
Interest Reserve Account | 358 |
Interest Shortfall | 312 |
Interested Person | 400 |
Interest-Only Certificates | 300 |
Investment Company Act | 1 |
Investor Certification | 324 |
IRS | 452 |
Issuing Entity | 146 |
JPMBB 2016-C1 Securitization | 198 |
KBRA | 387 |
KeyBank | 280, 293 |
KeyBank Outside Serviced Loans | 293 |
KeyBank/Berkadia Primary Servicing Agreement | 280 |
KGS | 147, 236 |
KGS Data Tape | 237 |
KGS Holdings | 335 |
KGS Mortgage Loans | 147 |
KGS Review Team | 237 |
Largest Tenant | 152 |
Largest Tenant Lease Expiration | 152 |
Lawsuit | 280 |
Lender Liability Act | 489 |
Liquidation Fee | 365 |
Liquidation Fee Rate | 366 |
Liquidation Proceeds | 366 |
Loan Combination | 146 |
Loan Combination Custodial Account | 358 |
Loan Per Unit | 152 |
Loss of Value Payment | 340 |
Lower-Tier Regular Interests | 451 |
Lower-Tier REMIC | 451 |
502 |
Lower-Tier REMIC Distribution Account | 358 |
LTV Ratio at Maturity | 152 |
LUST | 167 |
MAI | 377, E-1-13 |
Major Decision | 403 |
MAS | 13 |
MassDEP | 169 |
Master Servicer | 274 |
Master Servicer Decision | 351 |
Master Servicer Remittance Date | 354 |
Material Breach | 339 |
Material Defect | 339 |
Material Document Defect | 336 |
Maturity Date Loan-to-Value Ratio | 152 |
Maturity Date LTV Ratio | 152 |
McCallum Release Parcel | 190 |
Member Loans | 196 |
Midland | 289 |
Modeling Assumptions | 442 |
Modification Fees | 363 |
Monthly Payment | 306 |
Moody’s | 276, 293, 387 |
Morningstar | 293 |
Mortgage | 146 |
Mortgage File | 334 |
Mortgage Loan Purchase Agreement | 334 |
Mortgage Loan Schedule | 347 |
Mortgage Loan Sellers | 147 |
Mortgage Loans | 146 |
Mortgage Note | 146 |
Mortgage Pool | 146 |
Mortgage Rate | 311 |
Mortgaged Property | 146 |
Mortgagee | E-1-13 |
Most Recent NOI | 153 |
Net Cash Flow | 155 |
Net Mortgage Pass-Through Rate | 311 |
Net Mortgage Rate | 311 |
Non-Offered Certificates | 300 |
Nonrecoverable Advance | 355 |
Non-Reduced Certificates | 325 |
Non-U.S. Tax Person | 462 |
Notional Amount | 303 |
NRSRO | 323, 472 |
NRSRO Certification | 325 |
Occupancy | 153 |
Occupancy Date | 154 |
Offered Certificates | 300 |
OID Regulations | 454 |
OLA | 121 |
Operating Advisor | 295 |
Operating Advisor Consulting Fee | 368 |
Operating Advisor Fee | 368 |
Operating Advisor Fee Rate | 368 |
Operating Advisor Standard | 411 |
Operating Advisor Termination Event | 413 |
Original Balance | 154 |
Originators | 148, 244 |
Other Crossed Loans | 341 |
Outside Certificate Administrator | 345 |
Outside Controlling Class Representative | 345 |
Outside Controlling Note Holder | 345 |
Outside Depositor | 345 |
Outside Operating Advisor | 345 |
Outside Securitization | 345 |
Outside Serviced Companion Loan | 345 |
Outside Serviced Loan Combination | 345 |
Outside Serviced Mortgage Loan | 345 |
Outside Servicer | 345 |
Outside Servicing Agreement | 345 |
Outside Special Servicer | 345 |
Outside Trustee | 345 |
P&I | 275 |
P&I Advance | 354 |
Pads | 155 |
Pari Passu Companion Loan | 146 |
Pari Passu Indemnified Items | 385 |
Pari Passu Indemnified Parties | 385 |
Pari PassuLoan Combination | 146 |
Park Bridge Financial | 295 |
Park Bridge Lender Services | 295 |
Park Place Loan Combination | 198 |
Park Place Mortgage Loan | 198 |
Park Place Pari Passu Companion Loan | 198 |
Park Place Pari Passu Companion Loans | 198 |
Partial Defeasance Notice Date | 191 |
Partial Release Notice Date | 190 |
Participants | 331 |
Party in Interest | 464 |
Pass-Through Rate | 310 |
PCIS Persons | 11 |
PCO | 182 |
PCR | 248, 265 |
Penalty Charges | 363 |
Percentage Interest | 304 |
Permitted Encumbrances | E-1-3 |
Permitted Investments | 305 |
Permitted Special Servicer/Affiliate Fees | 367 |
PIPs | 111, 170 |
Plan Asset Regulations | 465 |
PML | 264, 267 |
Pooling and Servicing Agreement | 344 |
Pooling and Servicing Agreement Party Repurchase Request | 424 |
PPA | 275 |
PRC | 13 |
Preliminary Asset Review Report | 419 |
Preliminary Dispute Resolution Election Notice | 425 |
Prepayment Assumption | 455 |
Prepayment Interest Excess | 318 |
Prepayment Interest Shortfall | 318 |
Prepayment Penalty Description | 154 |
Prepayment Provision | 154 |
Prime Rate | 355 |
Principal Balance Certificates | 300 |
Principal Distribution Amount | 312 |
Principal Shortfall | 313 |
Privileged Information | 411 |
503 |
Privileged Information Exception | 411 |
Privileged Person | 323 |
Professional Investors | 13 |
Prohibited Prepayment | 318 |
Promotion of Collective Investment Schemes Exemptions Order | 11 |
Property Advances | 354 |
Proposed Course of Action Notice | 425 |
Prospectus | 13 |
Prospectus Directive | 12 |
PTE | 467 |
Qualification Criteria | 233, 236, 238 |
Qualified Investor | 12 |
Qualified Investors | 12 |
Qualified Mortgage | 336 |
Qualified Substitute Mortgage Loan | 340 |
RAIT | 147, 242 |
RAIT Data Tape | 243 |
RAIT Mortgage Loans | 147 |
RAIT Partnership | 242 |
RAIT Securitization Team | 242 |
Rated Final Distribution Date | 318 |
Rating Agencies | 494 |
Rating Agency | 494 |
Rating Agency Confirmation | 429 |
Rating Agency Declination | 429 |
RCRA | 489 |
Realized Loss | 320 |
REC | 167 |
Recognized Collective Investment Scheme | 11 |
Record Date | 304 |
Registration Statement | 499 |
Regular Certificates | 300 |
Regular Interestholder | 453 |
Regular Interests | 451 |
Regulation AB | 224 |
Related Group | 154 |
Release Date | 189 |
Release Parcel | 192 |
Relevant Member State | 12 |
Relevant Person | 14 |
Relevant Persons | 11 |
Remaining Tenants | 158 |
REMIC | 451 |
REMIC LTV Test | 145 |
REMIC Regulations | 451 |
Renovation Account | 170 |
REO Account | 359 |
REO Companion Loan | 313 |
REO Loan | 313 |
REO Mortgage Loan | 313 |
REO Property | 300 |
Repurchase Price | 339, 429 |
Repurchase Request | 424 |
Requesting Certificateholder | 425 |
Requesting Holders | 380 |
Requesting Investor | 334 |
Requesting Party | 427 |
Requirements | 493 |
Residual Certificates | 300 |
Resolution Failure | 424 |
Resolved | 424 |
Restricted Group | 468 |
Restricted Party | 411 |
Retail/Office Component | 190 |
Retention Requirement | 68 |
Review Materials | 418 |
Revised Rate | 184 |
RevPAR | 154 |
RFT | 242, 335 |
Rialto | 147, 231 |
Rialto Data Tape | 232 |
Rialto Mortgage Loans | 147, 231 |
Rialto Review Team | 232 |
Risk Factors | 10 |
RMBS | 273 |
Rooms | 155 |
Rule 17g-5 | 325, 394 |
S&P | 276, 293 |
Scheduled Principal Distribution Amount | 312 |
SEC | 225 |
Securities Act | 224 |
Securitization Accounts | 300 |
SEL | 264, 267, E-1-5 |
Senior Certificates | 300 |
Series 2007 CIBC18 Trust | 280 |
Serviced AB Loan Combination | 344 |
Serviced Companion Loan | 344 |
Serviced Companion Loan Holder | 344 |
Serviced Companion Loan Securities | 129, 387 |
Serviced Loan Combination | 344 |
Serviced Loans | 344 |
Serviced Mortgage Loans | 344 |
Serviced Outside Controlled Companion Loan | 345 |
Serviced Outside Controlled Loan Combination | 344 |
Serviced Outside Controlled Mortgage Loan | 345 |
Serviced Pari PassuCompanion Loan | 344 |
Serviced Pari Passu Companion Loan Holder | 344 |
Serviced Pari PassuLoan Combination | 344 |
Serviced Subordinate Companion Loan | 344 |
Serviced Subordinate Companion Loan Holder | 344 |
Servicer Termination Events | 386 |
Servicing Fee | 361 |
Servicing Fee Rate | 362 |
Servicing Function Participant | 382 |
Servicing Standard | 348 |
Servicing Transfer Event | 349 |
SFA | 13 |
Sheraton Denver Downtown Fee Loan Combination | 197 |
Sheraton Denver Downtown Fee Mortgage Loan | 197 |
Sheraton Denver Downtown Fee Pari Passu Companion Loan | 197 |
Similar Law | 470 |
Similar Requirements | 68 |
Single-Purpose Entity | E-1-9 |
504 |
SMMEA | 472 |
Soft Lockbox | 154 |
Soft Springing Lockbox | 154 |
Solvency II | 68 |
Special Servicer | 289 |
Special Servicing Fee | 364 |
Special Servicing Fee Rate | 364 |
Specially Serviced Loan | 349 |
Split Mortgage Loan | 146 |
Sponsors | 148, 226 |
Springing Cash Management | 154 |
Springing Lockbox | 154 |
Standard Qualifications | E-1-1 |
Startup Day | 451 |
Stated Principal Balance | 313 |
Structured Product | 13 |
Subject Loans | 369, 372 |
Subordinate Certificates | 300 |
Subordinate Companion Loan | 146 |
Sub-Servicing Agreement | 353 |
Summary of Terms | 10 |
T&I Advances | 282 |
TCO | 182 |
Terms and Conditions | 333 |
Terrorism Cap Amount | E-1-9 |
Tests | 419 |
Third Party Report | 148 |
TIA | 69, 271 |
Title Exception | E-1-2 |
Title Policy | E-1-2 |
Title V | 492 |
Trailing 12 NOI | 153 |
Tranche Percentage Interest | 303 |
TRIA | E-1-8 |
TRIPRA | 119 |
Trust Component | 302 |
Trust REMICs | 451 |
Trustee | 271 |
Trustee/Certificate Administrator Fee | 367 |
Trustee/Certificate Administrator Fee Rate | 367 |
U.S. Tax Person | 462 |
Underwriter Entities | 127 |
Underwriter Exemption | 467 |
Underwriting Agreement | 497 |
Underwritten EGI | 155 |
Underwritten Expenses | 154 |
Underwritten NCF | 155 |
Underwritten NCF DSCR | 151 |
Underwritten Net Cash Flow | 155 |
Underwritten Net Operating Income | 155 |
Underwritten NOI | 155 |
Underwritten Revenues | 155 |
Units | 155 |
Unscheduled Principal Distribution Amount | 313 |
Unsolicited Information | 418 |
UPB | 275 |
Updated Appraisal | 395 |
Upper-Tier REMIC | 451 |
Upper-Tier REMIC Distribution Account | 358 |
UST | 167 |
UW NCF DSCR | 151 |
Volcker Rule | 69 |
Voting Rights | 330 |
WAC Rate | 311 |
Wachovia | 274 |
WDNR | 168 |
Weighted Average Mortgage Rate | 156 |
Wells Fargo Bank | 274 |
Withheld Amounts | 358 |
Workout Fee | 364 |
Workout Fee Rate | 365 |
Workout-Delayed Reimbursement Amount | 357 |
YM Group A | 316 |
YM Group B | 316 |
YM Groups | 316 |
Zoning Regulations | E-1-7 |
505 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(THIS PAGE INTENTIONALLY LEFT BLANK)
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Related Group | Crossed Group | Address | City | State | Zip Code | General Property Type | Detailed Property Type | Year Built | Year Renovated | Units, Pads, Rooms, SF | Unit Description | Loan Per Unit ($) | ||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | NAP | NAP | 1550 Court Place | Denver | Colorado | 80202 | Land | Hospitality | 1959 | 2008-2010 | 1,231 | Rooms | 146,222.58 | ||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | NAP | NAP | 200 South 10th Street | Richmond | Virginia | 23219 | Office | CBD | 2010 | NAP | 205,698 | SF | 251.56 | ||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | NAP | NAP | 79 Madison Avenue | New York | New York | 10016 | Office | CBD | 1925 | 2015 | 274,084 | SF | 310.12 | ||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | NAP | NAP | 1710 Orrington Avenue | Evanston | Illinois | 60201 | Hospitality | Full Service | 1923 | 2013 | 269 | Rooms | 148,698.88 | ||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | NAP | NAP | 200 and 212 Lavaca Street | Austin | Texas | 78701 | Mixed Use | Hospitality/Office/Retail | 2010-2011 | NAP | 251 (Hotel) / 143,400 (Office and Retail) | Rooms / SF | 404.32 | ||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | NAP | NAP | 107 Rivington Street | New York | New York | 10002 | Hospitality | Full Service | 2003 | 2015 | 109 | Rooms | 334,862.39 | ||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | NAP | NAP | 350 South Beverly Drive | Beverly Hills | California | 90212 | Office | CBD | 1989 | NAP | 60,281 | SF | 573.98 | |||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | NAP | NAP | 600 Broadway | New York | New York | 10012 | Retail | Anchored | 1900 | 2008 | 77,280 | SF | 1,552.80 | ||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | NAP | NAP | 5 Penn Plaza | New York | New York | 10001 | Office | CBD | 1917 | 2015 | 650,329 | SF | 399.80 | ||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | NAP | NAP | 7401 New Hampshire Avenue | Takoma Park | Maryland | 20912 | Multifamily | High-Rise | 1967 | 2006, 2015 | 216 | Units | 101,851.85 | |||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | NAP | NAP | 1255, 1260, 1333, 1340, 1445 and 1450 South Spectrum Boulevard | Chandler | Arizona | 85286 | Office | General Suburban | 2009-2014 | NAP | 523,673 | SF | 177.59 | ||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | NAP | NAP | 419 | Units | 45,689.14 | |||||||||||||||||||||||||||
12.01 | Property | McCallum Glen | 7740 McCallum Boulevard | Dallas | Texas | 75252 | Multifamily | Garden | 1985 | 2014 | 275 | Units | ||||||||||||||||||||||||
12.02 | Property | McCallum Courts | 7777 McCallum Boulevard | Dallas | Texas | 75252 | Multifamily | Garden | 1983 | 2014 | 144 | Units | ||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | NAP | NAP | 3655 Rosslare Harbour Drive | Pickerington | Ohio | 43147 | Multifamily | Garden | 2009 | 2012 | 187 | Units | 100,000.00 | |||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | NAP | NAP | 12720 South Orange Blossom Trail | Orlando | Florida | 32837 | Retail | Anchored | 2003 | NAP | 106,292 | SF | 169.34 | ||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | NAP | NAP | 234,747 | SF | 60.28 | ||||||||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | 10000 Sam Neace Drive | Florence | Kentucky | 41042 | Self Storage | Self Storage | 1997 | NAP | 65,125 | SF | ||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | 3951 Nine Mile Tobasco Road | Cincinnati | Ohio | 45255 | Self Storage | Self Storage | 1998 | NAP | 73,125 | SF | ||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | 33 Chandler Avenue | Taunton | Massachusetts | 02780 | Self Storage | Self Storage | 1898 | 2000, 2016 | 44,997 | SF | ||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | 2020 Northside Drive | Hebron | Kentucky | 41048 | Self Storage | Self Storage | 1994 | NAP | 51,500 | SF | ||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | NAP | NAP | 331 | Units | 39,425.98 | |||||||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | 15151 Ashgrove Drive | Sterling Heights | Michigan | 48313 | Multifamily | Garden | 1984-1985 | 2012-2015 | 203 | Units | ||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | 3131 North Oaks Street | Valdosta | Georgia | 31602 | Multifamily | Garden | 1982-1983 | 2012-2015 | 80 | Units | ||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | 248 South Heincke Road | Miamisburg | Ohio | 45342 | Multifamily | Garden | 1985 | 2012-2015 | 48 | Units | ||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | NAP | NAP | 3975 North Nellis Boulevard | Las Vegas | Nevada | 89115 | Multifamily | Garden | 1995 | 2012-2015 | 336 | Units | 37,202.38 | ||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | NAP | NAP | 2869 Troy Center Drive | Troy | Michigan | 48084 | Multifamily | Mid-Rise | 1974 | NAP | 168 | Units | 68,750.00 | ||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | NAP | NAP | 6103 Landerhaven Drive | Mayfield Heights | Ohio | 44124 | Hospitality | Extended Stay | 2007 | NAP | 123 | Rooms | 91,056.91 | ||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | NAP | NAP | 1123-1133 West Armitage Avenue | Chicago | Illinois | 60614 | Retail | Unanchored | 2007 | NAP | 32,604 | SF | 337.38 | |||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | NAP | NAP | 2935 Pat Booker Road | Universal City | Texas | 78148 | Retail | Anchored | 1984 | 2002 | 137,798 | SF | 75.31 | ||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | Group 1 | NAP | 1033 Wisconsin Dells Parkway South | Baraboo | Wisconsin | 53913 | Hospitality | Limited Service | 1998 | 2007 | 114 | Rooms | 80,943.05 | ||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | NAP | NAP | 10080-10180 West Tropicana Avenue | Las Vegas | Nevada | 89147 | Retail | Shadow Anchored | 2005 | NAP | 49,304 | SF | 182.54 | |||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | NAP | NAP | 29100 Northwestern Highway | Southfield | Michigan | 48034 | Office | General Suburban | 1940, 1983, 2008 | 2013 | 96,514 | SF | 93.16 | ||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | NAP | NAP | 4070 East Main Street | Saint Charles | Illinois | 60174 | Hospitality | Limited Service | 2000 | 2014 | 120 | Rooms | 71,458.33 | ||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | Group 2 | NAP | 2519 North McMullen Booth Road | Clearwater | Florida | 33761 | Retail | Anchored | 1984 | NAP | 84,441 | SF | 96.81 | |||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | NAP | NAP | 9201 East 30th Street | Indianapolis | Indiana | 46229 | Multifamily | Garden | 1975 | 2015 | 187 | Units | 42,245.99 | |||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | Group 1 | NAP | 3536 Mount Hope Road | Williamsburg | Michigan | 49690 | Hospitality | Limited Service | 2001 | 2012-2014 | 81 | Rooms | 86,829.30 | ||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | NAP | NAP | 5920, 5940, 5960, 5884, 5970 and 5892 West Arizona Pavilions Drive | Marana | Arizona | 85743 | Retail | Shadow Anchored | 2004 | NAP | 24,347 | SF | 279.30 | ||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | NAP | NAP | 51315-51405 Gratiot Avenue | Chesterfield | Michigan | 48051 | Retail | Anchored | 2002, 2006 | NAP | 66,884 | SF | 97.84 | |||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | NAP | NAP | 401 Southwest 12th Avenue | Portland | Oregon | 97205 | Mixed Use | Multifamily/Retail | 1911 | 2013-2014 | 28,500 | SF | 221.05 | ||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | NAP | NAP | 106,575 | SF | 51.61 | ||||||||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | 2675 Whiskey Road | Aiken | South Carolina | 29803 | Self Storage | Self Storage | 1999, 2002, 2007 | NAP | 64,300 | SF | ||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | 441 Clemson Road | Columbia | South Carolina | 29229 | Self Storage | Self Storage | 2001 | NAP | 42,275 | SF | ||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | NAP | NAP | 7960 Niwot Road | Niwot | Colorado | 80503 | Retail | Shadow Anchored | 1972, 1974, 1986, 1999 | NAP | 41,264 | SF | 113.90 | ||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | NAP | NAP | 5702 Raymond Road | Madison | Wisconsin | 53711 | Retail | Single Tenant Retail | 2007 | NAP | 15,555 | SF | 290.90 | ||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | Group 3 | NAP | 20,441 | SF | 209.09 | |||||||||||||||||||||||||||
35.01 | Property | Mattress Firm | 26400 Lorain Road | North Olmsted | Ohio | 44070 | Retail | Single Tenant Retail | 2014 | NAP | 6,000 | SF | ||||||||||||||||||||||||
35.02 | Property | Olive Garden | 26000 Harvard Road | Warrensville Heights | Ohio | 44122 | Retail | Single Tenant Retail | 2009 | NAP | 7,441 | SF | ||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | 945 Coshocton Avenue | Mount Vernon | Ohio | 43050 | Retail | Single Tenant Retail | 2005 | NAP | 7,000 | SF | ||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | Group 2 | NAP | 1229 and 1235 Providence Boulevard | Deltona | Florida | 32725 | Retail | Anchored | 1984 | NAP | 80,567 | SF | 51.20 | |||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | NAP | NAP | 1921 South Main Street | West Bend | Wisconsin | 53095 | Retail | Single Tenant Retail | 2010 | NAP | 14,820 | SF | 269.91 | ||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | NAP | NAP | 10200-10232 South Pulaski Road | Oak Lawn | Illinois | 60453 | Multifamily | Garden | 1963 | 2005 | 81 | Units | 49,382.72 | |||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | NAP | NAP | 155 and 161 West Hanford Armona Road | Lemoore | California | 93245 | Retail | Shadow Anchored | 1992 | NAP | 19,842 | SF | 199.99 |
A-1 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Related Group | Crossed Group | Address | City | State | Zip Code | General Property Type | Detailed Property Type | Year Built | Year Renovated | Units, Pads, Rooms, SF | Unit Description | Loan Per Unit ($) | ||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | Group 3 | NAP | 3550 Fruitville Road | Sarasota | Florida | 34237 | Retail | Single Tenant Retail | 2005 | NAP | 14,820 | SF | 246.19 | |||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | NAP | NAP | 855 West Warner Road | Gilbert | Arizona | 85233 | Retail | Shadow Anchored | 1995 | 2002 | 15,360 | SF | 226.82 | |||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | NAP | NAP | 5 Stockade Drive | Ridgeland | South Carolina | 29909 | Self Storage | Self Storage | 2002 | NAP | 69,320 | SF | 37.87 | |||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | NAP | NAP | 1060 Freeport Boulevard | Sparks | Nevada | 89431 | Self Storage | Self Storage | 1974 | NAP | 63,860 | SF | 40.71 | ||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | Group 3 | NAP | 8,500 | SF | 265.53 | |||||||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | 22070 Hall Road | Clinton Township | Michigan | 48038 | Retail | Single Tenant Retail | 2008 | NAP | 4,500 | SF | ||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | 30600 Lyon Center Drive East | New Hudson | Michigan | 48165 | Retail | Single Tenant Retail | 2009 | NAP | 4,000 | SF | ||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | Group 6 | NAP | 23740 Fenkell Street | Detroit | Michigan | 48223 | Multifamily | Garden | 1967 | NAP | 138 | Units | 16,248.95 | |||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | Group 4 | NAP | 105 Mauldin Drive | Alpharetta | Georgia | 30004 | Self Storage | Self Storage | 1996 | 1998 | 43,300 | SF | 49.48 | ||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | Group 5 | NAP | 3271 East Waterloo Road | Akron | Ohio | 44312 | Manufactured Housing | Manufactured Housing | 1953, 1958, 1961 | NAP | 145 | Pads | 14,758.62 | |||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | Group 4 | NAP | 5405 Glade Road Southeast | Acworth | Georgia | 30102 | Self Storage | Self Storage | 1998 | 2000 | 47,575 | SF | 43.99 | |||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | Group 6 | NAP | 23871 Fullerton Street | Detroit | Michigan | 48223 | Multifamily | Garden | 1974 | NAP | 108 | Units | 18,434.49 | |||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | Group 3 | NAP | 27810 Chagrin Boulevard | Woodmere | Ohio | 44122 | Retail | Unanchored | 2013 | NAP | 6,700 | SF | 296.64 | |||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | Group 5 | NAP | 29200 County Road 20 | Elkhart | Indiana | 46517 | Manufactured Housing | Manufactured Housing | 1966 | NAP | 75 | Pads | 17,525.45 | |||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | NAP | NAP | 101 East Monroe Circle | Jefferson | Ohio | 44047 | Manufactured Housing | Manufactured Housing | 1984 | NAP | 100 | Pads | 12,750.00 | |||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | Group 5 | NAP | 130 South Suncoast Boulevard | Crystal River | Florida | 34429 | Manufactured Housing | Manufactured Housing | 1950 | NAP | 89 | Pads | 11,797.75 | |||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | Group 4 | NAP | 1600 French Boulevard | Buford | Georgia | 30518 | Self Storage | Self Storage | 1988 | NAP | 36,750 | SF | 23.05 |
A-2 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Ownership Interest | Original Balance ($) | Cut-off Date Balance ($) | Allocated Cut-off Date Loan Amount ($) | % of Initial Pool Balance | Balloon Balance ($) | Mortgage Loan Rate (%) | Administrative Fee Rate (%) (1) | Net Mortgage Loan Rate (%) | Monthly Debt Service ($) (2) | Annual Debt Service ($) | Pari Companion Loan Monthly Debt Service ($) | Pari Companion Loan Annual Debt Service ($) | Amortization Type | Interest Accrual Method | ||||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | Fee Simple | 70,000,000 | 70,000,000 | 70,000,000 | 10.1% | 70,000,000 | 4.50000% | 0.01576% | 4.4842% | 266,145.83 | 3,193,749.96 | 418,229.17 | 5,018,750.04 | Interest Only | Actual/360 | ||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | Fee Simple | 52,000,000 | 51,744,943 | 51,744,943 | 7.4% | 32,700,459 | 4.95000% | 0.01576% | 4.9342% | 341,742.32 | 4,100,907.84 | Amortizing | Actual/360 | ||||||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | Fee Simple | 40,000,000 | 40,000,000 | 40,000,000 | 5.8% | 40,000,000 | 4.75000% | 0.01576% | 4.7342% | 160,532.41 | 1,926,388.92 | 180,598.96 | 2,167,187.54 | Interest Only | Actual/360 | ||||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | Fee Simple | 40,000,000 | 40,000,000 | 40,000,000 | 5.8% | 35,463,075 | 5.07000% | 0.01576% | 5.0542% | 216,443.14 | 2,597,317.68 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | Fee Simple | 40,000,000 | 39,876,237 | 39,876,237 | 5.7% | 33,498,117 | 5.58000% | 0.02076% | 5.5592% | 229,127.38 | 2,749,528.56 | 630,100.31 | 7,561,203.72 | Amortizing | Actual/360 | ||||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | Fee Simple | 36,500,000 | 36,500,000 | 36,500,000 | 5.3% | 33,642,941 | 4.96000% | 0.01576% | 4.9442% | 195,048.57 | 2,340,582.84 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | Fee Simple | 34,600,000 | 34,600,000 | 34,600,000 | 5.0% | 31,328,104 | 5.07000% | 0.01576% | 5.0542% | 187,223.32 | 2,246,679.84 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | Fee Simple | 30,000,000 | 30,000,000 | 30,000,000 | 4.3% | 30,000,000 | 4.69000% | 0.01576% | 4.6742% | 118,878.47 | 1,426,541.67 | 356,635.42 | 4,279,625.00 | Interest Only | Actual/360 | ||||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | Fee Simple | 25,000,000 | 25,000,000 | 25,000,000 | 3.6% | 25,000,000 | 4.86153% | 0.01576% | 4.8458% | 102,688.57 | 1,232,262.84 | 965,272.53 | 11,583,270.41 | Interest Only | Actual/360 | ||||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | Fee Simple | 22,000,000 | 22,000,000 | 22,000,000 | 3.2% | 20,247,450 | 4.87000% | 0.01576% | 4.8542% | 116,359.05 | 1,396,308.60 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | Fee Simple | 20,000,000 | 20,000,000 | 20,000,000 | 2.9% | 17,673,564 | 4.92000% | 0.03326% | 4.8867% | 106,388.61 | 1,276,663.32 | 388,318.41 | 4,659,820.92 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | 19,143,750 | 19,143,750 | 19,143,750 | 2.8% | 17,597,540 | 4.79000% | 0.04326% | 4.7467% | 100,324.94 | 1,203,899.28 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||||
12.01 | Property | McCallum Glen | Fee Simple | 12,318,750 | ||||||||||||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | Fee Simple | 6,825,000 | ||||||||||||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | Fee Simple | 18,700,000 | 18,700,000 | 18,700,000 | 2.7% | 17,411,074 | 5.66000% | 0.02076% | 5.6392% | 108,061.33 | 1,296,735.96 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | Fee Simple | 18,000,000 | 18,000,000 | 18,000,000 | 2.6% | 16,288,905 | 5.04000% | 0.01576% | 5.0242% | 97,068.40 | 1,164,820.80 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 14,150,000 | 14,150,000 | 14,150,000 | 2.0% | 12,547,163 | 5.08000% | 0.04576% | 5.0342% | 76,653.59 | 919,843.08 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | Fee Simple | 4,290,000 | ||||||||||||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | Fee Simple | 3,800,000 | ||||||||||||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | Fee Simple | 3,345,000 | ||||||||||||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | Fee Simple | 2,715,000 | ||||||||||||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 13,050,000 | 13,050,000 | 13,050,000 | 1.9% | 11,282,953 | 4.97200% | 0.01576% | 4.9562% | 69,832.08 | 837,984.96 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | Fee Simple | 8,723,000 | ||||||||||||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | Fee Simple | 2,859,000 | ||||||||||||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | Fee Simple | 1,468,000 | ||||||||||||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | Fee Simple | 12,500,000 | 12,500,000 | 12,500,000 | 1.8% | 11,024,489 | 4.83000% | 0.01576% | 4.8142% | 65,810.03 | 789,720.36 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | Fee Simple | 11,550,000 | 11,550,000 | 11,550,000 | 1.7% | 10,212,739 | 4.95000% | 0.06326% | 4.8867% | 61,650.43 | 739,805.16 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | Fee Simple | 11,200,000 | 11,200,000 | 11,200,000 | 1.6% | 9,650,171 | 4.84000% | 0.01576% | 4.8242% | 59,033.62 | 708,403.44 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | Fee Simple | 11,000,000 | 11,000,000 | 11,000,000 | 1.6% | 9,683,784 | 4.75000% | 0.01576% | 4.7342% | 57,381.21 | 688,574.52 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | Fee Simple | 10,425,000 | 10,377,004 | 10,377,004 | 1.5% | 9,608,561 | 4.95000% | 0.01576% | 4.9342% | 55,645.52 | 667,746.24 | Amortizing | Actual/360 | ||||||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | Fee Simple | 9,250,000 | 9,227,508 | 9,227,508 | 1.3% | 7,591,944 | 4.94900% | 0.05576% | 4.8932% | 49,368.09 | 592,417.08 | Amortizing | Actual/360 | ||||||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | Fee Simple | 9,000,000 | 9,000,000 | 9,000,000 | 1.3% | 9,000,000 | 4.90000% | 0.01576% | 4.8842% | 37,260.42 | 447,125.04 | Interest Only | Actual/360 | |||||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | Fee Simple/Leasehold | 9,000,000 | 8,990,924 | 8,990,924 | 1.3% | 7,452,383 | 5.22000% | 0.06326% | 5.1567% | 49,531.23 | 594,374.76 | Amortizing | Actual/360 | ||||||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | Fee Simple | 8,575,000 | 8,575,000 | 8,575,000 | 1.2% | 7,427,993 | 5.05000% | 0.01576% | 5.0342% | 46,294.84 | 555,538.08 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | Fee Simple | 8,175,000 | 8,175,000 | 8,175,000 | 1.2% | 7,174,108 | 4.61000% | 0.01576% | 4.5942% | 41,957.55 | 503,490.60 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | Fee Simple | 7,900,000 | 7,900,000 | 7,900,000 | 1.1% | 7,144,802 | 5.01000% | 0.01576% | 4.9942% | 42,457.20 | 509,486.40 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | Fee Simple | 7,050,000 | 7,033,173 | 7,033,173 | 1.0% | 5,805,407 | 5.05000% | 0.05576% | 4.9942% | 38,061.65 | 456,739.80 | Amortizing | Actual/360 | ||||||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | Fee Simple | 6,800,000 | 6,800,000 | 6,800,000 | 1.0% | 6,410,665 | 5.30000% | 0.01576% | 5.2842% | 37,760.72 | 453,128.64 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | Fee Simple | 6,543,750 | 6,543,750 | 6,543,750 | 0.9% | 5,799,999 | 5.06000% | 0.01576% | 5.0442% | 35,368.61 | 424,423.32 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | Fee Simple | 6,300,000 | 6,300,000 | 6,300,000 | 0.9% | 6,300,000 | 4.69500% | 0.01576% | 4.6792% | 24,991.09 | 299,893.13 | Interest Only | Actual/360 | ||||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 5,500,000 | 5,500,000 | 5,500,000 | 0.8% | 4,868,761 | 5.00000% | 0.01576% | 4.9842% | 29,525.19 | 354,302.28 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | Fee Simple | 3,800,000 | ||||||||||||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | Fee Simple | 1,700,000 | ||||||||||||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | Fee Simple | 4,700,000 | 4,700,000 | 4,700,000 | 0.7% | 4,170,512 | 5.11000% | 0.09326% | 5.0167% | 25,547.53 | 306,570.36 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | Fee Simple | 4,525,000 | 4,525,000 | 4,525,000 | 0.7% | 4,103,069 | 5.15000% | 0.01576% | 5.1342% | 24,707.69 | 296,492.28 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 4,301,000 | 4,274,082 | 4,274,082 | 0.6% | 3,489,411 | 4.60000% | 0.01576% | 4.5842% | 22,048.83 | 264,585.96 | Amortizing | Actual/360 | ||||||||||||||||||||||||
35.01 | Property | Mattress Firm | Fee Simple | 1,655,573 | ||||||||||||||||||||||||||||||||||||
35.02 | Property | Olive Garden | Fee Simple | 1,486,637 | ||||||||||||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | Fee Simple | 1,131,872 | ||||||||||||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | Fee Simple | 4,125,000 | 4,125,000 | 4,125,000 | 0.6% | 3,619,963 | 4.61000% | 0.01576% | 4.5942% | 21,171.24 | 254,054.88 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | Fee Simple | 4,000,000 | 4,000,000 | 4,000,000 | 0.6% | 4,000,000 | 4.80000% | 0.01576% | 4.7842% | 16,222.22 | 194,666.64 | Interest Only | Actual/360 | ||||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | Fee Simple | 4,000,000 | 4,000,000 | 4,000,000 | 0.6% | 3,205,156 | 5.90000% | 0.01576% | 5.8842% | 25,528.10 | 306,337.20 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | Fee Simple | 4,000,000 | 3,968,136 | 3,968,136 | 0.6% | 3,297,435 | 5.08000% | 0.05576% | 5.0242% | 21,668.86 | 260,026.32 | Amortizing | Actual/360 |
A-3 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Ownership Interest | Original Balance ($) | Cut-off Date Balance ($) | Allocated Cut-off Date Loan Amount ($) | % of Initial Pool Balance | Balloon Balance ($) | Mortgage Loan Rate (%) | Administrative Fee Rate (%) (1) | Net Mortgage Loan Rate (%) | Monthly Debt Service ($) (2) | Annual Debt Service ($) | Pari Companion Loan Monthly Debt Service ($) | Pari Companion Loan Annual Debt Service ($) | Amortization Type | Interest Accrual Method | ||||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | Fee Simple | 3,672,000 | 3,648,517 | 3,648,517 | 0.5% | 2,967,904 | 4.49000% | 0.01576% | 4.4742% | 18,583.67 | 223,004.04 | Amortizing | Actual/360 | |||||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | Fee Simple | 3,500,000 | 3,484,029 | 3,484,029 | 0.5% | 2,877,223 | 4.99300% | 0.01576% | 4.9772% | 18,773.79 | 225,285.48 | Amortizing | Actual/360 | |||||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | Fee Simple | 2,625,000 | 2,625,000 | 2,625,000 | 0.4% | 2,332,328 | 5.17100% | 0.01576% | 5.1552% | 14,367.17 | 172,406.04 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | Fee Simple | 2,600,000 | 2,600,000 | 2,600,000 | 0.4% | 2,229,271 | 5.55000% | 0.01576% | 5.5342% | 14,844.18 | 178,130.16 | Interest Only, Then Amortizing | Actual/360 | ||||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 2,272,000 | 2,257,039 | 2,257,039 | 0.3% | 1,826,819 | 4.34000% | 0.01576% | 4.3242% | 11,296.91 | 135,562.92 | Amortizing | Actual/360 | ||||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | Fee Simple | 1,176,204 | ||||||||||||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | Fee Simple | 1,080,836 | ||||||||||||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | Fee Simple | 2,250,000 | 2,242,355 | 2,242,355 | 0.3% | 1,857,144 | 5.12000% | 0.01576% | 5.1042% | 12,244.04 | 146,928.48 | Amortizing | Actual/360 | |||||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | Fee Simple | 2,150,000 | 2,142,606 | 2,142,606 | 0.3% | 1,771,162 | 5.06000% | 0.01576% | 5.0442% | 11,620.63 | 139,447.56 | Amortizing | Actual/360 | ||||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | Fee Simple | 2,140,000 | 2,140,000 | 2,140,000 | 0.3% | 1,800,279 | 4.88000% | 0.07826% | 4.8017% | 11,331.55 | 135,978.60 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | Fee Simple | 2,100,000 | 2,092,778 | 2,092,778 | 0.3% | 1,729,971 | 5.06000% | 0.01576% | 5.0442% | 11,350.39 | 136,204.68 | Amortizing | Actual/360 | |||||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | Fee Simple | 2,000,000 | 1,990,925 | 1,990,925 | 0.3% | 1,645,580 | 5.02000% | 0.01576% | 5.0042% | 10,760.89 | 129,130.68 | Amortizing | Actual/360 | |||||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | Fee Simple | 2,000,000 | 1,987,483 | 1,987,483 | 0.3% | 1,622,604 | 4.60000% | 0.01576% | 4.5842% | 10,252.89 | 123,034.68 | Amortizing | Actual/360 | |||||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | Fee Simple | 1,330,000 | 1,314,409 | 1,314,409 | 0.2% | 989,769 | 4.87000% | 0.07826% | 4.7917% | 7,674.65 | 92,095.80 | Amortizing | Actual/360 | |||||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | Fee Simple | 1,275,000 | 1,275,000 | 1,275,000 | 0.2% | 1,101,741 | 4.95000% | 0.01576% | 4.9342% | 6,805.57 | 81,666.84 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | Fee Simple | 1,050,000 | 1,050,000 | 1,050,000 | 0.2% | 883,011 | 4.87000% | 0.07826% | 4.7917% | 5,553.50 | 66,642.00 | Interest Only, Then Amortizing | Actual/360 | |||||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | Fee Simple | 850,000 | 847,077 | 847,077 | 0.1% | 700,227 | 5.06000% | 0.01576% | 5.0442% | 4,594.20 | 55,130.40 | Amortizing | Actual/360 |
A-4 |
CGCMT 2016-GC37 Annex A | |||||||||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Seasoning (Mos.) | Original Interest-Only Period (Mos.) | Remaining Interest-Only Period (Mos.) | Original Term To Maturity (Mos.) | Remaining Term To Maturity (Mos.) | Original Amortization Term (Mos.) | Remaining Amortization Term (Mos.) | Origination Date | Due Date | First Due Date | Last IO Due Date | First P&I Due Date | Maturity Date | ARD (Yes / No) | Final Maturity Date | Grace Period- Late Fee | Grace Period- Default | Prepayment Provision (3) | ||||||||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | 3 | 120 | 117 | 120 | 117 | 0 | 0 | 12/9/2015 | 6 | 2/6/2016 | 1/6/2026 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/89_0%/4 | ||||||||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 2 | 0 | 0 | 120 | 118 | 240 | 238 | 1/8/2016 | 6 | 3/6/2016 | 3/6/2016 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | ||||||||||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 3 | 120 | 117 | 120 | 117 | 0 | 0 | 12/18/2015 | 6 | 2/6/2016 | 1/6/2026 | 1/6/2026 | No | 3 | 0 | Lockout/27_Defeasance/90_0%/3 | ||||||||||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | 3 | 36 | 33 | 120 | 117 | 360 | 360 | 12/18/2015 | 6 | 2/6/2016 | 1/6/2019 | 2/6/2019 | 1/6/2026 | No | 0 | 0 | Lockout/25_>YM or 1%/90_0%/5 | |||||||||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 3 | 0 | 0 | 120 | 117 | 360 | 357 | 1/5/2016 | 6 | 2/6/2016 | 2/6/2016 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/89_0%/4 | ||||||||||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | 1 | 60 | 59 | 120 | 119 | 360 | 360 | 2/8/2016 | 6 | 4/6/2016 | 3/6/2021 | 4/6/2021 | 3/6/2026 | No | 0 | 0 | Lockout/25_Defeasance/91_0%/4 | |||||||||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | 3 | 48 | 45 | 120 | 117 | 360 | 360 | 12/29/2015 | 6 | 2/6/2016 | 1/6/2020 | 2/6/2020 | 1/6/2026 | No | 0 | 0 | Lockout/24_>YM or 1%/89_0%/7 | ||||||||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 3 | 120 | 117 | 120 | 117 | 0 | 0 | 12/18/2015 | 6 | 2/6/2016 | 1/6/2026 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/88_0%/5 | ||||||||||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 3 | 120 | 117 | 120 | 117 | 0 | 0 | 1/6/2016 | 6 | 2/6/2016 | 1/6/2026 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/90_0%/3 | ||||||||||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | 2 | 60 | 58 | 120 | 118 | 360 | 360 | 1/12/2016 | 6 | 3/6/2016 | 2/6/2021 | 3/6/2021 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | ||||||||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 3 | 36 | 33 | 120 | 117 | 360 | 360 | 12/15/2015 | 6 | 2/6/2016 | 1/6/2019 | 2/6/2019 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/89_0%/4 | |||||||||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | 3 | 60 | 57 | 120 | 117 | 360 | 360 | 12/10/2015 | 6 | 2/6/2016 | 1/6/2021 | 2/6/2021 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance or >YM or 1%/90_0%/3 | ||||||||||||||||||||||||||
12.01 | Property | McCallum Glen | |||||||||||||||||||||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | |||||||||||||||||||||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | 7 | 60 | 53 | 120 | 113 | 360 | 360 | 8/31/2015 | 6 | 10/6/2015 | 9/6/2020 | 10/6/2020 | 9/6/2025 | No | 0 | 0 | Lockout/31_Defeasance/86_0%/3 | ||||||||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 3 | 48 | 45 | 120 | 117 | 360 | 360 | 12/17/2015 | 6 | 2/6/2016 | 1/6/2020 | 2/6/2020 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/89_0%/4 | |||||||||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 2 | 36 | 34 | 120 | 118 | 360 | 360 | 2/2/2016 | 6 | 3/6/2016 | 2/6/2019 | 3/6/2019 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | |||||||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | |||||||||||||||||||||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | |||||||||||||||||||||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | |||||||||||||||||||||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | |||||||||||||||||||||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 5 | 24 | 19 | 120 | 115 | 360 | 360 | 11/5/2015 | 6 | 12/6/2015 | 11/6/2017 | 12/6/2017 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/87_0%/4 | ||||||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | |||||||||||||||||||||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | |||||||||||||||||||||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | |||||||||||||||||||||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | 4 | 36 | 32 | 120 | 116 | 360 | 360 | 11/10/2015 | 6 | 1/6/2016 | 12/6/2018 | 1/6/2019 | 12/6/2025 | No | 0 | 0 | Lockout/28_Defeasance/88_0%/4 | |||||||||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | 2 | 36 | 34 | 120 | 118 | 360 | 360 | 1/14/2016 | 6 | 3/6/2016 | 2/6/2019 | 3/6/2019 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/91_0%/3 | |||||||||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | 2 | 24 | 22 | 120 | 118 | 360 | 360 | 1/21/2016 | 6 | 3/6/2016 | 2/6/2018 | 3/6/2018 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | |||||||||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 3 | 36 | 33 | 120 | 117 | 360 | 360 | 12/16/2015 | 6 | 2/6/2016 | 1/6/2019 | 2/6/2019 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/89_0%/4 | ||||||||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | 4 | 0 | 0 | 60 | 56 | 360 | 356 | 11/12/2015 | 1 | 1/1/2016 | 1/1/2016 | 12/1/2020 | No | 5 | 5 | Lockout/28_Defeasance/28_0%/4 | ||||||||||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | 2 | 0 | 0 | 120 | 118 | 360 | 358 | 1/13/2016 | 6 | 3/6/2016 | 3/6/2016 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | ||||||||||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | 3 | 120 | 117 | 120 | 117 | 0 | 0 | 12/18/2015 | 6 | 2/6/2016 | 1/6/2026 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/90_0%/3 | |||||||||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 1 | 0 | 0 | 120 | 119 | 360 | 359 | 2/25/2016 | 6 | 4/6/2016 | 4/6/2016 | 3/6/2026 | No | 0 | 0 | Lockout/25_Defeasance/91_0%/4 | ||||||||||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | 2 | 24 | 22 | 120 | 118 | 360 | 360 | 1/8/2016 | 6 | 3/6/2016 | 2/6/2018 | 3/6/2018 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/89_0%/5 | |||||||||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 5 | 36 | 31 | 120 | 115 | 360 | 360 | 10/9/2015 | 6 | 12/6/2015 | 11/6/2018 | 12/6/2018 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | ||||||||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | 2 | 48 | 46 | 120 | 118 | 360 | 360 | 1/29/2016 | 6 | 3/6/2016 | 2/6/2020 | 3/6/2020 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/91_0%/3 | ||||||||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | 2 | 0 | 0 | 120 | 118 | 360 | 358 | 1/21/2016 | 6 | 3/6/2016 | 3/6/2016 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | ||||||||||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | 0 | 12 | 12 | 60 | 60 | 360 | 360 | 3/14/2016 | 6 | 5/6/2016 | 4/6/2017 | 5/6/2017 | 4/6/2021 | No | 0 | 0 | Lockout/24_Defeasance/32_0%/4 | |||||||||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 2 | 36 | 34 | 120 | 118 | 360 | 360 | 1/22/2016 | 6 | 3/6/2016 | 2/6/2019 | 3/6/2019 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/91_0%/3 | ||||||||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | 5 | 120 | 115 | 120 | 115 | 0 | 0 | 10/20/2015 | 1 | 12/1/2015 | 11/1/2025 | 11/1/2025 | No | 5 | 5 | Lockout/29_>YM or 1%/87_0%/4 | ||||||||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 3 | 36 | 33 | 120 | 117 | 360 | 360 | 1/5/2016 | 6 | 2/6/2016 | 1/6/2019 | 2/6/2019 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/89_0%/4 | |||||||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | |||||||||||||||||||||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | |||||||||||||||||||||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 3 | 36 | 33 | 120 | 117 | 360 | 360 | 12/11/2015 | 1 | 2/1/2016 | 1/1/2019 | 2/1/2019 | 1/1/2026 | No | 5 | 5 | Lockout/27_Defeasance/89_0%/4 | |||||||||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | 3 | 48 | 45 | 120 | 117 | 360 | 360 | 12/30/2015 | 6 | 2/6/2016 | 1/6/2020 | 2/6/2020 | 1/6/2026 | No | 0 | 0 | Lockout/23_>YM or 1%/93_0%/4 | |||||||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 5 | 0 | 0 | 120 | 115 | 360 | 355 | 10/9/2015 | 6 | 12/6/2015 | 12/6/2015 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | |||||||||||||||||||||||||||
35.01 | Property | Mattress Firm | |||||||||||||||||||||||||||||||||||||||||||||
35.02 | Property | Olive Garden | |||||||||||||||||||||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | |||||||||||||||||||||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 5 | 36 | 31 | 120 | 115 | 360 | 360 | 10/9/2015 | 6 | 12/6/2015 | 11/6/2018 | 12/6/2018 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | ||||||||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | 2 | 120 | 118 | 120 | 118 | 0 | 0 | 1/28/2016 | 6 | 3/6/2016 | 2/6/2026 | 2/6/2026 | No | 0 | 0 | Lockout/26_Defeasance/90_0%/4 | ||||||||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | 1 | 12 | 11 | 120 | 119 | 300 | 300 | 2/19/2016 | 6 | 4/6/2016 | 3/6/2017 | 4/6/2017 | 3/6/2026 | No | 0 | 0 | Lockout/25_Defeasance/91_0%/4 | ||||||||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 7 | 0 | 0 | 120 | 113 | 360 | 353 | 8/19/2015 | 6 | 10/6/2015 | 10/6/2015 | 9/6/2025 | No | 0 | 0 | Lockout/31_Defeasance/85_0%/4 |
A-5 |
CGCMT 2016-GC37 Annex A | |||||||||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Seasoning (Mos.) | Original Interest-Only Period (Mos.) | Remaining Interest-Only Period (Mos.) | Original Term To Maturity (Mos.) | Remaining Term To Maturity (Mos.) | Original Amortization Term (Mos.) | Remaining Amortization Term (Mos.) | Origination Date | Due Date | First Due Date | Last IO Due Date | First P&I Due Date | Maturity Date | ARD (Yes / No) | Final Maturity Date | Grace Period- Late Fee | Grace Period- Default | Prepayment Provision (3) | ||||||||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | 5 | 0 | 0 | 120 | 115 | 360 | 355 | 10/15/2015 | 6 | 12/6/2015 | 12/6/2015 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | |||||||||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 4 | 0 | 0 | 120 | 116 | 360 | 356 | 12/4/2015 | 6 | 1/6/2016 | 1/6/2016 | 12/6/2025 | No | 0 | 0 | Lockout/28_Defeasance/87_0%/5 | |||||||||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | 3 | 36 | 33 | 120 | 117 | 360 | 360 | 12/30/2015 | 6 | 2/6/2016 | 1/6/2019 | 2/6/2019 | 1/6/2026 | No | 0 | 0 | Lockout/18_>YM or 1%/98_0%/4 | ||||||||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | 0 | 12 | 12 | 120 | 120 | 360 | 360 | 3/15/2016 | 6 | 5/6/2016 | 4/6/2017 | 5/6/2017 | 4/6/2026 | No | 0 | 0 | Lockout/24_Defeasance/92_0%/4 | |||||||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 5 | 0 | 0 | 120 | 115 | 360 | 355 | 10/15/2015 | 6 | 12/6/2015 | 12/6/2015 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | |||||||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | |||||||||||||||||||||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | |||||||||||||||||||||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | 3 | 0 | 0 | 120 | 117 | 360 | 357 | 12/10/2015 | 6 | 2/6/2016 | 2/6/2016 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/90_0%/3 | |||||||||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | 3 | 0 | 0 | 120 | 117 | 360 | 357 | 12/15/2015 | 6 | 2/6/2016 | 2/6/2016 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/90_0%/3 | ||||||||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | 6 | 12 | 6 | 120 | 114 | 360 | 360 | 9/25/2015 | 6 | 11/6/2015 | 10/6/2016 | 11/6/2016 | 10/6/2025 | No | 0 | 0 | Lockout/30_Defeasance/87_0%/3 | ||||||||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | 3 | 0 | 0 | 120 | 117 | 360 | 357 | 12/15/2015 | 6 | 2/6/2016 | 2/6/2016 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/90_0%/3 | |||||||||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | 4 | 0 | 0 | 120 | 116 | 360 | 356 | 11/24/2015 | 6 | 1/6/2016 | 1/6/2016 | 12/6/2025 | No | 0 | 0 | Lockout/28_Defeasance/89_0%/3 | |||||||||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | 5 | 0 | 0 | 120 | 115 | 360 | 355 | 10/9/2015 | 6 | 12/6/2015 | 12/6/2015 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | |||||||||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | 7 | 0 | 0 | 120 | 113 | 300 | 293 | 8/12/2015 | 6 | 10/6/2015 | 10/6/2015 | 9/6/2025 | No | 0 | 0 | Lockout/31_Defeasance/86_0%/3 | |||||||||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | 5 | 24 | 19 | 120 | 115 | 360 | 360 | 10/9/2015 | 6 | 12/6/2015 | 11/6/2017 | 12/6/2017 | 11/6/2025 | No | 0 | 0 | Lockout/29_Defeasance/88_0%/3 | ||||||||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | 7 | 12 | 5 | 120 | 113 | 360 | 360 | 8/12/2015 | 6 | 10/6/2015 | 9/6/2016 | 10/6/2016 | 9/6/2025 | No | 0 | 0 | Lockout/31_Defeasance/86_0%/3 | ||||||||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | 3 | 0 | 0 | 120 | 117 | 360 | 357 | 12/15/2015 | 6 | 2/6/2016 | 2/6/2016 | 1/6/2026 | No | 0 | 0 | Lockout/27_Defeasance/90_0%/3 |
A-6 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | 2012 EGI ($) | 2012 Expenses ($) | 2012 NOI ($) | 2013 EGI ($) | 2013 Expenses ($) | 2013 NOI ($) | 2014 EGI ($) | 2014 Expenses ($) | 2014 NOI ($) | Most Recent EGI (if past 2014) ($) | Most Recent Expenses (if past 2014) ($) | Most Recent NOI (if past 2014) ($) | Most Recent NOI Date (if past 2014) | Most Recent # of months | Most Recent Description | Underwritten EGI ($) | |||||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not Available | 10,500,000 | |||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 7,013,656 | 2,032,833 | 4,980,823 | 7,512,671 | 2,050,539 | 5,462,132 | 7,809,421 | 2,000,760 | 5,808,661 | 8,024,913 | 2,071,398 | 5,953,515 | 10/31/2015 | 12 | Trailing 12 | 7,750,876 | |||||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 9,473,836 | 5,373,574 | 4,100,261 | 8,647,836 | 5,191,787 | 3,456,049 | 6,845,911 | 5,464,873 | 1,381,038 | 8,207,185 | 5,556,903 | 2,650,281 | 9/30/2015 | 12 | Trailing 12 | 12,601,011 | |||||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | 15,176,320 | 12,360,977 | 2,815,343 | 15,750,637 | 12,142,150 | 3,608,487 | 15,671,993 | 12,162,041 | 3,509,952 | 17,713,881 | 12,673,179 | 5,040,702 | 2/29/2016 | 12 | Trailing 12 | 17,713,881 | |||||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 50,091,621 | 38,564,543 | 11,527,078 | 56,140,611 | 42,548,657 | 13,591,954 | 63,784,086 | 46,164,757 | 17,619,329 | 64,166,433 | 47,084,214 | 17,082,219 | 11/30/2015 | 12 | Trailing 12 | 64,578,445 | |||||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | 14,344,952 | 10,874,713 | 3,470,239 | 13,621,943 | 9,623,133 | 3,998,810 | 12,310,925 | 8,795,796 | 3,515,129 | 11,574,674 | 8,226,826 | 3,347,848 | 11/30/2015 | 12 | Trailing 12 | 10,282,902 | |||||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | N/A | N/A | N/A | 2,526,600 | 1,316,818 | 1,209,782 | 2,438,032 | 1,246,723 | 1,191,309 | 2,674,156 | 1,358,808 | 1,315,348 | 10/31/2015 | 10 | Annualized | 4,032,780 | ||||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 10,366,656 | 1,448,697 | 8,917,959 | 11,109,963 | 1,915,512 | 9,194,451 | 12,219,294 | 2,458,284 | 9,761,011 | 13,124,281 | 2,988,576 | 10,135,705 | 10/31/2015 | 12 | Trailing 12 | 13,259,893 | |||||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 30,023,243 | 12,600,866 | 17,422,377 | 32,476,844 | 13,470,556 | 19,006,288 | 32,180,504 | 13,698,201 | 18,482,303 | 34,226,259 | 14,673,392 | 19,552,867 | 9/30/2015 | 12 | Trailing 12 | 38,272,463 | |||||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 3,149,993 | 1,406,513 | 1,743,480 | 2/29/2016 | 11 | Annualized | 3,381,181 | ||||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 3,633,359 | 1,505,046 | 2,128,313 | 6,184,083 | 2,011,268 | 4,172,815 | 7,646,738 | 2,193,060 | 5,453,678 | 9,795,726 | 2,486,782 | 7,308,944 | 9/30/2015 | 12 | Trailing 12 | 12,323,925 | |||||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | N/A | N/A | N/A | N/A | N/A | N/A | 3,417,210 | 1,563,797 | 1,853,412 | 3,578,424 | 1,400,814 | 2,177,610 | 9/30/2015 | 12 | Trailing 12 | 3,578,423 | ||||||||||||||||||||||
12.01 | Property | McCallum Glen | N/A | N/A | N/A | N/A | N/A | N/A | 2,178,787 | 980,593 | 1,198,194 | 2,302,239 | 897,334 | 1,404,905 | 9/30/2015 | 12 | Trailing 12 | 2,302,239 | ||||||||||||||||||||||||
12.02 | Property | McCallum Courts | N/A | N/A | N/A | N/A | N/A | N/A | 1,238,423 | 583,204 | 655,219 | 1,276,184 | 503,480 | 772,704 | 9/30/2015 | 12 | Trailing 12 | 1,276,184 | ||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | N/A | N/A | N/A | 2,438,759 | 692,712 | 1,746,047 | 2,505,584 | 821,192 | 1,684,392 | 2,526,186 | 849,819 | 1,676,368 | 7/30/2015 | 12 | Trailing 12 | 2,510,008 | ||||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 2,032,235 | 411,033 | 1,621,202 | 2,088,284 | 457,623 | 1,630,661 | 2,000,013 | 448,416 | 1,551,596 | 2,046,937 | 489,543 | 1,557,395 | 1/31/2016 | 12 | Trailing 12 | 2,297,548 | |||||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 1,624,950 | 698,739 | 926,211 | 1,763,111 | 828,340 | 934,771 | 2,012,377 | 899,731 | 1,112,646 | 2,175,270 | 931,666 | 1,243,604 | Various | 12 | Trailing 12 | 2,176,714 | |||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | 382,258 | 148,775 | 233,483 | 434,801 | 189,139 | 245,662 | 538,933 | 210,817 | 328,116 | 616,155 | 223,372 | 392,783 | 12/31/2015 | 12 | Trailing 12 | 616,155 | ||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | 372,349 | 158,925 | 213,423 | 434,299 | 190,500 | 243,799 | 496,685 | 204,011 | 292,674 | 538,832 | 215,555 | 323,277 | 12/31/2015 | 12 | Trailing 12 | 540,276 | ||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | 492,193 | 262,234 | 229,959 | 514,825 | 296,517 | 218,308 | 570,846 | 316,588 | 254,258 | 618,463 | 326,631 | 291,832 | 11/30/2015 | 12 | Trailing 12 | 618,463 | ||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | 378,150 | 128,804 | 249,346 | 379,186 | 152,185 | 227,001 | 405,913 | 168,315 | 237,598 | 401,819 | 166,108 | 235,712 | 12/31/2015 | 12 | Trailing 12 | 401,819 | ||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 1,886,756 | 829,054 | 1,057,702 | 2,054,912 | 950,574 | 1,104,338 | 2,096,362 | 1,015,745 | 1,080,617 | 2,361,256 | 991,436 | 1,369,820 | 11/30/2015 | 12 | Trailing 12 | 2,418,763 | ||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 1,550,339 | 591,004 | 959,335 | 11/30/2015 | 12 | Trailing 12 | 1,584,196 | ||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 471,793 | 218,498 | 253,295 | 11/30/2015 | 12 | Trailing 12 | 484,390 | ||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 339,124 | 181,934 | 157,190 | 11/30/2015 | 12 | Trailing 12 | 350,177 | ||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 2,383,288 | 1,372,193 | 1,011,094 | 12/31/2015 | 12 | Trailing 12 | 2,606,068 | |||||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | 1,595,233 | 663,018 | 932,215 | 1,702,515 | 703,914 | 998,601 | 1,785,962 | 842,903 | 943,059 | 1,755,887 | 729,904 | 1,025,983 | 10/31/2015 | 12 | Trailing 12 | 1,755,887 | |||||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | 3,155,348 | 1,905,464 | 1,249,884 | 3,633,047 | 2,049,258 | 1,583,789 | 3,891,692 | 2,119,378 | 1,772,314 | 4,071,952 | 2,250,987 | 1,820,965 | 10/31/2015 | 12 | Trailing 12 | 3,994,488 | |||||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 848,074 | 193,767 | 654,307 | 934,963 | 270,221 | 664,741 | 810,130 | 192,290 | 617,840 | 926,915 | 223,608 | 703,307 | 9/30/2015 | 12 | Trailing 12 | 1,278,995 | ||||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | N/A | N/A | N/A | 1,276,169 | 417,768 | 858,401 | 1,417,821 | 428,870 | 988,951 | 1,479,017 | 561,400 | 917,617 | 12/31/2015 | 12 | Trailing 12 | 1,508,941 | |||||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | 2,976,639 | 1,909,359 | 1,067,280 | 3,039,605 | 1,959,620 | 1,079,984 | 3,257,174 | 2,039,376 | 1,217,798 | 3,341,182 | 2,113,540 | 1,227,642 | 11/30/2015 | 12 | Trailing 12 | 3,341,182 | |||||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | N/A | N/A | N/A | 908,523 | 274,155 | 634,368 | 994,960 | 292,552 | 702,408 | 1,093,304 | 307,721 | 785,583 | 10/31/2015 | 12 | Trailing 12 | 1,167,862 | ||||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 1,424,331 | 801,109 | 623,222 | 1,579,689 | 793,923 | 785,766 | 1,676,626 | 832,171 | 844,454 | 1,747,928 | 899,500 | 848,427 | 9/30/2015 | 12 | Trailing 12 | 2,001,238 | |||||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | N/A | N/A | N/A | 3,248,577 | 2,482,208 | 766,369 | 3,509,118 | 2,490,412 | 1,018,706 | 3,941,612 | 2,779,752 | 1,161,860 | 11/30/2015 | 12 | Trailing 12 | 3,848,200 | |||||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 1,175,827 | 433,057 | 742,770 | 1,205,775 | 443,225 | 762,550 | 1,261,031 | 421,352 | 839,680 | 1,249,842 | 390,493 | 859,350 | 5/31/2015 | 12 | Trailing 12 | 1,249,023 | ||||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | 1,550,759 | 847,911 | 702,848 | 1,518,521 | 929,853 | 588,668 | 1,592,316 | 973,298 | 619,018 | 1,708,288 | 910,035 | 798,253 | 11/30/2015 | 12 | Trailing 12 | 1,708,288 | ||||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | 1,830,891 | 1,194,238 | 636,653 | 2,006,045 | 1,194,644 | 811,401 | 2,082,426 | 1,256,322 | 826,104 | 2,228,785 | 1,307,369 | 921,416 | 11/30/2015 | 12 | Trailing 12 | 2,228,785 | |||||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | N/A | N/A | N/A | 805,276 | 173,872 | 631,405 | 855,062 | 149,181 | 705,881 | 735,117 | 164,725 | 570,392 | 12/31/2015 | 12 | Trailing 12 | 751,877 | |||||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 847,469 | 160,143 | 687,326 | 840,045 | 144,068 | 695,977 | 865,223 | 167,365 | 697,857 | 860,705 | 184,176 | 676,529 | 9/30/2015 | 12 | Trailing 12 | 947,881 | ||||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | 759,720 | 120,394 | 639,326 | 734,697 | 138,791 | 595,905 | 771,940 | 139,830 | 632,110 | 804,291 | 112,498 | 691,794 | 12/31/2015 | 12 | Trailing 12 | 774,134 | |||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 814,147 | 293,833 | 520,314 | 843,951 | 293,209 | 550,742 | 872,462 | 320,825 | 551,637 | 910,052 | 328,647 | 581,405 | 2/29/2016 | 12 | Trailing 12 | 933,096 | |||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | 523,977 | 157,320 | 366,657 | 547,886 | 158,238 | 389,648 | 564,165 | 174,135 | 390,030 | 584,317 | 179,290 | 405,027 | 2/29/2016 | 12 | Trailing 12 | 586,377 | ||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | 290,170 | 136,513 | 153,657 | 296,065 | 134,971 | 161,094 | 308,297 | 146,690 | 161,607 | 325,735 | 149,357 | 176,378 | 2/29/2016 | 12 | Trailing 12 | 346,719 | ||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 837,562 | 375,802 | 461,760 | 805,573 | 346,729 | 458,844 | 814,582 | 366,361 | 448,221 | 833,844 | 380,752 | 453,092 | 9/30/2015 | 12 | Trailing 12 | 842,147 | |||||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | 360,000 | N/A | 360,000 | 360,000 | N/A | 360,000 | 360,000 | N/A | 360,000 | 360,000 | N/A | 360,000 | 11/30/2015 | 12 | Trailing 12 | 362,258 | |||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 261,555 | 29,814 | 231,741 | 263,296 | 30,177 | 233,119 | 262,568 | 36,647 | 225,921 | 262,432 | 37,394 | 225,038 | 3/31/2015 | 12 | Trailing 12 | 576,620 | ||||||||||||||||||||||
35.01 | Property | Mattress Firm | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not Available | N/A | ||||||||||||||||||||||||
35.02 | Property | Olive Garden | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not Available | N/A | ||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not Available | N/A | ||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 678,672 | 253,901 | 424,771 | 653,973 | 282,207 | 371,766 | 662,634 | 273,181 | 389,453 | 687,305 | 244,036 | 443,269 | 5/31/2015 | 12 | Trailing 12 | 686,528 | ||||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | 370,000 | N/A | 370,000 | 370,000 | N/A | 370,000 | 370,000 | N/A | 370,000 | N/A | N/A | N/A | N/A | N/A | Not Available | 366,300 | |||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | N/A | N/A | N/A | 666,822 | 253,654 | 413,168 | 645,416 | 264,254 | 381,162 | 702,673 | 210,434 | 492,239 | 2/29/2016 | 12 | Trailing 12 | 717,640 | ||||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 609,494 | 209,470 | 400,024 | 556,719 | 236,215 | 320,504 | 667,272 | 221,798 | 445,474 | 694,712 | 209,680 | 485,032 | 6/30/2015 | 12 | Trailing 12 | 594,182 |
A-7 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | 2012 EGI ($) | 2012 Expenses ($) | 2012 NOI ($) | 2013 EGI ($) | 2013 Expenses ($) | 2013 NOI ($) | 2014 EGI ($) | 2014 Expenses ($) | 2014 NOI ($) | Most Recent EGI (if past 2014) ($) | Most Recent Expenses (if past 2014) ($) | Most Recent NOI (if past 2014) ($) | Most Recent NOI Date (if past 2014) | Most Recent # of months | Most Recent Description | Underwritten EGI ($) | |||||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | 325,120 | 8,115 | 317,005 | 325,120 | 7,690 | 317,430 | 325,120 | 7,363 | 317,757 | 325,120 | 7,344 | 317,776 | 3/31/2015 | 12 | Trailing 12 | 404,424 | ||||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 431,788 | 157,038 | 274,750 | 540,881 | 133,278 | 407,603 | 534,072 | 138,620 | 395,452 | 600,466 | 142,092 | 458,374 | 8/31/2015 | 12 | Trailing 12 | 540,356 | ||||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 365,534 | 150,448 | 215,086 | 11/30/2015 | 9 | Annualized | 389,763 | ||||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | N/A | N/A | N/A | 358,904 | 139,829 | 219,075 | 346,199 | 140,027 | 206,172 | 434,953 | 173,625 | 261,328 | 1/31/2016 | 12 | Trailing 12 | 427,606 | |||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 248,831 | 39,776 | 209,055 | 261,918 | 39,261 | 222,657 | 265,020 | 39,813 | 225,208 | 266,979 | 39,754 | 227,225 | 3/31/2015 | 12 | Trailing 12 | 289,688 | ||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not Available | N/A | ||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not Available | N/A | ||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | 660,990 | 422,101 | 238,889 | 743,921 | 429,606 | 314,315 | 709,870 | 454,855 | 255,015 | 791,638 | 472,308 | 319,331 | 10/31/2015 | 10 | Annualized | 754,504 | ||||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | 311,655 | 112,153 | 199,502 | 308,000 | 122,810 | 185,190 | 304,171 | 119,094 | 185,077 | 342,409 | 126,338 | 216,071 | 9/30/2015 | 12 | Trailing 12 | 351,590 | |||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | 470,227 | 198,850 | 271,377 | 480,329 | 188,212 | 292,117 | 494,977 | 224,403 | 270,574 | 502,847 | 238,286 | 264,560 | 6/30/2015 | 12 | Trailing 12 | 495,473 | ||||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | 273,123 | 119,003 | 154,119 | 297,055 | 118,443 | 178,612 | 331,046 | 127,307 | 203,740 | 377,658 | 135,321 | 242,337 | 9/30/2015 | 12 | Trailing 12 | 390,411 | ||||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | N/A | N/A | N/A | 749,940 | 496,947 | 252,993 | 752,876 | 468,904 | 283,971 | 728,652 | 344,054 | 384,598 | 10/31/2015 | 6 | Annualized | 715,813 | ||||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | N/A | N/A | N/A | 163,406 | 67,906 | 95,500 | 232,187 | 77,948 | 154,239 | 243,861 | 72,656 | 171,205 | 3/31/2015 | 12 | Trailing 12 | 273,543 | ||||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | 243,768 | 38,042 | 205,726 | 247,576 | 56,314 | 191,262 | 273,168 | 47,627 | 225,541 | 241,480 | 53,114 | 188,366 | 6/30/2015 | 12 | Trailing 12 | 226,042 | ||||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | 198,301 | 99,669 | 98,632 | 211,170 | 106,445 | 104,725 | 230,400 | 104,652 | 125,748 | N/A | N/A | N/A | N/A | N/A | Not Available | 263,050 | ||||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | 187,999 | 170,321 | 17,678 | 187,240 | 188,393 | (1,153) | 254,201 | 104,301 | 149,900 | 313,931 | 107,854 | 206,077 | 5/31/2015 | 12 | Trailing 12 | 268,679 | ||||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | 167,363 | 96,047 | 71,316 | 164,180 | 84,539 | 79,641 | 186,742 | 97,400 | 89,341 | 215,565 | 94,354 | 121,211 | 9/30/2015 | 12 | Trailing 12 | 220,302 |
A-8 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Underwritten Expenses ($) | Underwritten Net Operating Income ($) | Debt Yield on Underwritten Net Operating Income (%) | Underwritten Replacement / FF&E Reserve ($) | Underwritten TI / LC ($) | Underwritten Net Cash Flow ($) | Underwritten NCF DSCR (x) (4) | Debt Yield on Underwritten Net Cash Flow (%) | Appraised Value ($) | Appraisal Date | As Stabilized Appraised Value ($) | As Stabilized Appraisal Date | Cut-off Date LTV Ratio (%) | LTV Ratio at Maturity (%) | |||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | N/A | 10,500,000 | 5.8% | 0 | 0 | 10,500,000 | 1.28 | 5.8% | 240,000,000 | 12/15/2015 | NAP | NAP | 75.0% | 75.0% | |||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 2,099,598 | 5,651,278 | 10.9% | 41,140 | 219,826 | 5,390,312 | 1.31 | 10.4% | 80,500,000 | 11/17/2015 | NAP | NAP | 64.3% | 40.6% | |||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 5,691,868 | 6,909,143 | 8.1% | 63,039 | 623,348 | 6,222,755 | 1.52 | 7.3% | 190,000,000 | 11/1/2015 | NAP | NAP | 44.7% | 44.7% | |||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | 12,742,879 | 4,971,002 | 12.4% | 708,555 | 0 | 4,262,447 | 1.64 | 10.7% | 60,900,000 | 10/27/2015 | 64,100,000 | 11/1/2018 | 65.7% | 55.3% | |||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 47,259,417 | 17,319,028 | 11.6% | 1,767,859 | 0 | 15,551,170 | 1.51 | 10.4% | 239,000,000 | 11/18/2015 | NAP | NAP | 62.6% | 52.6% | |||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | 6,564,082 | 3,718,821 | 10.2% | 386,106 | 0 | 3,332,714 | 1.42 | 9.1% | 66,000,000 | 11/30/2015 | 75,000,000 | 1/1/2018 | 55.3% | 44.9% | |||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | 1,244,869 | 2,787,911 | 8.1% | 20,804 | 52,851 | 2,714,256 | 1.21 | 7.8% | 48,200,000 | 11/11/2015 | NAP | NAP | 71.8% | 65.0% | ||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 3,709,744 | 9,550,149 | 8.0% | 11,592 | 338,687 | 9,199,870 | 1.61 | 7.7% | 220,000,000 | 12/14/2015 | NAP | NAP | 54.5% | 54.5% | |||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 15,542,394 | 22,730,069 | 8.7% | 130,066 | 1,526,020 | 21,073,984 | 1.64 | 8.1% | 540,000,000 | 11/1/2015 | NAP | NAP | 48.1% | 48.1% | |||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | 1,499,290 | 1,881,890 | 8.6% | 54,000 | 0 | 1,827,890 | 1.31 | 8.3% | 32,900,000 | 11/20/2015 | NAP | NAP | 66.9% | 61.5% | ||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 2,954,962 | 9,368,963 | 10.1% | 104,735 | 719,855 | 8,544,373 | 1.44 | 9.2% | 140,000,000 | 11/10/2015 | 146,500,000 | 1/1/2017 | 66.4% | 56.1% | |||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | 1,702,802 | 1,875,621 | 9.8% | 125,700 | 0 | 1,749,921 | 1.45 | 9.1% | 25,700,000 | 11/10/2015 | NAP | NAP | 74.5% | 68.5% | ||||||||||||||||||||
12.01 | Property | McCallum Glen | 1,104,626 | 1,197,614 | 82,500 | 0 | 1,115,114 | 16,650,000 | 11/10/2015 | NAP | NAP | |||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | 598,176 | 678,008 | 43,200 | 0 | 634,808 | 9,050,000 | 11/10/2015 | NAP | NAP | |||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | 845,977 | 1,664,031 | 8.9% | 39,083 | 0 | 1,624,948 | 1.25 | 8.7% | 24,900,000 | 12/11/2015 | NAP | NAP | 75.1% | 69.9% | ||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 487,242 | 1,810,305 | 10.1% | 15,944 | 53,146 | 1,741,215 | 1.49 | 9.7% | 26,600,000 | 12/3/2015 | NAP | NAP | 67.7% | 61.2% | |||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 936,204 | 1,240,510 | 8.8% | 40,162 | 0 | 1,200,348 | 1.30 | 8.5% | 18,490,000 | Various | 19,370,000 | Various | 72.7% | 64.8% | |||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | 223,438 | 392,717 | 9,769 | 0 | 382,948 | 5,400,000 | 11/6/2015 | NAP | NAP | |||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | 214,757 | 325,519 | 10,969 | 0 | 314,550 | 5,200,000 | 11/6/2015 | NAP | NAP | |||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | 331,799 | 286,664 | 11,699 | 0 | 274,965 | 4,400,000 | 11/16/2015 | 5,200,000 | 3/1/2017 | |||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | 166,209 | 235,611 | 7,725 | 0 | 227,886 | 3,490,000 | 11/6/2015 | 3,570,000 | 11/6/2016 | |||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 993,162 | 1,425,601 | 10.9% | 99,300 | 0 | 1,326,301 | 1.58 | 10.2% | 17,800,000 | Various | NAP | NAP | 73.3% | 63.4% | ||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | 592,020 | 992,176 | 60,900 | 0 | 931,276 | 11,900,000 | 10/16/2015 | NAP | NAP | |||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | 218,877 | 265,513 | 24,000 | 0 | 241,513 | 3,900,000 | 10/23/2015 | NAP | NAP | |||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | 182,265 | 167,912 | 14,400 | 0 | 153,512 | 2,000,000 | 10/20/2015 | NAP | NAP | |||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | 1,338,675 | 1,267,393 | 10.1% | 80,640 | 0 | 1,186,753 | 1.50 | 9.5% | 20,300,000 | 10/8/2015 | 21,400,000 | 10/1/2016 | 61.6% | 51.5% | |||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | 757,361 | 998,526 | 8.6% | 49,056 | 0 | 949,470 | 1.28 | 8.2% | 14,750,000 | 12/10/2015 | 16,800,000 | 12/1/2017 | 74.1% | 60.8% | |||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | 2,293,584 | 1,700,904 | 15.2% | 159,780 | 0 | 1,541,124 | 2.18 | 13.8% | 15,500,000 | 11/10/2015 | 19,500,000 | 11/1/2017 | 62.3% | 49.5% | |||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 413,347 | 865,648 | 7.9% | 8,477 | 32,986 | 824,185 | 1.20 | 7.5% | 15,200,000 | 12/3/2015 | NAP | NAP | 72.4% | 63.7% | ||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | 499,744 | 1,009,197 | 9.7% | 20,670 | 68,873 | 919,655 | 1.38 | 8.9% | 13,900,000 | 8/8/2015 | NAP | NAP | 74.7% | 69.1% | |||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | 2,115,402 | 1,225,780 | 13.3% | 133,647 | 0 | 1,092,132 | 1.84 | 11.8% | 12,200,000 | 12/11/2015 | 15,000,000 | 12/11/2018 | 65.9% | 50.6% | |||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | 285,835 | 882,027 | 9.8% | 7,396 | 34,513 | 840,119 | 1.88 | 9.3% | 14,000,000 | 11/18/2015 | NAP | NAP | 64.3% | 64.3% | ||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 872,615 | 1,128,624 | 12.6% | 22,758 | 156,234 | 949,631 | 1.60 | 10.6% | 13,100,000 | 1/12/2016 | NAP | NAP | 68.6% | 56.9% | |||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | 2,757,129 | 1,091,071 | 12.7% | 153,928 | 0 | 937,143 | 1.69 | 10.9% | 11,500,000 | 12/11/2015 | 14,400,000 | 1/1/2019 | 65.4% | 51.6% | |||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 404,126 | 844,898 | 10.3% | 12,666 | 73,027 | 759,205 | 1.51 | 9.3% | 10,900,000 | 7/29/2015 | NAP | NAP | 75.0% | 65.8% | ||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | 963,580 | 744,708 | 9.4% | 56,848 | 0 | 687,860 | 1.35 | 8.7% | 10,870,000 | 12/15/2015 | NAP | NAP | 72.7% | 65.7% | ||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | 1,309,846 | 918,939 | 13.1% | 89,151 | 0 | 829,788 | 1.82 | 11.8% | 10,100,000 | 12/8/2015 | NAP | NAP | 69.6% | 57.5% | |||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | 160,858 | 591,018 | 8.7% | 2,435 | 19,461 | 569,123 | 1.26 | 8.4% | 10,500,000 | 2/8/2016 | 11,200,000 | 2/8/2017 | 64.8% | 57.2% | |||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 299,181 | 648,700 | 9.9% | 10,033 | 53,496 | 585,172 | 1.38 | 8.9% | 8,750,000 | 12/17/2015 | NAP | NAP | 74.8% | 66.3% | ||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | 150,364 | 623,770 | 9.9% | 7,622 | 29,050 | 587,098 | 1.96 | 9.3% | 10,910,000 | 8/25/2015 | NAP | NAP | 57.7% | 57.7% | |||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 367,846 | 565,250 | 10.3% | 3,197 | 0 | 562,053 | 1.59 | 10.2% | 7,820,000 | 12/7/2015 | NAP | NAP | 70.3% | 62.3% | |||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | 194,086 | 392,292 | 1,929 | 0 | 390,363 | 4,900,000 | 12/7/2015 | NAP | NAP | |||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | 173,761 | 172,958 | 1,268 | 0 | 171,690 | 2,590,000 | 12/7/2015 | NAP | NAP | |||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 384,290 | 457,857 | 9.7% | 6,190 | 41,264 | 410,403 | 1.34 | 8.7% | 7,100,000 | 10/31/2015 | NAP | NAP | 66.2% | 58.7% | |||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | 5,917 | 356,341 | 7.9% | 2,000 | 0 | 354,341 | 1.20 | 7.8% | 6,430,000 | 11/12/2015 | NAP | NAP | 70.4% | 63.8% | |||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 194,878 | 381,742 | 8.9% | 4,092 | 23,926 | 353,724 | 1.34 | 8.3% | 6,325,000 | Various | NAP | NAP | 67.6% | 55.2% | ||||||||||||||||||||
35.01 | Property | Mattress Firm | N/A | N/A | N/A | N/A | N/A | 2,450,000 | 5/6/2015 | NAP | NAP | |||||||||||||||||||||||||||
35.02 | Property | Olive Garden | N/A | N/A | N/A | N/A | N/A | 2,200,000 | 5/6/2015 | NAP | NAP | |||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | N/A | N/A | N/A | N/A | N/A | 1,675,000 | 5/19/2015 | NAP | NAP | |||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 235,172 | 451,356 | 10.9% | 12,085 | 65,278 | 373,992 | 1.47 | 9.1% | 5,500,000 | 7/28/2015 | NAP | NAP | 75.0% | 65.8% | ||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | 10,989 | 355,311 | 8.9% | 1,482 | 0 | 353,829 | 1.82 | 8.8% | 7,000,000 | 11/22/2015 | NAP | NAP | 57.1% | 57.1% | |||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | 285,963 | 431,677 | 10.8% | 20,169 | 0 | 411,508 | 1.34 | 10.3% | 5,550,000 | 12/2/2015 | NAP | NAP | 72.1% | 57.8% | ||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 204,280 | 389,902 | 9.8% | 4,762 | 16,883 | 368,257 | 1.42 | 9.3% | 5,650,000 | 7/15/2015 | NAP | NAP | 70.2% | 58.4% |
A-9 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Underwritten Expenses ($) | Underwritten Net Operating Income ($) | Debt Yield on Underwritten Net Operating Income (%) | Underwritten Replacement / FF&E Reserve ($) | Underwritten TI / LC ($) | Underwritten Net Cash Flow ($) | Underwritten NCF DSCR (x) (4) | Debt Yield on Underwritten Net Cash Flow (%) | Appraised Value ($) | Appraisal Date | As Stabilized Appraised Value ($) | As Stabilized Appraisal Date | Cut-off Date LTV Ratio (%) | LTV Ratio at Maturity (%) | |||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | 92,279 | 312,145 | 8.6% | 0 | 0 | 312,145 | 1.40 | 8.6% | 5,400,000 | 5/6/2015 | NAP | NAP | 67.6% | 55.0% | ||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 135,533 | 404,823 | 11.6% | 3,072 | 15,360 | 386,391 | 1.72 | 11.1% | 5,150,000 | 10/6/2015 | NAP | NAP | 67.7% | 55.9% | ||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | 158,356 | 231,407 | 8.8% | 6,986 | 0 | 224,421 | 1.30 | 8.5% | 3,500,000 | 11/25/2015 | NAP | NAP | 75.0% | 66.6% | ||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | 165,990 | 261,616 | 10.1% | 7,025 | 0 | 254,592 | 1.43 | 9.8% | 3,750,000 | 1/4/2016 | 4,500,000 | 1/1/2017 | 69.3% | 49.5% | |||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 48,871 | 240,818 | 10.7% | 1,704 | 8,898 | 230,215 | 1.70 | 10.2% | 3,550,000 | 5/5/2015 | NAP | NAP | 63.6% | 51.5% | ||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | N/A | N/A | N/A | N/A | N/A | 1,850,000 | 5/5/2015 | NAP | NAP | |||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | N/A | N/A | N/A | N/A | N/A | 1,700,000 | 5/5/2015 | NAP | NAP | |||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | 454,892 | 299,611 | 13.4% | 42,780 | 0 | 256,831 | 1.75 | 11.5% | 3,300,000 | 10/21/2015 | NAP | NAP | 68.0% | 56.3% | ||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | 144,990 | 206,600 | 9.6% | 4,967 | 0 | 201,633 | 1.45 | 9.4% | 3,400,000 | 10/28/2015 | NAP | NAP | 63.0% | 52.1% | |||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | 257,140 | 238,333 | 11.1% | 7,260 | 0 | 231,073 | 1.70 | 10.8% | 2,850,000 | 8/4/2015 | NAP | NAP | 75.1% | 63.2% | ||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | 166,665 | 223,746 | 10.7% | 4,758 | 0 | 218,989 | 1.61 | 10.5% | 3,400,000 | 10/28/2015 | NAP | NAP | 61.6% | 50.9% | ||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | 459,594 | 256,219 | 12.9% | 32,400 | 0 | 223,819 | 1.73 | 11.2% | 2,700,000 | 10/21/2015 | NAP | NAP | 73.7% | 60.9% | ||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | 81,536 | 192,007 | 9.7% | 1,344 | 4,800 | 185,863 | 1.51 | 9.4% | 3,000,000 | 5/6/2015 | NAP | NAP | 66.2% | 54.1% | ||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | 56,652 | 169,389 | 12.9% | 3,750 | 0 | 165,639 | 1.80 | 12.6% | 1,875,000 | 7/3/2015 | NAP | NAP | 70.1% | 52.8% | ||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | 123,393 | 139,657 | 11.0% | 5,000 | 0 | 134,657 | 1.65 | 10.6% | 1,700,000 | 9/1/2015 | NAP | NAP | 75.0% | 64.8% | ||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | 123,727 | 144,952 | 13.8% | 4,450 | 0 | 140,502 | 2.11 | 13.4% | 1,700,000 | 6/29/2015 | NAP | NAP | 61.8% | 51.9% | ||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | 103,147 | 117,154 | 13.8% | 6,615 | 0 | 110,539 | 2.01 | 13.0% | 1,700,000 | 10/28/2015 | NAP | NAP | 49.8% | 41.2% |
A-10 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Occupancy (%) (5) | Occupancy Date | ADR ($) | RevPAR ($) | Largest Tenant | Largest Tenant Sq Ft | Largest Tenant Lease Expiration (6) | Second Largest Tenant | Second Largest Tenant Sq Ft | Second Largest Tenant Lease Expiration (6) | Third Largest Tenant | Third Largest Tenant Sq Ft | Third Largest Tenant Lease Expiration (6) | Fourth Largest Tenant | |||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | 77.0% | 9/30/2015 | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 95.4% | 8/1/2015 | NAP | NAP | Williams Mullen | 148,911 | 6/30/2028 | Capital One Services | 13,063 | 6/30/2017 | Cherry, Bekaert & Holland (Williams Mullen Sublease) | 10,482 | 6/30/2028 | Cherry, Bekaert & Holland | |||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 98.0% | 11/1/2015 | NAP | NAP | WeWork Companies Inc. | 168,300 | 7/31/2032 | Ted Moudis Associates Inc. | 32,000 | 7/31/2024 | Pranna | 19,429 | 3/31/2025 | Allsteel Inc | |||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | 74.7% | 2/29/2016 | 167.09 | 124.77 | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 81.6% (Hotel) / 99.6% (Office and Retail) | 11/30/2015 (Hotel) / 1/5/2016 (Office and Retail) | 346.81 | 282.95 | M. Arthur Gensler & Associates | 14,667 | 1/31/2019 | Weisbart Springer, LLP | 10,853 | 6/30/2024 | Urban Outfitters | 9,931 | 1/31/2022 | Stratus Properties Inc. | |||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | 76.2% | 11/30/2015 | 308.25 | 234.79 | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | 90.7% | 1/1/2016 | NAP | NAP | Untitled Entertainment | 17,064 | 3/31/2020 | First Citizens Bank | 7,930 | 7/31/2023 | Latitude Management | 7,381 | 2/28/2019 | Strom, Madison, Sloan | ||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 100.0% | 12/1/2015 | NAP | NAP | Hollister Co. | 30,509 | 5/31/2028 | 24 Hour Fitness | 30,279 | 12/17/2023 | Abercrombie | 8,246 | 5/31/2028 | Gilly Hicks | |||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 97.2% | 11/1/2015 | NAP | NAP | Sirius XM Radio | 99,754 | 11/30/2029 | Thomas Publishing Company | 93,072 | 12/31/2025 | Visiting Nurse Services NY | 55,754 | 9/30/2020 | HQ Global Workplace | |||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | 99.1% | 2/29/2016 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 100.0% | 12/1/2015 | NAP | NAP | Infusion Software | 261,591 | 9/30/2021 | Education Management | 100,885 | 1/31/2022 | Healthways, Inc | 92,109 | 4/30/2020 | Insys Therapeutics, Inc. | |||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | 99.3% | NAP | NAP | |||||||||||||||||||||||||||||||
12.01 | Property | McCallum Glen | 99.6% | 10/5/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | 98.6% | 10/5/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | 97.3% | 12/18/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 93.6% | 2/29/2016 | NAP | NAP | LA Fitness | 49,015 | 6/30/2026 | Meat Emporium | 4,488 | 2/28/2020 | Wendy’s | 3,498 | 12/31/2020 | Uceda School | |||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 85.4% | NAP | NAP | ||||||||||||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | 88.6% | 12/31/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | 83.5% | 12/31/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | 93.6% | 11/30/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | 76.9% | 12/31/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 91.5% | NAP | NAP | |||||||||||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | 92.1% | 1/7/2016 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | 87.5% | 1/7/2016 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | 95.8% | 1/7/2016 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | 88.7% | 11/2/2015 | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | 98.2% | 11/13/2015 | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | 79.7% | 10/31/2015 | 112.18 | 89.44 | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 100.0% | 12/3/2015 | NAP | NAP | Goddard School | 11,604 | 9/30/2021 | Salon 1800 | 10,000 | 12/31/2024 | Susan Fredman Design Group | 6,000 | 9/30/2020 | Lagree Fitness | ||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | 96.6% | 2/1/2016 | NAP | NAP | Golds Gym | 37,690 | 2/28/2018 | Gattiland | 23,682 | 12/31/2018 | Aarons Rents | 17,000 | 4/30/2019 | Dollar Tree | |||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | 64.7% | 11/30/2015 | 122.58 | 79.29 | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | 81.2% | 11/1/2015 | NAP | NAP | Wells Fargo | 5,961 | 3/31/2026 | Snap Fitness (Halcyon Investments, LLC) | 4,761 | 8/31/2022 | Dotty’s (Nevada Restaurant Services, Inc.) | 4,500 | 12/31/2022 | Smile City Dental (Lac Dental, Ltd.) | ||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 91.9% | 1/1/2016 | NAP | NAP | Area Agency on Aging 1-B | 12,289 | 9/30/2021 | The Hayman Company, Inc. | 10,810 | 9/30/2021 | Etkin Equities, LLC | 10,099 | 10/31/2018 | Children’s Hospital of Michigan | |||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | 70.6% | 11/30/2015 | 113.85 | 80.34 | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 99.9% | 12/31/2015 | NAP | NAP | Winn-Dixie | 35,091 | 8/31/2019 | Dollar Tree | 13,000 | 8/31/2020 | Bay Tile Kitchen and Bath | 6,000 | 3/31/2021 | Bonefish Grill Florida | ||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | 95.2% | 11/30/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | 61.4% | 11/30/2015 | 122.56 | 75.24 | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | 76.4% | 2/17/2016 | NAP | NAP | Mattress Firm | 4,000 | 9/30/2024 | Chipotle | 2,200 | 6/30/2025 | Jersey Mikes | 1,752 | 8/31/2025 | Starbucks | |||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 94.9% | 11/1/2015 | NAP | NAP | Michaels | 23,911 | 2/28/2022 | PetSmart | 20,098 | 2/28/2021 | Dollar Tree | 9,961 | 9/30/2019 | Pier 1 Imports | ||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | 100.0% | 12/31/2015 | NAP | NAP | Jake’s Famous Crawfish | 16,600 | 10/13/2019 | NAP | NAP | NAP | |||||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 80.7% | NAP | NAP | ||||||||||||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | 86.7% | 3/18/2016 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | 71.6% | 3/18/2016 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 89.2% | 12/8/2015 | NAP | NAP | Fan’s 66 | 3,616 | 4/30/2017 | Garcia’s of Niwot | 2,668 | 8/31/2017 | Integral Crossfit | 2,661 | 8/31/2018 | Longmont United Hospital | |||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | 100.0% | 11/9/2015 | NAP | NAP | Walgreens | 15,555 | 9/30/2082 | NAP | NAP | NAP | |||||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 100.0% | NAP | NAP | |||||||||||||||||||||||||||||||
35.01 | Property | Mattress Firm | 100.0% | 8/11/2015 | NAP | NAP | Mattress Firm | 6,000 | 8/31/2024 | NAP | NAP | NAP | ||||||||||||||||||||||||||
35.02 | Property | Olive Garden | 100.0% | 8/11/2015 | NAP | NAP | Olive Garden | 7,441 | 4/30/2019 | NAP | NAP | NAP | ||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | 100.0% | 8/11/2015 | NAP | NAP | Advanced Auto Parts | 7,000 | 12/31/2020 | NAP | NAP | NAP | ||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 91.9% | 12/31/2015 | NAP | NAP | Winn-Dixie | 42,000 | 9/26/2019 | Pet Supermarket | 10,356 | 9/11/2019 | Insight Credit Union | 2,500 | 3/31/2018 | Coast Dental Services, LLC | ||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | 100.0% | 12/1/2015 | NAP | NAP | Walgreens | 14,820 | 6/30/2085 | NAP | NAP | NAP | |||||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | 95.1% | 12/1/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 100.0% | 12/29/2015 | NAP | NAP | Goodwill | 4,592 | 2/28/2022 | Sally’s Shoes & Fashion | 3,000 | 4/30/2019 | Sushi Table | 2,450 | 8/30/2018 | Bella Nails & Spa |
A-11 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Occupancy (%) (5) | Occupancy Date | ADR ($) | RevPAR ($) | Largest Tenant | Largest Tenant Sq Ft | Largest Tenant Lease Expiration (6) | Second Largest Tenant | Second Largest Tenant Sq Ft | Second Largest Tenant Lease Expiration (6) | Third Largest Tenant | Third Largest Tenant Sq Ft | Third Largest Tenant Lease Expiration (6) | Fourth Largest Tenant | |||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | 100.0% | 8/11/2015 | NAP | NAP | Walgreens | 14,820 | 7/31/2080 | NAP | NAP | NAP | ||||||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 100.0% | 10/15/2015 | NAP | NAP | The Pet Club | 4,513 | 5/31/2019 | Bagel Nosh | 1,800 | 7/31/2016 | Delia’s Cleaners | 1,800 | 1/31/2020 | Sun Devil Pool Supply | ||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | 61.6% | 10/31/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | 97.3% | 3/8/2016 | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 100.0% | NAP | NAP | |||||||||||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | 100.0% | 8/11/2015 | NAP | NAP | Sherwin Williams | 4,500 | 11/30/2023 | NAP | NAP | NAP | ||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | 100.0% | 8/11/2015 | NAP | NAP | Sherwin Williams | 4,000 | 12/31/2019 | NAP | NAP | NAP | ||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | 96.4% | 11/30/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | 89.3% | 10/23/2015 | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | 97.9% | 8/1/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | 95.2% | 10/22/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | 99.1% | 10/1/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | 100.0% | 8/11/2015 | NAP | NAP | Ohio Savings Bank | 3,700 | 4/30/2028 | Vitamin Shoppe | 3,000 | 3/31/2023 | NAP | NAP | ||||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | 100.0% | 7/1/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | 76.0% | 9/18/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | 86.5% | 7/31/2015 | NAP | NAP | NAP | NAP | NAP | NAP | ||||||||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | 85.7% | 10/23/2015 | NAP | NAP | NAP | NAP | NAP | NAP |
A-12 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Fourth Largest Tenant Sq Ft | Fourth Largest Tenant Lease Expiration (6) | Fifth Largest Tenant | Fifth Largest Tenant Sq Ft | Fifth Largest Tenant Lease Expiration (6) | Environmental Phase I Report Date | Environmental Phase II Y/N | Environmental Phase II Report Date | Engineering Report Date | Seismic Report Date | PML or SEL (%) | Earthquake Insurance Required Y/N | Upfront RE Tax Reserve ($) | Ongoing RE Tax Reserve ($) | Upfront Insurance Reserve ($) | Ongoing Insurance Reserve ($) | Upfront Replacement Reserve ($) | ||||||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | NAP | 11/13/2015 | No | NAP | 11/16/2015 | NAP | NAP | No | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 10,482 | 1/30/2023 | Divaris (Williams Mullen Sublease) | 5,532 | 6/30/2028 | 10/26/2015 | No | NAP | 10/23/2015 | NAP | NAP | No | 114,233 | 57,117 | 10,331 | 3,444 | 0 | ||||||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 16,935 | 9/30/2023 | Morris Visitor Publications | 16,000 | 12/31/2016 | 11/10/2015 | No | NAP | 11/9/2015 | NAP | NAP | No | 198,542 | 198,542 | 0 | 0 | 0 | ||||||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | NAP | 12/23/2015 | No | NAP | 11/3/2015 | NAP | NAP | No | 1,030,000 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 8,993 | 4/30/2021 | ACL Showcase Venue | 4,531 | 3/1/2026 | 11/10/2015 | No | NAP | 11/11/2015 | NAP | NAP | No | 353,261 | 353,261 | 144,502 | 24,084 | 0 | ||||||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | NAP | 12/2/2015 | No | NAP | 12/4/2015 | NAP | NAP | No | 350,724 | 116,908 | 127,814 | 9,832 | 0 | ||||||||||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | 4,668 | 5/31/2022 | First Property Realty Corp. | 4,250 | 12/31/2016 | 12/9/2015 | No | NAP | 7/26/2015 | 12/8/2015 | 14% | No | 0 | 44,550 | 0 | 0 | 0 | |||||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 8,246 | 5/31/2028 | Omnipoint | 12/31/2018 | 9/17/2015 | No | NAP | 9/14/2015 | NAP | NAP | No | 259,197 | 259,197 | 0 | 0 | 0 | |||||||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 55,754 | 8/31/2020 | Covenant House | 39,254 | 3/31/2022 | 11/12/2015 | No | NAP | 11/12/2015 | NAP | NAP | No | 1,168,977 | 584,489 | 0 | 0 | 0 | ||||||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | NAP | 12/2/2015 | No | NAP | 12/2/2015 | NAP | NAP | No | 165,311 | 26,240 | 45,084 | 3,578 | 0 | |||||||||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 34,945 | 6/30/2021 | Infineon Technologies | 25,941 | 5/31/2019 | 11/18/2015 | No | NAP | 11/17/2015 | NAP | NAP | No | 587,243 | 117,449 | 102,602 | 11,400 | 0 | ||||||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | No | 65,239 | 32,619 | 18,287 | 9,143 | 0 | ||||||||||||||||||||||||||||||||||
12.01 | Property | McCallum Glen | NAP | 11/19/2015 | No | NAP | 11/19/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | NAP | 11/19/2015 | No | NAP | 11/19/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | NAP | 7/8/2015 | No | NAP | 7/9/2015 | NAP | NAP | No | 87,408 | 29,136 | 9,005 | 4,502 | 0 | |||||||||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 3,231 | 1/31/2023 | Boom Self Defense | 3,054 | 5/31/2020 | 10/22/2015 | No | NAP | 10/22/2015 | NAP | NAP | No | 39,255 | 18,693 | 95,563 | 6,501 | 0 | ||||||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | No | 42,485 | 14,162 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | NAP | 10/7/2015 | No | NAP | 10/7/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | NAP | 10/7/2015 | No | NAP | 10/7/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | NAP | 2/2/2016 | No | NAP | 11/23/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | NAP | 10/7/2015 | No | NAP | 10/7/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | No | 72,645 | 18,978 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | NAP | 9/29/2015 | No | NAP | 9/29/2015 | NAP | �� | NAP | No | |||||||||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | NAP | 9/29/2015 | No | NAP | 9/29/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | NAP | 9/29/2015 | No | NAP | 9/29/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | NAP | 9/29/2015 | No | NAP | 9/29/2015 | NAP | NAP | No | 0 | 11,767 | 5,381 | 5,381 | 0 | ||||||||||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | NAP | 12/15/2015 | No | NAP | 12/16/2015 | NAP | NAP | No | 70,220 | 14,044 | 6,694 | 3,347 | 0 | ||||||||||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | NAP | 11/13/2015 | No | NAP | 11/13/2015 | NAP | NAP | No | 5,787 | 2,893 | 10,629 | 3,543 | 0 | ||||||||||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 3,600 | 11/30/2019 | Pressbox | 1,400 | 10/31/2018 | 11/13/2015 | No | NAP | 11/16/2015 | NAP | NAP | No | 227,809 | 28,476 | 4,658 | 2,329 | 0 | |||||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | 14,840 | 5/31/2017 | Calvary Center | 7,585 | 7/31/2017 | 8/21/2015 | No | NAP | 8/21/2015 | NAP | NAP | No | 0 | 22,888 | 24,150 | 2,013 | 0 | ||||||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | NAP | 12/11/2015 | No | NAP | 12/14/2015 | NAP | NAP | No | 9,542 | 4,771 | 0 | 0 | 0 | ||||||||||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | 2,400 | 8/31/2020 | Great Harvest Bread Co. (Whole Lotta loaf, LLC) | 2,084 | 12/31/2020 | 12/1/2015 | No | NAP | 11/30/2015 | NAP | NAP | No | 0 | 3,787 | 0 | 0 | 616 | |||||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 10,000 | 2/28/2019 | Dwellworks, LLC | 9,459 | 10/31/2021 | 12/15/2015 | No | NAP | 12/15/2015 | NAP | NAP | No | 37,487 | 18,743 | 5,105 | 1,021 | 0 | ||||||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | NAP | 12/14/2015 | No | NAP | 12/14/2015 | NAP | NAP | No | 109,568 | 13,696 | 10,291 | 3,430 | 75,000 | ||||||||||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 4,862 | 4/30/2021 | Alipes | 2,492 | 11/30/2017 | 8/11/2015 | No | NAP | 8/11/2015 | NAP | NAP | No | 199,699 | 16,639 | 17,132 | 5,710 | 0 | |||||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | NAP | 12/22/2015 | No | NAP | 12/18/2015 | NAP | NAP | No | 55,977 | 13,994 | 59,929 | 4,994 | 0 | |||||||||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | NAP | 12/11/2015 | No | NAP | 12/11/2015 | NAP | NAP | No | 19,490 | 4,872 | 0 | 0 | 0 | ||||||||||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | 1,515 | 8/31/2024 | Sprint | 1,440 | 9/30/2018 | 2/8/2016 | No | NAP | 2/2/2016 | NAP | NAP | No | 7,736 | 7,367 | 3,570 | 680 | 0 | ||||||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 9,487 | 3/31/2021 | NAP | 12/7/2015 | No | NAP | 12/7/2015 | NAP | NAP | No | 12,683 | 2,114 | 2,958 | 1,479 | 0 | |||||||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | NAP | 9/8/2015 | No | NAP | 9/8/2015 | 9/8/2015 | 16% | No | 6,848 | 3,424 | 12,181 | 2,030 | 0 | ||||||||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | No | 45,664 | 9,133 | 2,054 | 652 | 0 | |||||||||||||||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | NAP | 12/16/2015 | No | NAP | 12/16/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | NAP | 12/16/2015 | No | NAP | 12/15/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 2,480 | 11/30/2017 | Adam Saeks, DDS | 2,352 | 11/30/2026 | 11/10/2015 | No | NAP | 11/9/2015 | NAP | NAP | No | 105,465 | 11,718 | 5,828 | 1,943 | 221,000 | ||||||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | NAP | 11/20/2015 | No | NAP | 11/20/2015 | NAP | NAP | No | 0 | 0 | 518 | 493 | 0 | ||||||||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | No | 16,241 | 2,707 | 3,868 | 323 | 0 | ||||||||||||||||||||||||||||||||||
35.01 | Property | Mattress Firm | NAP | 5/21/2015 | No | NAP | 5/20/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
35.02 | Property | Olive Garden | NAP | 6/3/2015 | No | NAP | 5/20/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | NAP | 5/21/2015 | No | NAP | 5/20/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 2,250 | 8/31/2017 | Quality Business Solutions | 2,025 | 1/14/2019 | 8/11/2015 | No | NAP | 8/11/2015 | NAP | NAP | No | 84,243 | 7,021 | 15,633 | 5,212 | 0 | |||||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | NAP | 12/2/2015 | No | NAP | 12/2/2015 | NAP | NAP | No | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | NAP | 12/14/2015 | No | NAP | 12/15/2015 | NAP | NAP | No | 71,946 | 8,565 | 3,656 | 1,741 | 100,000 | |||||||||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 1,750 | 10/31/2017 | Subway | 1,400 | 2/28/2017 | 7/14/2015 | No | NAP | 7/14/2015 | 7/14/2015 | 6% | No | 28,727 | 4,788 | 9,171 | 764 | 10,000 |
A-13 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Fourth Largest Tenant Sq Ft | Fourth Largest Tenant Lease Expiration (6) | Fifth Largest Tenant | Fifth Largest Tenant Sq Ft | Fifth Largest Tenant Lease Expiration (6) | Environmental Phase I Report Date | Environmental Phase II Y/N | Environmental Phase II Report Date | Engineering Report Date | Seismic Report Date | PML or SEL (%) | Earthquake Insurance Required Y/N | Upfront RE Tax Reserve ($) | Ongoing RE Tax Reserve ($) | Upfront Insurance Reserve ($) | Ongoing Insurance Reserve ($) | Upfront Replacement Reserve ($) | ||||||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | NAP | 5/21/2015 | No | NAP | 5/21/2015 | NAP | NAP | No | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 1,787 | 9/30/2017 | Happy Dental | 1,600 | 6/30/2018 | 11/18/2015 | No | NAP | 10/16/2015 | NAP | NAP | No | 590 | 590 | 0 | 0 | 256 | |||||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | NAP | 11/30/2015 | No | NAP | 12/2/2015 | NAP | NAP | No | 9,195 | 4,597 | 3,250 | 0 | 582 | |||||||||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | NAP | 12/29/2015 | No | NAP | 12/23/2015 | 1/8/2016 | 10% | No | 5,723 | 1,817 | 5,494 | 523 | 0 | ||||||||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | No | 4,528 | 1,132 | 1,500 | 150 | 0 | ||||||||||||||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | NAP | 5/21/2015 | No | NAP | 5/21/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | NAP | 5/21/2015 | No | NAP | 5/21/2015 | NAP | NAP | No | ||||||||||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | NAP | 11/3/2015 | No | NAP | 11/3/2015 | NAP | NAP | No | 5,519 | 5,519 | 7,641 | 3,821 | 15,075 | |||||||||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | NAP | 11/2/2015 | No | NAP | 11/2/2015 | NAP | NAP | No | 6,220 | 2,073 | 3,552 | 507 | 0 | ||||||||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | NAP | 8/24/2015 | No | NAP | 9/17/2015 | NAP | NAP | No | 0 | 2,228 | 894 | 447 | 0 | |||||||||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | NAP | 11/2/2015 | No | NAP | 11/2/2015 | NAP | NAP | No | 2,649 | 883 | 4,142 | 592 | 0 | |||||||||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | NAP | 11/3/2015 | No | NAP | 11/3/2015 | NAP | NAP | No | 4,899 | 3,780 | 20,018 | 2,860 | 0 | |||||||||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | NAP | 5/21/2015 | No | NAP | 5/21/2015 | NAP | NAP | No | 22,463 | 3,744 | 1,607 | 134 | 0 | |||||||||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | NAP | 7/10/2015 | No | NAP | 7/14/2015 | NAP | NAP | No | 0 | 812 | 823 | 274 | 11,371 | |||||||||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | NAP | 9/15/2015 | No | NAP | 9/16/2015 | NAP | NAP | No | 8,203 | 1,367 | 606 | 303 | 0 | |||||||||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | NAP | 7/10/2015 | No | NAP | 7/15/2015 | NAP | NAP | No | 13,033 | 1,862 | 3,628 | 1,814 | 0 | |||||||||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | NAP | 11/2/2015 | No | NAP | 11/2/2015 | NAP | NAP | No | 3,162 | 790 | 3,224 | 461 | 0 |
A-14 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Ongoing Replacement Reserve ($) | Replacement Reserve Caps ($) | Upfront TI/LC Reserve ($) | Ongoing TI/LC Reserve ($) | TI/LC Caps ($) | Upfront Debt Service Reserve ($) | Ongoing Debt Service Reserve ($) | Upfront Deferred Maintenance Reserve ($) | Ongoing Deferred Maintenance Reserve ($) | Upfront Environmental Reserve ($) | Ongoing Environmental Reserve ($) | Upfront Other Reserve ($) | Ongoing Other Reserve ($) | Other Reserve Description | |||||||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 3,428 | 0 | 1,783,675 | 17,142 | 1,028,490 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 5,306 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 10,874,851 | 0 | Unfunded Obligations Reserve($8,948,151), Free Rent Reserve($1,226,700), Pranna Reserve ($700,000) | |||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | 57,285 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 3,750,000 | 0 | Garage Renovation Reserve | |||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 2,240 | 0 | 0 | 4,720 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 67,787 | 0 | Gap Rent Reserve for ACL Showcase Venue | |||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | 38,582 | 0 | 0 | 0 | 0 | 0 | 0 | 125,688 | 0 | 0 | 0 | 325,000 | 90,000 | Monthly Seasonality Reserve ($90,000); Unfunded Obligations Reserve ($325,000) | |||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | 1,959 | 70,524 | 225,000 | 6,279 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 1,093 | 0 | 0 | 7,288 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 5,000,000 | 0 | A&F Credit Reserve | |||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 10,839 | 0 | 0 | 0 | 0 | 0 | 0 | 1,306,250 | 0 | 0 | 0 | 22,217,785 | 0 | Guaranty Collateral Reserve ($17,333,334); Unfunded Obligations ($3,069,378); Contingency Reserve ($1,088,442.55); Gap Rent Reserve ($726,630) | |||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | 4,500 | 0 | 0 | 0 | 0 | 0 | 0 | 3,406 | 0 | 0 | 0 | 210,722 | 0 | Rent Subsidy Reserve | ||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 8,728 | 0 | 500,000 | 43,640 | 2,094,692 | 0 | 0 | 0 | 0 | 0 | 0 | 7,618,460 | 0 | Gap Rent Reserve ($2,217,788); Infusion Building 4 Unfunded Landlord Obligation Reserve ($5,246,634); Insys Therapeutics Unfunded Landlord Obligation Reserve ($38,168); Infineon Free Rent Reserve ($115,870) | |||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | 9,833 | 0 | 0 | 0 | 0 | 0 | 0 | 21,875 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
12.01 | Property | McCallum Glen | ||||||||||||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | ||||||||||||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | 3,257 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 1,329 | 200,000 | 250,000 | 0 | 250,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 13,387 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 700,000 | 0 | Economic Holdback | |||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | ||||||||||||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | ||||||||||||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | ||||||||||||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | ||||||||||||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 8,275 | 0 | 0 | 0 | 0 | 0 | 0 | 57,058 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | ||||||||||||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | ||||||||||||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | ||||||||||||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 360,000 | 0 | Renovation Reserve | |||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | 4,088 | 0 | 0 | 0 | 0 | 0 | 0 | 14,094 | 0 | 0 | 0 | 1,275,000 | 0 | Designated Replacement Reserve ($650,000); Holdback Reserve ($625,000) | |||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | 6,658 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2,716,288 | 0 | PIP Reserve | |||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 706 | 65,000 | 75,000 | 0 | 75,000 | 0 | 0 | 7,025 | 0 | 1,000,000 | 0 | 10,000 | 0 | Salon 1800 Signage Reserve | ||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | 1,722 | 0 | 400,000 | 0 | 400,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | 11,137 | 0 | 0 | 0 | 0 | 0 | 0 | 46,640 | 0 | 0 | 0 | 1,853,339 | 0 | PIP Reserve ($1,800,000); Seasonality Reserve ($53,339 upfront, $26,670 monthly in June, July, August and September) | |||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | 616 | 0 | 2,876 | 2,876 | 69,026 | 0 | 0 | 0 | 0 | 0 | 0 | 16,906 | 0 | Free Rent Reserve | ||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 1,897 | 91,032 | 250,000 | 11,260 | 540,480 | 0 | 0 | 0 | 0 | 0 | 0 | 102,850 | 0 | Real Estate One TI Reserve | |||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | 11,465 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1,768,939 | 0 | PIP Reserve ($1,768,939), Seasonality Reserve ($0) | |||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 1,056 | 150,000 | 200,000 | 0 | 115,000 | 0 | 0 | 211,750 | 0 | 0 | 0 | 78,000 | 0 | SC Re-Tenanting Reserve | ||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | 4,737 | 0 | 0 | 0 | 0 | 0 | 0 | 4,563 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | 7,415 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 472,285 | 0 | PIP Reserve ($400,000); Seasonality Reserve ($72,285 upfront, $45,204 monthly in June, July, August, September and October) | |||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | 203 | 0 | 100,000 | 1,622 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 836 | 40,132 | 0 | 2,787 | 100,000 | 0 | 0 | 58,819 | 0 | 0 | 0 | 5,434 | 1,359 | Condo Assessments Reserve | ||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 266 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | ||||||||||||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | ||||||||||||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 516 | 0 | 0 | 3,439 | 123,792 | 0 | 0 | 23,344 | 0 | 0 | 0 | 64,500 | 0 | Outstanding TI Reserve ($47,040), Rent Escrow Reserve ($17,459.68) | |||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 167 | 0 | 0 | ||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 341 | 12,265 | 0 | 1,703 | 81,764 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
35.01 | Property | Mattress Firm | ||||||||||||||||||||||||||||||||||||
35.02 | Property | Olive Garden | ||||||||||||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | ||||||||||||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 1,007 | 150,000 | 150,000 | 0 | 150,000 | 0 | 0 | 169,840 | 0 | 0 | 0 | 5,579 | 0 | Unfunded Obligations Reserve | ||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | 1,681 | 0 | 0 | 0 | 0 | 0 | 0 | 25,375 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 397 | 0 | 50,000 | 1,417 | 85,000 | 0 | 0 | 6,250 | 0 | 0 | 0 | 0 | 0 |
A-15 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Ongoing Replacement Reserve ($) | Replacement Reserve Caps ($) | Upfront TI/LC Reserve ($) | Ongoing TI/LC Reserve ($) | TI/LC Caps ($) | Upfront Debt Service Reserve ($) | Ongoing Debt Service Reserve ($) | Upfront Deferred Maintenance Reserve ($) | Ongoing Deferred Maintenance Reserve ($) | Upfront Environmental Reserve ($) | Ongoing Environmental Reserve ($) | Upfront Other Reserve ($) | Ongoing Other Reserve ($) | Other Reserve Description | |||||||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 256 | 0 | 1,280 | 1,280 | 76,800 | 0 | 0 | 46,895 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | 582 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 75,000 | 0 | Facilities Upgrade Reserve | ||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | 585 | 21,074 | 0 | 0 | 0 | 0 | 0 | 6,563 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 142 | 5,100 | 0 | 475 | 17,085 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | ||||||||||||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | ||||||||||||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | 3,565 | 0 | 0 | 0 | 0 | 0 | 0 | 34,925 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | 414 | 14,900 | 0 | 0 | 0 | 0 | 0 | 6,813 | 0 | 2,750 | 0 | 0 | 0 | ||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | 605 | 0 | 0 | 0 | 0 | 0 | 0 | 4,875 | 0 | 0 | 0 | 46,100 | 0 | Renovation Reserve | ||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | 396 | 14,273 | 0 | 0 | 0 | 0 | 0 | 3,750 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | 2,700 | 0 | 0 | 0 | 0 | 0 | 0 | 27,063 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | 112 | 4,020 | 0 | 497 | 17,889 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | 313 | 0 | 0 | 0 | 0 | 0 | 0 | 11,371 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | 417 | 0 | 0 | 0 | 0 | 0 | 0 | 26,000 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | 371 | 0 | 0 | 0 | 0 | 0 | 0 | 3,938 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | 551 | 19,845 | 0 | 0 | 0 | 0 | 0 | 16,638 | 0 | 2,750 | 0 | 0 | 0 |
A-16 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Borrower Name | Delaware Statutory Trust? Y/N | Carve-out Guarantor | Loan Purpose | Loan Amount (sources) ($) | Principal’s New Cash Contribution (7) ($) | Subordinate Debt ($) | Other Sources ($) | Total Sources ($) | Loan Payoff ($) | |||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | Court Place Land LLC | No | David Werner and Allan V. Rose | Acquisition | 180,000,000 | 60,729,575 | 0 | 0 | 240,729,575 | 0 | |||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | Kireland South 10th Street, LLC | No | Kireland Holdings, LLC | Acquisition | 52,000,000 | 30,097,095 | 0 | 0 | 82,097,095 | 0 | |||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 79 Madison LLC | No | Michael T. Cohen, Robert Getreu and Andrew H. Roos | Refinance | 85,000,000 | 0 | 0 | 13,560,441 | 98,560,441 | 85,237,316 | |||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | Evanston Orrington Hotel, LLC | No | Morton L. Olshan | Acquisition | 40,000,000 | 21,220,254 | 0 | 4,830,000 | 66,050,254 | 0 | |||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | Stratus Block 21, L.L.C. | No | Stratus Properties Inc. | Refinance | 150,000,000 | 0 | 0 | 0 | 150,000,000 | 129,850,554 | |||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | The Downtown LLC | No | Paul Stallings | Refinance | 36,500,000 | 0 | 0 | 100,000 | 36,600,000 | 35,003,095 | |||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | Beverly Capital Ventures, LLC | No | David Taban | Acquisition | 34,600,000 | 13,805,583 | 0 | 0 | 48,405,583 | 0 | ||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 600 Broadway Partners LLC | No | Stanley Cayre, Stanley Chera and Harry Adjmi | Refinance | 120,000,000 | 0 | 0 | 0 | 120,000,000 | 69,585,845 | |||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 5 Penn Plaza LLC | No | Stephen D. Haymes and The Stephen D. Haymes Revocable Trust | Refinance | 260,000,000 | 0 | 40,000,000 | 300,000 | 300,300,000 | 213,091,475 | |||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | Orlo Takoma, LLC | No | Aaron Orlofsky | Refinance | 22,000,000 | 0 | 0 | 50,000 | 22,050,000 | 14,978,471 | ||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | CAZ 1 DE LLC | No | David Allred, Allred Family Revocable Trust Dated April 1, 1998 and the Douglas Allred Family Investments, LLC | Refinance | 93,000,000 | 0 | 0 | 85,000 | 93,085,000 | 64,124,118 | |||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | McCallum Portfolio LLC and Heritage Hill Manager LLC | No | Chad A. Doty, Daniel R. Chamberlain, Andrew C. McClellan, Brady J. McClellan and William C. Mara | Acquisition | 19,143,750 | 7,019,060 | 0 | 505,005 | 26,667,815 | 0 | ||||||||||||||||
12.01 | Property | McCallum Glen | ||||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | ||||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | Arbors One, LLC | No | Rod E. Wilt, Brian G. Uffelman and Lisa M. Boyd | Acquisition | 18,700,000 | 4,654,275 | 0 | 0 | 23,354,275 | 0 | ||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | Blue Sphere Deerfield Plaza, Ltd. | No | Thomas Joseph Delahanty, Jr. and Yacob Blatt a/k/a Jacob Blatt | Refinance | 18,000,000 | 0 | 0 | 45,000 | 18,045,000 | 12,228,876 | |||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | Amsdell Storage Ventures VI, LLC and Amsdell Storage Ventures XLI, LLC | No | Robert J. Amsdell and Barry L. Amsdell | Refinance/Acquisition | 14,150,000 | 0 | 0 | 283,561 | 14,433,561 | 5,785,566 | |||||||||||||||
15.01 | Property | Compass Self Storage - Florence | ||||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | ||||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | ||||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | ||||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | Slate Run Apartments of Miamisburg, LLC; Ashgrove Apartments of Sterling Heights, LLC; Ashgrove Apartments of Sterling Heights, II, LLC; Woodside Apartments, LLC; Ramblewood Apartments II, LLC | No | Arbor Realty SR, Inc. | Refinance | 13,050,000 | 0 | 0 | 0 | 13,050,000 | 11,136,062 | ||||||||||||||||
16.01 | Property | Ashgrove Apartments | ||||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | ||||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | ||||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | Westernaire Partners LLC | No | Milton M. Mabry, Jr. and Tim R. Johnson | Acquisition | 12,500,000 | 6,943,409 | 0 | 0 | 19,443,409 | 0 | |||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | SG Troy Place LLC | No | Derron Sanders | Acquisition | 11,550,000 | 3,563,875 | 0 | 439,666 | 15,553,542 | 0 | |||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | Seal Mayfield, LLC | No | Vamsikrishna Bonthala and Sheenal Patel | Acquisition | 11,200,000 | 7,722,527 | 0 | 214,680 | 19,137,207 | 0 | |||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | LLJ Retail Ventures 8, LLC | No | LLJ Ventures, LLC | Acquisition | 11,000,000 | 5,217,405 | 0 | 385,666 | 16,603,071 | 0 | ||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | Booker Triangle, LLC | No | David Weinstein and Amy Stevens | Refinance | 10,425,000 | 0 | 0 | 0 | 10,425,000 | 7,427,547 | |||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | Haldimand Bay Trading Company, L.L.C. | No | Robert Ciampa, James Clawson, Seth Glickman, Brian Kelly, Steven Marx, Donald Schappacher and David Wespiser | Refinance | 9,250,000 | 0 | 0 | 0 | 9,250,000 | 4,787,343 | |||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | Siena Town Plaza, LP | No | Investment Concepts, Inc. | Acquisition | 9,000,000 | 5,154,432 | 0 | 0 | 14,154,432 | 0 | ||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | Franklin Center Associates, L.L.C. | No | Douglas M. Etkin, Phillip W. Fisher and Richard P. Kughn | Refinance | 9,000,000 | 0 | 0 | 45,000 | 9,045,000 | 7,449,659 | |||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | St Charles Hotel Partners, LLC | No | Rakesh Chauhan, Manoj Chauhan and Andy Amit Chopra | Acquisition | 8,575,000 | 3,924,607 | 0 | 407,446 | 12,907,053 | 0 | |||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | ECA Elle Northwood Partners, LLC | No | Elliot Sasson, Christopher Wild and Abraham Reichbach | Acquisition | 8,175,000 | 3,321,726 | 0 | 0 | 11,496,726 | 0 | ||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | Roco-Cheswick LLC | No | Tyler Ross, Michael Colman and David Colman | Acquisition | 7,900,000 | 2,516,955 | 0 | 40,000 | 10,456,955 | 0 | ||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | JPMS I, LLC | No | Robert Ciampa, James Clawson, Brian Kelly, Donald Schappacher, Sharon Schappacher and David Wespiser | Refinance | 7,050,000 | 0 | 0 | 0 | 7,050,000 | 1,657,524 | |||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | AZPAV, LLC | No | Eric B. Rosenberg | Refinance | 6,800,000 | 0 | 0 | 40,000 | 6,840,000 | 5,026,489 | |||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | Integris Ventures - CS, LLC, Integris Ventures - SPVCS, LLC, Coshocton Associates - CS, LLC and Westmore Equities - CS, LLC | No | Richard Fine, Jason Fine, Robert Elkan and Patrice E. Boehler | Acquisition | 6,543,750 | 2,624,971 | 0 | 36,500 | 9,205,221 | 0 | ||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | Boin Properties, LLC | No | William Paul McCormick | Refinance | 6,300,000 | 0 | 0 | 0 | 6,300,000 | 3,714,638 | |||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | Prime Aiken Storage, LLC and Prime Clemson Storage, LLC | No | Robert Moser and Robert Morgan | Acquisition | 5,500,000 | 1,794,807 | 0 | 0 | 7,294,807 | 0 | |||||||||||||||
32.01 | Property | Storage R Us - Aiken | ||||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | ||||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | Bridge Commercial Partners Fund III, LLC | No | Harris Faberman | Refinance | 4,700,000 | 54,256 | 0 | 0 | 4,754,256 | 4,163,157 | |||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | Wilden Enterprises Madison, LLC | No | William M. Petrie and Denise T. Petrie | Acquisition | 4,525,000 | 2,067,973 | 0 | 40,000 | 6,632,973 | 0 | |||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | KJR Olive Garden LLC, KJR Mt. Vernon LLC, WBR 26400 Lorain LLC and RRR Ohio Two LLC | No | Kathy J. Risman | Recapitalization | 4,301,000 | 0 | 0 | 0 | 4,301,000 | 0 | ||||||||||||||||
35.01 | Property | Mattress Firm | ||||||||||||||||||||||||||||
35.02 | Property | Olive Garden | ||||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | ||||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | ECA Buligo Providence Partners, LP | No | Elliot Sasson, Christopher Wild and Abraham Reichbach | Acquisition | 4,125,000 | 1,961,434 | 0 | 0 | 6,086,434 | 0 | ||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | WAG West Bend LLC | No | Michael Marvisi | Acquisition | 4,000,000 | 3,076,145 | 0 | 25,000 | 7,101,145 | 0 | |||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | Oak Lawn Gardens, LLC | No | Joseph Junkovic | Acquisition | 4,000,000 | 1,658,324 | 0 | 35,000 | 5,693,324 | 0 | ||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | Lemoore99 LLC and Bkat99 LLC | No | Massoud Ghomizadeh and Behrooz Katirai | Refinance | 4,000,000 | 130,723 | 0 | 0 | 4,130,723 | 3,852,825 |
A-17 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Borrower Name | Delaware Statutory Trust? Y/N | Carve-out Guarantor | Loan Purpose | Loan Amount (sources) ($) | Principal’s New Cash Contribution (7) ($) | Subordinate Debt ($) | Other Sources ($) | Total Sources ($) | Loan Payoff ($) | |||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | RRR Riverview LLC | No | Kathy J. Risman | Recapitalization | 3,672,000 | 0 | 0 | 0 | 3,672,000 | 0 | ||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | Fry’s Hollingshead LLC; Fry’s Rolling Green LLC; Fry’s Smalley LLC; New Fry’s Investors LLC | No | Peter Hollingshead and Thomas A. Cologna | Refinance | 3,500,000 | 16,857 | 0 | 0 | 3,516,857 | 3,322,465 | ||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | Okatie Storage Partners, LLC | No | Ryan L. Hanks | Acquisition | 2,625,000 | 1,301,691 | 0 | 0 | 3,926,691 | 0 | ||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | American Self Storage of Sparks I, LLC | No | Dennis A. Peterson | Refinance | 2,600,000 | 0 | 0 | 35,000 | 2,635,000 | 989,200 | |||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | KJR SW Clinton, LLC and KJR SW Lyon, LLC | No | Kathy J. Risman | Recapitalization | 2,272,000 | 0 | 0 | 0 | 2,272,000 | 0 | ||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | ||||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | ||||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | Parkside I, LLC | No | David Haridim | Acquisition | 2,250,000 | 916,879 | 0 | 0 | 3,166,879 | 0 | ||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | Carpenter Storage II, LLLP | No | J. Robert Carpenter | Refinance | 2,150,000 | 0 | 0 | 0 | 2,150,000 | 1,611,116 | |||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | Maplewood MHC, LLC | No | Adam T. Schwerin | Acquisition | 2,140,000 | 848,326 | 0 | 0 | 2,988,326 | 0 | ||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | Carpenter Storage I, LLLP | No | J. Robert Carpenter | Refinance | 2,100,000 | 0 | 0 | 0 | 2,100,000 | 1,346,641 | ||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | Glen Cove I, LLC | No | David Haridim and Jonathan Quinn | Refinance | 2,000,000 | 0 | 0 | 0 | 2,000,000 | 1,500,000 | ||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | RRR Ohio Three, LLC, WBR 27810 Chagrin II, LLC and WBR 27810 Chagrin III, LLC | No | Kathy J. Risman | Recapitalization | 2,000,000 | 0 | 0 | 0 | 2,000,000 | 0 | ||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | Elkhart MHP LLC | No | Adam T. Schwerin | Refinance | 1,330,000 | 0 | 0 | 0 | 1,330,000 | 878,281 | ||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | Hunter’s Creek Jefferson MHC, LLC | No | David M. Ruby and Richard L. Ruby | Acquisition | 1,275,000 | 513,233 | 0 | 0 | 1,788,233 | 0 | ||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | Crystal River MHP LLC | No | Adam T. Schwerin | Acquisition | 1,050,000 | 530,373 | 0 | 0 | 1,580,373 | 0 | ||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | Carpenter Storage III, LLLP | No | J. Robert Carpenter | Refinance | 850,000 | 0 | 0 | 0 | 850,000 | 540,345 |
A-18 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Purchase Price ($) | Closing Costs ($) | Reserves ($) | Principal Equity Distribution ($) | Other Uses ($) | Total Uses ($) | Lockbox | Cash Management | Cash Management Triggers | Ground Lease Y/N | |||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | 235,000,000 | 5,729,575 | 0 | 0 | 0 | 240,729,575 | Hard | In Place | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.20x, (iii) the occurrence of a Hotel Lease Cash Sweep Period | No | |||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | 78,000,000 | 2,188,856 | 1,908,239 | 0 | 0 | 82,097,095 | Hard | In Place | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.20x, (iii) the occurrence of a Lease Sweep Period, (iv) the occurrence of a Mezzanine Trigger Period | No | |||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 0 | 1,627,747 | 11,073,393 | 621,984 | 0 | 98,560,441 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x, (iii) the occurrence of a Specified Tenant Trigger Period | No | |||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | 60,000,000 | 1,270,254 | 4,780,000 | 0 | 0 | 66,050,254 | Hard | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.15x | No | |||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 0 | 5,404,967 | 565,550 | 14,178,929 | 0 | 150,000,000 | Hard (Hotel, Office, Retail) / Soft (Music Venue) | In Place | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x, (iii) failure to deliver financial statements as required in the Loan Agreement, (iv) the property no longer being subject to an Approved Hotel Operating Agreement, (v) failure of Sponsor to maintain net worth and liquidity above the respective thresholds, (vi) ACL Music Venue Trigger | No | |||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | 0 | 583,522 | 929,226 | 84,158 | 0 | 36,600,000 | Hard | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x, (iii) the occurrence of a Franchise Trigger Period, (iv) the occurrence of a Franchise Renewal Trigger Event, (v) the occurrence of a Manager Bankruptcy Event | No | |||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | 48,000,000 | 180,583 | 225,000 | 0 | 0 | 48,405,583 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) the occurrence of a Lease Sweep Event | No | ||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 0 | 4,196,440 | 5,259,197 | 38,122,518 | 2,836,000 | 120,000,000 | Hard | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x | No | |||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 0 | 3,919,961 | 27,557,733 | 55,730,831 | 0 | 300,300,000 | Hard | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) the occurrence of a Mezzanine Loan Event of Default | No | |||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | 0 | 358,813 | 424,523 | 6,288,193 | 0 | 22,050,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager | No | ||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 0 | 1,006,627 | 8,808,305 | 19,145,950 | 0 | 93,085,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield falling is less than 7.0%, (iv) Occupancy is less than 80%, (v) the occurrence of a Specified Tenant Trigger Period | No | |||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | 25,525,000 | 1,037,415 | 105,400 | 0 | 0 | 26,667,815 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x | |||||||||||||||||
12.01 | Property | McCallum Glen | No | |||||||||||||||||||||||||||
12.02 | Property | McCallum Courts | No | |||||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | 22,000,000 | 1,257,862 | 96,413 | 0 | 0 | 23,354,275 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.05x, (iii) Debt Yield is less than 6.80% | No | ||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | 0 | 276,758 | 384,818 | 5,154,548 | 0 | 18,045,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.20x, (iv) the occurrence of a Critical Tenant Trigger Event | No | |||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | 4,000,000 | 281,614 | 742,485 | 3,623,896 | 0 | 14,433,561 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.20x | ||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | No | |||||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | No | |||||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | No | |||||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | No | |||||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | 0 | 262,467 | 129,703 | 1,521,769 | 0 | 13,050,000 | Soft Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x | |||||||||||||||||
16.01 | Property | Ashgrove Apartments | No | |||||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | No | |||||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | No | |||||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | 18,550,000 | 528,028 | 365,381 | 0 | 0 | 19,443,409 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 7.20% | No | |||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | 13,700,000 | 487,534 | 1,366,008 | 0 | 0 | 15,553,542 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x | No | |||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | 12,000,000 | 1,203,151 | 2,732,703 | 0 | 3,201,353 | 19,137,207 | Hard | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.50x, (iii) the occurrence of a Franchise Agreement Trigger Period, (iv) the occurrence of a Franchise Renewal Trigger Event, (v) Bankruptcy action of the Manager | No | |||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | 14,670,000 | 608,579 | 1,324,492 | 0 | 0 | 16,603,071 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) the occurrence of a Specified Tenant Trigger Period | No | ||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | 0 | 432,636 | 424,150 | 2,140,667 | 0 | 10,425,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) the occurrence of a Specified Tenant Trigger Period | No | |||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | 0 | 180,237 | 1,909,521 | 2,372,899 | 0 | 9,250,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x, (iii) failure to deliver financial statements as required in the Loan Agreement, (iv) the occurrence of a Franchise Trigger Event | No | |||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | 14,000,000 | 134,034 | 20,398 | 0 | 0 | 14,154,432 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x | No | ||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 0 | 171,436 | 395,441 | 1,028,463 | 0 | 9,045,000 | Soft Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) the occurrence of a Specified Tenant Trigger Period | Yes | |||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | 10,600,000 | 343,255 | 1,963,798 | 0 | 0 | 12,907,053 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of Manager, (iii) DSCR is less than 1.40x, (iv) the occurrence of a Franchise Agreement Trigger Period, (v) Franchise Renewal Trigger Event | No | |||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | 10,500,000 | 290,145 | 706,581 | 0 | 0 | 11,496,726 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) Debt Yield falling is less than 7.0%, (iv) the occurrence of a Specified Tenant Trigger Period | No | ||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | 10,250,000 | 86,487 | 120,469 | 0 | 0 | 10,456,955 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x | No | ||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | 0 | 157,256 | 491,775 | 4,743,445 | 0 | 7,050,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x, (iii) failure to deliver financial statements as required in the Loan Agreement, (iv) the occurrence of a Franchise Trigger Event, (v) the occurrence of a Guarantor Covenant Event | No | |||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | 0 | 430,172 | 111,306 | 1,272,033 | 0 | 6,840,000 | Hard | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.20x | No | |||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | 8,725,000 | 400,327 | 79,893 | 0 | 0 | 9,205,221 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) the occurrence of a Specified Tenant Trigger Period | No | ||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | 0 | 262,359 | 19,029 | 2,303,975 | 0 | 6,300,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) the occurrence of a Specified Tenant Trigger Period | No | |||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | 6,800,000 | 447,089 | 47,718 | 0 | 0 | 7,294,807 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.20x | ||||||||||||||||
32.01 | Property | Storage R Us - Aiken | No | |||||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | No | |||||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | 0 | 170,962 | 420,137 | 0 | 0 | 4,754,256 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x | No | |||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | 6,428,571 | 203,885 | 518 | 0 | 0 | 6,632,973 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.15x, (iv) the occurrence of a Critical Tenant Trigger Event | No | |||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | 0 | 148,237 | 20,109 | 4,132,654 | 0 | 4,301,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 6.7%, (iv) the occurrence of Specified Tenant Trigger Period | |||||||||||||||||
35.01 | Property | Mattress Firm | No | |||||||||||||||||||||||||||
35.02 | Property | Olive Garden | No | |||||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | No | |||||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | 5,300,000 | 361,139 | 425,295 | 0 | 0 | 6,086,434 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) Debt Yield is less than 7.0% and (iv) the occurrence of a Specified Tenant Trigger Period | No | ||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | 7,000,000 | 101,145 | 0 | 0 | 0 | 7,101,145 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.20x, (iv) the occurrence of a Critical Tenant Trigger Event | No | |||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | 5,350,000 | 142,347 | 200,977 | 0 | 0 | 5,693,324 | Hard | In Place | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.10x | No | ||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | 0 | 173,750 | 104,148 | 0 | 0 | 4,130,723 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 7.50%, (iv) the occurrence of a Specified Tenant Trigger Period, (v) the occurrence of a Shadow Anchor Trigger Period | No |
A-19 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Purchase Price ($) | Closing Costs ($) | Reserves ($) | Principal Equity Distribution ($) | Other Uses ($) | Total Uses ($) | Lockbox | Cash Management | Cash Management Triggers | Ground Lease Y/N | |||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | 0 | 156,156 | 0 | 3,515,844 | 0 | 3,672,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 6.7% | No | ||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | 0 | 145,371 | 49,021 | 0 | 0 | 3,516,857 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x | No | ||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | 3,500,000 | 338,665 | 88,027 | 0 | 0 | 3,926,691 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x | No | ||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | 0 | 114,525 | 17,780 | 1,513,495 | 0 | 2,635,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) Bankruptcy action of the Borrower, Guarantor or Manager, (iii) DSCR is less than 1.20x | No | |||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | 0 | 110,182 | 6,028 | 2,155,790 | 0 | 2,272,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 6.7%, (iv) the occurrence of Specified Tenant Trigger Period | |||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | No | |||||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | No | |||||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | 2,950,000 | 153,719 | 63,160 | 0 | 0 | 3,166,879 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.25x, (iii) Debt Yield is less than 8.20% | No | ||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | 0 | 70,693 | 19,335 | 448,855 | 0 | 2,150,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) Debt Yield is less than 7.5% | No | |||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | 2,850,000 | 86,457 | 51,869 | 0 | 0 | 2,988,326 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 7.3% | No | ||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | 0 | 51,287 | 10,541 | 691,531 | 0 | 2,100,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) Debt Yield is less than 7.5% | No | ||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | 0 | 95,490 | 51,980 | 352,530 | 0 | 2,000,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.20x, (iii) Debt Yield is less than 7.9% | No | ||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | 0 | 105,029 | 24,070 | 1,870,901 | 0 | 2,000,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 6.7% | No | ||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | 0 | 77,646 | 23,566 | 350,508 | 0 | 1,330,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 8.2% | No | ||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | 1,700,000 | 53,424 | 34,809 | 0 | 0 | 1,788,233 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 7.5% | No | ||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | 1,400,000 | 159,774 | 20,599 | 0 | 0 | 1,580,373 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.15x, (iii) Debt Yield is less than 7.5% | No | ||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | 0 | 49,140 | 25,774 | 234,741 | 0 | 850,000 | Springing | Springing | (i) the occurrence of an Event of Default, (ii) DSCR is less than 1.10x, (iii) Debt Yield is less than 7.5% | No |
A-20 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Ground Lease Expiration Date | Annual Ground Lease Payment ($) | Cut-off Date Pari Passu Companion Loan Balance ($) | Cut-off Date Subordinate Companion Loan Balance ($) | Subordinate Companion Loan Interest Rate (%) | Cut-off Date Mezzanine Debt Balance ($) | Mezzanine Debt Interest Rate (%) | Terrorism Insurance Required Y/N | Control Number | ||||||||||||||
1 | Loan | 8 | CGMRC | CGMRC | Sheraton Denver Downtown Fee | 110,000,000.00 | Yes | 1 | ||||||||||||||||||||
2 | Loan | 9 | CGMRC | Pillar Multifamily, LLC | Williams Mullen Center | Yes | 2 | |||||||||||||||||||||
3 | Loan | 10 | CGMRC | CGMRC | 79 Madison Avenue | 45,000,000.00 | Yes | 3 | ||||||||||||||||||||
4 | Loan | 11, 12, 13, 14 | RMF | RMF | Hilton Orrington Evanston | Yes | 4 | |||||||||||||||||||||
5 | Loan | 15, 16, 17 | GSMC | GSMC | Austin Block 21 | 109,659,650.66 | Yes | 5 | ||||||||||||||||||||
6 | Loan | 11, 18, 19 | CGMRC | CGMRC | Hotel on Rivington | Yes | 6 | |||||||||||||||||||||
7 | Loan | BNYM | BNYM | West LA Office - 350 South Beverly Drive | Yes | 7 | ||||||||||||||||||||||
8 | Loan | 20, 21 | BNYM | BNYM, GACC | 600 Broadway | 90,000,000.00 | Yes | 8 | ||||||||||||||||||||
9 | Loan | 22, 23 | CGMRC | CGMRC, Barclays Bank PLC | 5 Penn Plaza | 235,000,000.00 | 40,000,000 | 5.7500% | Yes | 9 | ||||||||||||||||||
10 | Loan | RMF | RMF | Hampshire Tower Apartments | Yes | 10 | ||||||||||||||||||||||
11 | Loan | 11, 24, 25, 26, 27 | CGMRC | CGMRC | Park Place | 73,000,000.00 | Yes | 11 | ||||||||||||||||||||
12 | Loan | CGMRC | CGMRC | McCallum Courts and McCallum Glen | Yes | 12 | ||||||||||||||||||||||
12.01 | Property | McCallum Glen | Yes | 12.01 | ||||||||||||||||||||||||
12.02 | Property | McCallum Courts | Yes | 12.02 | ||||||||||||||||||||||||
13 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Arbors at Turnberry | Yes | 13 | ||||||||||||||||||||||
14 | Loan | 28, 29 | RMF | RMF | Deerfield Plaza | Yes | 14 | |||||||||||||||||||||
15 | Loan | 11, 30 | CGMRC | CGMRC | Amsdell Self Storage - Cincinnati Portfolio | Yes | 15 | |||||||||||||||||||||
15.01 | Property | Compass Self Storage - Florence | Yes | 15.01 | ||||||||||||||||||||||||
15.02 | Property | Compass Self Storage - Cincinnati | Yes | 15.02 | ||||||||||||||||||||||||
15.03 | Property | CubeSmart Self Storage - Taunton | Yes | 15.03 | ||||||||||||||||||||||||
15.04 | Property | Compass Self Storage - Hebron | Yes | 15.04 | ||||||||||||||||||||||||
16 | Loan | BNYM | BNYM | MI, OH & GA Multifamily Portfolio | Yes | 16 | ||||||||||||||||||||||
16.01 | Property | Ashgrove Apartments | Yes | 16.01 | ||||||||||||||||||||||||
16.02 | Property | Ramblewood Apartments | Yes | 16.02 | ||||||||||||||||||||||||
16.03 | Property | Slate Run Apartments | Yes | 16.03 | ||||||||||||||||||||||||
17 | Loan | 11, 31 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Estates at Westernaire | Yes | 17 | |||||||||||||||||||||
18 | Loan | 11, 32 | CGMRC | CGMRC | Troy Place Apartments | Yes | 18 | |||||||||||||||||||||
19 | Loan | 11, 33, 34 | CGMRC | CGMRC | Staybridge Cleveland Mayfield | Yes | 19 | |||||||||||||||||||||
20 | Loan | CGMRC | CGMRC | The Armitage Collection | Yes | 20 | ||||||||||||||||||||||
21 | Loan | 35 | RAIT Funding, LLC | RAIT Funding, LLC | Triangle Shopping Center | Yes | 21 | |||||||||||||||||||||
22 | Loan | 11, 36, 37, 38 | GSMC | GSMC | Holiday Inn Express & Suites Wisconsin | Yes | 22 | |||||||||||||||||||||
23 | Loan | BNYM | BNYM | Siena Town Center | Yes | 23 | ||||||||||||||||||||||
24 | Loan | 39, 40 | CGMRC | CGMRC | Franklin Center | 6/10/2107 | 1 | Yes | 24 | |||||||||||||||||||
25 | Loan | 11, 41, 42 | CGMRC | CGMRC | Hilton Garden Inn - Saint Charles | Yes | 25 | |||||||||||||||||||||
26 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Northwood Oaks | Yes | 26 | ||||||||||||||||||||||
27 | Loan | CGMRC | CGMRC | Cheswick Village Apartments | Yes | 27 | ||||||||||||||||||||||
28 | Loan | 43, 44 | GSMC | GSMC | Holiday Inn Express & Suites Traverse City | Yes | 28 | |||||||||||||||||||||
29 | Loan | 11 | RMF | RMF | Arizona Pavilion | Yes | 29 | |||||||||||||||||||||
30 | Loan | CGMRC | CGMRC | Chesterfield Square | Yes | 30 | ||||||||||||||||||||||
31 | Loan | 45 | RAIT Funding, LLC | RAIT Funding, LLC | Whitney Gray Building | Yes | 31 | |||||||||||||||||||||
32 | Loan | 46 | RMF | RMF | Storage R Us Portfolio | Yes | 32 | |||||||||||||||||||||
32.01 | Property | Storage R Us - Aiken | Yes | 32.01 | ||||||||||||||||||||||||
32.02 | Property | Storage R Us - Columbia | Yes | 32.02 | ||||||||||||||||||||||||
33 | Loan | 47 | RAIT Funding, LLC | RAIT Funding, LLC | Cottonwood Square Shopping Center | Yes | 33 | |||||||||||||||||||||
34 | Loan | 48 | RMF | RMF | Walgreens Madison | Yes | 34 | |||||||||||||||||||||
35 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Ohio Retail Portfolio | Yes | 35 | ||||||||||||||||||||||
35.01 | Property | Mattress Firm | Yes | 35.01 | ||||||||||||||||||||||||
35.02 | Property | Olive Garden | Yes | 35.02 | ||||||||||||||||||||||||
35.03 | Property | Advanced Auto Parts | Yes | 35.03 | ||||||||||||||||||||||||
36 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Providence Plaza | Yes | 36 | ||||||||||||||||||||||
37 | Loan | 49 | RMF | RMF | Walgreens West Bend | Yes | 37 | |||||||||||||||||||||
38 | Loan | RMF | RMF | Oak Lawn Apartments | Yes | 38 | ||||||||||||||||||||||
39 | Loan | 50 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Lemoore Plaza | Yes | 39 |
A-21 |
CGCMT 2016-GC37 Annex A | ||||||||||||||||||||||||||||
Control Number | Loan / Property Flag | Footnotes | Mortgage Loan Seller | Originator | Property Name | Ground Lease Expiration Date | Annual Ground Lease Payment ($) | Cut-off Date Pari Passu Companion Loan Balance ($) | Cut-off Date Subordinate Companion Loan Balance ($) | Subordinate Companion Loan Interest Rate (%) | Cut-off Date Mezzanine Debt Balance ($) | Mezzanine Debt Interest Rate (%) | Terrorism Insurance Required Y/N | Control Number | ||||||||||||||
40 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Walgreens Sarasota | Yes | 40 | ||||||||||||||||||||||
41 | Loan | BNYM | BNYM | Fry’s at the Islands | Yes | 41 | ||||||||||||||||||||||
42 | Loan | BNYM | BNYM | Okatie Self Storage | Yes | 42 | ||||||||||||||||||||||
43 | Loan | 11, 51 | RMF | RMF | American Self Storage | Yes | 43 | |||||||||||||||||||||
44 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Sherwin Williams Portfolio | Yes | 44 | ||||||||||||||||||||||
44.01 | Property | Sherwin Williams-Clinton Township | Yes | 44.01 | ||||||||||||||||||||||||
44.02 | Property | Sherwin Williams-New Hudson | Yes | 44.02 | ||||||||||||||||||||||||
45 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Parkside Apartments | Yes | 45 | ||||||||||||||||||||||
46 | Loan | 52 | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Midway Self Storage | Yes | 46 | |||||||||||||||||||||
47 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Maplewood MHC | Yes | 47 | ||||||||||||||||||||||
48 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Acworth Self Storage | Yes | 48 | ||||||||||||||||||||||
49 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Glen Cove Apartments | Yes | 49 | ||||||||||||||||||||||
50 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | 27810 Chagrin Boulevard | Yes | 50 | ||||||||||||||||||||||
51 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Elkhart MHC | Yes | 51 | ||||||||||||||||||||||
52 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Jefferson MHC | Yes | 52 | ||||||||||||||||||||||
53 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Suncoast MHC | Yes | 53 | ||||||||||||||||||||||
54 | Loan | KGS | KGS-Alpha Real Estate Capital Markets, LLC | Buford Self Storage | Yes | 54 |
A-22 |
Footnotes to Annex A
(1) | The Administrative Fee Rate includes the Servicing Fee Rate, the Operating Advisor Fee Rate, the Trustee/Certificate Administrator Fee Rate and the CREFC® Intellectual Property Royalty License Fee Rate applicable to each Mortgage Loan. |
(2) | The monthly debt service shown for Mortgage Loans with a partial interest-only period reflects the amount payable after the expiration of the interest-only period. |
(3) | The open period is inclusive of the Maturity Date. |
(4) | Underwritten NCF DSCR is calculated based on amortizing debt service payments (except for interest-only loans). |
(5) | Occupancy reflects tenants that have signed leases, but are not yet in occupancy or may not be paying rent. |
(6) | The lease expirations shown are based on full lease terms; however, in some instances, the tenant may have the option to terminate its lease prior to the expiration date shown. In addition, in some instances, a tenant may have the right to assign its lease or sublease the leased premises and be released from its obligations under the lease. |
(7) | If the purpose of the Mortgage Loan was to finance an acquisition of the Mortgaged Property, the field “Principal’s New Cash Contribution” reflects the cash investment by one or more of the equity owners in the borrower in connection with such acquisition. If the purpose of the Mortgage Loan was to refinance the Mortgaged Property, the field “Principal’s New Cash Contribution” reflects the cash contributed to the borrower by one or more of the equity owners at the time the Mortgage Loan was originated. |
(8) | The Cut-off Date Balance of $70,000,000 represents the non-controlling note A-2 of a $180,000,000 loan combination evidenced by twopari passu notes. The companion loan, evidenced by the controlling note A-1 has an outstanding principal balance of $110,000,000 as of the Cut-off Date and was contributed to the CGCMT 2016-GC36 securitization transaction. Cut-off Date LTV Ratio, LTV Ratio at Maturity, Underwritten NCF DSCR, Debt Yield on Underwritten Net Operating Income, Debt Yield on Underwritten Net Cash Flow and Loan Per Unit calculations are based on the aggregate Cut-off Date Balance of $180,000,000. |
(9) | The Largest Tenant, Williams Mullen, leases a total of 170,287 SF at the Mortgaged Property. 21,376 SF of that space is subleased to three different sub-tenants: (i) Cherry, Bekaert & Holland (10,482 SF), (ii) Divaris (5,532 SF) and (iii) Oppenheimer (5,362 SF). |
(10) | The Cut-off Date Balance of $40,000,000 represents the non-controlling note A-2 of a $85,000,000 loan combination evidenced by twopari passu notes. The companion loan, evidenced by the controlling note A-1 has an outstanding principal balance of $45,000,000 as of the Cut-off Date and was contributed to the CGCMT 2016-P3 securitization transaction. Cut-off Date LTV Ratio, LTV Ratio at Maturity, Underwritten NCF DSCR, Debt Yield on Underwritten Net Operating Income, Debt Yield on Underwritten Net Cash Flow and Loan Per Unit calculations are based on the aggregate Cut-off Date Balance of $85,000,000. |
(11) | The Appraised Value represents the “as-is” Appraised Value of each Mortgaged Property unless otherwise noted. The Cut-off Date LTV Ratio is calculated on the basis of such Appraised Value. The LTV Ratio at Maturity is calculated in whole or in part on the basis of the “as stabilized” Appraised Value. |
(12) | The Cut-off Date LTV Ratio is calculated based upon the property’s “as-is” Appraised Value. The “as-is” Appraised Value assumes that $3,800,000 required to fund the structural repairs to the garage is paid for by a fully funded escrow account. An upfront garage renovation reserve of $3,750,000 is in place. The appraiser concluded an “as-is” value without a garage renovation reserve of $57,100,000. The Cut-off Date LTV Ratio without a garage renovation reserve is 70.1%. |
A-23 |
(13) | The Ongoing RE Tax Reserve is waived for the first seven monthly payments. Commencing on the due date in September 2016, the borrower is required to make monthly payments of $85,833.33 through the loan’s Maturity Date. |
(14) | The Purchase Price of $60,000,000 includes a garage renovation credit of $4,750,000 with certain contemplated improvements to be made to the parking garage. |
(15) | The Cut-off Date Balance of $39,876,237 represents the non-controlling note A-2 of a $150,000,000 loan combination evidenced by twopari passu notes. The controlling note A-1, with an outstanding principal balance as of the Cut-off Date of $109,659,651 was contributed to the CGCMT 2016-GC36 securitization transaction. |
(16) | The Austin Block 21 Mortgaged Property is a 37-story, 369,842 SF mixed use development consisting of a 251-room (226,442 SF) hotel component that was 81.6% occupied as of November 30, 2015, an 86,757 SF music venue component with a 2,750-person capacity and a 56,643 SF retail/office component that was 99.6% leased as of January 5, 2016. |
(17) | The Second Largest Tenant, Weisbart Springer, LLP, subleases 3,621 SF to VertsKebap, Inc. |
(18) | The Ongoing Replacement Reserve is an FF&E reserve in an amount equal to the greater of (i) the amount required for FF&E under the franchise agreement (if any) and (ii) the “Hotel on Rivington FF&E Payment”, which is an amount equal to one-twelfth of 4.0% of the greater of (a) the annual gross revenues for the hotel related operations at the Hotel on Rivington Property in the preceding calendar year and (b) the gross revenues for the hotel related operations at the Hotel on Rivington Property in the projected budget for the succeeding year. The Hotel on Rivington FF&E Payment will be adjusted by the lender in April 2017 and each April thereafter. |
(19) | Borrower is required to deposit funds into the Seasonality Reserve each year on each monthly payment date during the months of September, October, November and December. For the 2016 calendar year, the ongoing Seasonality Reserve will be $90,000 for each seasonality reserve monthly payment date. For each subsequent calendar year, borrower is required on each Due Date during the months of September, October, November and December to deposit an amount equal to the quotient obtained by dividing (x) 110% of the aggregate negative monthly amounts for the preceding calendar year by (y) four. Provided no event of default has occurred, on the Due Dates occurring in January and February 2017, lender will disburse an amount equal to the amount, if any, by which operating income for the Mortgaged Property for the calendar month is insufficient to establish a debt service coverage ratio of 1.00x based on such annual financial statements to (i) during a trigger period, the cash management account or (ii) if no trigger period is then continuing, to the borrower. |
(20) | The Cut-off Date Balance of $30,000,000 represents the non-controlling note A-2-2 and note A-6 (which is expected to be acquired by The Bank of New York Mellon from German American Capital Corporation in connection with this securitization transaction) of a $120,000,000 loan combination evidenced by eightpari passu notes. The non-controlling note A-1, note A-2-1 and note A-3 with an aggregate original principal balance of $50,000,000 were contributed to the CGCMT 2016-P3 securitization transaction. The controlling note A-4 and non-controlling note A-5-1 and note A-5-2, with an aggregate original principal balance of $40,000,000 are expected to be contributed to the DBJPM 2016-C1 securitization transaction. Cut-off Date LTV Ratio, LTV Ratio at Maturity, Underwritten NCF DSCR, Debt Yield on Underwritten Net Operating Income, Debt Yield on Underwritten Net Cash Flow and Loan Per Unit calculations are based on the aggregate Cut-off Date Balance of $120,000,000. |
(21) | The lockout period will be at least 27 payment dates beginning with and including the first payment date of February 6, 2016. For the purposes of this Prospectus, the assumed lockout period of 27 payment dates is based on the expected CGCMT 2016-GC37 securitization closing date in April 2016. The actual lockout period may be longer. |
A-24 |
(22) | The Cut-off Date Balance of $25,000,000 represents a non-controlling note A-2-II of a $260,000,000 loan combination evidenced by fourpari passu notes. The companion loans, evidenced by notes A-1, A-2-I and A-3, have an aggregate principal balance of $235,000,000 as of the Cut-off Date. The controlling note A-1 ($115,000,000) was contributed to the CGCMT 2016-GC36 securitization transaction. The non-controlling note A-2-I ($42,000,000) was contributed to the CGCMT 2016-P3 securitization transaction. The non-controlling note A-3 ($78,000,000) was contributed to the JPMBB 2016-C1 securitization transaction. Cut-off Date LTV Ratio, LTV Ratio at Maturity, Underwritten NCF DSCR, Debt Yield on Underwritten Net Operating Income, Debt Yield on Underwritten Net Cash Flow and Loan Per Unit calculations are based on the aggregate Cut-off Date Balance of $260,000,000. |
(23) | The Fourth Largest Tenant, HQ Global Workplace, has two expiration dates. 27,877 SF of the total 55,754 SF expires on August 31, 2020. The remaining 27,877 SF expires on February 28, 2019. |
(24) | The Cut-off Date Balance of $20,000,000 represents the non-controlling note A-2-1 of a $93,000,000 loan combination evidenced by threepari passu notes. The companion loan, evidenced by notes A-1 and A-2-2 has an aggregate principal balance of $73,000,000 as of the Cut-off Date. The controlling note A-1 ($50,000,000) was contributed to the CGCMT 2016-GC36 securitization transaction. The non-controlling note A-2-2 ($23,000,000) is expected to be contributed to one or more future securitization transactions. Cut-off Date LTV Ratio, LTV Ratio at Maturity, Underwritten NCF DSCR, Debt Yield on Underwritten Net Operating Income, Debt Yield on Underwritten Net Cash Flow and Loan Per Unit calculations are based on the aggregate Cut-off Date Balance of $93,000,000. |
(25) | The lockout period will be at least 27 payment dates beginning with and including the first payment date of February 6, 2016. For the purposes of this Prospectus, the assumed lockout period of 27 payment dates is based on the expected CGCMT 2016-GC37 securitization closing date in April 2016. The actual lockout period may be longer. |
(26) | The Largest Tenant, Infusion Software, has two expiration dates. 160,969 SF of the total 261,591 SF expires on September 30, 2021. The remaining 100,622 SF expires on December 31, 2024. |
(27) | Following the first occurrence of the balance of the TI/LC Reserve equaling or exceeding the TI/LC Reserve cap ($2,094,692), should the borrower draw upon the funds in the TI/LC Reserve and reduce the balance in the TI/LC Reserve to less than $1,000,000, the Ongoing TI/LC Reserve will be increased to $65,460. |
(28) | On the origination date, the borrower deposited $250,000 for the Upfront TI/LC Reserve. The borrower is not required to make an Ongoing TI/LC Reserve payment unless the TI/LC reserve account balance falls below the TI/LC Cap, after which the borrower must pay the Ongoing TI/LC Reserve amount of $4,428.83 until the TI/LC reserve equals or exceeds the TI/LC Cap (initially $250,000). |
(29) | The Largest Tenant, LA Fitness, (49,015 SF) representing 46.1% of net rentable SF, may terminate its lease at any time with at least 30 days’ prior notice if either all or any portion of the premises is taken by right of eminent domain or condemnation by a competent governmental authority, or a material portion of the common area is taken (defined as 20% or more of the gross SF of the common area, 10% or more reduction of parking in LA Fitness’ area of control or access to the premises (LA Fitness must have a right-in, right out access from at least two of the roads into the shopping center)). |
(30) | The Cut-off Date LTV Ratio is calculated net of a $700,000 economic holdback. The Cut-off Date LTV Ratio calculated based upon the fully funded Mortgage Loan amount of $14,150,000 and the “as-is” Appraised Value of $18,490,000 is 76.5%. |
(31) | Commencing on the 13th monthly payment date and for each monthly payment date occurring thereafter, a constant monthly payment of approximately $6,720 will be deposited by the borrower into the Ongoing Replacement Reserve. |
A-25 |
(32) | The Cut-off Date LTV Ratio is calculated net of a $625,000 holdback reserve. The Cut-off Date LTV Ratio calculated based upon the fully funded Mortgage Loan amount of $11,550,000 and the “as-is” Appraised Value of $14,750,000 is 78.3%. |
(33) | The Cut-off Date LTV Ratio is calculated using the “as-is” Appraised Value of $15,500,000 plus the amount of PIP required under the franchise agreement ($2,469,353). The Cut-off Date LTV Ratio calculated using solely the “as-is” Appraised Value is 72.3%. |
(34) | The Ongoing Replacement Reserve is an FF&E reserve in an amount equal to the greater of (i) the amount required for FF&E under the franchise agreement (if any) and (ii) the “Staybrdige FF&E Payment”, which is an amount equal to one-twelfth of (a) for each Due Date through and including the Due Date in February 2017, 2.0% of the gross income from the Staybridge Cleveland Mayfield Property in the preceding calendar year, (b) for each Due Date beginning in March 2017 through and including the Due Date in February 2018, 3.0% of the gross income from the Staybridge Cleveland Mayfield Property in the preceding calendar year, and (c) for each Due Date on and after the Due Date in March 2018, 4.0% of the gross income from the Staybridge Cleveland Mayfield Property in the preceding calendar year. The Staybridge FF&E Payment will be adjusted each January by the lender. |
(35) | The borrower is required to fund an Ongoing TI/LC Reserve in the amount of $5,739 on each monthly payment date until such time that the reserve balance is at least equal to $400,000. In the event the reserve is less than $400,000 or an event of default exists, the borrower’s obligation to make monthly deposits recommences until the reserve balance is at least equal to $400,000 or such event of default is cured. However, if, on or prior to January 1, 2019, (i) tenant Golds Gym has extended its lease or an acceptable replacement tenant has entered into a replacement lease with the borrower, in either case expiring on or after February 28, 2023 and (ii) all other obligations have been satisfied, then the lender is required to release any amounts in the TI/LC reserve in excess of $150,000 and the borrower’s obligation to make monthly deposits recommences unless the reserve balance is at least equal to a reduced cap of $250,000. |
(36) | The Ongoing Replacement Reserve is an FF&E reserve in an amount equal to (i) for the Due Dates occurring in March 2016 through and including February 2017, $11,137.25 and (ii) thereafter, the greater of (a) the monthly amount required to be reserved pursuant to the franchise agreement for the replacement of FF&E or (b) one-twelfth of 4.0% of the operating income of the Mortgaged Property for the previous 12-month period as determined on each anniversary of the last day of January. |
(37) | The Cut-off Date LTV Ratio is calculated based on the “as-is” Appraised Value of $12,200,000 plus the amount of PIP required under the franchise agreement ($1,800,000). The Cut-off Date LTV Ratio calculated utilizing solely the “as-is” Appraised Value ($12,200,000) is 75.6%. |
(38) | On each Due Date occurring in June, July, August and September of each calendar year, the borrower will deposit into the seasonality reserve account an amount equal to $26,670. On each Due Date occurring in December, January, February and March, the lender will cause an amount equal to $26,670 to be disbursed to the borrower for the purpose of satisfying the deposit requirements of the basic carrying costs escrow account, the FF&E expenditure reserve account and the scheduled principal and interest due and owing on the Mortgage Loan on such Due Date. |
(39) | The Largest Tenant, Area Agency on Aging 1-B, has two expiration dates. 10,592 SF of the total 12,289 SF expires on September 30, 2021. The remaining 1,697 SF expires on June 30, 2018. |
(40) | The borrower ground leases a small vacant parcel immediately adjacent to the Mortgaged Property for the purpose of using approximately 20 parking spaces. The parking spaces subject to the ground lease are not required in order to comply with applicable zoning law. |
(41) | The Cut-off Date LTV Ratio is calculated using the “as-is” Appraised Value of $11,500,000 plus the amount of PIP required under the franchise agreement ($1,608,126). The Cut-off Date LTV Ratio calculated using solely the “as-is” Appraised Value is 74.6%. |
A-26 |
(42) | The Ongoing Replacement Reserve is an FF&E reserve in an amount equal to the greater of (i) the “FF&E Payment”, which shall be an amount equal to the greater of one-twelfth of 4.0% of the total gross revenues for the Hilton Garden Inn - Saint Charles Property in (a) the preceding calendar year or (b) the projected budget for the succeeding year or (ii) the amount required for FF&E under the franchise agreement (if any). The FF&E Payment will be adjusted annually by the lender at the time the annual budget for each year is developed. |
(43) | The Ongoing Replacement Reserve is an FF&E reserve in an amount equal to (i) for the Due Dates occurring in March 2016 through and including February 2017, $7,414.50 and (ii) thereafter, the greater of (a) the monthly amount required to be reserved pursuant to the franchise agreement for the replacement of FF&E or (b) one-twelfth of 4.0% of the operating income of the Mortgaged Property for the previous 12-month period as determined on each anniversary of the last day January. |
(44) | On each Due Date occurring in June, July, August, September and October of each calendar year, the borrower will deposit into the seasonality reserve account an amount equal to $45,204. On March 6, 2016 and April 6, 2016, the lender will cause an amount equal to $36,142.50 to be disbursed to the borrower. Thereafter, on each Due Date occurring in November, December, January, February, March and April, the lender will cause an amount equal to $37,670 to be disbursed to the borrower, in each case for the purpose of satisfying the deposit requirements of the basic carrying costs escrow account, the FF&E expenditure reserve account and the scheduled principal and interest due and owing on the Mortgage Loan on such Due Date. |
(45) | The Mortgaged Property is a four-story, 28,500 SF mixed use development consisting of a 20-unit (11,900 SF) apartment component that is 100.0% occupied as of December 31, 2015 and a 16,600 SF retail component that is 100.0% leased as of December 31, 2015. |
(46) | The Appraised Value presented for the Mortgage Loan reflects a pool level Appraised Value, which includes a diversity premium based on an assumption that all the Mortgaged Properties would be sold together as a portfolio. The aggregate of the individual Mortgaged Property Appraised Values is $7,490,000. |
(47) | The borrower is required to fund an Ongoing TI/LC Reserve in the amount of $3,438.67 on each monthly payment date until such time that the reserve balance is at least equal to $123,792. Thereafter, in the event the reserve balance is less than $61,896 and/or an event of default exists, the borrower’s obligation to make monthly deposits recommences until the reserve balance is at least equal to $123,792 and any existing event of default is cured. |
(48) | The Largest Tenant, Walgreens, (15,555 SF) representing 100.0% of net rentable SF, may terminate its lease on September 30, 2032 and every five years thereafter with at least six months’ prior notice. |
(49) | The Largest Tenant, Walgreens, (14,820 SF) representing 100.0% of net rentable SF, may terminate its lease on June 30, 2035 and as of the last day of any month thereafter with at least 12 months’ prior notice. |
(50) | The Largest Tenant, Goodwill, subleases the entirety of its space (4,592 SF) from JP Morgan Chase Bank through its lease expiration on February 28, 2022. JP Morgan Chase Bank guarantees the lease. |
(51) | The Cut-off Date LTV Ratio is calculated based upon the property’s “hypothetical value as if container units were removed” which excludes 50 units currently pending zoning approval. The “as-is” Appraised Value is $4,000,000. The Cut-off Date LTV Ratio based upon the “as-is” Appraised Value is 65.0%. |
(52) | The Mortgaged Property includes an additional 1,850 SF rentable office space that is not included in the net rentable area. The space is currently vacant with no lease in-place. The lender did not underwrite office revenue. |
A-27 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX B
SIGNIFICANT LOAN SUMMARIES
SHERATON DENVER DOWNTOWN FEE |
B-2 |
SHERATON DENVER DOWNTOWN FEE |
B-3 |
SHERATON DENVER DOWNTOWN FEE |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | CGMRC | ||
Location (City/State) | Denver, Colorado | Cut-off Date Principal Balance(2) | $70,000,000 | ||
Property Type(1) | Land | Cut-off Date Principal Balance per Room(3) | $146,222.58 | ||
Size (Rooms) | 1,231 | Percentage of Initial Pool Balance | 10.1% | ||
Total TTM Occupancy as of 9/30/2015 | 77.0% | Number of Related Mortgage Loans | None | ||
Owned TTM Occupancy as of 9/30/2015 | 77.0% | Type of Security(1) | Fee Simple | ||
Year Built / Latest Renovation | 1959 / 2008-2010 | Mortgage Rate | 4.50000% | ||
Appraised Value(1) | $240,000,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | NAP | ||||
Underwritten Revenues | $10,500,000 | Original Interest-Only Period (Months) | 120 | ||
Underwritten Expenses | $0 | ||||
Underwritten Net Operating Income (NOI) | $10,500,000 | Escrows | |||
Underwritten Net Cash Flow (NCF) | $10,500,000 | Upfront | Monthly | ||
Cut-off Date LTV Ratio(2)(3) | 75.0% | Taxes | $0 | $0 | |
Maturity Date LTV Ratio(2)(3) | 75.0% | Insurance | $0 | $0 | |
DSCR Based on Underwritten NOI / NCF(3) | 1.28x / 1.28x | FF&E | $0 | $0 | |
Debt Yield Based on Underwritten NOI / NCF(3) | 5.8% / 5.8% | Other | $0 | $0 |
Sources and Uses(3) | |||||||||||
Sources | $ | % | Uses | $ | % | ||||||
Loan Combination Amount | $180,000,000 | 74.8 | % | Purchase Price | $235,000,000 | 97.6 | % | ||||
Principal’s New Cash Contribution | 60,729,575 | 25.2 | Closing Costs | 5,729,575 | 2.4 | ||||||
Total Sources | $240,729,575 | 100.0 | % | Total Uses | $240,729,575 | 100.0 | % |
(1) | The collateral for the Sheraton Denver Downtown Fee Loan consists of both the land and the improvements comprised of a 1,231-room full-service hotel. However, as the Sheraton Denver Downtown Fee Property is subject to a 99-year ground lease with various purchase options in favor of the ground lessee throughout the term of the Ground Lease, the value of the improvements were excluded from the analysis of the Sheraton Denver Downtown Fee Loan. The appraised value represents the leased fee interest in the Sheraton Denver Downtown Fee Property. See“—Appraisal” below. |
(2) | The Sheraton Denver Downtown Fee Loan has an outstanding principal balance as of the Cut-off Date of $70,000,000 and represents the non-controlling note A-2 of the $180,000,000 Sheraton Denver Downtown Fee Loan Combination, which is evidenced by twopari passunotes. The related companion loan, which is evidenced by the controlling note A-1, with an outstanding principal balance as of the Cut-off Date of $110,000,000, has been contributed to the CGCMT 2016-GC36 securitization transaction. See“—The Mortgage Loan” below. |
(3) | Calculated based on the aggregate outstanding principal balance of the Sheraton Denver Downtown Fee Loan Combination. |
■ | The Mortgage Loan.The mortgage loan (the “Sheraton Denver Downtown Fee Loan”) is part of a loan combination (the “Sheraton Denver Downtown Fee Loan Combination”) evidenced by twopari passu notes that are together secured by a first mortgage encumbering the borrower’s fee simple interest in the land and the improvements consisting of a 1,231-room full-service hotel located in Denver, Colorado (the “Sheraton Denver Downtown Fee Property”). The Sheraton Denver Downtown Fee Loan, which is evidenced by note A-2 and represents a non-controlling interest in the Sheraton Denver Downtown Fee Loan Combination, had an original principal balance of $70,000,000, has an outstanding principal balance as of the Cut-off Date of $70,000,000 and represents approximately 10.1% of the Initial Pool Balance. The related companion loan, which is evidenced by note A-1 and represents the controlling interest in the Sheraton Denver Downtown Fee Loan Combination, had an original principal balance of $110,000,000, has an outstanding principal balance as of the Cut-off Date of $110,000,000, and has been contributed to the CGCMT 2016-GC36 securitization transaction. The Sheraton Denver Downtown Fee Loan Combination was originated by Citigroup Global Markets Realty Corp. on December 9, 2015. The Sheraton Denver Downtown Fee Loan Combination had an original principal balance of $180,000,000, has an outstanding principal balance as of the Cut-off Date of $180,000,000 and accrues interest at an interest rate of 4.50000%per annum. The proceeds of the Sheraton Denver Downtown Fee Loan Combination were primarily used to acquire the Sheraton Denver Downtown Fee Property and pay origination costs. |
The Sheraton Denver Downtown Fee Loan had an initial term of 120 months and has a remaining term of 117 months as of the Cut-off Date. The Sheraton Denver Downtown Fee Loan requires monthly payments of interest only. The scheduled maturity date of the Sheraton Denver Downtown Fee Loan is the due date in January 2026. Provided that no event of default has occurred and is continuing under the Sheraton Denver Downtown Fee Loan documents, at any time on or after the first due date following the second anniversary of the securitization Closing Date, the Sheraton Denver Downtown Fee Loan may be defeased with certain direct full faith and credit obligations of the United States of America or other obligations which are “government securities” permitted under the Sheraton Denver Downtown Fee Loan documents. Provided that no event of default has occurred and is continuing under the Sheraton Denver Downtown Fee Loan documents, voluntary prepayment of the Sheraton Denver Downtown Fee Loan without a prepayment premium or yield maintenance charge is permitted on or after the due date in October 2025. Additionally, in the event the Tenant (as defined below) exercises the purchase option under the Ground Lease (as defined below) prior to October 6, 2025, the borrower is required to prepay the Sheraton Denver Downtown Fee Loan in whole along with a prepayment premium.
B-4 |
SHERATON DENVER DOWNTOWN FEE |
■ | The Mortgaged Property.The Sheraton Denver Downtown Fee Property consists of the land and the improvements comprising a 1,231-room full-service hotel located in Downtown Denver, Colorado. The Sheraton Denver Downtown Fee Property is subject to a 99-year ground lease, dated December 9, 2015 (the “GroundLease”), between the borrower, as ground lessor, and W2007 MVP Denver, LLC, a Delaware limited liability company, as tenant (the “Tenant”), which Ground Lease is superior to the lien of the Sheraton Denver Downtown Fee Loan security instrument. |
The Sheraton Denver Downtown Fee Property was built in 1959 and renovated between 2008 and 2010. The Sheraton Denver Downtown Fee Property includes 82 suites and approximately 160,000 SF of conference space across 48 separate meeting spaces. The Sheraton Denver Downtown Fee Property also includes entertainment suites, multiple dining establishments, a fitness center and multimedia facilities.
The Tenant is a party to an operating agreement (the “Operating Agreement”) which expires on December 31, 2038 with Sheraton License Operating Company, LLC (“Sheraton”) that enables Sheraton to operate the hotel under certain trademarks.1
■ | Ground Lease.The Ground Lease includes annual CPI increases to the ground rent (capped at 4%) through lease expiration; the Ground Lease cannot decrease due to negative CPI growth. In addition, the rent under the Ground Lease may decrease to $1,292,308 per year with no CPI increases if the borrower attempts to reject the Ground Lease and/or reject any purchase option in the Ground Lease in a bankruptcy proceeding (or otherwise). However, such reduction is not permitted to occur for a period not to exceed 4 calendar years so long as (i) the lender is opposing such rejection action in a commercially reasonable manner, (ii) a court of competent jurisdiction has not confirmed the borrower’s rejection action by a final, non-appealable order and (iii) the lender is pursuing foreclosure in a commercially reasonable manner (including attempting to lift the automatic stay, if applicable). Additionally, the Sheraton Denver Downtown Fee Loan will be fully recourse to the guarantors upon a borrower bankruptcy. The Tenant has the option to purchase all of the borrower’s interests in the Sheraton Denver Downtown Fee Property (a) during the last six months of the 20th lease year, (b) during the last six months of the 30th lease year (each of (a) and (b) occurring after maturity of the Sheraton Denver Downtown Fee Loan) or (c) upon the Tenant’s determination that a condemnation has affected substantially all of the leased premises or within five months following a casualty affecting more than 25% of the leased premises. |
The following table presents certain information relating to the estimated 2015 demand analysis with respect to theSheraton Denver Downtown Fee Property based on market segmentation, as provided in the appraisal for theSheraton Denver Downtown Fee Property:
Estimated 2015 Market Mix Accommodated Room Night Demand(1)
Property | Group/Meeting | Corporate | Leisure | Discount | ||||
Sheraton Denver Downtown Fee Property | 55.0% | 20.0% | 15.0% | 10.0% |
(1) | Source: Appraisal. |
1 | NEITHER SHERATON NOR ITS AFFILIATES OWN SUCH HOTEL OR ARE A PARTY TO THE FINANCING OF THE SHERATON DENVER DOWNTOWN FEE PROPERTY OR PARTICIPANTS IN THIS OFFERING AND HAVE NOT PROVIDED OR REVIEWED, ARE NOT RESPONSIBLE FOR, AND DO NOT ENDORSE ANY DISCLOSURES OR OTHER INFORMATION SET FORTH HEREIN. |
B-5 |
SHERATON DENVER DOWNTOWN FEE |
The following table presents certain information relating to the TTM August 31, 2015 penetration rates relating to the Sheraton Denver Downtown Fee Property and various market segments, as provided in the August 2015 travel research report for the Sheraton Denver Downtown Fee Property:
TTM August 31, 2015 Penetration Rates(1)
Property | Occupancy | ADR | RevPAR | |||
Sheraton Denver Downtown Fee Property | 104.1% | 91.4% | 95.1% |
(1) | Source: August 2015 travel research report. |
The following table presents certain information relating to historical occupancy, ADR and RevPAR at the Sheraton Denver Downtown Fee Property:
Sheraton Denver Downtown Fee Property(1)
2010 | 2011 | 2012 | 2013 | 2014 | TTM 9/30/2015 | |||||||||||||
Occupancy | 64.6% | 64.5% | 67.6% | 69.5% | 75.2% | 77.0% | ||||||||||||
ADR | $139.19 | $143.77 | $139.62 | $146.98 | $149.98 | $153.02 | ||||||||||||
RevPAR | $89.91 | $92.77 | $94.36 | $102.12 | $112.77 | $117.76 |
(1) | As provided by the borrower. |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance of the Tenant and the Underwritten Net Cash Flow of the Ground Lease at the Sheraton Denver Downtown Fee Property: |
Cash Flow Analysis(1)
Tenant 2012(2) | Tenant | Tenant | Tenant | Tenant | Underwritten(3) | ||||||||||||
Room Revenue/Base Rent | $42,512,461 | $45,885,380 | $50,667,034 | $53,058,232 | $43,102 | $10,500,000 | |||||||||||
Food & Beverage Revenue | 21,522,504 | 21,731,888 | 25,096,528 | 27,243,966 | 22,132 | N/A | |||||||||||
Other Revenue(4) | 5,659,505 | 5,805,350 | 7,185,747 | 6,858,457 | 5,571 | N/A | |||||||||||
Total Revenue | $69,694,470 | $73,422,618 | $82,949,309 | $87,160,655 | $70,805 | $10,500,000 | |||||||||||
Room Expense | $10,379,797 | $11,228,078 | $12,653,990 | $12,684,279 | $10,304 | N/A | |||||||||||
Food & Beverage Expense | 13,727,373 | 13,236,420 | 14,898,899 | 15,222,801 | 12,366 | N/A | |||||||||||
Other Expense | 373,720 | 432,134 | 441,900 | 186,645 | 152 | N/A | |||||||||||
Total Departmental Expense | $24,480,890 | $24,896,632 | $27,994,789 | $28,093,725 | $22,822 | $0 | |||||||||||
Total Undistributed Expense | 17,165,950 | 18,463,684 | 21,513,698 | 22,346,786 | 18,153 | N/A | |||||||||||
Total Fixed Charges | 5,743,409 | 4,431,304 | 4,238,355 | 4,231,885 | 3,438 | N/A | |||||||||||
Total Operating Expenses | $47,390,249 | $47,791,620 | $53,746,842 | $54,672,396 | $44,413 | $0 | |||||||||||
Net Operating Income | $22,304,221 | $25,630,998 | $29,202,467 | $32,488,259 | $26,392 | $10,500,000 | |||||||||||
FF&E | 2,712,254 | 2,850,475 | 3,228,957 | 3,390,731 | 2,754 | N/A | |||||||||||
Net Cash Flow | $19,591,967 | $22,780,523 | $25,973,510 | $29,097,528 | $23,637 | $10,500,000 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | The information shown represents the historical operating performance of the tenant under the Ground Lease which was excluded from the Underwritten Net Cash Flow. |
(3) | The $10,500,000 in Base Rent represents the initial ground rent payable to the borrower under the Ground Lease. |
(4) | Other Revenue is comprised of parking income and restaurant/retail leases. |
B-6 |
SHERATON DENVER DOWNTOWN FEE |
■ | Appraisal. According to the appraisal, as of December 15, 2015, the leased fee interest in theSheraton Denver Downtown Fee Property had an appraised value of $240,000,000 and the leasehold interest on the Sheraton Denver Downtown Fee Property had an appraised value of $195,000,000. The as-is appraised value of the fee simple real estate as of November 16, 2015 was $415,000,000. |
■ | Environmental Matters. According to the Phase I environmental report, dated November 13, 2015, there are no recognized environmental conditions or recommendations for further action at the Sheraton Denver Downtown Fee Property. |
■ | Market Overview and Competition.Downtown Denver is the main financial, commercial and entertainment district in Denver, Colorado. Denver’s largest employers represent a diverse cross-section of industries, ranging from aerospace, telecom, energy, financial services, medical and biomedical, retail, computer hardware and software development, government and transportation. According to the appraisal, Downtown Denver is home to several Fortune 500 companies, including Wells Fargo, CenturyLink and DaVita, and is becoming an increasingly attractive place for companies looking to relocate. |
The Sheraton Denver Downtown Fee Property is located at 1550 Court Place in the CBD/Downtown hotel submarket of Denver, Colorado. The Colorado Convention Center is located within four blocks east of the Sheraton Denver Downtown Fee Property. The Colorado Convention Center, a multi-purpose complex, developed in 1990, underwent an expansion in 2004 and currently hosts more than 400 events annually. The 16th Street Mall, a pedestrian and transit mall totaling 1.25 miles along 16th Street, is adjacent to the Sheraton Denver Downtown Fee Property. The 16th Street Mall includes over 300 locally owned and national retailers and more than 184 food/dining options. Other attractions in the area include the Colorado State Capitol, University of Colorado Denver campus and the Pepsi Center, a multi-purpose arena which is home to the Denver Nuggets and Colorado Avalanche.
According to the appraisal, Denver is one of the top performing hotel markets in the United States. The Denver hospitality market is comprised of more than 300 hotels totaling approximately 42,500 rooms. Per the appraisal, the CBD/Downtown hotel submarket consists of 46 hotels totaling 10,194 rooms. According to the appraisal, occupancy, ADR and RevPAR for the CBD/Downtown hotel submarket has increased an average of 2.5%, 3.9% and 6.5%, respectively, since 2010.
The following table presents certain information relating to historical occupancy, ADR and RevPAR at the Sheraton Denver Downtown Fee Property and the competitive set, as provided in a market report for the Sheraton Denver Downtown Fee Property:
Historical Statistics
Sheraton Denver Downtown Fee | Competitive Set(2) | Penetration(2) | ||||||||||||||||||||||||
2013 | 2014 | TTM | 2013 | 2014 | TTM | 2013 | 2014 | TTM 8/31/2015 | ||||||||||||||||||
Occupancy | 69.5% | 75.2% | 77.0% | 71.3% | 75.2% | 74.4% | 98.8% | 102.4% | 104.1% | |||||||||||||||||
ADR | $146.98 | $149.98 | $153.02 | $150.78 | $160.77 | $167.23 | 96.3% | 90.7% | 91.4% | |||||||||||||||||
RevPAR | $102.12 | $112.77 | $117.76 | $107.51 | $120.82 | $124.41 | 95.2% | 92.9% | 95.1% |
(1) | As provided by the borrower. |
(2) | Source: August 2015 travel research report. |
B-7 |
SHERATON DENVER DOWNTOWN FEE |
Sheraton Denver Downtown Fee Property Competitive Set(1)
Property | Number of Rooms | Year Opened | ||
Sheraton Denver Downtown Fee Property | 1,231 | 1985 | ||
Crowne Plaza Denver | 364 | 1973 | ||
Marriott Denver Tech Center | 628 | 1984 | ||
Marriott Denver City Center | 613 | 1982 | ||
Renaissance Denver Hotel | 399 | 1985 | ||
Westin Denver Downtown | 430 | 1985 | ||
Hyatt Regency Denver Convention Center | 1,100 | 2005 | ||
Embassy Suites Denver Downtown Convention Center | 403 | 2010 | ||
Total | 5,168 |
(1) | Source: August 2015 travel research report |
■ | The Borrower. The borrower is Court Place Land LLC, a Delaware limited liability company and newly formed single-purpose entity. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of theSheraton Denver Downtown Fee Loan. The non-recourse carveout guarantors are Allan V. Rose of AVR Realty and David Werner of David Werner Real Estate Investments. David Werner Real Estate Investments is a privately-owned commercial real estate owner, operator and investor. AVR Realty is a privately held commercial real estate development and management company. The Sheraton Denver Downtown Fee Loan documents require the non-recourse carveout guarantors to maintain an aggregate minimum net worth and liquidity of $150,000,000 and $75,000,000, respectively, throughout the term of the Sheraton Denver Downtown Fee Loan. |
■ | Escrows. None. If at any time a Hotel Lease Trigger Period (as defined below) exists, at the lender’s option, the borrower will be required to promptly establish and maintain with and for the benefit of the lender reserves for the payment of real estate taxes, insurance premiums, capital expenditures and other charges and the borrower will enter into amendments to the Sheraton Denver Downtown Fee Loan agreement and the cash management agreement relating to any reserves. |
The“Hotel Lease Trigger Period” means the period: (A) commencing upon the first to occur of (i) the Hotel Tenant being in default in any material respect under the Hotel Lease beyond applicable notice and cure periods, (ii) the Hotel Tenant giving written notice of its intention to terminate the Hotel Lease pursuant to or in accordance with the terms of the Hotel Lease, (iii) either the borrower or the Hotel Tenant attempting to terminate or cancel the Hotel Lease through the institution of legal action without the consent of the lender, (iv) any termination or cancellation of the Hotel Lease (including, without limitation, rejection in any bankruptcy or similar insolvency proceeding) and/or the Hotel Lease failing to otherwise be in full force and effect or (v) any bankruptcy or similar insolvency of the Hotel Tenant; and (B) expiring upon the first to occur, as applicable, of the following: (i) with respect to (A)(i) above, the Hotel Tenant having cured all defaults under the Hotel Lease, (ii) with respect to (A)(ii) and/or (iii) above, the Hotel Tenant having revoked or rescinded any termination or cancellation notice with respect to the Hotel Lease and having reaffirmed the Hotel Lease as being in full force and effect, (iii) with respect to (A)(iv) or (v) above, in connection with any bankruptcy or insolvency proceedings involving the Hotel Tenant and/or the Hotel Lease, the Hotel Tenant is no longer insolvent or subject to such bankruptcy or insolvency proceedings and having affirmed the Hotel Lease pursuant to a final, non-appealable order of a court of competent jurisdiction and (iv) with respect to (A)(ii), (iii), (iv) or (v) above, the borrower having re-let the entire Sheraton Denver Downtown Fee Property in accordance with the applicable terms and conditions of the Sheraton Denver Downtown Fee Loan documents, the applicable Hotel Tenant under such Hotel Lease being in actual, physical occupancy, open to the public for business in the space demised under its Hotel Lease and paying the full amount of the rent due under its Hotel Lease.
The “Hotel Tenant” means the Tenant, together with its successors and/or assigns, or any tenant under a replacement hotel lease (together with its successors and/or assigns).
The“Hotel Lease” means (i) the Ground Lease and (ii) any lease replacing the Ground Lease that demises all or substantially all of the Sheraton Denver Downtown Fee Property.
B-8 |
SHERATON DENVER DOWNTOWN FEE |
■ | Lockbox and Cash Management. The Sheraton Denver Downtown Fee Loan is structured with a lender-controlled lockbox in place at origination and in-place cash management. The borrower directed the Hotel Tenant to pay rent directly to the lender-controlled lockbox account, and the borrower is required to deposit all revenue generated by the Sheraton Denver Downtown Fee Property in the lockbox account. All sums on deposit in the lockbox account are required to be swept on a periodic basis into a cash management account for the payment of, among other things, debt service and property operating expenses, and for the funding of monthly escrows. Provided no Cash Sweep Period and no event of default has occurred and is continuing, any excess amounts must be disbursed to the borrower and, after the occurrence and during the continuance of a Cash Sweep Period, any excess is to be held by the lender as additional security for the Sheraton Denver Downtown Fee Loan. |
The“Cash Sweep Period” means a period: (A) commencing upon the earliest of (i) the occurrence and continuance of an event of default, (ii) the debt service coverage ratio being less than 1.20x and (iii) the occurrence of a Hotel Lease Cash Sweep Period; and (B) expiring upon (x) with regard to any Cash Sweep Period commenced in connection with clause (i) above, the cure of such event of default, (y) with regard to any Cash Sweep Period commenced in connection with clause (ii) above, the date that the debt service coverage ratio is equal to or greater than 1.20x for two consecutive calendar quarters and (z) with regard to any Cash Sweep Period commenced in connection with clause (iii) above, a Hotel Lease Cash Sweep Period ceasing to exist in accordance with the terms of the Sheraton Denver Downtown Fee Loan documents.
The“Hotel Lease Cash Sweep Period” means a period: (A) commencing upon the first to occur of (i) the Hotel Tenant being in default under the Hotel Lease beyond applicable notice and cure periods, (ii) the Hotel Tenant giving notice that it is terminating its lease for all or any portion of the Sheraton Denver Downtown Fee Property, (iii) any termination or cancellation of the Hotel Lease (including, without limitation, rejection in any bankruptcy or similar insolvency proceeding) and/or the Hotel Lease failing to otherwise be in full force and effect and (iv) any bankruptcy or similar insolvency of the Hotel Tenant; and (B) expiring upon the first to occur of the lender’s receipt of evidence reasonably acceptable to the lender (which such evidence must include, without limitation, a duly executed estoppel certificate from the Hotel Tenant in form and substance acceptable to the lender) of (1) the satisfaction of the Hotel Tenant Cure Conditions, (2) the borrower leasing the entire Sheraton Denver Downtown Fee Property in accordance with the applicable terms and conditions of the Sheraton Denver Downtown Fee Loan documents, the applicable Hotel Tenant under the Hotel Lease being in actual, physical occupancy of, and open to the public for business in, the space demised under its Hotel Lease and paying the full amount of the rent due under its Hotel Lease or (3) upon (x) a termination of the Hotel Lease pursuant to the terms thereof and the terms of the Sheraton Denver Downtown Fee Loan documents and (y) the borrower commencing operation of the Sheraton Denver Downtown Fee Property without a tenant and entering into a management agreement with a qualified manager, in each case, pursuant to the terms of the Sheraton Denver Downtown Fee Loan documents.
The“Hotel Tenant Cure Conditions” means each of the following, as applicable: (i) the Hotel Tenant has cured all defaults under the Hotel Lease; (ii) the Hotel Tenant is in actual, physical possession of the Sheraton Denver Downtown Fee Property, open to the public for business and not “dark”; (iii) the Hotel Tenant has revoked or rescinded all termination or cancellation notices and has re-affirmed the Hotel Lease as being in full force and effect; (iv) with respect to any applicable bankruptcy or insolvency proceedings involving the Hotel Tenant and/or the Hotel Lease, the Hotel Tenant is no longer insolvent or subject to any bankruptcy or insolvency proceedings and has affirmed the Hotel Lease pursuant to a final, non-appealable order of a court of competent jurisdiction; and (v) the Hotel Tenant is paying full, unabated rent under the Hotel Lease.
B-9 |
SHERATON DENVER DOWNTOWN FEE |
■ | Property Management. The Sheraton Denver Downtown Fee Property is self-managed. Pursuant to the Operating Agreement, Sheraton will operate the Sheraton Denver Downtown Fee Property as a hotel in accordance with an operating plan approved by the Tenant. If the Tenant intends to sell its interest in the Sheraton Denver Downtown Fee Property at any time after April 2018, Sheraton has the right to propose terms of a sale of the hotel to Sheraton within 30 days after receipt of notice that the Tenant wants to sell (the“Sheraton ROFO”); if the Tenant rejects the offer, the Tenant may sell to a non-affiliate so long as the purchase price is more than 95% of Sheraton’s offer and not substantially more favorable to the purchaser than Sheraton’s offer. At the origination of the Sheraton Denver Downtown Fee Loan, the borrower, the Tenant, and Sheraton entered into a Subordination of Management Contract and Non-Disturbance Agreement (“SMNDA”) that (i) generally provides for Sheraton’s attornment to the borrower upon termination of the Ground Lease and (ii) clarifies that the Sheraton ROFO will not apply to transfers of the borrower’s interest in the Sheraton Denver Downtown Fee Property prior to a termination of the Ground Lease. The borrower, the lender, Sheraton, and the Tenant have entered into a Fee Mortgage Recognition Agreement which provides that (i) Sheraton will enter into a subordination and non-disturbance agreement with the lender upon termination of the Ground Lease but prior to a foreclosure so long as the lender satisfies certain requirements under the Operating Agreement with respect to financing, (ii) if a foreclosure occurs prior to termination of the Ground Lease, the lender will be deemed the borrower under the SMNDA and the lender will not be liable for the Tenant’s breach or default if the lender succeeds to the Tenant’s interest following termination of the Ground Lease and (iii) the Sheraton ROFO will not apply to a foreclosure by the lender. |
If the Tenant transfers its interest in the hotel after December 31, 2019, the Tenant may terminate the Operating Agreement upon the payment of a termination fee.
■ | Additional Indebtedness.$8,000,000 (the“Key Money”) was provided from Sheraton to the Tenant for the conversion of the hotel to the “Sheraton” brand. If the Operating Agreement is terminated prior to a specified date in 2023, the Tenant will be liable for repayment of the unamortized balance of the Key Money. The Sheraton Denver Downtown Fee Loan documents provide for recourse to the borrower and guarantors for any losses the lender may suffer as a result of the Key Money becoming due and payable upon termination of the Operating Agreement. |
■ | Mezzanine or Subordinate Indebtedness. Not permitted. |
B-10 |
SHERATON DENVER DOWNTOWN FEE |
■ | Terrorism Insurance.The borrower is required to maintain an “all-risk” insurance policy that provides coverage for terrorism in an amount equal to the full replacement cost of the Sheraton Denver Downtown Fee Property, plus business interruption coverage in an amount equal to 100% of the net operating income plus continuing expenses of the Sheraton Denver Downtown Fee Property for a period continuing from the time of loss until restoration, not to exceed 24 months. The “all-risk” policy containing terrorism insurance is required to contain a deductible no larger than $250,000. |
If “acts of terrorism” or other similar acts or events or “fire following” are excluded from the borrower’s “all-risk” policy and/or business interruption insurance, then the borrower is obligated to obtain an endorsement to such policy or policies, or a separate policy insuring against all such excluded acts or events and “fire following,” for one hundred percent of the replacement value of the Sheraton Denver Downtown Fee Property plus the business income coverage, provided that such coverage is commercially available. Notwithstanding the foregoing, with respect to any terrorism coverage included in an endorsement to the insurance policies or any standalone policy covering terrorism acts, the borrower will not be required to pay any insurance premiums solely with respect to such terrorism coverage in excess of an amount equal to two times the amount of the insurance premiums that would then be payable for such policy period under policies obtained at then-current market rates on a stand-alone basis in respect of property and business income insurance required under the Sheraton Denver Downtown Fee Loan documents (the “Terrorism Insurance Cap”); provided, however, that if at any time during the term of the Sheraton Denver Downtown Fee Loan the insurance premiums with respect to such required terrorism coverage exceeds the Terrorism Insurance Cap, the borrower must promptly notify the lender in writing and the lender may elect to contribute all or part of the amount of such insurance premiums in excess of the Terrorism Insurance Cap. Notwithstanding the foregoing, if the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”) is in effect and covers both domestic and foreign acts of terrorism, the lender will accept terrorism insurance which covers against “certified acts” as defined by TRIPRA as full compliance with this paragraph as it relates to risks that are required under this paragraph. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus.
THE TENANT IS A PARTY TO A MANAGEMENT CONTRACT WITH SHERATON LICENSE OPERATING COMPANY, LLC (THE “OPERATOR”) THAT ENABLES IT TO OPERATE A HOTEL USING CERTAIN TRADEMARKS. NEITHER THE OPERATOR NOR ITS AFFILIATES OWN SUCH HOTEL OR ARE PARTY TO THE FINANCING OF THE SHERATON DENVER DOWNTOWN FEE PROPERTY OR PARTICIPANTS IN THIS OFFERING AND HAVE NOT PROVIDED OR REVIEWED, ARE NOT RESPONSIBLE FOR, AND DO NOT ENDORSE ANY DISCLOSURES OR OTHER INFORMATION SET FORTH HEREIN.
B-11 |
WILLIAMS MULLEN CENTER |
B-12 |
WILLIAMS MULLEN CENTER |
B-13 |
WILLIAMS MULLEN CENTER |
B-14 |
WILLIAMS MULLEN CENTER |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | CGMRC | ||
Location (City/State) | Richmond, Virginia | Cut-off Date Principal Balance | $51,744,943 | ||
Property Type | Office | Cut-off Date Principal Balance per SF | $251.56 | ||
Size (SF) | 205,698 | Percentage of Initial Pool Balance | 7.4% | ||
Total Occupancy as of 8/1/2015 | 95.4% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 8/1/2015 | 95.4% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 2010 / NAP | Mortgage Rate | 4.95000% | ||
Appraised Value | $80,500,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 240 | ||||
Original Interest Only Term (Months) | NAP | ||||
Underwritten Revenues | $7,750,876 | ||||
Underwritten Expenses | $2,099,598 | Escrows | |||
Underwritten Net Operating Income (NOI) | $5,651,278 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $5,390,312 | Taxes | $114,233 | $57,117 | |
Cut-off Date LTV Ratio | 64.3% | Insurance | $10,331 | $3,444 | |
Maturity Date LTV Ratio | 40.6% | Replacement Reserve | $0 | $3,428 | |
DSCR Based on Underwritten NOI / NCF | 1.38x / 1.31x | TI/LC(1) | $1,783,675 | $17,142 | |
Debt Yield Based on Underwritten NOI / NCF | 10.9% / 10.4% | Other | $0 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % | |
Loan Amount | $52,000,000 | 63.3% | Purchase Price | $78,000,000 | 95.0% | |
Principal’s New Cash Contribution | 30,097,095 | 36.7 | Closing Costs | 2,188,856 | 2.7 | |
Reserves | 1,908,239 | 2.3 | ||||
Total Sources | $82,097,095 | 100.0% | Total Uses | $82,097,095 | 100.0% |
(1) | The tenant improvements and leasing commissions (“TI/LC”) reserve is capped at $1,028,490, at which point no further monthly deposits will be required unless and until, and after and during such time as, the remaining balance of the TI/LC reserve falls below such cap; the initial $1,783,675 deposit in the TI/LC reserve is in addition to such monthly deposits and the cap thereon, and disbursements from the TI/LC reserve are applied first to reduce the TI/LC Initial Deposit (defined below). See“— Escrows” below. |
■ | The Mortgage Loan.The mortgage loan (the “Williams Mullen Center Loan”) is evidenced by a note in the original principal amount of $52,000,000 and is secured by a first mortgage encumbering the borrower’s fee simple interest in an office complex with ground floor retail located in Richmond, Virginia (the “Williams Mullen Center Property”). The Williams Mullen Center Loan was originated by Pillar Multifamily, LLC on January 8, 2016 and represents approximately 7.4% of the Initial Pool Balance. The note evidencing the Williams Mullen Center Loan has an outstanding principal balance as of the Cut-off Date of $51,744,943 and an interest rate of 4.95000%per annum. The proceeds of the Williams Mullen Center Loan were primarily used to purchase the Williams Mullen Center Property, pay origination costs and fund reserves. |
The Williams Mullen Center Loan had an initial term of 120 months and has a remaining term as of the Cut-off Date of 118 months. The Williams Mullen Center Loan requires payments of interest and principal based on a 20-year amortization schedule. The scheduled maturity date of the Williams Mullen Center Loan is February 6, 2026. Voluntary prepayment of the Williams Mullen Center Loan without payment of any prepayment premium is permitted on or after November 6, 2025. Provided no event of default under the Williams Mullen Center Loan documents has occurred and is continuing, at any time after the second anniversary of the Closing Date, the Williams Mullen Center Loan may be defeased with certain direct, non-callable obligations of the United States of America or other obligations which are “government securities” permitted under the Williams Mullen Center Loan documents.
■ | The Mortgaged Property.The Williams Mullen Center Property consists of a 205,698 SF, 15-story Class A, LEED-certified office tower located in Richmond, Virginia. The Williams Mullen Center Property was built in 2010. Total Occupancy and Owned Occupancy at the Williams Mullen Center Property were both 95.4% as of August 1, 2015. The collateral is comprised of eleven levels of office space, a three-level parking garage and ground floor retail space. The office space is 95.4% leased to 7 tenants, which includes sublease tenants. The largest office tenant is Williams Mullen, which leases 170,287 SF, or 82.8% of net rentable area (“NRA”), of which 21,376 SF is subleased to three other tenants. Williams Mullen also has the contractual obligation to expand on the ninth floor by 19,693 SF in July 2020. The ninth floor is currently occupied by Capital One Services and Agincourt Management. Williams Mullen has been in occupancy since the Williams Mullen Center Property was constructed. Williams Mullen is a Richmond-based law firm and lobbying group founded in 1909. The company provides legal, government relations and economic development services to regional, national and international clients, with attorneys and lobbyists in offices located in North Carolina, South Carolina, Virginia and Washington D.C. There are 5,236 SF of retail space. One of the two retail spaces is currently occupied by La Parisienne, a |
B-15 |
WILLIAMS MULLEN CENTER |
French café. The three-level parking garage has 117 covered parking spaces, with an overall parking ratio of 0.60 spaces per 1,000 SF of NRA. |
The following table presents certain information relating to the major tenants at the Williams Mullen Center Property:
Largest Tenants Based on Underwritten Base Rent
Tenant Name | Credit Rating (Fitch/MIS/S&P)(1) | Tenant | % of GLA | UW Base | % of | UW Base | Lease | Renewal / Extension Options | |||||||||||
Williams Mullen | NR / NR / NR | 148,911 | 72.4 | % | $6,464,515 | 85.5 | % | $43.41 | 6/30/2028 | 2, 5-year options | |||||||||
Capital One Services | A- / Baa1/ BBB | 13,063 | 6.4 | 294,370 | 3.9 | 22.53 | 6/30/2017 | 1, 3-year option | |||||||||||
Cherry, Bekaert & Holland | NR / NR / NR | 10,482 | 5.1 | 249,106(2) | 3.3 | 23.77 | (2) | 6/30/2028(3) | 2, 5-year options(3) | ||||||||||
Cherry, Bekaert & Holland | NR / NR / NR | 10,482 | 5.1 | 249,083 | 3.3 | 23.76 | 1/30/2023 | 2, 5-year options | |||||||||||
Oppenheimer | NR / B2 / B | 5,362 | 2.6 | 125,846(2) | 1.7 | 23.47 | (2) | 6/30/2028(3) | 2, 5-year options(3) | ||||||||||
Divaris | NR / NR / NR | 5,532 | 2.7 | 124,470(2) | 1.6 | 22.50 | (2) | 6/30/2028(3) | 2, 5-year options(3) | ||||||||||
La Parisienne | NR / NR / NR | 2,350 | 1.1 | 49,938 | 0.7 | 21.25 | 7/24/2021 | 3, 5-year options | |||||||||||
Largest Tenants | 196,182 | 95.4 | % | $7,557,328 | 100.0 | % | $38.52 | ||||||||||||
Vacant Spaces (Owned Space) | 9,516 | 4.6 | 0 | 0.0 | 0.00 | ||||||||||||||
Total / Wtd. Avg. All Tenants | 205,698 | 100.0 | % | $7,557,328 | 100.0 | % | $38.52 |
(1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
(2) | The tenants sublease their space from Williams Mullen, and the UW Base Rent shown in the chart above represents the terms of the respective sublease. |
(3) | The tenants sublease their space from Williams Mullen, and the Lease Expirations and Renewal / Extension Options shown in the chart above represent the terms under the Williams Mullen lease. |
The following table presents the lease rollover schedule at the Williams Mullen Center Property, based on initial lease expiration dates:
Lease Expiration Schedule(1)
Year Ending | Expiring Owned GLA | % of Owned | Cumulative % of Owned GLA | UW | % of Total UW | UW Base Rent | # of Expiring Tenants(2) | ||||||||||||||
2016 | 0 | 0.0 | % | 0.0% | $0 | 0.0 | % | $0.00 | 0 | ||||||||||||
2017 | 13,063 | 6.4 | 6.4% | 294,370 | 3.9 | 22.53 | 1 | ||||||||||||||
2018 | 0 | 0.0 | 6.4% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2019 | 0 | 0.0 | 6.4% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2020 | 0 | 0.0 | 6.4% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2021 | 2,350 | 1.1 | 7.5% | 49,938 | 0.7 | 21.25 | 1 | ||||||||||||||
2022 | 0 | 0.0 | 7.5% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2023 | 10,482 | 5.1 | 12.6% | 249,083 | 3.3 | 23.76 | 1 | ||||||||||||||
2024 | 0 | 0.0 | 12.6% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2025 | 0 | 0.0 | 12.6% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2026 | 0 | 0.0 | 12.6% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2027 & Thereafter | 170,287 | 82.8 | 95.4% | 6,963,937 | 92.1 | 40.90 | 1 | ||||||||||||||
Vacant | 9,516 | 4.6 | 100.0% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
Total / Wtd. Avg. | 205,698 | 100.0 | % | $7,557,328 | 100.0 | % | $38.52 | 4 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. |
(2) | The three sublease tenants are not included in the calculation of the # of Expiring Tenants. |
B-16 |
WILLIAMS MULLEN CENTER |
The following table presents certain information relating to historical leasing at the Williams Mullen Center Property:
Historical Leased %(1)
2010 | 2011 | 2012 | 2013 | 2014 | As of | |||||||
Owned Space | 84.2% | 88.6% | 99.0% | 98.0% | 98.6% | 95.4% |
(1) | As provided by the borrower and reflects occupancy as of December 31 for the specified year unless otherwise indicated. |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the Williams Mullen Center Property: |
Cash Flow Analysis(1)
2012 | 2013 | 2014 | TTM 10/31/2015 | Underwritten | Underwritten | ||||||||||||
Base Rent(2) | $6,735,657 | $7,190,240 | $7,423,110 | $7,695,384 | $7,365,974 | $35.81 | |||||||||||
Contractual Rent Steps(3) | 0 | 0 | 0 | 0 | 191,355 | 0.93 | |||||||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 258,876 | 1.26 | |||||||||||
Total Rent | $6,735,657 | $7,190,240 | $7,423,110 | $7,695,384 | $7,816,204 | $38.00 | |||||||||||
Total Reimbursables | 64,258 | 100,988 | 159,023 | 96,199 | 100,158 | 0.49 | |||||||||||
Parking Income | 213,740 | 221,443 | 227,288 | 233,330 | 230,331 | 1.12 | |||||||||||
Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (395,818 | ) | (1.92 | ) | |||||||||
Effective Gross Income | $7,013,656 | $7,512,671 | $7,809,421 | $8,024,913 | $7,750,876 | $37.68 | |||||||||||
Real Estate Taxes | $685,400 | $685,400 | $685,400 | $685,400 | $706,175 | $3.43 | |||||||||||
Insurance | 67,170 | 73,528 | 74,641 | 74,935 | 77,183 | 0.38 | |||||||||||
Management Fee | 210,410 | 225,380 | 234,283 | 240,747 | 232,526 | 1.13 | |||||||||||
Other Operating Expenses | 1,069,854 | 1,066,231 | 1,006,436 | 1,070,316 | 1,083,714 | 5.27 | |||||||||||
Total Operating Expenses | $2,032,833 | $2,050,539 | $2,000,760 | $2,071,398 | $2,099,598 | $10.21 | |||||||||||
Net Operating Income | $4,980,823 | $5,462,132 | $5,808,661 | $5,953,515 | $5,651,278 | $27.47 | |||||||||||
TI/LC | 0 | 0 | 0 | 0 | 219,826 | 1.07 | |||||||||||
Replacement Reserves | 0 | 0 | 0 | 0 | 41,140 | 0.20 | |||||||||||
Net Cash Flow | $4,980,823 | $5,462,132 | $5,808,661 | $5,953,515 | $5,390,312 | $26.20 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | The Underwritten Base Rent for the sublease tenants is based on the base rent under the respective subleases. |
(3) | Contractual Rent Steps are underwritten based on the actual scheduled rent increases occurring through August 1, 2016 and present value of the rent increase during the second year of the loan term for Capital One Services. |
■ | Appraisal.According to the appraisal, the Williams Mullen Center Property had an “as-is” appraised value of $80,500,000 as of November 17, 2015. |
■ | Environmental Matters.Based on the Phase I environmental report dated October 26, 2015, there were no recommendations for further action regarding the Williams Mullen Center Property. |
■ | Market Overview and Competition. The Williams Mullen Center Property is located in the city of Richmond, within the Richmond-Petersburg metropolitan statistical area. The property is located on the southwest corner of East Canal Street and South 10th Street in the heart of the Richmond central business district. The Williams Mullen Center Property is located approximately 8.1 miles west of the Richmond International Airport and approximately 0.6 miles west of the Richmond Amtrak Station, which connects Richmond with Boston, Providence, New York City, Washington D.C. and Virginia Beach. |
Richmond’s economy is primarily driven by the healthcare, government and educational services sectors. The downtown area hosts various legal, finance and governmental agencies and firms. The city is home to both the United States Court of Appeals for the Fourth Circuit and the Federal Reserve Bank of Richmond. Fortune 500 companies headquartered in the area include Dominion Resources, CarMax, Owens & Minor, Genworth Financial
B-17 |
WILLIAMS MULLEN CENTER |
and MeadWestvaco. Additionally, Richmond is home to several large law firms: Hunton & Williams, McGuireWoods, Williams Mullen and LeClair Ryan.
According to the appraisal, the Richmond office market was comprised of a total inventory of 61.2 million SF as of third quarter 2015. The vacancy rate for third quarter 2015 was 9.6% and asking rents were $17.48 per SF. The appraisal identified four properties located within less than a mile of the Williams Mullen Center Property that are considered the competitive set for the Williams Mullen Center Property. The comparables were built between 1990 and 2015 and range from 263,132 SF to 486,970 SF with reported physical occupancies ranging from 81% to 100%. The adjusted lease rate for the competitive set ranges from $24.25 to $42.47 per SF. The appraisal concluded a gross rental rate of $42.25 per SF for law office space and $24.50 per SF for typical office space.
The appraisal identified three retail lease comparables with an adjusted triple-net lease rate ranging from $17.60 to $35.00 per SF and an average of $24.78 per SF. The appraisal concluded a triple-net rental rate of $21.00 per SF.
The following table presents certain information relating to certain directly competitive office buildings provided in the appraisal for the Williams Mullen Center Property:
Directly Competitive Office Buildings(1)
Williams Mullen | Gateway Plaza | MeadeWestVaco | Riverfront Plaza | Riverside on the 1001 Haxall Point | ||||||
Total GLA | 205,698 | 321,500 | 310,950 | 486,970 | 263,132 | |||||
Year Built | 2010 | 2015 | 2008 | 1990 | 2005 | |||||
Occupancy | 95.4% | 84.0% | 100.0% | 81.3% | 98.0% | |||||
Direct Asking Rent (per SF) | - | $24.00 - 35.00 | $32.42 | $24.25 - 25.50 | $34.34 | |||||
Lease Type | - | Triple-Net | Triple-Net | Full Service | Full Service |
(1) | Source: Appraisal |
■ | The Borrower. The borrower is Kireland South 10th Street, LLC, a single-purpose, single-asset Delaware limited liability company. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Williams Mullen Center Loan. The guarantor of the non-recourse carveouts under the Williams Mullen Center Loan is Kireland Holdings, LLC. |
■ | Escrows. On the origination date of the Williams Mullen Center Loan, the borrower funded a reserve of (i) $114,233 for real estate taxes, (ii) $10,331 for insurance premiums and (iii) $1,783,675 for tenant improvements and leasing commissions (the “TI/LC Initial Deposit”). |
On each due date, the borrower is required to fund reserves for: (i) one-twelfth of the taxes (or payment-in-lieu thereof) that the lender estimates will be payable over the then-succeeding 12-month period, initially $57,117, (ii) at the option of the lender, if the liability or casualty policy maintained by the borrower does not constitute an approved blanket or umbrella insurance policy under the Williams Mullen Center Loan documents, an insurance reserve equal to one-twelfth of the amount that the lender estimates will be necessary to pay insurance premiums over the then-succeeding 12-month period, initially $3,444, (iii) a TI/LC reserve in the amount of $17,142 per month, subject to a cap of $1,028,490 (at which point no further monthly deposits are required unless and until, and after and during such time as, the remaining balance of the TI/LC reserve falls below the cap; the TI/LC Initial Deposit in the TI/LC reserve is in addition to such monthly deposits and the cap thereon, and disbursements from the TI/LC reserve are applied first to reduce the TI/LC Initial Deposit) and (iv) a replacement reserve in the amount of $3,428 per month.
■ | Lockbox and Cash Management.The Williams Mullen Center Loan documents require a hard lockbox with in-place cash management. The Williams Mullen Center Loan documents require the borrower to direct all tenants to pay rent directly to a lender-controlled lockbox account and require that all other money received by the borrower with respect to the Williams Mullen Center Property be promptly deposited into such lockbox account following receipt. All funds in the lockbox are required to be remitted on each business day to a lender-controlled cash management account, and are applied on each due date to pay debt service and to fund required reserves |
B-18 |
WILLIAMS MULLEN CENTER |
in accordance with the Williams Mullen Center Loan documents, with any excess, provided no event of default or other Williams Mullen Center Trigger Period (as defined below) is continuing, to be disbursed to the borrower. If an event of default or other Williams Mullen Center Trigger Period is continuing, then any excess funds in the lender-controlled cash management account, after payment of debt service, funding required reserves in accordance with the Williams Mullen Center Loan documents and budgeted operating expenses, is required to (i) if no Major Tenant Sweep Event (as defined below) is continuing, be held in a lender-controlled cash collateral account (the “Cash Collateral Account”) as additional collateral for the Williams Mullen Center Loan and disbursed in the event such Williams Mullen Center Trigger Period no longer exists or (ii) if a Major Tenant Sweep Event is continuing, fund a lender-controlled reserve account (the “Lease Sweep Reserve Account”) for use in retenanting the space demised under the related Major Leases (or disbursement of the balance, other than amounts set aside for remaining free rent and leasing costs for replacement leases upon retenanting, provided that if another Williams Mullen Center Trigger Period is continuing, such net disbursement from the Lease Sweep Reserve Account is required to be deposited in the Cash Collateral Account). During the continuance of an event of default under the Williams Mullen Center Loan, the lender may apply any funds in the cash management account to amounts payable under the Williams Mullen Center Loan and/or toward the payment of expenses of Williams Mullen Center Property, in such order of priority as the lender may determine. |
A “Williams Mullen Center Trigger Period” means the period (A) commencing upon the earliest of, (i) the occurrence of an event of default, (ii) the debt service coverage ratio, measured quarterly, being less than 1.20x and (iii) the occurrence of a Major Tenant Sweep Event; and (B) expiring upon (x) with respect to clause (A)(i) above, the cure of such event of default, (y) with respect to clause (A)(ii) above, the date that the debt service coverage ratio is equal to or greater than 1.25x for two consecutive calendar quarters and (z) with respect to clause (A)(iii) above, such Major Tenant Sweep Event ceasing to exist.
“Major Tenant Sweep Event” means a period (i) commencing (a) upon the first to occur of (i) the date that is 12 months prior to the expiration of a Major Lease (as defined below) or (ii) the date under the Major Lease by which the Major Tenant (as defined below) is required to give notice of its exercise of a renewal option thereunder (and such renewal has not been so exercised); (b) upon the early termination, early cancellation or early surrender of a Major Lease or upon the borrower’s receipt of notice from a Major Tenant of its intent to effect an early termination, early cancellation or early surrender of its Major Lease; (c) if a Major Tenant has ceased operating its business at its space at the Williams Mullen Center Property, (or a material portion thereof) or the borrower receives notice from a Major Tenant that it intends to cease operating its business at its space at the Williams Mullen Center Property (or a material portion thereof); (d) upon a default under a Major Lease by a Major Tenant beyond any applicable notice and cure period; or (e) upon a bankruptcy or insolvency proceeding of a Major Tenant or its parent, and (ii) ending (a) in the case of (i)(a), (i)(b) and (i)(c) above, when the related premises under the Major Lease has been re-let under qualified leases pursuant to the Williams Mullen Center Loan documents and sufficient funds have accumulated in the Lease Sweep Reserve Account to cover the anticipated remaining free rent and leasing costs for such qualified leases, (b) in the case of (i)(a) above, the date on which the subject Major Tenant renewed its lease or entered into an extension agreement acceptable to the lender, (c) in the case of clause (i)(d) above, the date upon which the subject default has been cured, and no other default occurs under such Major Lease for a period of three consecutive months following such cure, and (d) in the case of clause (i)(e) above, when the applicable bankruptcy or insolvency proceeding has terminated and the applicable Major Lease has been affirmed, assumed or assigned in a manner reasonably acceptable to the lender.
“Major Lease” means, as applicable, (i) a lease with Williams Mullen or (ii) any other lease(s) representing greater than 15,000 SF of NRA at the Williams Mullen Center Property.
“Major Tenant”means, as applicable, the tenant under a Major Lease.
B-19 |
WILLIAMS MULLEN CENTER |
■ | Property Management. The Williams Mullen Center Property is currently managed by Morton G. Thalhimer, Inc. d/b/a Thalhimer, an affiliate of Cushman & Wakefield. Under the Williams Mullen Center Loan documents, the Williams Mullen Center Property may not be managed by any party other than Thalhimer without the lender’s reasonable consent; provided, however, that so long as no event of default under the Williams Mullen Center Loan documents exists, the borrower may replace Thalhimer with a Qualified Manager. A “Qualified Manager” means either (i) as long as the borrower is controlled by Alex Kurkin or Eva L. Klein, a property management company owned and/’or controlled by either or both of them and reasonably approved by the lender or (ii) a reputable nationally or regionally recognized management company having at least five years of experience in the management of similar type properties that at the time of its engagement as property manager has leasable square footage of the same property type as the Williams Mullen Center Property equal to the lesser of 1,000,000 SF and five times the leasable SF of the Williams Mullen Center Property, and that is not the subject of a bankruptcy or similar insolvency proceeding. The lender has the right to require that the borrower terminate the management agreement and replace the property manager with an unaffiliated Qualified Manager selected by the borrower or another property manager chosen by the borrower and approved by the lender if (a) the property manager becomes insolvent or a debtor in any bankruptcy or insolvency proceeding, (b) an event of default under the Williams Mullen Center Loan documents exists, (c) the property manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds or (d) there exists a default by the property manager beyond all applicable notice and cure periods under the management agreement. |
■ | Mezzanine or Secured Subordinate Indebtedness. Not permitted. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy or a separate policy that provides coverage for terrorism in an amount equal to the full replacement cost of the Williams Mullen Center Property (plus 18 months of rental loss and/or business interruption coverage plus an additional period of indemnity covering the six months following restoration), provided such coverage is available, and if not available from insurance carriers that satisfy the rating criteria set forth in the Williams Mullen Center Loan documents, the borrower is required to obtain such coverage from the highest rated insurance company providing such coverage. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgage Properties” in the Prospectus. |
B-20 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
B-21 |
79 madison avenue |
B-22 |
79 madison avenue |
B-23 |
79 madison avenue |
B-24 |
79 madison avenue |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | CGMRC | ||
Location (City/State) | New York, New York | Cut-off Date Principal Balance(2) | $40,000,000 | ||
Property Type | Office | Cut-off Date Principal Balance per SF(1) | $310.12 | ||
Size (SF) | 274,084 | Percentage of Initial Pool Balance | 5.8% | ||
Total Occupancy as of 11/1/2015 | 98.0% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 11/1/2015 | 98.0% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 1925 / 2015 | Mortgage Rate | 4.75000% | ||
Appraised Value | $190,000,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | NAP | ||||
Original Interest Only Term (Months) | 120 | ||||
Underwritten Revenues | $12,601,011 | ||||
Underwritten Expenses | $5,691,868 | Escrows | |||
Underwritten Net Operating Income (NOI) | $6,909,143 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $6,222,755 | Taxes | $198,542 | $198,542 | |
Cut-off Date LTV Ratio(1) | 44.7% | Insurance | $0 | $0 | |
Maturity Date LTV Ratio(1) | 44.7% | Replacement Reserve | $0 | $5,306 | |
DSCR Based on Underwritten NOI / NCF(1) | 1.69x / 1.52x | TI/LC | $0 | $0 | |
Debt Yield Based on Underwritten NOI / NCF(1) | 8.1% / 7.3% | Other(3) | $10,874,851 | $0 |
Sources and Uses(4) | ||||||||||
Sources | $ | % | Uses | $ | % | |||||
Loan Combination Amount | $85,000,000 | 86.2 | % | Loan Payoff | $85,237,316 | 86.5 | % | |||
Other Sources(5) | 13,560,441 | 13.8 | Reserves | 11,073,393 | 11.2 | |||||
Closing Costs | 1,627,747 | 1.7 | ||||||||
Principal Equity Distribution | 621,984 | 0.6 | ||||||||
Total Sources | $98,560,441 | 100.0 | % | Total Uses | $98,560,441 | 100.0 | % |
(1) | Calculated based on the aggregate outstanding principal balance of the 79 Madison Avenue Loan Combination. |
(2) | The Cut-off Date Principal Balance of $40,000,000 is evidenced by the non-controlling note A-2 which is part of the $85,000,000 79 Madison Avenue Loan Combination evidenced by twopari passu notes. The related companion loan, which is evidenced by the controlling note A-1, with an outstanding principal balance as of the Cut-off Date of $45,000,000, was contributed to the CGCMT 2016-P3 securitization transaction. See“— The Mortgage Loan” below. |
(3) | Upfront Other reserves include the following: unfunded obligations reserve ($8,948,151), free rent reserve ($1,226,700) and Pranna reserve ($700,000). See“— Escrows” below. |
(4) | Based on the aggregate original principal balance of the 79 Madison Avenue Loan Combination. |
(5) | Other Sources includes an old loan reserve from KeyBank for $12,610,441. This reserve was for future lease ups that were never drawn down. |
■ | The Mortgage Loan.The mortgage loan (the“79 Madison Avenue Loan”) is part of a Loan Combination (the“79 Madison Avenue Loan Combination”) evidenced by twopari passu notes that are together secured by a first mortgage encumbering the borrower’s fee simple interest in a 274,084 SF office building in New York, New York (the“79 Madison Avenue Property”). The 79 Madison Avenue Loan, which is evidenced by note A-2 and represents the non-controlling interest in the 79 Madison Avenue Loan Combination, had an original principal balance of $40,000,000, has an outstanding principal balance as of the Cut-off Date of $40,000,000, and represents approximately 5.8% of the Initial Pool Balance. The related companion loan (the “79 Madison Avenue Companion Loan”), which is evidenced by note A-1 and represents the controlling interest in the 79 Madison Avenue Loan Combination, was contributed to the CGCMT 2016-P3 securitization transaction, had an original principal balance of $45,000,000 and has an outstanding principal balance as of the Cut-off Date of $45,000,000. The 79 Madison Avenue Loan Combination was originated by Citigroup Global Markets Realty Corp. on December 18, 2015. The 79 Madison Avenue Loan Combination had an original principal balance of $85,000,000 and has an outstanding principal balance as of the Cut-off Date of $85,000,000. Both the 79 Madison Avenue Loan and the 79 Madison Avenue Companion Loan accrue interest at an interest rate of 4.75000%per annum. The proceeds of the 79 Madison Avenue Loan Combination were primarily used to refinance the 79 Madison Avenue Property, pay origination costs, return equity to the borrower sponsor and fund reserves. |
The 79 Madison Avenue Loan had an initial term of 120 months and has a remaining term of 117 months as of the Cut-off Date. The 79 Madison Avenue Loan requires monthly payments of interest only during its term. The scheduled maturity date of the 79 Madison Avenue Loan is the due date in January 2026. Voluntary prepayment of the 79 Madison Avenue Loan without payment of any prepayment premium is permitted on or after the due date in November 2025. At any time after the earlier to occur of (i) the second anniversary of the last securitization of any portion of the 79 Madison Avenue Loan Combination and (ii) the fourth anniversary of the origination of the 79 Madison Avenue Loan Combination, the 79 Madison Avenue Loan may be defeased with certain direct full faith and credit obligations of the United States of America or obligations which are “government securities” permitted under the 79 Madison Avenue Loan documents.
■ | The Mortgaged Property. The 79 Madison Avenue Property consists of a 274,084 SF, 17-story, office building with ground floor retail located on the southeast corner of 28th Street and Madison Avenue in Midtown Manhattan. |
B-25 |
79 madison avenue |
The 79 Madison Avenue Property was constructed in 1925 and most recently renovated in 2015. The 79 Madison Avenue Property is comprised of 253,514 SF of office space which includes storage space and 20,570 SF of retail space. As of November 1, 2015 the 79 Madison Avenue Property was 98.0% leased to seven office tenants and two retail tenants. The largest tenant at the 79 Madison Avenue Property is WeWork Companies Inc. which occupies 168,300 SF of the total square footage (61.4% of net rentable area; 61.3% of underwritten gross potential income). Additionally, WeWork Companies Inc. will occupy the eighth floor in January 2017 upon expiration of the current tenant’s lease at that space. The retail space is 100% leased to two tenants, Pranna Restaurant (“Pranna”) and SMK Wines and Liquors. |
The following table presents certain information relating to the major tenants at the 79 Madison Avenue Property:
Five Largest Tenants Based on Underwritten Base Rent
Tenant Name | Credit Rating (Fitch/MIS/S&P)(1) | Tenant GLA | % of GLA | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | Lease Expiration | Renewal / Extension Options | ||||||||||||
WeWork Companies Inc. | NR / NR / NR | 168,300 | 61.4 | % | $7,846,084 | 61.3 | % | $46.62 | 7/31/2032 | 1, 5-year option | ||||||||||
Ted Moudis Associates Inc. | NR / NR/ NR | 32,000 | 11.7 | 1,714,631 | 13.4 | 53.58 | 7/31/2024 | NA | ||||||||||||
Pranna(2) | NR / NR / NR | 19,429 | 7.1 | 1,020,000 | 8.0 | 52.50 | 3/31/2025 | NA | ||||||||||||
Allsteel Inc | NR / NR / NR | 16,935 | 6.2 | 724,935 | 5.7 | 42.81 | 9/30/2023 | 1, 3-year option | ||||||||||||
Morris Visitor Publications | NR / NR / NR | 16,000 | 5.8 | 694,722 | 5.4 | 43.42 | 12/31/2016 | NA | ||||||||||||
Five Largest Tenants | 252,664 | 92.2 | % | $12,000,372 | 93.8 | % | $47.50 | |||||||||||||
Remaining Owned Tenants | 16,064 | 5.9 | 790,985 | 6.2 | 49.24 | |||||||||||||||
Vacant Spaces (Owned Space) | 5,356 | 2.0 | 0 | 0.0 | 0.00 | |||||||||||||||
Total / Wtd. Avg. All Owned Tenants | 274,084 | 100.0 | % | $12,791,357 | 100.0 | % | $47.60 |
(1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
(2) | Pranna is currently operating but is not paying rent and is expected to vacate the leased premises in the near future. As such, the space leased to Pranna has been underwritten as vacant. See “Cash Flow Analysis”, below. The 79 Madison Avenue Loan is structured with a $700,000 upfront reserve for the Pranna space; see“—Escrows” for more information. Additionally, Pranna has a $350,000 security deposit that will be retained by the lender as additional security for the 79 Madison Avenue Loan upon Pranna’s default in accordance with the terms of the 79 Madison Avenue Loan documents. |
B-26 |
79 madison avenue |
The following table presents the lease rollover schedule at the 79 Madison Avenue Property, based on initial lease expiration dates:
Lease Expiration Schedule(1)(2)
Year Ending | Expiring Owned | % of Owned | Cumulative % of | UW | % of Total UW | UW Base Rent | # of Expiring Tenants | |||||||||||||
2016 | 19,836 | 7.2 | % | 7.2 | % | $862,413 | 6.7 | % | $43.48 | 2 | ||||||||||
2017 | 0 | 0.0 | 7.2 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
2018 | 0 | 0.0 | 7.2 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
2019 | 11,087 | 4.0 | 11.2 | % | 503,047 | 3.9 | 45.37 | 2 | ||||||||||||
2020 | 0 | 0.0 | 11.2 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
2021 | 0 | 0.0 | 11.2 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
2022 | 0 | 0.0 | 11.2 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
2023 | 16,935 | 6.2 | 17.4 | % | 724,935 | 5.7 | 42.81 | 1 | ||||||||||||
2024 | 32,000 | 11.7 | 29.1 | % | 1,714,631 | 13.4 | 53.58 | 1 | ||||||||||||
2025 | 20,570 | 7.5 | 36.6 | % | 1,140,247 | 8.9 | 55.43 | 2 | ||||||||||||
2026 | 0 | 0.0 | 36.6 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
2027 & Thereafter | 168,300 | 61.4 | 98.0 | % | 7,846,084 | 61.3 | 46.62 | 1 | ||||||||||||
Vacant | 5,356 | 2.0 | 100.0 | % | 0 | 0.0 | 0.00 | 0 | ||||||||||||
Total / Wtd. Avg. | 274,084 | 100.0 | % | $12,791,357 | 100.0 | % | $47.60 | 9 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. |
(2) | The Lease Expiration Schedule assumes that the Pranna lease is in place, however, Pranna’s rent was excluded in our underwriting. See “Cash Flow Analysis”, below. |
The following table presents certain information relating to historical leasing at the 79 Madison Avenue Property:
Historical Leased %(1)
2012 | 2013(2) | 2014 | As of 11/1/2015 | |||||
Owned Space | 100.0% | 52.8% | 85.0% | 98.0% |
(1) | As provided by the borrower and which reflects occupancy as of December 31 for the specified year unless otherwise indicated. |
(2) | Occupancy at the 79 Madison Avenue Property decreased significantly in 2013 primarily due to the departure of a major tenant. |
B-27 |
79 madison avenue |
n | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the 79 Madison Avenue Property: |
Cash Flow Analysis(1)
| 2012 |
| 2013 |
| 2014 | TTM 9/30/2015 | Underwritten(2) | Underwritten$ per SF | Market Adjusted Underwriting(3) | ||||||||||
Base Rent(4) | $8,088,744 | $7,729,484 | $5,851,097 | $6,961,664 | $12,558,562 | $45.82 | $13,045,324 | ||||||||||||
Contractual Rent Steps(5) | 0 | 0 | 0 | 0 | 232,795 | 0.85 | 172,795 | ||||||||||||
Gross Up Vacancy | 0 | 0 | 0 | �� | 0 | 212,651 | 0.78 | 212,651 | |||||||||||
Total Rent | $8,088,744 | $7,729,484 | $5,851,097 | $6,961,664 | $13,004,008 | $47.45 | $13,430,770 | ||||||||||||
Total Reimbursables | 543,497 | 183,246 | 141,091 | 280,817 | 228,553 | 0.83 | 228,553 | ||||||||||||
Other Income(6) | 841,595 | 735,105 | 853,723 | 964,703 | 611,515 | 2.23 | 611,515 | ||||||||||||
Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (1,243,064) | (4.54) | (682,966) | ||||||||||||
Effective Gross Income | $9,473,836 | $8,647,836 | $6,845,911 | $8,207,185 | $12,601,011 | $45.97 | $13,587,871 | ||||||||||||
Real Estate Taxes | $1,868,705 | $1,988,639 | $2,050,839 | $2,265,921 | $2,296,212 | $8.38 | $2,296,212 | ||||||||||||
Insurance | 66,853 | 53,737 | 108,463 | 88,405 | 169,535 | 0.62 | 169,535 | ||||||||||||
Management Fee | 331,584 | 302,674 | 239,607 | 287,251 | 441,035 | 1.61 | 475,575 | ||||||||||||
Other Operating Expenses | 3,106,432 | 2,846,737 | 3,065,964 | 2,915,326 | 2,785,086 | 10.16 | 2,785,086 | ||||||||||||
Total Operating Expenses | $5,373,574 | $5,191,787 | $5,464,873 | $5,556,903 | $5,691,868 | $20.77 | $5,726,409 | ||||||||||||
Net Operating Income | $4,100,261 | $3,456,049 | $1,381,038 | $2,650,281 | $6,909,143 | $25.21 | $7,861,463 | ||||||||||||
TI/LC | 0 | 0 | 0 | 0 | 623,348 | 2.27 | 695,908 | ||||||||||||
Replacement Reserves | 0 | 0 | 0 | 0 | 63,039 | 0.23 | 63,039 | ||||||||||||
Net Cash Flow | $4,100,261 | $3,456,049 | $1,381,038 | $2,650,281 | $6,222,755 | $22.70 | $7,102,515 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | The Pranna premises are underwritten as vacant, resulting in higher Vacancy & Credit Loss figures by the amount equal to Pranna’s current base rent. The Pranna space was also excluded from the calculation of TI/LC due to the $700,000 upfront Pranna Reserve (see“—Escrows” below). |
(3) | Market Adjusted Underwriting is for presentation purposes only and was not used in the calculation of DSCR or Debt Yield figures in the term sheet or Prospectus. Market Adjusted Underwriting reflects the lease up of the Pranna space at the appraiser’s concluded gross market rent of $75.00 per SF and a vacancy factor of 5%. Based on the Market Adjusted Underwriting, the NCF DSCR and NOI Debt Yield would be 1.74x and 9.2%, respectively. |
(4) | Underwritten Base Rent represents in-place rent at the 79 Madison Avenue Property based on actual, contractual rent from nine tenants. The underwritten base rent is significantly higher than historical amounts due to lease-up at the 79 Madison Avenue Property. Additionally, as part of its initial lease, WeWork Companies Inc. received rent abatements that have started to expire thus restoring a portion of WeWork Companies Inc.’s space to fully, unabated rent. |
(5) | Contractual Rent Steps are underwritten based upon the actual scheduled rent increases on October 1, 2016. |
(6) | Other Income includes electricity reimbursements, freight elevator reimbursements and other minor miscellaneous income sources. |
■ | Appraisal.According to the appraisal, the 79 Madison Avenue Property had an “as-is” appraised value of $190,000,000 as of November 1, 2015. |
■ | Environmental Matters.Based on the Phase I environmental report dated November 10, 2015, there are no recognized environmental conditions or recommendations for further action at the 79 Madison Avenue Property other than the recommendation for the continued implementation of the existing asbestos O&M plan. |
■ | Market Overview and Competition.The 79 Madison Avenue Property is located in Midtown Manhattan at 79 Madison Avenue on the east side of Madison Avenue on the northeast corner of East 28th Street within the Madison/Union Square office submarket of Midtown South Manhattan. Per the appraisal, Midtown South Manhattan continues to be one of the strongest office markets in the country with its steady rent growth and low vacancy rate. It is Manhattan’s smallest office market, housing 66.6 million SF of office space. According to the appraisal, Midtown South Manhattan continues to exhibit one of the lowest vacancy rates of any central business district office market in the nation, at 5.8% which represents a 2.6% decrease from 2014. Additionally, the overall average asking rent in Midtown South Manhattan has increased considerably over the past year, up 15.4% from $58.08 per SF to $67.05 per SF during the third quarter of 2015. According to the appraisal, Midtown South Manhattan registered 844,196 SF of positive absorption in the first three quarters of 2015, 126,127 SF of which was absorbed during the third quarter of 2015. The appraisal has identified six office buildings, totaling 484,846 SF of office space, that are considered to be directly competitive with the 79 Madison Avenue Property. The average overall occupancy rate for these buildings is approximately 94.2% with average asking rent range of $52.00 to $60.00 per SF. |
B-28 |
79 madison avenue |
The following table presents certain information relating to certain office lease comparables provided in the appraisal for the 79 Madison Avenue Property:
Office Lease Comparables(1)
79 | 111 West | 470 Park | 119-125 | 387 Park | 136 Madison | |||||||
Year Built | 1925 | 1901 | 1912 | 1913 | 1910 | 1916 | ||||||
Total GLA | 274,084 | 110,400 | 227,053 | 137,984 | 213,954 | 272,000 | ||||||
Lease SF | NAP | 46,000 | 10,500 | 75,024 | 19,269 | 18,364 | ||||||
Lease Structure | Various | Gross | Gross | Gross | Gross | Gross | ||||||
Lease Term (years) | Various | 10.0 | 10.7 | 10.0 | 10.0 | 10.5 | ||||||
Rental Rate ($ per SF) | $47.60(2) | $60.04 | $56.95 | $60.97 | $65.38 | $47.88 |
(1) | Source: Appraisal. |
(2) | Represents average gross rent at the 79 Madison Avenue Property. |
■ | The Borrower. The borrower is 79 Madison LLC, a single-purpose, single-asset Delaware limited liability company. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the 79 Madison Avenue Loan Combination. The guarantors of the non-recourse carveouts under the 79 Madison Avenue Loan Combination are Michael T. Cohen, Robert Getreu and Andrew H. Roos. Michael T. Cohen, Robert Getreu and Andrew H. Roos, operating under the name, Colliers International, own a portfolio of office and retail properties throughout New York City. |
■ | Escrows. On the origination date of the 79 Madison Avenue Loan Combination, the borrower funded a reserve of (i) $198,542 for real estate taxes, (ii) $8,948,151 for unfunded obligations, (iii) $1,226,700 for free rent and (iv) $700,000 relating to the Pranna lease (the “Pranna Reserve”). The Pranna Reserve is disbursed proportionately to the borrower, provided no event of default is continuing under the 79 Madison Avenue Loan documents, upon the lender’s receipt of evidence that a replacement lease of a portion or all of the Pranna premises (or, in the event that Pranna remains in the space for at least one year following origination of the 79 Madison Avenue Loan Combination with no defaults under the Pranna lease, the Pranna lease) is in full force and effect and the tenant is in occupancy paying unabated rent and all tenant improvement and leasing costs in connection with the Pranna premises have been paid in full. Portions of the Pranna Reserve may also be disbursed in accordance with the 79 Madison Avenue Loan documents when tenant improvement and leasing costs are outstanding upon the satisfaction of certain conditions therein. |
On each due date, the borrower will be required to fund (i) one-twelfth of the taxes that the lender estimates will be payable over the then-succeeding 12-month period, (ii) at the option of the lender, if the liability or casualty policy maintained by the borrower does not constitute an approved blanket or umbrella insurance policy under the 79 Madison Avenue Loan documents, an insurance reserve in an amount equal to one-twelfth of the amount that the lender estimates will be necessary to pay insurance premiums over the then-succeeding 12-month period, (iii) from such date as the debt service coverage ratio is less than 1.45x until such date as the debt service coverage ratio is equal to or greater than 1.45x for one calendar quarter, a tenant improvements and leasing commissions reserve in the amount of $45,681 and (iv) a replacement reserve in the amount of $5,306.
■ | Lockbox and Cash Management. The 79 Madison Avenue Loan Combination is structured with a springing lockbox and springing cash management. Upon the first occurrence of a 79 Madison Avenue Trigger Period (as defined below), the borrower is required to deposit, or cause to be deposited, all revenue generated by the 79 Madison Avenue Property into a restricted account. All funds are transferred on each business day from the restricted account to or at the direction of borrower unless a 79 Madison Avenue Trigger Period exists, in which case such funds are transferred on each business day to a lender-controlled cash management account for the payment of debt service and funding of reserves, with the remainder to be held by the lender in an excess cash flow fund. |
B-29 |
79 madison avenue |
A“79 Madison Avenue Trigger Period” means a period (i) commencing upon the occurrence of an event of default under the 79 Madison Avenue Loan documents and continuing until the same is cured, (ii) commencing on the date that the debt service coverage ratio as calculated under the 79 Madison Avenue Loan documents is less than 1.25x and continuing until the debt service coverage ratio is equal to or greater than 1.30x for two consecutive calendar quarters and (iii) commencing upon the occurrence of a 79 Madison Avenue Specified Tenant Trigger Period (as defined below), and continuing until the same is cured.
A“79 Madison Avenue Specified Tenant Trigger Period” means a period (A) commencing upon the first to occur of (i) a 79 Madison Avenue Specified Tenant (as defined below) being in material default under its lease beyond applicable notice and cure periods, (ii) a 79 Madison Avenue Specified Tenant failing to be in actual, physical possession of its space, failing to be open to the public for business during customary hours and/or “going dark” in a substantial portion of its space, (iii) a 79 Madison Avenue Specified Tenant giving notice that it is terminating any portion of its lease, (iv) any termination or cancellation of any 79 Madison Avenue Specified Tenant lease or any 79 Madison Avenue Specified Tenant Lease failing to otherwise be in full force and effect and (v) any bankruptcy or similar insolvency of any 79 Madison Avenue Specified Tenant; and (B) expiring upon the first to occur of the lender’s receipt of reasonably acceptable evidence of (1) the cure of the applicable event giving rise to the 79 Madison Avenue Specified Tenant Trigger Period in accordance with the provisions of the 79 Madison Avenue Loan documents or such circumstances ceasing to exist, or (2) the borrower leasing the entire space demised to the applicable 79 Madison Avenue Specified Tenant and the applicable tenant under the lease being in occupancy and open for business in the space and paying the full amount of the rent due under its lease.
A “79 Madison AvenueSpecified Tenant” means (i) WeWork Companies Inc. and (ii) any tenant under any ST Major Lease (as defined below) and any guarantor(s) of the applicable ST Major Lease.
An“ST Major Lease” means (i) any lease which, individually or when aggregated with all other leases at the 79 Madison Avenue Property with the same tenant or its affiliate, either (A) accounts for 30% or more of the total rental income for the 79 Madison Avenue Property or (B) demises 30% or more of the 79 Madison Avenue Property’s gross leasable area and (ii) any instrument guaranteeing or providing credit support for any lease meeting the requirements of (i) and/or (ii) above.
n | Property Management. The 79 Madison Avenue Property is currently managed by Colliers Tri-State Management LLC. Under the 79 Madison Avenue Loan documents, the 79 Madison Avenue Property may not be managed by any party other than Colliers Tri-State Management LLC; provided, however, that so long as no event of default under the 79 Madison Avenue Loan documents exists, the borrower can replace Colliers Tri-State Management LLC with a property manager upon notice to the lender, provided that (i) the replacement property manager and replacement property management agreement are approved by the lender in writing (which approval may be conditioned upon receipt of a rating agency confirmation), (ii) the replacement would not cause a termination right, right of first refusal or similar right, cause termination fees to become due, or cause a material adverse effect, under the union agreements and (iii) if such property manager is an affiliate of the borrower, a new non-consolidation opinion is provided from the borrower’s counsel. The lender has the right to terminate the property management agreement and replace the property manager or require that the borrower terminate the property management agreement and replace the property manager if (a) the property manager becomes a debtor in (i) any involuntary bankruptcy or insolvency proceeding that is not dismissed within 90 days of the filing thereof or (ii) any voluntary bankruptcy or insolvency proceeding, (b) there exists an event of default under the 79 Madison Avenue Loan documents, (c) the property manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds or (d) there exists a default by the property manager beyond all applicable notice and cure periods under the property management agreement. |
B-30 |
79 madison avenue |
n | Mezzanine or Subordinate Indebtedness. The 79 Madison Avenue Loan documents permit the borrower to incur future mezzanine financing, subject to the satisfaction of certain conditions set forth in the 79 Madison Avenue Loan documents, including among others: (i) no event of default under the 79 Madison Avenue Loan documents is ongoing; (ii) the lender’s receipt, at least 60 days and no more than 90 days, of prior written notice of the exercise of the mezzanine option; (iii) the mezzanine loan will be junior and subordinate to the 79 Madison Avenue Loan Combination; (iv) the lender’s approval of the terms and conditions of the mezzanine loan and the mezzanine loan documents; (v) if the interest rate under the mezzanine loan is a floating rate, the mezzanine borrower will have obtained and will maintain an interest rate cap agreement; (vi) upon notice of and after giving effect to the mezzanine loan, the debt service coverage ratio will be equal to or greater than 1.40x and the debt yield will be equal to or greater than 9.0%; (vii) the loan term (including any extension terms) of the mezzanine loan will be coterminous with or longer than the term of the 79 Madison Avenue Loan; (viii) upon notice of and after giving effect to the mezzanine loan, the loan-to-value ratio will be equal to or less than 70.0%; (ix) the mezzanine lender’s entry into an intercreditor agreement with the lender in form and substance acceptable to the lender and the rating agencies and (x) delivery of a rating agency confirmation. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy that provides coverage for terrorism in an amount equal to the full replacement cost of the 79 Madison Avenue Property (plus 18 months of rental loss and/or business interruption coverage and an additional period of indemnity covering the six months following restoration). If TRIPRA (or any applicable subsequent statute, extension or reauthorization) is not in effect and terrorism coverage becomes subject to rating and availability on the open market, the borrower is not required to pay additional annual premiums in excess of two times the annual premium payable at such time for the policies required under the 79 Madison Avenue Loan documents to the extent they insure the 79 Madison Avenue Property on a stand-alone basis (without giving effect to the terrorism coverage components of the policies) in order to obtain the terrorism coverage as part of any applicable insurance policy, but the borrower is obligated to purchase the maximum amount of terrorism coverage available with respect to the applicable insurance policy with such funds equal to two times the annual premium payable at such time for the policies required under the 79 Madison Avenue Loan documents. “See“Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-31 |
hilton orrington evanston |
B-32 |
hilton orrington evanston |
B-33 |
hilton orrington evanston |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | RMF | ||
Location (City/State) | Evanston, Illinois | Cut-off Date Principal Balance | $40,000,000 | ||
Property Type | Hospitality | Cut-off Date Principal Balance per Room | $148,698.88 | ||
Size (Rooms) | 269 | Percentage of Initial Pool Balance | 5.8% | ||
Total TTM Occupancy as of 2/29/2016 | 74.7% | Number of Related Mortgage Loans | None | ||
Owned TTM Occupancy as of 2/29/2016 | 74.7% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 1923 / 2013 | Mortgage Rate | 5.07000% | ||
Appraised Value(1) | $60,900,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | 36 | ||||
Underwritten Revenues | $17,713,881 | ||||
Underwritten Expenses | $12,742,879 | Escrows | |||
Underwritten Net Operating Income (NOI) | $4,971,002 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $4,262,447 | Taxes | $1,030,000 | $0 | |
Cut-off Date LTV Ratio(1) | 65.7% | Insurance | $0 | $0 | |
Maturity Date LTV Ratio(2) | 55.3% | FF&E | $0 | $57,285 | |
DSCR Based on Underwritten NOI / NCF | 1.91x / 1.64x | Other(3) | $3,750,000 | $0 | |
Debt Yield Based on Underwritten NOI / NCF | 12.4% / 10.7% |
Sources and Uses
Sources | $ | % | Uses | $ | % | |
Loan Amount | $40,000,000 | 60.6% | Purchase Price | $60,000,000 | 90.8% | |
Principal’s New Cash Contribution | 21,220,254 | 32.1 | Reserves | 4,780,000 | 7.2 | |
Garage Renovation Credit | 4,750,000 | 7.2 | Closing Costs | 1,270,254 | 1.9 | |
Other Sources | 80,000 | 0.1 | ||||
Total Sources | $66,050,254 | 100.0% | Total Uses | $66,050,254 | 100.0% |
(1) | The Appraised Value of $60,900,000 assumes the completion of $3.8 million in garage renovations. An upfront garage renovation reserve of $3.75 million is in place. The appraisal concluded an “as-is” appraised value without the garage renovations reserve of $57,100,000. The Cut-off Date LTV Ratio without the garage renovations reserve is 70.1%. The appraisal concluded an “as stabilized” appraised value of $64,100,000 as of November 1, 2018. Based on the “as stabilized” appraised value, the Cut-off Date LTV Ratio is 62.4%. |
(2) | The Maturity Date LTV Ratio is calculated utilizing the “as stabilized” appraised value of $64,100,000. The Maturity Date LTV Ratio calculated based on the “as-is” appraised value is 58.2%. |
(3) | Other upfront escrows represent reserves for garage renovation. See“—Escrows”below. |
■ | The Mortgage Loan.The mortgage loan (the “Hilton Orrington Evanston Loan”) is evidenced by a note in the original principal amount of $40,000,000 and is secured by a first mortgage encumbering the borrower’s fee simple interest in a 269-room full service hotel located in Evanston, Illinois (the “Hilton Orrington Evanston Property”). The Hilton Orrington Evanston Loan was originated by Rialto Mortgage Finance, LLC on December 18, 2015. The Hilton Orrington Evanston Loan has an outstanding principal balance as of the Cut-off Date of $40,000,000 which represents approximately 5.8% of the Initial Pool Balance and accrues interest at an interest rate of 5.07000%per annum. The proceeds of the Hilton Orrington Evanston Loan were primarily used to acquire the Hilton Orrington Evanston Property. |
The Hilton Orrington Evanston Loan had an initial term of 120 months and has a remaining term of 117 months as of the Cut-off Date and requires payments of interest only for the initial 36 months, followed by payments of interest and principal sufficient to amortize the loan over a 30-year amortization schedule. The scheduled maturity date of the Hilton Orrington Evanston Loan is the due date in January 2026. The Hilton Orrington Evanston Loan may be voluntarily prepaid on or after the due date in March 2018 with the payment of a prepayment fee equal to the greater of (i) a yield maintenance premium calculated based on the present values of the remaining scheduled principal and interest payments and (ii) 1% of the principal amount being prepaid. Voluntary prepayment of the Hilton Orrington Evanston Loan is permitted on and after the due date in September 2025 without payment of any yield maintenance or prepayment premium.
■ | The Mortgaged Property. The Hilton Orrington Evanston Property is comprised of one, nine-story full service hotel containing 269 rooms and one, five-story garage/retail building located in Evanston, Illinois, approximately 13 miles north of Chicago and directly adjacent to Northwestern University. The Hilton Orrington Evanston Property was originally constructed in 1923. Since 2013, the Hilton Orrington Evanston Property has undergone approximately $5.07 million in capital expenditures, which included renovations to guestrooms, public space, exterior buildings and systems and equipment. |
B-34 |
hilton orrington evanston |
The Hilton Orrington Evanston Property features standard and suite-style guestroom configurations with guestrooms on levels three through eight of the hotel building. Guestrooms include signature Hilton Serenity plush pillow-top beds along with an oversized work desk and ergonomic chair. Other room amenities include a 37-inch flat-panel TV, clock radio, coffee maker and wireless internet access. The room mix includes 150 king rooms, 107 queen rooms, five studio suites, five one-bedroom suites and two two-bedroom suites. Other amenities include a fitness center, business center and room service.
The Hilton Orrington Evanston Property has 18,505 SF of meeting space with the majority of the meeting rooms situated across the second floor of the Hilton Orrington Evanston Property and additional meeting space situated across the ninth (top) floor. The Hilton Orrington Evanston Property features three food and beverage outlets, all located on the main floor of the hotel building, as well as a leased coffee shop (The Unicorn Café) located on the first floor of the garage building. The Hilton Orrington Evanston Property’s primary dining outlet is eTown Bistro, located adjacent to the lobby. The 91-seat restaurant is open for breakfast, lunch and dinner and also provides in-room dining. The outlet was closed in early 2015 for a comprehensive renovation and re-opened in March 2015. The Hilton Orrington Evanston Property’s lounge was relocated inside eTown Bistro in 2015 and offers a dinner and appetizer menu, as well as a full bar. In addition, the 60-seat Farmhouse Evanston is the Hilton Orrington Evanston Property’s leased restaurant and is operated by a local restaurateur for lunch and dinner. Farmhouse Evanston leases approximately 8,046 SF of space with 4,300 SF located adjacent to the lobby for the main restaurant, 2,399 SF on the second floor for the outlet’s private dining area and approximately 1,347 SF in the basement for additional storage. The expiration date of the lease is October 28, 2022 with two five-year extension options.
The parking garage was originally constructed in the late 1950’s and provides 174 parking spaces or 0.65 spaces per room exclusively for the hotel. The garage is valet-only and is operated by the hotel. The hotel building and the garage building are connected through an underground walkway. The borrower commenced renovations on the garage in March 2016 and is expected to complete the renovations in June 2016. $3.75 million was held in escrow at the Hilton Orrington Evanston Loan closing for these garage renovations (see “—Escrows” below). The City of Evanston previously approved a plan for the construction of up to 30 residential units above the existing parking garage. Prior to construction of the residential units, the borrower is required to, among other conditions, complete all of the garage renovations. The Hilton Orrington Evanston Loan documents permit the borrower to convert the garage portion of the Hilton Orrington Evanston Property to a condominium, consisting of a retail unit for the current retail space, a parking unit for the current hotel parking, a residential unit for residential development above the existing garage and a residential parking unit dedicated to parking for any such residential development above the existing garage. The residential unit and residential parking unit are permitted to be released from the lien of the Hilton Orrington Evanston Loan subject to, among other things, the lender’s reasonable approval of the condominium documents and other agreements relating to the release and all plans and specifications relating to any renovations or construction to the garage contemplated in connection with the garage restructuring. Currently, the garage building has five leased retail units on the ground floor which range from 600 SF to 1,878 SF.
The following table presents certain information relating to the 2015 demand analysis with respect to the Hilton Orrington Evanston Property based on market segmentation, as provided in the appraisal for the Hilton Orrington Evanston Property:
2015 Accommodated Room Night Demand(1)
Property | Meeting and Group | Leisure | Commercial | |||
Hilton Orrington Evanston | 28% | 25% | 47% |
(1) | Source: Appraisal. |
B-35 |
hilton orrington evanston |
The following table presents certain information relating to historical occupancy, ADR and RevPAR at theHilton Orrington Evanston Property:
Hilton Orrington Evanston (1)
2012 | 2013 | 2014 | TTM 2/29/2016 | |||||
Occupancy | 69.7% | 71.3% | 67.9% | 74.7% | ||||
ADR | $147.37 | $152.55 | $161.92 | $167.09 | ||||
RevPAR | $102.70 | $108.79 | $109.95 | $124.77 |
(1) | Source: As provided by borrower. |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow, on an aggregate basis and a per room basis, at the Hilton Orrington Evanston Property: |
Cash Flow Analysis(1)
2012 | 2013 | 2014 | TTM 2/29/2016 | Underwritten | Underwritten $ per Room | |||||||
Room Revenue | $10,111,655 | $10,681,850 | $10,795,794 | $12,250,144 | $12,250,144 | $45,540 | ||||||
Food & Beverage Revenue | 4,031,836 | 4,028,920 | 3,906,138 | 4,338,256 | 4,338,256 | 16,127 | ||||||
Other Revenue(2) | 1,032,829 | 1,039,867 | 970,061 | 1,125,482 | 1,125,482 | 4,184 | ||||||
Total Revenue | $15,176,320 | $15,750,637 | $15,671,993 | $17,713,881 | $17,713,881 | $65,851 | ||||||
Room Expense | $2,681,405 | $2,635,826 | $2,409,161 | $2,624,638 | $2,624,638 | $9,757 | ||||||
Food & Beverage Expense | 3,124,553 | 3,198,395 | 3,019,844 | 3,120,724 | 3,120,724 | 11,601 | ||||||
Other Expense | 579,892 | 477,038 | 442,163 | 637,407 | 637,407 | 2,370 | ||||||
Total Departmental Expense | $6,385,850 | $6,311,259 | $5,871,168 | $6,382,769 | $6,382,769 | $23,728 | ||||||
Total Undistributed Expense | 4,920,399 | 4,849,114 | 4,725,315 | 5,081,494 | 5,013,654 | 18,638 | ||||||
Total Fixed Charges | 1,054,728 | 981,777 | 1,565,558 | 1,208,916 | 1,346,456 | 5,005 | ||||||
Total Operating Expenses | $12,360,977 | $12,142,150 | $12,162,041 | $12,673,179 | $12,742,879 | $47,371 | ||||||
Net Operating Income | $2,815,343 | $3,608,487 | $3,509,952 | $5,040,702 | $4,971,002 | $18,480 | ||||||
FF&E | 607,053 | 630,128 | 626,880 | 654,263 | 708,555 | 2,634 | ||||||
Net Cash Flow | $2,208,290 | $2,978,359 | $2,883,072 | $4,386,440 | $4,262,447 | $15,846 |
(1) | Certain items such as interest expense, interest income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Other Revenue also includes rental amounts for the Farmhouse Evanston restaurant and the four retail leases. |
■ | Appraisal. According to the appraisal, the Hilton Orrington Evanston Property had an “as-is” appraised value of $60,900,000 as of an effective date of October 27, 2015. The “as-is” appraised value assumes the $3.8 million in garage renovations are complete. The borrower reserved $3.75 million for garage renovations at loan origination. The appraiser also concluded an “as stabilized” appraised value of $64,100,000 as of an effective date of November 1, 2018. |
■ | Environmental Matters. According to a Phase I environmental report, dated December 23, 2015, there are no recommendations for further action at the Hilton Orrington Evanston Property other than a recommendation for an asbestos operations and maintenance plan, which is already in place. |
B-36 |
hilton orrington evanston |
■ | Market Overview and Competition.The Hilton Orrington Evanston Property is located in downtown Evanston, Cook County, Illinois. Evanston is approximately 13 miles north of Chicago and is part of the greater Chicago economic base and also part of the Chicago-Naperville-Elgin, IL-IN-WI metropolitan statistical area. Chicago’s economy is supported by manufacturing, printing/publishing, finance and insurance. The industrial base and inland port contribute to the city’s position as a national transportation and distribution center, with O’Hare International Airport and Midway International Airport supporting the region. The financial industry acts as a key component to the economy of the Chicago area and is home to the retail financial services and commercial banking headquarters of JPMorgan Chase, one of the largest employers for the market. The Hilton Orrington Evanston Property is located adjacent to Northwestern University which has an enrollment of approximately 21,000 students and a faculty of over 3,000. Northwestern University is one of the oldest private universities in the U.S. and is comprised of 12 schools and colleges and offers undergraduate degrees in 124 different majors as well as 145 different graduate and professional degrees. The 240-acre main campus of Northwestern University is situated one block north of the Hilton Orrington Evanston Property, and this campus houses the undergraduate schools, the Graduate School and the Kellogg School of Management. Northwestern University is a part of the Big Ten athletic conference, and all of its athletic fields and events are located in Evanston. |
The following table presents certain information relating to the historical occupancy, ADR and RevPAR at the Hilton Orrington Evanston Property and its competitive set, as provided in a market report for the Hilton Orrington Evanston Property:
Historical Statistics
Hilton Orrington Evanston | Competitive Set | Penetration | ||||||||||||||||
2013(1) | 2014(1) | TTM 2/29/2016(2) | 2013(1) | 2014(1) | TTM 2/29/2016(2) | 2013(1) | 2014(1) | TTM 2/29/2016(2) | ||||||||||
Occupancy | 70.3% | 67.9% | 74.7% | 65.0% | 67.1% | 70.0% | 108.1% | 101.2% | 106.7% | |||||||||
ADR | $153.98 | $163.29 | $168.10 | $127.29 | $132.97 | $138.11 | 121.0% | 122.8% | 121.7% | |||||||||
RevPAR | $108.20 | $110.85 | $125.52 | $82.73 | $89.16 | $96.62 | 130.8% | 124.3% | 129.9% |
(1) | Source: December 2015 travel research report. |
(2) | Source: February 2016 travel research report. |
Hilton Orrington Evanston Property Competitive Set(1)
Property | Number of Rooms | Year Built | ||
Hilton Orrington Evanston | 269 | 1923 | ||
DoubleTree by Hilton Chicago North Shore | 369 | 1974 | ||
Hilton Garden Inn Evanston | 178 | 2001 | ||
Best Western University Plaza Evanston | 159 | 1974 | ||
Renaissance Chicago North Shore Hotel | 385 | 1973 | ||
Westin Chicago North Shore | 412 | 2006 | ||
Hampton Inn & Suites Skokie | 225 | 2000 | ||
Residence Inn by Marriott Chicago Wilmette | 130 | 2014 | ||
Holiday Inn Skokie | 244 | 1969 | ||
Total | 2,371 |
(1) | Source: Appraisal |
■ | The Borrower. The borrower is Evanston Orrington Hotel, LLC, a single-purpose, single-asset entity. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Hilton Orrington Evanston Loan. The non-recourse carve-out guarantor is Morton L. Olshan. |
B-37 |
hilton orrington evanston |
■ | Escrows. On the origination date of the Hilton Orrington Evanston Loan, the borrower funded escrow reserves of $3,750,000 for the garage renovation reserve and $1,030,000 for real estate taxes. |
On each due date, the borrower is required to fund the following reserves with respect to the Hilton Orrington Evanston Loan: (i) commencing on the due date in September 2016, a tax reserve in an amount equal to one-twelfth of the amount that the lender estimates will be necessary to pay taxes over the then succeeding 12-month period; (ii) an insurance reserve equal to one-twelfth of the amount that the lender reasonably estimates will be necessary to pay the insurance premiums over the then succeeding 12-month period unless the insurance is maintained under a blanket policy; (iii) an FF&E reserve in an amount equal to the greater of (a) one-twelfth of 4.0% of gross income from operations during the calendar year immediately preceding the calendar year in which such monthly payment date occurs and (b) the aggregate amount, if any, required to be reserved under the management agreement and the franchise agreement.
The $3,750,000 upfront garage renovation reserve is being used to complete renovations on the garage. Commencing on the monthly payment dates in February 2016 through May 2016, the garage renovation reserve funds are to be disbursed into a separate account maintained by the borrower for the benefit of the lender (the “Renovation Account”) as follows (a) $1,000,000 with respect to the monthly payment dates in February 2016, March 2016 and April 2016 and (b) $750,000 with respect to the monthly payment date in May 2016. The borrower has access to the funds in the Renovation Account without having to submit disbursement requests, but is required to use such funds to pay for renovation costs.
■ | Lockbox and Cash Management. The Hilton Orrington Evanston Loan requires a hard lockbox and a springing cash management, which will be established upon written notification from the lender to the lockbox bank. The Hilton Orrington Evanston Loan documents require the borrower to deposit or cause to be deposited all revenue generated by the Hilton Orrington Evanston Property. Following the occurrence of a Cash Management Trigger Event (as defined below), the borrower is required to establish a cash management account and, upon establishment of the account, funds on deposit in the lockbox account are required to be transferred daily to the cash management account. On each due date after the occurrence of a Cash Management Trigger Event, the related loan documents require that all amounts on deposit in the lockbox account be applied in the following order of priority: (i) real estate taxes; (ii) insurance; (iii) fees and expenses of the cash management bank in accordance with the cash management agreement; (iv) monthly debt service payment; (v) monthly FF&E reserves; (vi) funds sufficient to be applied to the operating expenses set forth in the annual operating budget; (vii) funds sufficient to pay for extraordinary or other operating expenses; (viii) funds sufficient to pay any interest accruing at the default rate with respect to any event of default that has occurred; and (ix) all excess cash flow will be applied to the excess cash flow account if a Cash Sweep Event (as defined below) is in effect or to a borrower-controlled account if no Cash Sweep Event is in effect. |
A“Cash Management Trigger Event”means the occurrence of (i) an event of default; (ii) any bankruptcy action of borrower, guarantor or property manager; or (iii) a Cash Management DSCR Trigger Event (as defined below).
A“Cash Management DSCR Trigger Event”means as of the date of determination, the debt service coverage ratio based on the trailing 12-month period is less than 1.15x.
A“Cash Sweep Event”means the occurrence of (i) an event of default; (ii) any bankruptcy action of borrower, guarantor or property manager; or (iii) a Cash Sweep DSCR Trigger Event (as defined below).
A“Cash Sweep DSCR Trigger Event”means as of the date of determination, the debt service coverage ratio based on the trailing 12-month period is less than 1.10x.
■ | Property Management.The Hilton Orrington Evanston Property is currently managed by Orrington Hotel Manager, LLC, an affiliate of the borrower, pursuant to a management agreement. The Hilton Orrington Evanston Loan documents provide that the lender may require the borrower to replace the property manager with a property manager which is not an affiliate of the borrower, but may be chosen by the borrower upon the occurrence of (i) an event of default; (ii) if the property manager is in default under the management agreement beyond any applicable notice and cure period; (iii) if the property manager becomes insolvent or a debtor in any bankruptcy action and/or (iv) if at any time the property manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds. |
B-38 |
hilton orrington evanston |
■ | Mezzanine or Subordinate Indebtedness. The Hilton Orrington Evanston Loan documents permit one or more subordinate affiliate loans made by direct or indirect members of the borrower to the borrower that have an aggregate principal amount of no more than $1,025,000 and that are subject to a valid and binding standstill and subordination agreement executed by the borrower and each holder of such loans. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy that provides coverage for terrorism in an amount equal to the full replacement cost of the Hilton Orrington Evanston Property, plus 18 months of business interruption coverage as calculated under the Hilton Orrington Evanston Loan documents (with an additional extended period of indemnity as reasonably required by the lender) in an amount equal to 100% of the projected gross income from the Hilton Orrington Evanston Property (on an actual loss sustained basis) for a period continuing until the restoration of the Hilton Orrington Evanston Property is completed and containing an extended period endorsement which provides for up to 12 months of additional coverage. The terrorism insurance is required to contain a deductible that is acceptable to the lender and is no larger than $25,000. See“Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-39 |
austin block 21 |
B-40 |
austin block 21 |
B-41 |
austin block 21 |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | GSMC | ||
Location (City/State) | Austin, Texas | Cut-off Date Principal Balance(3) | $39,876,237 | ||
Property Type(1) | Mixed Use | Cut-off Date Principal Balance per SF(2) | $404.32 | ||
Size (SF)(1) | 369,842 | Percentage of Initial Pool Balance | 5.7% | ||
Total TTM Occupancy as of 11/30/2015(1) | 81.6% | Number of Related Mortgage Loans | None | ||
Owned TTM Occupancy as of 11/30/2015(1) | 81.6% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 2010-2011 / NAP | Mortgage Rate | 5.58000% | ||
Appraised Value | $239,000,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | NAP | ||||
Underwritten Revenues | $64,578,445 | ||||
Underwritten Expenses | $47,259,417 | Escrows | |||
Underwritten Net Operating Income (NOI) | $17,319,028 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $15,551,170 | Taxes | $353,261 | $353,261 | |
Cut-off Date LTV Ratio(2) | 62.6% | Insurance | $144,502 | $24,084 | |
Maturity Date LTV Ratio(2) | 52.6% | Replacement Reserves(4) | $0 | $2,240 | |
DSCR Based on Underwritten NOI / NCF(2) | 1.68x / 1.51x | TI/LC | $0 | $4,720 | |
Debt Yield Based on Underwritten NOI / NCF(2) | 11.6% / 10.4% | Other(5) | $67,787 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % | ||
Loan Combination Amount | $150,000,000 | 100.0% | Loan Payoff | $129,850,554 | 86.6 | % | |
Principal Equity Distribution | 14,178,929 | 9.5 | |||||
Closing Costs | 5,404,967 | 3.6 | |||||
Reserves | 565,550 | 0.4 | |||||
Total Sources | $150,000,000 | 100.0% | Total Uses | $150,000,000 | 100.0 | % |
(1) | The Austin Block 21 Property is a 37-story, 369,842 SF mixed use development consisting of a 251-room (226,442 SF) hotel component that was 81.6% occupied as of November 30, 2015, an 86,757 SF music venue component with a 2,750-person capacity and a 56,643 SF Retail/Office Component that was 99.6% leased as of January 5, 2016. One tenant, ACL Showcase Venue (4,531 SF of the Retail/Office Component), is an affiliate of the borrower and has an executed lease for ground floor retail space (which is used as a smaller, approximately 350 person capacity venue) and took occupancy and began paying rent in March 2016. |
(2) | Calculated based on the aggregate outstanding principal balance of the Austin Block 21 Loan Combination. |
(3) | The Cut-off Date Principal Balance of $39,876,237 represents the non-controlling note A-2 of a $150,000,000 loan combination evidenced by twopari passu notes. The controlling note A-1, with an outstanding principal balance as of the Cut-off Date of $109,659,651, was contributed to the CGCMT 2016-GC36 securitization transaction. |
(4) | Noted amount is cumulative amount to be deposited in separate reserves for the ACL Music Venue Component and the Retail/Office Component. See “—Escrows” below. |
(5) | Other upfront reserve represents a gap rent reserve for the ACL Showcase Venue ground floor retail space tenant. See “—Escrows” below. |
■ | The Mortgage Loan. The mortgage loan (the “Austin Block 21 Loan”) is part of a loan combination structure (the “Austin Block 21 Loan Combination”) comprised of twopari passu notes that are collectively secured by a first mortgage encumbering the borrower’s fee simple interest in a mixed-use property located in Austin, Texas (the ”Austin Block 21 Property”). The Austin Block 21 Loan (evidenced by note A-2) has an outstanding principal balance as of the Cut-off Date of $39,876,237 and represents approximately 5.7% of the Initial Pool Balance. The related companion loan (the “Austin Block 21 Companion Loan”) has an outstanding principal balance as of the Cut-off Date of $109,659,651 and is evidenced by note A-1, which represents the controlling interest in the Austin Block 21 Loan Combination. The Austin Block 21 Companion Loan was contributed to the CGCMT 2016-GC36 securitization transaction. The Austin Block 21 Loan Combination was originated by Goldman Sachs Mortgage Company on January 5, 2016. The Austin Block 21 Loan Combination has an original principal balance of $150,000,000 and each note has an interest rate of 5.58000%per annum. The borrower utilized the proceeds of the Austin Block 21 Loan to refinance existing debt on the Austin Block 21 Property, fund reserves, pay loan origination costs and return equity to the borrower sponsor. |
The Austin Block 21 Loan had an initial term of 120 months and has a remaining term of 117 months as of the Cut-off Date. The Austin Block 21 Loan requires monthly payments of interest and principal sufficient to amortize the loan over a 30-year amortization schedule. The scheduled maturity date of the Austin Block 21 Loan is the due date in January 2026. Voluntary prepayment of the Austin Block 21 Loan is prohibited prior to the due date in October 2025. Provided that no event of default under the Austin Block 21 Loan is continuing, defeasance with direct, non-callable obligations of the United States of America is permitted at any time on or after the first due date following the second anniversary of the securitization Closing Date.
B-42 |
austin block 21 |
■ | The Mortgaged Property. The Austin Block 21 Property is a 37-story, 369,842 SF mixed-use development located in Austin, Texas. The Austin Block 21 Property consists of the 251-room, 226,442 SF, W Austin Hotel (the ”W AustinHotel Component”), an 86,757 SF live music, entertainment and private event venue (the “ACL Music Venue Component”), and a 56,643 SF retail and office space (the “Retail/Office Component”). Developed by the borrower sponsor and opened between 2010 and 2011, the Austin Block 21 Property is located at the intersection of 2nd Street and Lavaca Street in downtown Austin, Texas. The largest portion of the collateral consists of the 251-room W Austin Hotel Component. There are additionally 159 residential condominiums (under the W Residences brand) located on floors 18-37 of the development which are owned by third parties and are not included in the 369,842 SF collateral for the Austin Block 21 Loan Combination. |
The 251-room, 226,442 SF, W Austin Hotel Component (excluding the residential condominiums that are not part of the collateral) represents approximately 68.0% of the appraised value of the Austin Block 21 Property. The 86,757 SF ACL Music Venue Component is a 2,750-person capacity integrated music and private events venue and special events facility that hosts the PBS television show “Austin City Limits,” as well as hundreds of artists and private events annually. The borrower is permitted to use the “Austin City Limits” and “ACL” trademarks, pursuant to a licensing agreementwith Capital of Texas PublicTelecommunications Council, a Texas nonprofit corporation, entered into in July 2010 with an initial 10-year term and extension options. The ACL Music Venue Component represents approximately 19.5% of the appraised value of the Austin Block 21 Property. The Retail/Office Component consists of 18,327 SF of ground floor retail space (98.9% leased) and 38,316 SF of 2nd and 3rd floor office space (100.0% leased). The ACL Showcase Venue ground floor retail space, which comprises 4,531 SF of the Retail/Office Component, is leased to an affiliate of the borrower, and used as a smaller, approximately 350-person capacity venue beginning in March 2016. The Retail/Office Component represents approximately 12.5% of the appraised value of the Austin Block 21 Property.
■ | Operating Agreement. The W Austin Hotel Component is managed pursuant to a hotel operating agreement, as amended between the borrower, formerly known as CJUF II Stratus Block 21 LLC, an indirect, wholly owned subsidiary of the non-recourse carveout guarantor, Stratus Properties Inc. and W Hotel Management Inc., an affiliate of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”) (the “Operating Agreement”). Pursuant to a subordination, non-disturbance and attornment agreement, the Operating Agreement is subordinate to the Austin Block 21 Loan. Upon foreclosure, provided that Starwood is then in default under the Operating Agreement, the lender may terminate the Operating Agreement. |
The following table presents certain information relating to the 2015 demand analysis with respect to the W Austin Hotel Component of the Austin Block 21 Property based on market segmentation, as provided in the appraisal for the Austin Block 21 Property:
2015 Accommodated Room Night Demand(1)
Meeting and Group | Leisure and Business | |||
W Austin Hotel Component | 28.0% | 72.0% |
(1) | Source: Appraisal. |
The following table presents certain information relating to the penetration rates relating to the W Austin Hotel Component of the Austin Block 21 Property and various market segments, as provided in a November 2015 travel research report for the W Austin Hotel Component:
Penetration Rates(1)
Occupancy | ADR | RevPAR | ||||
TTM November 2015 | 99.3% | 122.1% | 121.2% | |||
TTM November 2014 | 99.2% | 127.9% | 126.9% | |||
TTM November 2013 | 101.0% | 121.8% | 123.0% |
(1) | Source: November 2015 travel research report. |
B-43 |
austin block 21 |
The following table presents certain information relating to historical occupancy, ADR and RevPAR at the W Austin Hotel Component:
W Hotel Austin(1)
2013 | 2014 | TTM 11/30/2015 | ||||
Occupancy | 83.1% | 82.9% | 81.6% | |||
ADR | $313.00 | $351.56 | $346.81 | |||
RevPAR | $260.12 | $291.49 | $282.95 |
(1) | As provided by the borrower and represents averages for the indicated periods. |
The following table presents certain information relating to the major commercial tenants (of which certain tenants may have co-tenancy provisions) at the Austin Block21 Property based on initial lease expiration dates:
Largest Tenants Based on Underwritten Commercial Base Rent
Tenant Name | Credit Rating (Fitch/MIS/S&P)(1) | Tenant | % of | UW Base | % of | UW | Lease | Tenant | Occupancy Cost | Renewal / Extension Options | ||||||||||
M. Arthur Gensler & Associates | NR / NR / NR | 14,667 | 25.9% | $520,679 | 28.3% | $35.50 | 1/31/2019 | NA | NA | 2, 5-year options | ||||||||||
Weisbart Springer, LLP(2) | NR / NR / NR | 10,853 | 19.2 | 379,855 | 20.7 | 35.00 | 6/30/2024 | NA | NA | 1, 5-year option | ||||||||||
Urban Outfitters | NR / NR / NR | 9,931 | 17.5 | 305,875 | 16.6 | 30.80 | 1/31/2022 | $374.29 | 12.1% | 2, 5-year options | ||||||||||
Stratus Properties Inc. | NR / NR / NR | 8,993 | 15.9 | 302,345 | 16.4 | 33.62 | 4/30/2021 | NA | NA | 2, 5-year options | ||||||||||
ACL Showcase Venue(3) | NR / NR / NR | 4,531 | 8.0 | 203,895 | 11.1 | 45.00 | 3/1/2026 | NA | NA | 2, 5-year options | ||||||||||
Starbucks | A / A2 / A- | 2,455 | 4.3 | 87,766 | 4.8 | 35.75 | 2/28/2024 | NA | NA | 2, 5-year options | ||||||||||
DEN Properties | NR / NR / NR | 800 | 1.4 | 30,400 | 1.7 | 38.00 | 10/31/2022 | NA | NA | 1, 10-year option | ||||||||||
Willie’s Roadhouse (Sirius XM) | NR / NR / NR | 400 | 0.7 | 7,200 | 0.4 | 18.00 | 8/31/2017 | NA | NA | 5, 1-year options | ||||||||||
Austin City Limits Backstage(4) | NR / NR / NR | 3,803 | 6.7 | 0 | 0.0 | 0.00 | MTM | NA | NA | |||||||||||
Largest Tenants | 56,433 | 99.6% | $1,838,014 | 100.0% | $32.57 | |||||||||||||||
Remaining Owned Tenants | 0 | 0.0 | 0 | 0.0 | 0.00 | |||||||||||||||
Vacant Spaces (Owned Space) | 210 | 0.4 | 0 | 0.0 | 0.00 | |||||||||||||||
Totals / Wtd. Avg. Tenants | 56,643 | 100.0% | $1,838,014 | 100.0% | $32.57 |
(1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
(2) | Weisbart Springer, LLP has a termination option that is exercisable as of October 1, 2020 with six months’ notice and the payment of the unamortized cost of tenant improvement allowances and leasing commissions. 3,621 SF is currently subleased to VertsKebap, Inc. at $25.50 per SF triple-net. |
(3) | ACL Showcase Venue is an affiliate of the borrower and has an executed lease for ground floor retail space (which is used as a smaller, approximately 350-person capacity venue) and took occupancy and began paying rent in March 2016. A $67,787 gap rent reserve for the tenant was escrowed at origination. |
(4) | The Austin City Limits Backstage space is used in conjunction with ACL Music Venue Component operations and only required to pay pro-rata share of operating expenses. |
The following table presents certain information relating to the lease rollover schedule at the Austin Block21 Property based on initial lease expiration dates:
Commercial Lease Expiration Schedule (1)
Year Ending | Expiring Owned | % of Owned | Cumulative % of | UW Base Rent | % of Total UW | UW Base | # of | |||||||
MTM | 3,803 | 6.7% | 6.7% | $0 | 0.0% | $0.00 | 1 | |||||||
2016 | 0 | 0.0 | 6.7% | 0 | 0.0 | 0.00 | 0 | |||||||
2017 | 400 | 0.7 | 7.4% | 7,200 | 0.4 | 18.00 | 1 | |||||||
2018 | 0 | 0.0 | 7.4% | 0 | 0.0 | 0.00 | 0 | |||||||
2019 | 14,667 | 25.9 | 33.3% | 520,679 | 28.3 | 35.50 | 1 | |||||||
2020 | 0 | 0.0 | 33.3% | 0 | 0.0 | 0.00 | 0 | |||||||
2021 | 8,993 | 15.9 | 49.2% | 302,345 | 16.4 | 33.62 | 1 | |||||||
2022 | 10,731 | 18.9 | 68.1% | 336,275 | 18.3 | 31.34 | 2 | |||||||
2023 | 0 | 0.0 | 68.1% | 0 | 0.0 | 0.00 | 0 | |||||||
2024 | 13,308 | 23.5 | 91.6% | 467,621 | 25.4 �� | 35.14 | 2 | |||||||
2025 | 0 | 0.0 | 91.6% | 0 | 0.0 | 0.00 | 0 | |||||||
2026 | 4,531 | 8.0 | 99.6% | 203,895 | 11.1 | 45.00 | 1 | |||||||
2027 & Thereafter | 0 | 0.0 | 99.6% | 0 | 0.0 | 0.00 | 0 | |||||||
Vacant | 210 | 0.4 | 100.0% | 0 | 0.0 | 0.00 | 0 | |||||||
Total / Wtd. Avg. | 56,643 | 100.0% | $1,838,014 | 100.0% | $32.57 | 9 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. |
B-44 |
austin block 21 |
The following table presents certain information relating to historical commercial occupancy at the Austin Block 21 Property:
Historical Leased %(1)
2013 | 2014 | As of 1/5/2016 | ||
84.4% | 85.7% | 99.6% |
(1) | As provided by the borrower and reflects average occupancy for the Retail/Office Component for the indicated year ended December 31 unless specified otherwise. |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow, on an aggregate basis and per room, at the Austin Block 21 Property: |
Cash Flow Analysis(1)
2013(2) | 2014(2) | TTM 11/30/2015 | Underwritten | Underwritten | ||||||
Rooms Revenue | $23,830,833 | $26,704,516 | $25,922,152 | $25,922,152 | $103,276 | |||||
Food & Beverage Revenue | 13,497,982 | 13,847,454 | 13,807,034 | 13,807,034 | 55,008 | |||||
ACL Live Revenue(4) | 14,859,585 | 18,474,489 | 19,492,344 | 19,492,344 | 77,659 | |||||
Other Operating Departments Revenue(5) | 2,233,888 | 2,351,060 | 2,377,587 | 2,377,587 | 9,472 | |||||
Commercial Revenue(6) (7) | 1,718,323 | 2,406,567 | 2,567,316 | 2,979,328 | 11,870 | |||||
Total Revenue | $56,140,611 | $63,784,086 | $64,166,433 | $64,578,445 | $257,285 | |||||
Rooms Expense | $4,631,524 | $5,117,388 | $4,863,841 | $4,863,841 | $19,378 | |||||
Food & Beverage Expense | 9,935,672 | 10,023,545 | 9,819,144 | 9,819,144 | 39,120 | |||||
Other Operating Departments Expense | 1,802,705 | 1,656,224 | 1,360,230 | 1,360,230 | 5,419 | |||||
ACL Live Expense | 12,372,208 | 14,312,795 | 15,121,523 | 15,121,523 | 60,245 | |||||
Commercial Expense | 794,445 | 1,058,559 | 1,001,224 | 1,159,460 | 4,619 | |||||
Total Departmental Expense | $29,536,554 | $32,168,511 | $32,165,962 | $32,324,198 | $128,782 | |||||
Total Undistributed Expense | 9,909,512 | 10,855,533 | 11,032,553 | 11,032,553 | 43,954 | |||||
Total Fixed Expense | 3,102,591 | 3,140,713 | 3,885,699 | 3,902,666 | 15,548 | |||||
Total Operating Expenses | $42,548,657 | $46,164,757 | $47,084,214 | $47,259,417 | $188,285 | |||||
Net Operating Income | $13,591,954 | $17,619,329 | $17,082,219 | $17,319,028 | $69,000 | |||||
FF&E Reserve(8) | 1,677,721 | 1,811,334 | 1,779,484 | 1,767,859 | 7,043 | |||||
Net Cash Flow | $11,914,233 | $15,807,994 | $15,302,735 | $15,551,170 | $61,957 |
(1) | Certain items such as straight line rent, interest expense, interest income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Increase in Net Cash Flow between 2013 and 2014 is due to stabilization of the ACL Music Venue Component and increase in RevPAR at the W Austin Hotel. |
(3) | Underwritten $ per Room doesnot account for the ACL Music Venue Component or the Retail/Office Component. |
(4) | ACL Live Revenue consists of revenue generated by ACL Music Venue Component. |
(5) | Other Operating Departments Revenue includes miscellaneous revenues. |
(6) | Commercial Revenue consists of revenue generated by contractual leases in the Retail/Office Component. |
(7) | Commercial Revenue is based on in-place commercial leases with rent steps through August 2016. |
(8) | Underwritten FF&E Reserve consists of 4.0% of departmental W Austin Hotel Component revenues and underwritten capital expenditures for the ACL Music Venue Component and Retail/Office Component. |
■ | Appraisal. According to the appraisal, the Austin Block 21 Property had an “as-is” appraised value of $239,000,000 as of November 18, 2015. |
■ | Environmental Matters. According to a Phase I environmental report, dated November 10, 2015, there are no recognized environmental conditions or recommendations for further action at the Austin Block 21 Property. |
■ | Market Overview and Competition.The Austin Block 21 Property is located in the Austin, Texas central business district submarket. The W Austin Hotel Component’s competitive set has an average occupancy of 82.2%, ADR of $284.11 and RevPAR of $233.53 as of the trailing 12-month period ended November 30, 2015 per the November 2015 travel research report. |
B-45 |
austin block 21 |
The following table presents certain information relating to the primary competition for the W Austin Hotel Component:
Competitive Set(1)
Property | Number of Rooms | Year Built | TTM November 2015 Occupancy | TTM November | TTM November | |||||
W Austin Hotel Component | 251 | 2010 | 81.6% | $346.81 | $282.95 | |||||
Competitive Set | ||||||||||
Omni Austin Hotel Downtown | 392 | 1986 | NAV | NAV | NAV | |||||
Hyatt Driskill Hotel | 189 | 1886 | NAV | NAV | NAV | |||||
Four Seasons Hotel Austin | 291 | 1987 | NAV | NAV | NAV | |||||
InterContinental Stephen F Austin Hotel | 190 | 2000 | NAV | NAV | NAV | |||||
Hotel San Jose | 40 | 1999 | NAV | NAV | NAV | |||||
Total / Wtd. Avg. Competitive Set | 82.2% | $284.11 | $233.53 |
(1) | Source: November 2015 travel research report. |
■ | The Borrower. The borrower is Stratus Block 21, L.L.C., a single-purpose, single-asset entity. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Austin Block 21 Loan. The non-recourse carveout guarantor under the Austin Block 21 Loan is Stratus Properties Inc., an indirect owner of the borrower. |
Stratus Properties Inc. is a real estate company, primarily engaged in the development and management of commercial, hotel, entertainment, and multi and single-family residential real estate properties. Stratus Properties Inc.’s portfolio includes master planned communities in Austin locations such as Barton Creek, Circle C, Lantana, and The Oaks at Lakeway.
■ | Escrows. On the origination date, the borrower funded (i) a tax reserve in the amount of $353,261, (ii) an insurance reserve in the amount of $144,502 and (iii) a gap rent reserve for suite 1a (the ACL Showcase Venue ground floor retail space) of the Retail/Office Component in the amount of $67,787. |
On each due date, the borrower is required to fund (i) a tax and insurance reserve in an amount equal to one-twelfth of the amount that the lender reasonably estimates will be necessary to pay taxes and insurance premiums over the then succeeding 12-month period, (ii) a tenant improvements and leasing commissions reserve in the amount of $4,720, (iii) after an ACL Music Venue Trigger Event until the conclusion of any subsequent trailing 12-month period (as of the last day of any calendar quarter) an ACL Music Venue Trigger Event ceases to exist, a reserve in an amount equal to $350,000 capped at $4,000,000, (iv) a capital expenditure reserve in connection with the Retail/Office Component in an amount equal to $944, (v) a capital expenditure reserve in connection with the ACL Music Venue Component in an amount equal to $1,296 and (vi) an FF&E reserve in an amount equal to the greater of (i) the monthly amount required by Starwood to be reserved pursuant to the Operating Agreement or (ii) one-twelfth of 4% of the revenues from the W Austin Hotel Component of the Austin Block 21 Property for the previous 12 month period as determined on the anniversary of the last day of the calendar month in which the origination date occurs.
Notwithstanding the foregoing, the borrower is not required to make a deposit into the FF&E reserve in order to reserve amounts in respect of capital expenditures made in connection with the W Austin Hotel Component to the extent the equivalent deposits have already been paid or are paid by the borrower directly to Starwood pursuant to the Operating Agreement, provided (i) the borrower provides the lender with satisfactory evidence that such amounts (which, as of the origination date, is required to be at least 4.0% of gross revenues of the W Austin Hotel Component) have been reserved in a Starwood controlled FF&E reserve account, (ii) the Operating Agreement is and will continue to be in full force and effect and will not be subject to any default beyond any applicable grace or notice and cure period by the borrower, and (iii) no material adverse change should, in the lender’s reasonable determination, have occurred with respect to Starwood such that the amounts reserved in respect of capital expenditures made in connection with the W Austin Hotel Component which the borrower is required to reserve pursuant to the Operating Agreement in the FF&E reserve account has, in the lender’s reasonable determination, been materially jeopardized. As of the end of 2015, funds totaling $3,441,616 have been deposited in the FF&E reserve account maintained by Starwood to be used in part towards a property improvement plan estimated to
B-46 |
austin block 21 |
cost $4,200,000. Monthly deposits are required to be made into the FF&E reserve account maintained by Starwood in accordance with the Austin Block 21 Loan agreement.
An “ACL Music Venue Trigger Event” means any period commencing upon the net operating income attributable to the ACL Music Venue Component (as calculated under the Austin Block 21 Loan documents) for the trailing 12-month period (as of the last day of any fiscal quarter) falling below $2,100,000 and ending at the conclusion of any subsequent 12-month period ending on the last day of a fiscal quarter for which the net operating income attributable to the ACL Music Venue Component is greater than $2,100,000.
■ | Lockbox and Cash Management. With respect to the W Austin Hotel Component, the Austin Block 21 Loan documents require all credit card receivables, cash revenues and all other money received by the borrower or Starwood to be deposited into one or more accounts established under the Operating Agreement controlled by Starwood, pledged to the lender and subject to an account control agreement (each, a “Manager Account”) or to a FF&E reserve account established under the Operating Agreement (the “Approved FF&E Account”), and in the name of the borrower (which account is pledged to the lender and subject to an account control agreement in favor of the lender) (or, if Starwood is terminated, all such credit card receivables, cash revenues and other amounts are required to be deposited into the lender-controlled lockbox account or cash management account until a replacement hotel operator has been engaged and has established replacement Manager Accounts and a replacement Approved FF&E Account). Subject to the rights of the lender following the termination of Starwood or the occurrence of an event giving rise to the right of the borrower or the lender to terminate Starwood, Starwood is required to pay all costs and expenses incurred in connection with the operation of the W Austin Hotel Component, including, but not limited to, operating expenses and capital expenditures, and all other amounts required or permitted to be paid by Starwood in the performance of its duties and obligations with respect to the W Austin Hotel Component out of the Manager Accounts, the Approved FF&E Account and a zero-balance disbursement account. Unless (i) the Operating Agreement has been terminated or (ii)(a) the Austin Block 21 Loan has been accelerated following an event of default under the Austin Block 21 Loan documents and (b) Starwood is in default under the Operating Agreement, Starwood will have unrestricted access to the Manager Accounts and the Approved FF&E Account. After all payments have been made in connection with the operation of the W Austin Hotel Component, all excess funds are required to be delivered to the lockbox account. |
With respect to the ACL Music Venue Component, the Austin Block 21 Loan documents require that all cash revenues received by the borrower or the operator of the ACL Music Venue Component (the tenant, which is a borrower affiliate) be deposited into an account maintained pursuant to the Austin Block 21 Loan documents, which only contains revenue derived from the operation of a music, entertainment and private event business at the ACL Music Venue Component (the “ACL Music Venue Account”) (which account is pledged to the lender and subject to an account control agreement in favor of the lender) or into an account maintained pursuant to the Austin Block 21 Loan documents, which only contains amounts relating to operating expenses at the ACL Music Venue Component (the “ACL Music Venue Settlement Account”) (which account is pledged to the lender and subject to an account control agreement in favor of the lender) (or, if the ACL Music Venue Component lease is terminated, all cash revenues are required to be deposited into the lockbox account or cash management account until a replacement ACL Music Venue Component lease has been entered into and an applicable ACL Music Venue Account and ACL Music Venue Settlement Account, as appropriate, have been established). Subject to the rights of the lender or borrower following the termination of the ACL Music Venue Component lease, the operator of the ACL Music Venue Component is permitted to pay all costs and expenses incurred in connection with the operation of the ACL Music Venue Component, including, but not limited to operating expenses and capital expenditures, and all other amounts required or permitted to be paid by the operator in the performance of its duties and obligations with respect to the Austin Block 21 Property solely out of the ACL Music Venue Account or the ACL Music Venue Settlement Account and no other account. Unless (a) the ACL Music Venue Component lease has been terminated or (b) the Austin Block 21 Loan has been accelerated following an event of default under the Austin Block 21 Loan documents, the operator of the ACL Music Venue Component will have unrestricted access to the ACL Music Venue Account and the ACL Music Venue Settlement Account. After all operating expenses have been paid in relation to the ACL Music Venue Component, all excess funds, subject to certain funds which may be withheld by the operator are required to be delivered to the lockbox account as a rental payment pursuant to the ACL Music Venue Component lease.
B-47 |
austin block 21 |
In connection with the origination of the Austin Block 21 Loan, the borrower established a lender controlled lockbox account, subject to a lockbox account agreement which provides that the borrower will have no access to funds in the lockbox account and that all amounts in the lockbox account will be swept on each business day to a lender-controlled cash management account. The Austin Block 21 Loan documents require the borrower to deliver notices to the tenants (including the operator under the ACL Music Venue Component lease with respect to any payments to the borrower required under the ACL Music Venue Component lease) instructing them to remit all payments under the leases into the lockbox account. In addition, the borrower is required to cause all amounts otherwise required to be paid or remitted by the property manager to the borrower or by Starwood to the borrower pursuant to the Operating Agreement and all other cash revenues or other amounts received by the borrower, property manager or Starwood with respect to the Austin Block 21 Property to be remitted directly to the cash management account or the lockbox account and, in the event that any such amounts or any other amounts in respect of the Austin Block 21 Property are paid directly to the borrower, the property manager or Starwood, such party is required to cause such amounts to be deposited into the cash management account or the lockbox account within one business day following receipt, except for such other amounts that are required to be deposited into the Manager Accounts, disbursement account or the FF&E reserve account pursuant to the Operating Agreement or the ACL Music Venue Account or the ACL Music Venue Settlement Account pursuant to the ACL Music Venue Component lease.
Provided that no Austin Block 21 Trigger Period or event of default under the Austin Block 21 Loan is continuing, at the end of each month (or less frequently at the borrower’s option) all amounts on deposit in the cash management account in excess of the amounts required to be paid to or reserved with the lender on the next due date are required to be remitted to an operating account controlled by the borrower.
On each due date during an Austin Block 21 Trigger Period or, at the lender’s discretion, during an event of default under the Austin Block 21 Loan, the Austin Block 21 Loan documents require that all amounts on deposit in the cash management account, in excess of the amount required on the next due date to pay debt service and required reserves and a deposit to borrower’s operating account for the payment of budgeted operating expenses, subject to the terms of the Austin Block 21 Loan documents be reserved in an excess cash flow account as additional collateral for the Austin Block 21 Loan.
An “Austin Block 21 Trigger Period” means any period (i) commencing upon the debt service coverage ratio (as calculated under the Austin Block 21 Loan documents) for the trailing 12-month period (as of the last day of any fiscal quarter) falling below 1.25x and ending at the conclusion of the second consecutive fiscal quarter for which the debt service coverage ratio is equal to or greater than 1.30x, (ii) commencing upon the borrower’s failure to deliver monthly, quarterly or annual financial reports and ending when such reports are delivered and indicate that an Austin Block 21 Trigger Period pursuant to clause (i) is not ongoing, (iii) commencing upon the date the Austin Block 21 Property is not subject to an approved hotel operating agreement and ending when the Austin Block 21 Property is subject to a replacement approved hotel operating agreement and (iv) commencing when the borrower sponsor fails to maintain a net worth in excess of $125,000,000 excluding any assets attributable to the Austin Block 21 Property, or liquid assets in excess of $10,000,000 (excluding any funds that are held by the lender in one or more accounts and sub-accounts established pursuant to the Austin Block 21 Loan documents) and ending when such net worth and liquid assets thresholds are satisfied.
■ | Property Management. The W Austin Hotel Component is managed by W Hotel Management, Inc., an affiliate of Starwood, pursuant to the Operating Agreement. The Retail/Office Component is managed by Peloton Real Estate Management Austin, LLC (“Peloton”), pursuant to a management agreement. Peloton is not affiliated with the borrower. The ACL Music Venue Component is managed and controlled by a borrower affiliate, Block 21 Service Company LLC (“Block 21”), pursuant to the ACL Music Venue Component lease. Under the related loan documents, the respective portions of the Austin Block 21 Property are required to remain managed by Starwood and Peloton, certain pre-approved management companies or any other management company approved by the lender and with respect to which a rating agency confirmation has been received. With respect to the Retail/Office Component, the lender has the right to replace, or require the borrower to replace, the property manager with a property manager selected by the lender (i) during the continuance of an event of default under the Austin Block 21 Loan Combination, (ii) upon the occurrence of a material default by the property manager, (iii) following any foreclosure, conveyance in lieu of foreclosure or other similar transaction, (iv) if the property manager files for or is the subject of a petition in bankruptcy or (v) if a trustee or receiver is appointed for the property manager’s assets or the property manager makes an assignment for the benefit of its creditors or is |
B-48 |
austin block 21 |
adjudicated insolvent. With respect to the W Austin Hotel Component, the lender has the right to replace Starwood with a hotel operator selected by the lender following any foreclosure, conveyance in lieu of foreclosure or other similar transaction if Starwood has then committed or suffered to exist an event of default pursuant to the hotel Operating Agreement which remains uncured for which the borrower, or a successor borrower, would have the right to terminate the OperatingAgreement pursuant to the terms thereof. With respect to the ACL Music Venue Component, the lender may, in its sole discretion, terminate the ACL Music Venue Component lease following any foreclosure or conveyance in lieu of foreclosure regardless of whether the operator is in default or in compliance with the terms of the ACL Music Venue Component lease and without the payment of any termination fees. |
Component | Manager | Borrower Affiliate? |
W Austin Hotel Component | W Hotel Management Inc. | No |
Retail/Office Component | Peloton Real Estate Management Austin, LLC | No |
ACL Music Venue Component | Block 21 Service Company LLC | Yes |
■ | Release of Collateral. Provided no event of default under the Austin Block 21 Loan Combination is then continuing, at any time on or after the first due date following the second anniversary of the securitization Closing Date, the borrower may obtain the release of (a) all of the Austin Block 21 Property or (b) the ACL Music Venue Component and/or the Retail/Office Component from the lien of the Austin Block 21 Loan documents. |
With respect to a release, the borrower is required to satisfy certain conditions as set forth in the Austin Block 21 Loan documents, including among others: (i) delivery of defeasance collateral in an amount sufficient (x) to pay the interest and principal due on such payment dates in respect of the Austin Block 21 Loan Combination equal to the portion of the outstanding principal balance being defeased and (y) to repay the applicable portion of the outstanding principal balance of the Austin Block 21 Loan Combination on a payment date on or after the payment date which occurs in October 2025; (ii) delivery of a REMIC opinion; and (iii) delivery of a rating agency confirmation with respect to such defeasance. In addition to the requirements set forth in clauses (i) through (iii), with respect to a partial release in connection with the sale of the ACL Music Venue Component and/or the Retail/Office Component to an unaffiliated third party, the borrower may obtain the release of such properties, upon the satisfaction of certain conditions, including (x) the partial defeasance of the greater of (a) 80% of the net sales proceeds from the sale of the applicable portion of the property being defeased, and (b) 115% of the allocated loan amount of the applicable property being defeased, which is (a) $37,000,000 for the ACL Music Venue Component or (b) $20,000,000 for the Retail/Office Component and (y) after giving effect to the partial release, the debt service coverage ratio (as calculated under the Austin Block 21 Loan documents) for the remaining Austin Block 21 Property for the 12-month period preceding the end of the most recent fiscal quarter is no less than the greater of (a) 1.51x and (b) the debt service coverage ratio immediately prior to the release.
■ | Mezzanine or Secured Subordinate Indebtedness.Not permitted. |
■ | Condominium Structure.The Austin Block 21 Property consists of two condominium regimes, one of which consists of private residences. The borrower has a 55.2278% aggregate percentage interest in the common elements of the first condominium, and the remaining 44.7722% aggregate percentage interest in the common elements of the first condominium is owned entirely by the owners of the private residences. The borrower has a 61.2195% aggregate percentage interest in the common elements of the second condominium, and the remaining 38.7805% aggregate percentage interest in the common elements of the second condominium is owned entirely by the owners of the private residences. |
B-49 |
austin block 21 |
■ | Terrorism Insurance. So long as TRIPRA or a similar or subsequent statute is in effect, the borrower is required to maintain terrorism insurance for foreign and domestic acts (as those terms are defined in TRIPRA or a similar or subsequent statute) in an amount equal to the full replacement cost of the Austin Block 21 Property (plus 18 months of rental loss and/or business interruption coverage plus an additional period of indemnity covering the 12 months following restoration). If TRIPRA or a similar or subsequent statute is not in effect, then provided that terrorism insurance is commercially available, the borrower will be required to carry terrorism insurance throughout the term of the Austin Block 21 Loan as described in the preceding sentence, but in that event the borrower will not be required to spend more than two times the amount of the insurance premium that is payable at that time in respect of the property and business interruption/rental loss insurance required under the Austin Block 21 Loan documents (without giving effect to the cost of terrorism and earthquake components of such property and business interruption/rental loss insurance), and if the cost of terrorism insurance exceeds such amount, then the borrower will be required to purchase the maximum amount of terrorism insurance available with funds equal to such amount. In either such case, terrorism insurance may not have a deductible in excess of $50,000. The required terrorism insurance may be included in a blanket policy, provided that the borrower provides evidence satisfactory to the lender that the insurance premiums for the Austin Block 21 Property are separately allocated to the Austin Block 21 Property and that the policy will provide the same protection as a separate policy. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-50 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
B-51 |
Hotel on Rivington
B-52 |
Hotel on Rivington
B-53 |
Hotel on Rivington
Mortgaged Property Information | Mortgage Loan Information | ||||||||||||||
Number of Mortgaged Properties | 1 | Loan Seller | CGMRC | ||||||||||||
Location (City / State) | New York, New York | Cut-off Date Principal Balance | $36,500,000 | ||||||||||||
Property Type | Hospitality | Cut-off Date Principal Balance per Room | $334,862.39 | ||||||||||||
Size (Rooms) | 109 | Percentage of Initial Pool Balance | 5.3% | ||||||||||||
Total TTM Occupancy as of 11/30/2015 | 76.2% | Number of Related Mortgage Loans | None | ||||||||||||
Owned TTM Occupancy as of 11/30/2015 | 76.2% | Type of Security | Fee Simple | ||||||||||||
Year Built / Latest Renovation | 2003 / 2015 | Mortgage Rate | 4.96000% | ||||||||||||
Appraised Value | $66,000,000 | Original Term to Maturity (Months) | 120 | ||||||||||||
Original Amortization Term (Months) | 360 | ||||||||||||||
Underwritten Revenues | $10,282,902 | Original Interest Only Period (Months) | 60 | ||||||||||||
Underwritten Expenses | $6,564,082 | ||||||||||||||
Underwritten Net Operating Income (NOI) | $3,718,821 | Escrows | |||||||||||||
Underwritten Net Cash Flow (NCF) | $3,332,714 | Upfront | Monthly | ||||||||||||
Cut-off Date LTV Ratio | 55.3% | Taxes | $350,724 | $116,908 | |||||||||||
Maturity Date LTV Ratio(1) | 44.9% | Insurance | $127,814 | $9,832 | |||||||||||
DSCR Based on Underwritten NOI / NCF | 1.59x / 1.42x | FF&E | $0 | $38,582 | |||||||||||
Debt Yield Based on Underwritten NOI / NCF | 10.2% / 9.1% | Other(2) | $450,688 | $90,000 | |||||||||||
Sources and Uses | |||||||||||||||
Sources | $ | % | Uses | $ | % | ||||||||||
Loan Amount | $36,500,000 | 99.7% | Loan Payoff | $35,003,095 | 95.6% | ||||||||||
Other Sources | 100,000 | 0.3 | Reserves | 929,226 | 2.5 | ||||||||||
Closing Costs | 583,522 | 1.6 | |||||||||||||
Principal Equity Distribution | 84,158 | 0.2 | |||||||||||||
Total Sources | $36,600,000 | 100.0% | Total Uses | $36,600,000 | 100.0% | ||||||||||
(1) | The Maturity Date LTV Ratio is calculated utilizing the “as stabilized” appraised value of $75,000,000. The Maturity Date LTV Ratio calculated on the basis of the “as-is” appraised value of $66,000,000 is 51.0%. See “—Appraisal” below. |
(2) | Other reserve represents an upfront unfunded obligations reserve of $325,000 and an upfront deferred maintenance reserve of $125,688. Additionally, there is a monthly seasonality reserve of $90,000. See “—Escrows” below. |
n | The Mortgage Loan.The mortgage loan (the “Hotel on Rivington Loan”) is evidenced by a note in the original principal amount of $36,500,000 secured by a first mortgage encumbering the borrower’s fee simple interest in a full service hotel located in New York, New York (the “Hotel on Rivington Property”). The Hotel on Rivington Loan was originated by Citigroup Global Markets Realty Corp. on February 8, 2016 and represents approximately 5.3% of the Initial Pool Balance. The note evidencing the Hotel on Rivington Loan has an outstanding principal balance as of the Cut-off Date of $36,500,000 and an interest rate of 4.96000%per annum. The proceeds of the Hotel on Rivington Loan were primarily used to refinance the existing debt on the Hotel on Rivington Property, fund reserves, pay origination costs and return equity to the borrower sponsor. |
The Hotel on Rivington Loan had an initial term of 120 months and has a remaining term of 119 months as of the Cut-off Date. The Hotel on Rivington Loan requires interest only payments on each due date through and including the due date occurring in March 2021 and thereafter requires payments of interest and principal based on a 30-year amortization schedule. The scheduled maturity date of the Hotel on Rivington Loan is the due date in March 2026. Voluntary prepayment of the Hotel on Rivington Loan without payment of any prepayment premium is permitted on or after December 2025. Provided no event of default under the Hotel on Rivington Loan documents occurred and is continuing, at any time after the second anniversary of the securitization Closing Date, theHotel on Rivington Loan may be defeased with certain direct, non-callable obligations of the United States of America or other obligations which are “government securities” permitted under the Hotel on Rivington Loan documents. | |
n | The Mortgaged Property.The Hotel on Rivington Property is a 20-story, 109-room, full service, luxury, boutique hotel located at 107 Rivington Street in New York City. The Hotel on Rivington Property was constructed, by the borrower sponsor, in 2003. The Hotel on Rivington Property is situated midblock on the south side of Rivington Street, between Essex and Ludlow Streets, in the Lower East Side neighborhood of Manhattan. Guestrooms at the Hotel on Rivington Property are located on floors three through 19 with the following room mix: 15 regular king rooms, 12 deluxe king rooms, eight king rooms with soaking tubs, seven high king rooms, 13 double-double rooms, 15 corner king rooms with balconies, 11 high king rooms with tubs, eight corner king rooms with tubs, 14 studio suites, three unique rooms, one terrace suite and one owner’s suite. The guestrooms range in size from 265 SF to 400 SF and the suites range in size from 600 SF to 1,000 SF. Each of the guestrooms at the Hotel on Rivington Property features a flat-screen television, telephone and lounge chair, among other items, and approximately 60.0% of the guestrooms include outdoor terraces. Room amenities include Tempur-Pedic beds, soaking tubs, steam showers, complimentary Wi-Fi and floor to ceiling windows with views of the New York |
B-54 |
Hotel on Rivington
skyline. The Hotel on Rivington Property offers a variety of amenities including a two-level penthouse suite, lobby with restaurant/bar, in-room spa services, in-house salon, fitness center, concierge and business center. | |
The following table presents certain information relating to the estimated 2015 demand analysis with respect to the Hotel on Rivington Property based on market segmentation, as provided in the appraisal for the Hotel on Rivington Property: |
Estimated 2015 Market Mix Accommodated Room Night Demand(1)
Property | Leisure | Commercial | Meeting and Group |
Hotel on Rivington Property | 60.0% | 30.0% | 10.0% |
(1) | Source: Appraisal. |
The following table presents certain information relating to the TTM November 30, 2015 penetration rates relating to the Hotel on Rivington Property, as provided in the November 2015 travel research report for the Hotel on RivingtonProperty:
TTM November 30, 2015 Penetration Rates(1)
Property | Occupancy | ADR | RevPAR |
Hotel on Rivington Property | 95.2% | 90.4% | 86.1% |
(1) | Source: November 2015 travel research report. |
The following table presents certain information relating to historical occupancy, ADR and RevPAR at the Hotel on Rivington Property:
Hotel on Rivington Property
2013(1) | 2014(1) | TTM 11/30/2015(2) | ||||||
Occupancy | 83.9% | 80.9% | 76.2% | |||||
ADR | $298.95 | $302.98 | $308.25 | |||||
RevPAR | $250.78 | $244.98 | $234.79 |
(1) | Source: November 2015 travel research report. |
(2) | As provided by the borrower. |
B-55 |
Hotel on Rivington
n | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow, on an aggregate basis and per room, at the Hotel on Rivington Property: |
Cash Flow Analysis(1)
2012 | 2013 | 2014 | TTM 11/30/2015 | Underwritten | Underwritten | ||||||
Room Revenue | $9,180,531 | $9,538,811 | $9,381,521 | $9,341,308 | $9,341,308 | $85,700 | |||||
Food & Beverage Revenue(2) | 4,879,061 | 3,507,289 | 2,638,127 | 1,922,015 | 0 | 0 | |||||
Other Revenue(2)(3) | 285,360 | 575,843 | 291,277 | 311,351 | 941,594 | 8,638 | |||||
Total Revenue | $14,344,952 | $13,621,943 | $12,310,925 | $11,574,674 | $10,282,902 | $94,339 | |||||
Room Expense | $2,126,816 | $2,239,737 | $2,134,215 | $2,120,335 | $2,120,335 | $19,453 | |||||
Food & Beverage Expense(2) | 4,274,208 | 2,755,914 | 2,190,277 | 1,818,227 | 0 | 0 | |||||
Other Expense(2) | 313,691 | 344,464 | 296,900 | 263,612 | 263,612 | 2,418 | |||||
Total Departmental Expense | $6,714,715 | $5,340,115 | $4,621,392 | $4,202,174 | $2,383,947 | $21,871 | |||||
Total Undistributed Expense | 2,812,043 | 2,829,558 | 2,717,836 | 2,457,559 | 2,641,382 | 24,233 | |||||
Total Fixed Charges | 1,347,955 | 1,453,460 | 1,456,568 | 1,567,093 | 1,538,753 | 14,117 | |||||
Total Operating Expenses | $10,874,713 | $9,623,133 | $8,795,796 | $8,226,826 | $6,564,082 | $60,221 | |||||
Net Operating Income | $3,470,239 | $3,998,810 | $3,515,129 | $3,347,848 | $3,718,821 | $34,118 | |||||
FF&E | 0 | 0 | 0 | 0 | 386,106 | 3,542 | |||||
Net Cash Flow | $3,470,239 | $3,998,810 | $3,515,129 | $3,347,848 | $3,332,714 | $30,575 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Food & Beverage Revenue and Food & Beverage Expense were historically generated from the restaurant and lobby bar outlets and have been discontinued with the leasing of a new restaurant. Rental revenue and expenses for the new leased restaurant are included within Other Revenue and Other Expense. |
(3) | Underwritten Other Revenue consists of rental revenue for the new restaurant lease and recoveries totaling $600,000 plus 50.0% of the net penthouse operations. The remaining balance consists of miscellaneous other income that is also reflected in the historical information. Other Revenue in 2013 includes non-recurring insurance receipts and refunds attributable to Hurricane Sandy totaling $239,000. |
n | Appraisal. According to the appraisal, the Hotel on Rivington Property had an “as-is” appraised value of $66,000,000 as of November 30, 2015 and is expected to have an “as stabilized” appraised value of $75,000,000 as of January 1, 2018. |
n | Environmental Matters. According to the Phase I environmental report dated December 2, 2015, there are no recognized environmental conditions or recommendations for further action at the Hotel on Rivington Property. |
n | Market Overview and Competition. According to the appraisal, New York City is estimated to have accommodated roughly 56.4 million visitors in 2014 and was projected to welcome 58.1 million visitors in 2015. Per the appraisal, the expanded availability of hotel rooms has allowed the New York City hotel market to accommodate the increased demand from visitors. The Hotel on Rivington Property is located in the Lower East Side neighborhood which is within walking distance of several Downtown Manhattan neighborhoods including, Soho, Tribeca, Chinatown, Little Italy and the East Village. The Hotel on Rivington Property is situated approximately one block from the Essex Street-Delancey Street subway station and is close to a large number of restaurants, lounges/bars, music venues and other entertainment venues. According to a third party report, the Hotel on Rivington Property is part of the Lower Manhattan lodging submarket. As of November 2015, the Lower Manhattan lodging submarket contained a total of 180 hotels with a lodging inventory of 30,330 rooms. As of the trailing 12-month period ending November 2015, the Lower Manhattan lodging submarket achieved an aggregate occupancy level of 85.4% with an ADR of $262.99, reflecting a RevPAR of $224.63. |
B-56 |
Hotel on Rivington
The following table presents certain information relating to historical occupancy, ADR and RevPAR at the Hotel on Rivington Property and its competitive set, as provided in a market report for the Hotel on Rivington Property:
Historical Statistics(1)
Hotel on Rivington | Competitive Set | Penetration | ||||||||||||||||
2013 | 2014 | TTM | 2013 | 2014 |
TTM | 2013 | 2014 |
TTM 11/30/2015 | ||||||||||
Occupancy | 83.9% | 80.9% | 76.2% | 83.1% | 80.7% | 82.5% | 101.0% | 100.1% | 95.2% | |||||||||
ADR | $298.95 | $302.98 | $308.25 | $341.69 | $336.64 | $327.82 | 87.5% | 90.0% | 90.4% | |||||||||
RevPAR | $250.78 | $244.98 | $234.79 | $283.85 | $271.83 | $270.32 | 88.4% | 90.1% | 86.1% |
(1) | Source: November 2015 travel research report. |
(2) | As provided by the borrower. |
Hotel on Rivington Property Competitive Set(1)
Property | Number of Rooms | Year Opened | ||
Hotel on Rivington | 109 | 2003 | ||
Soho Grand Hotel | 353 | 1996 | ||
The Roxy Hotel Tribeca | 201 | 2000 | ||
Sixty LES | 141 | 2008 | ||
The Nolitan | 57 | 2011 | ||
The Ludlow Hotel | 184 | 2014 | ||
Total | 1,045 |
(1) | Source: November 2015 travel research report. |
n | The Borrower. The borrower is The Downtown LLC, a single-purpose, single-asset entity. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Hotel on Rivington Loan. The non-recourse carveout guarantor is Paul Stallings. Paul Stallings has been engaged in real estate development since 1979. He has either built or renovated over 30 properties, including the Hotel on Rivington Property. In addition to the Hotel on Rivington Property, he presently owns and operates 11 apartment buildings totaling 329 units. |
n | Escrows.On the origination date, the borrower funded aggregate reserves of $929,226 with respect to the Hotel on RivingtonProperty, comprised of (i) $350,724 for real estate taxes, (ii) $127,814 for insurance, (iii) $325,000 for unfunded obligations and (iv) $125,688 for deferred maintenance. |
On each monthly payment date, the borrower is required to fund (i) a tax reserve in an amount equal to 1/12 of the amount the lender estimates will be necessary to pay taxes over the then succeeding 12-month period, (ii) at the option of the lender, if the liability or casualty policy maintained by the borrower does not constitute an approved blanket or umbrella insurance policy under the Hotel on Rivington Loan documents, an insurance reserve in an amount equal to 1/12 of the amount the lender estimates will be necessary to pay insurance premiums over the then succeeding 12-month period and (iii) an FF&E reserve in an amount equal to the greater of (x) the amount required to be deposited on account of FF&E pursuant to any franchise agreement and (y) 1/12 of 4% of the greater of (A) the annual gross revenues for the hotel related operations at the Hotel on Rivington Property for the immediately preceding calendar year and (B) the projected annual gross revenues for the hotel related operations at the Hotel on Rivington Property as set forth in the approved annual budget; provided that notwithstanding anything to the contrary, if no approved annual budget exists for the applicable calendar year, the amount of the FF&E payment will be determined by the lender in its reasonable discretion. Additionally, the borrower is required to fund on each Seasonality Reserve Monthly Payment Date, a seasonality reserve in an amount equal to the applicable Seasonality Reserve Monthly Deposit.
A “Seasonality Reserve Monthly Payment Date” means each monthly payment date occurring in September, October, November and December of any calendar year during the term of the Hotel on Rivington Loan.
B-57 |
Hotel on Rivington
A “Seasonality Reserve Monthly Deposit” means (i) on each Seasonality Reserve Monthly Payment Date occurring in the 2016 calendar year, an amount equal to $90,000 and (ii) on each Seasonality Reserve Monthly Payment Date occurring in each subsequent calendar year during the term of the Hotel on Rivington Loan, an amount as determined in accordance with the Hotel on Rivington Loan documents. The Seasonality Reserve Monthly Deposit will be determined by the lender and, except in subsection (i) above with respect to the 2016 calendar year, will be equal to the quotient obtained by dividing (x) 110% of the aggregate Negative Monthly Amounts for the preceding calendar year by (y) four. Provided that no event of default has occurred and is then continuing, on each Seasonality Reserve Disbursement Date, the lender is required to (i) during the continuance of a Hotel on Rivington Trigger Period, disburse a portion of the seasonality reserve funds in an amount equal to the Negative Monthly Amount for the applicable corresponding month of the preceding calendar year to the cash management account to be disbursed in accordance with the Hotel on Rivington Loan documents, or (ii) if a Hotel on Rivington Trigger Period does not exist, use the same to satisfy (in whole or in part) the borrower’s obligations to make payments of debt service and deposits into the accounts then due and payable. Notwithstanding anything to the contrary, solely with respect to the 2017 calendar year, on the monthly payment date occurring in January and February of the 2017 calendar year, the lender is required to (provided that no event of default has occurred and is then continuing) (i) during the continuance of a Hotel on Rivington Trigger Period, disburse the Predetermined Seasonality Reserve Disbursement to the cash management account to be disbursed in accordance with the Hotel on Rivington Loan agreement or (ii) if a Hotel on Rivington Trigger Period does not exist, use the Predetermined Seasonality Reserve Disbursement to satisfy (in whole or in part) the borrower’s obligations to make payments of debt service and deposits into the accounts then due and payable and in either case, thereafter will have no obligation to make disbursements from the seasonality reserve account for the 2017 calendar year, except in its sole discretion.
A “Negative Monthly Amount” means with respect to any month in the immediately preceding calendar year covered by the applicable annual financial statements and delivered to the lender for such preceding calendar year, the amount, if any, by which operating income for the Hotel on Rivington Property for the calendar month is insufficient to establish a debt service coverage ratio of 1.00x based on such annual financial statements. The lender’s calculation of the debt service coverage ratio solely for the determination of Negative Monthly Amounts will be based on the actual amount of debt service which would be due for such period.
A“Seasonality Reserve Disbursement Date” means the monthly payment date occurring in a calendar month for which there was a Negative Monthly Amount in the corresponding month of the immediately preceding calendar year.
A “Predetermined Seasonality Reserve Disbursement” means (i) for the monthly payment date occurring in January 2017, an amount equal to $220,000 and (ii) for the monthly payment date occurring in February 2017, an amount equal to $140,000.
A “Hotel on Rivington Trigger Period” means a period commencing upon the occurrence of (a) an event of default and continuing until the cure of such event of default, (b) the debt service coverage ratio being less than 1.25x and continuing until the debt service coverage ratio is equal to or greater than 1.30x for two consecutive calendar quarters, (c) a Franchise Agreement Trigger Period and continuing until the Franchise Agreement Trigger Period ceases to exist, (d) if a Franchise Renewal Event has not occurred, the date that is 12 months prior to the scheduled expiration date of the franchise agreement, and continuing until the occurrence of a Franchise Renewal Event or (e) a manager bankruptcy event and continuing until the borrower’s replacement of the applicable manager in accordance with the terms of the Hotel on Rivington Loan agreement with a new manager that is a qualified manager engaged pursuant to a qualified management agreement.
B-58 |
Hotel on Rivington
A “Franchise Agreement Trigger Period” means a period (a) commencing upon the first to occur of (i) the borrower being in default under any franchise agreement in place beyond any applicable notice and cure periods, (ii) the borrower or franchisor giving notice that it is terminating any franchise agreement in place, (iii) any termination or cancellation of any franchise agreement in place (including, without limitation, rejection in any bankruptcy or similar insolvency proceeding of franchisor) and/or any franchise agreement in place expiring or otherwise failing to be in full force and effect, (iv) any bankruptcy or similar insolvency of the franchisor, (v) the Hotel on Rivington Property failing to be operated, “flagged” and/or branded pursuant to any franchise agreement in place and (vi) any permit applicable to any franchise agreement in place ceasing to be in full force and effect; and (B) expiring upon the lender’s receipt of evidence reasonably acceptable to the lender of (1) (a) the satisfaction of the Franchise Agreement Cure Conditions or (b) the branding, “flagging” and operation of the Hotel on Rivington Property pursuant to a replacement qualified franchise agreement entered into in accordance with the terms of the Hotel on Rivington Loan documents and (2) to the extent a property improvement plan (“PIP”) is required in connection with the foregoing, the deposit of the corresponding PIP deposit into the PIP reserve account in accordance with the Hotel on Rivington Loan agreement.
A “Franchise Renewal Event” means an event that will occur upon the lender’s receipt of reasonably acceptable evidence that (i) the related franchise agreement in place has been extended or a replacement qualified franchise agreement has been entered into, in each case for a term expiring no earlier than three years after the maturity date of the Hotel on Rivington Loan and otherwise in accordance with the Hotel on Rivington Loan documents, (ii) such franchise agreement in place or replacement qualified franchise agreement is in full force and effect with no defaults and (iii) to the extent a PIP is required, the corresponding PIP deposit has been deposited in the PIP reserve account in accordance with the Hotel on Rivington Loan documents.
A “Franchise Agreement Cure Condition” means (i) the borrower has cured all defaults under any franchise agreement in place, (ii) the borrower and the applicable franchisor have re-affirmed any franchise agreement in place as being in full force and effect, (iii) with respect to any applicable bankruptcy or insolvency proceedings involving the franchisor or any franchise agreement in place, such franchisor is no longer insolvent or subject to any bankruptcy or insolvency proceedings and has affirmed such franchise agreement pursuant to a final, non-appealable order of a court of competent jurisdiction, (iv) the Hotel on Rivington Property continues to be operated, “flagged” and branded pursuant to any franchise agreement in place and (v) all permits applicable to any related franchise agreement in place are in full force and effect.
Lockbox and Cash Management. The Hotel on Rivington Loan is structured with a hard lockbox and springing cash management. The lockbox was initially established in connection with prior financing that was refinanced by the Hotel on Rivington Loan. At closing, the prior lender terminated the control agreement in connection with the lockbox and the lockbox bank entered into a new control agreement with the lender. The borrower sent letters to tenants directing such tenants to pay rent directly to the lender-controlled lockbox account and the borrower is required to deposit all revenue generated by the Hotel on Rivington Property in the lockbox account. Prior to the occurrence of a Hotel on Rivington Trigger Period, funds in the lockbox account are disbursed to or at the direction of the borrower. If a Hotel on Rivington Trigger Period exists, all sums on deposit in the lockbox account are required to be swept on a daily basis into a cash management account for the payment of, among other things, debt service, property operating expenses, and the funding of monthly escrows, with any excess to be held by the lender in an excess cash flow reserve account. |
n | Property Management. The Hotel on Rivington Property is self-managed. |
n | Mezzanine or Subordinate Indebtedness. Not permitted. |
n | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy that provides coverage for terrorism in an amount equal to the full replacement cost of the Hotel on Rivington Property (plus 18 months of rental loss and/or business interruption coverage and an additional period of indemnity covering the six months following restoration). The “all-risk” policy containing terrorism insurance is required to contain a deductible no larger than $10,000. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-59 |
west la office – 350 south beverly drive
B-60 |
west la office – 350 south beverly drive
B-61 |
west la office – 350 south beverly drive
| |||||
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | BNYM | ||
Location (City/State) | Beverly Hills, California | Cut-off Date Principal Balance | $34,600,000 | ||
Property Type | Office | Cut-off Date Principal Balance per SF | $573.98 | ||
Size (SF) | 60,281 | Percentage of Initial Pool Balance | 5.0% | ||
Total Occupancy as of 1/1/2016 | 90.7% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 1/1/2016 | 90.7% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 1989 / NAP | Mortgage Rate | 5.07000% | ||
Appraised Value | $48,200,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Underwritten Revenues | $4,032,780 | Original Interest Only Term (Months) | 48 | ||
Underwritten Expenses | $1,244,869 | ||||
Underwritten Net Operating Income (NOI) | $2,787,911 | Escrows(2) | |||
Underwritten Net Cash Flow (NCF) | $2,714,256 | Upfront | Monthly | ||
Cut-off Date LTV Ratio | 71.8% | Taxes | $0 | $44,550 | |
Maturity Date LTV Ratio | 65.0% | Insurance | $0 | $0 | |
DSCR Based on Underwritten NOI / NCF(1) | 1.24x / 1.21x | Replacement Reserve | $0 | $1,959 | |
Debt Yield Based on Underwritten NOI / NCF | 8.1% / 7.8% | TI/LC | $225,000 | $6,279 |
Sources and Uses | ||||||
Sources | $ | % | Uses | $ | % | |
Loan Amount | $34,600,000 | 71.5% | Purchase Price | $48,000,000 | 99.2% | |
Principal’s New Cash Contribution | 13,805,583 | 28.5 | Reserves | 225,000 | 0.5 | |
Closing Costs | 180,583 | 0.4 | ||||
Total Sources | $48,405,583 | 100.0% | Total Uses | $48,405,583 | 100.0% |
(1) | Based on the current interest only payments for the 350 South Beverly Drive Loan, Underwritten NOI DSCR and Underwritten NCF DSCR are 1.57x and 1.53x, respectively. |
(2) | See “—Escrows” below. |
■ | The Mortgage Loan. The West LA Office - 350 South Beverly Drive loan (“350 South Beverly Drive Loan”) is a $34,600,000 fixed rate loan secured by a first mortgage encumbering the borrower’s fee simple interest in a 60,281 SF office building located at 350 South Beverly Drive, Beverly Hills, California (the “350 South Beverly Drive Property”). The 350 South Beverly Drive Loan was originated by The Bank of New York Mellon on December 29, 2015. The 350 South Beverly Drive Loan has an outstanding principal balance as of the Cut-off Date of $34,600,000, which represents 5.0% of the Initial Pool Balance and accrues interest at an interest rate of 5.07000%per annum. Proceeds of the 350 South Beverly Drive Loan were used to acquire the 350 South Beverly Drive Property, fund reserves and pay loan origination costs. |
The 350 South Beverly Drive Loan had an initial term of 120 months and has a remaining term as of the Cut-off Date of 117 months. The 350 South Beverly Drive Loan requires interest only payments on each due date through and including the due date in January 2020 and thereafter requires payments of principal and interest based on a 30-year amortization schedule. The scheduled maturity date of the 350 South Beverly Drive Loan is the due date in January 2026. The 350 South Beverly Drive Loan may be voluntarily prepaid on or after the due date in February 2018 with the payment of a prepayment fee equal to the greater of (i) a yield maintenance premium calculated based on the present values of the remaining scheduled principal and interest payments and (ii) 1% of the principal amount being prepaid. Voluntary prepayment of the 350 South Beverly Drive Loan without payment of any prepayment premium is permitted on or after the due date in July 2025.
■ | The Mortgaged Property.The 350 South Beverly Drive Property is a 60,281 SF three-story office building with a four-story underground parking structure located on a 0.64 acre parcel in Beverly Hills, California. The 350 South Beverly Drive Property was completed in 1989 and was constructed with steel frame with composite steel decking. The 350 South Beverly Drive Property is located south of the Beverly Hills “Golden Triangle” and benefits from frontage along both Beverly Drive and Olympic Boulevard, two highly trafficked corridors. The 350 South Beverly Drive Property predominantly features traditional office space which accounts for 86.8% of the net rentable area, occupying 52,351 SF. The retail space on the ground floor is leased to First Citizens Bank and accounts for 13.2% of the net rentable area, occupying 7,930 SF. The 350 South Beverly Drive Property benefits from a rent roll consisting of a variety of tenants with every tenant except for Untitled Entertainment (28.3% of NRA) occupying under 14.0% of the total net rentable area. |
B-62 |
west la office – 350 south beverly drive
The 350 South Beverly Drive Property collateral also includes a 241 space subterranean parking garage. Historically, the seller operated the garage in-house; however, the sponsor leased the parking garage to United Valet Parking, Inc. The lease is for five years at a rate of $751,920 per year, increasing by 3.0% annually.
The following table presents certain information relating to the tenants at the 350 South Beverly Drive Property:
Largest Tenants Based on Underwritten Base Rent
Tenant Name | Credit Rating (Fitch/MIS/S&P)(1) | Tenant GLA | % of | UW Base Rent | % of Total | UW Base Rent | Lease Expiration | Renewal / Extension Options | ||||||||
Untitled Entertainment | NR/NR/NR | 17,064 | 28.3% | $819,072 | 30.7% | $48.00 | 3/31/2020 | 1, 5-year option | ||||||||
First Citizens Bank | NR/NR/A3 | 7,930 | 13.2 | 471,048 | 17.7 | 59.40 | 7/31/2023 | 2, 5-year options | ||||||||
Latitude Management | NR/NR/NR | 7,381 | 12.2 | 328,896 | 12.3 | 44.56 | 2/28/2019 | 1, 5-year option | ||||||||
Strom, Madison, Sloan | NR/NR/NR | 4,668 | 7.7 | 260,148 | 9.8 | 55.73 | 5/31/2022 | 1, 5-year option | ||||||||
FS US Services | NR/NR/NR | 3,371 | 5.6 | 202,260 | 7.6 | 60.00 | 3/31/2021 | 1, 5-year option | ||||||||
First Property Realty Corp. | NR/NR/NR | 4,250 | 7.1 | 172,380 | 6.5 | 40.56 | 12/31/2016 | 1, 5-year option | ||||||||
Barrington Bank & Trust Co. | NR/NR/NR | 3,754 | 6.2 | 149,556 | 5.6 | 39.84 | 11/30/2016 | 1, 5-year option | ||||||||
The Point Media, Inc. | NR/NR/NR | 2,717 | 4.5 | 108,240 | 4.1 | 39.84 | 10/31/2018 | 1, 5-year option | ||||||||
Konrad Raynes & Victor | NR/NR/NR | 2,414 | 4.0 | 99,648 | 3.7 | 41.28 | 4/30/2018 | 1, 5-year option | ||||||||
Double E Pictures | NR/NR/NR | 1,129 | 1.9 | 54,252 | 2.0 | 48.05 | 9/30/2016 | NA | ||||||||
Total Occupied Collateral | 54,678 | 90.7% | $2,665,500 | 100.0% | $48.75 | |||||||||||
Vacant Space | 5,603 | 9.3% | 0 | 0 | 0.00 | |||||||||||
Total / Wtd. Avg. All Tenants | 60,281 | 100.0% | $2,665,500 | 100.0% | $44.22 |
(1) | The rating is of the parent company whether or not the parent guarantees the lease. |
The following table presents certain information relating to the major tenants at the 350 South Beverly Drive Property:
Tenant Name | Tenant Description | Renewal/Extension Options |
Untitled Entertainment | Untitled Entertainment (17,064 SF; 28.3% of NRA; 30.7% of UW Base Rent) Untitled Entertainment is a management company for Hollywood actors and writers, primarily in television and film. Untitled Entertainment has leased space at the 350 South Beverly Drive Property since 2011. | 1, 5-year option |
First Citizens Bank | First Citizens Bank (7,930 SF; 13.2% of NRA; 17.7% of UW Base Rent)Founded in 1898, First-Citizens Bank & Trust Company is a North Carolina state-chartered commercial bank headquartered in Raleigh, North Carolina. It is a wholly owned subsidiary of First Citizens BancShares, Inc. (NASDAQ: FCNCA/FCNCB), a Delaware financial holding company also headquartered in Raleigh. First Citizens has retail bank branch space located on the ground floor of the 350 South Beverly Drive Property. First Citizens bank has been a tenant at the 350 South Beverly Drive Property since 2015.
| 2, 5-year options |
Latitude Management | Latitude Management (7,381 SF; 12.2% of NRA; 12.3% of UW Base Rent)Latitude Management is a commercial real estate bridge lender with a primary focus on value-add and transitional properties in sustainable growth markets throughout the United States and operator of a $1.0 billion discretionary debt fund. Latitude Management has been a tenant at the 350 South Beverly Drive Property since 2013. | 1, 5-year option |
■ | The Master Lease. 5,603 SF (9.3% of NRA). The borrower entered into a 10-year master lease with JADE Enterprises, LLC to cover suites 210 and 330 for an annual rental amount of $115,496.85 (approximately $28.17 per SF) and $42,339.45 (approximately $28.17 per SF), respectively. The master lease payments are guaranteed by David Taban (the “Guarantor”) during the loan term. So long as no event of default is continuing under the 350 South Beverly Drive Loan, if the borrower is able to lease either suite subject to the master lease to a third party for rental amounts equal to or greater than the rental amounts under the master lease for a term of at least five years, a portion of the master lease may be terminated upon delivery to lender of an estoppel evidencing that a tenant has taken occupancy of an applicable suite and is paying full unabated rent. |
B-63 |
west la office – 350 south beverly drive
The following table presents the lease rollover schedule at the 350 South Beverly Drive Property, based on initial lease expiration dates:
Lease Expiration Schedule(1)
Year Ending December 31, | Expiring Owned GLA | % of Owned GLA | Cumulative % of | UW | % of Total UW | UW Base Rent | # of Expiring Tenants | |||||||
MTM | 0 | 0.0% | 0.0% | $0 | 0.0% | $0.00 | 0 | |||||||
2016 | 9,133 | 15.2 | 15.2% | 376,188 | 14.1 | 41.19 | 3 | |||||||
2017 | 0 | 0.0 | 15.2% | 0 | 0.0 | 0.00 | 0 | |||||||
2018 | 5,131 | 8.5 | 23.7% | 207,888 | 7.8 | 40.52 | 2 | |||||||
2019 | 7,381 | 12.2 | 35.9% | 328,896 | 12.3 | 44.56 | 1 | |||||||
2020 | 17,064 | 28.3 | 64.2% | 819,072 | 30.7 | 48.00 | 1 | |||||||
2021 | 3,371 | 5.6 | 69.8% | 202,260 | 7.6 | 60.00 | 1 | |||||||
2022 | 4,668 | 7.7 | 77.6% | 260,148 | 9.8 | 55.73 | 1 | |||||||
2023 | 7,930 | 13.2 | 90.7% | 471,048 | 17.7 | 59.40 | 1 | |||||||
2024 | 0 | 0.0 | 90.7% | 0 | 0.0 | 0.00 | 0 | |||||||
2025 | 0 | 0.0 | 90.7% | 0 | 0.0 | 0.00 | 0 | |||||||
2026 | 0 | 0.0 | 90.7% | 0 | 0.0 | 0.00 | 0 | |||||||
2027 & Thereafter | 0 | 0.0 | 90.7% | 0 | 0.0 | 0.00 | 0 | |||||||
Vacant | 5,603 | 9.3 | 100.0% | 0 | 0.0 | 0.00 | 0 | |||||||
Total / Wtd. Avg. | 60,281 | 100.0% | $2,665,500 | 100.0% | $48.75 | 10 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. In-place rents at the 350 South Beverly Drive Property are $8.25/SF below market (14.5%), based upon the appraisal’s concluded market rent. Three tenants, measuring 9,133 SF (15.2% of NRA) expire within the first year of the 350 South Beverly Drive Loan and are, collectively, 24.9% below market. Leasing those three spaces at market rent produces $144,393 of additional rental income, thereby increasing the underwritten NCF Debt Yield to 8.3% and amortizing DSCR to 1.27x. |
The following table presents certain information relating to historical leasing at the 350 South Beverly Drive Property:
Historical Leased %(1)
| 2011 | 2012 | 2013 | 2014 | As of | ||
Owned Space | 75.8% | 73.6% | 82.3% | 86.1% | 90.7% | ||
(1) | Source: As provided by a third party industry report that reflects average occupancy rate for the indicated year. |
(2) | Source: As provided by the borrower. |
B-64 |
west la office – 350 south beverly drive
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the 350 South Beverly Drive Property: |
Cash Flow Analysis(1)
2013 | 2014 | T-10 10/31/2015 Annualized | Borrower Budget | Underwritten | Underwritten | |||||||
Base Rent | $2,157,361 | $2,085,049 | $2,475,959 | $2,994,983 | $2,665,500 | $44.22 | ||||||
Contractual Rent Steps | 0 | 0 | 0 | 0 | 106,068 | 1.76 | ||||||
Rent Abatements | (83,803) | (134,732) | (472,325) | 0 | 0 | 0.00 | ||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 329,483 | 5.47 | ||||||
Total Rent | $2,073,558 | $1,950,317 | $2,003,634 | $2,994,983 | $3,101,051 | $51.44 | ||||||
Total Reimbursables | 76,306 | 66,016 | 106,783 | 318,555 | 318,555 | 5.28 | ||||||
Parking Income | 370,154 | 417,983 | 560,574 | 751,920 | 774,478 | 12.85 | ||||||
Other Income | 6,585 | 3,710 | 3,164 | 10,344 | 10,344 | 0.17 | ||||||
Vacancy & Credit Loss(2) | (3) | 6 | 0 | (149,749) | (171,647) | (2.85) | ||||||
Effective Gross Income | $2,526,600 | $2,438,032 | $2,674,156 | $3,926,053 | $4,032,780 | $66.90 | ||||||
Real Estate Taxes | $399,407 | $332,122 | $359,734 | $534,600 | $534,600 | $8.87 | ||||||
Insurance | 33,452 | 33,697 | 29,774 | 8,692 | 8,692 | 0.14 | ||||||
Management Fee | 155,352 | 167,283 | 179,582 | 117,782 | 120,983 | 2.01 | ||||||
Other Operating Expenses | 728,607 | 713,621 | 789,718 | 580,593 | 580,593 | 9.63 | ||||||
Total Operating Expenses | $1,316,818 | $1,246,723 | $1,358,808 | $1,241,667 | $1,244,869 | $20.65 | ||||||
Net Operating Income | $1,209,782 | $1,191,309 | $1,315,348 | $2,684,386 | $2,787,911 | $46.25 | ||||||
TI/LC/Upfront Credit | 0 | 0 | 0 | 0 | 52,851 | 0.88 | ||||||
Capital Expenditures | 0 | 0 | 0 | 0 | 20,804 | 0.35 | ||||||
Net Cash Flow(3) | $1,209,782 | $1,191,309 | $1,315,348 | $2,684,386 | $2,714,256 | $45.03 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Underwritten Vacancy & Credit Loss represents 5.0% of Total Rent. |
(3) | Underwritten Net Cash Flow increased primarily due to free rent burn off a newly executed parking lease with a third party. |
■ | Appraisal.According to the appraisal, the 350 South Beverly Drive Property had an “as-is” appraised value of $48,200,000 as of November 11, 2015, which results in approximately $800 per SF and a Cut-off Date LTV Ratio of 71.8% |
■ | Environmental Matters.The Phase I assessment performed on December 9, 2015 did not cite any outstanding or open recognized environmental conditions or environmental issues in connection with the 350 South Beverly Drive Property and recommended no further action at the 350 South Beverly Drive Property other than the implementation of an asbestos operations and maintenance plan. |
■ | Market Overview and Competition. The 350 South Beverly Drive Property is located in the Beverly Hills office submarket of Beverly Hills, California. The submarket consists of 10.9 million SF of total NRA. The majority of the office space in the submarket is located along Wilshire Boulevard and Beverly Drive while the surrounding areas are primarily residential. As it relates to the 350 South Beverly Drive Property, the Golden Triangle is located just north of the 350 South Beverly Drive Property. The area features numerous luxury retail stores and restaurants, especially on Rodeo Drive, Beverly Hills’ most well-known shopping street/retail corridor. The average 2015 household income within one mile from the 350 South Beverly Drive Property is $125,451. |
The 2014 overall submarket has an 8.5% vacancy rate and $53.04 per SF annual market rent as of year-end 2014. The submarket added 92,659 SF of new supply since 2011, which represents less than a 0.8% increase to the total market supply. There is one building currently under construction in the submarket, which will add 32,450 SF to the market. Nearly the entire office product is located along Beverly Drive, Wilshire Blvd or in the Golden Triangle. Asking rents have increased over 21.0% since 2011, while the overall submarket’s vacancy has reduced from 14.1% to 8.5%.
B-65 |
west la office – 350 south beverly drive
Office Lease Comparables(1)
Property | Tenant Name | Total GLA | Base Rent per SF | |||
350 South Beverly Drive(2) | Untitled Entertainment | 17,064 | $48.00 | |||
9320 Wilshire Boulevard | Sattler & Associates | 3,077 | $46.80 | |||
9355-9361 Wilshire Boulevard | NetJets Services, Inc. | 2,199 | $63.60 | |||
9350 Wilshire Boulevard | Truth Be Told | 2,130 | $54.00 | |||
9595 Wilshire Boulevard | BHRAC, LLC | 3,708 | $72.12 | |||
9401 Wilshire Boulevard | Doyle Law | 2,807 | $60.00 | |||
315 South Beverly Drive | PLG Commercial | 3,930 | $46.20 | |||
Total / Wtd. Avg.(3) | 17,851 | $56.93 |
(1) | Source: Appraisal. |
(2) | Based on the rent roll dated January 1, 2016. |
(3) | Total / Wtd. Avg. excludes the 350 South Beverly Drive Property. |
■ | The Borrower. The borrower for the 350 South Beverly Drive Loan, Beverly Capital Ventures, LLC, is a California limited liability company managed by Mr. David Taban and is a bankruptcy remote special purpose entity with one independent director controlled by JADE Enterprises, LLC. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the 350 South Beverly Drive Loan. The non-recourse guarantor is David Taban. |
The 350 South Beverly Drive Loan’s sponsor is David Taban, who is involved in a family-owned business, JADE Enterprises, LLC. JADE Enterprises, LLC is a private, family-owned developer, operator and owner with real estate holdings primarily in California, with a concentration in Los Angeles. Three brothers, Albert, David, and Jacob Taban, are the primary controllers of the business.
■ | Escrows.At closing, the borrower deposited $225,000 into a TI/LC reserve account.On a monthly basis, the borrower is required to deposit reserves of (i) one-twelfth of the estimated annual real estate taxes, which equates to $44,550, into a reserve account, (ii) $1,959 into a replacement reserve account (subject to a replacement reserve cap equal to $70,524) and (iii) $6,279 into a TI/LC reserve account. In addition, upon notice from the lender, the borrower will be required to depositone-twelfthof the annual insurance premiums into an insurance reserve account if (i) an event of default under the 350 South Beverly Drive Loan has occurred, (ii) a blanket or umbrella policy approved by the lender in its reasonable discretion is no longer in place, (iii) the borrower fails to provide evidence of renewal of insurance or (iv) the borrower fails to provide evidence that the insurance premiums have been paid. |
■ | Lockbox and Cash Management. The 350 South Beverly Drive Loan is structured with a springing lockbox and springing cash management. The tenants are required to deposit all rents into a lockbox account maintained by the lender upon the commencement of a Cash Trap Event Period (as defined below). During a Cash Trap Event Period, all funds in the lockbox account are swept daily to a cash management account under the control of the lender and disbursed in accordance with the loan documents. Excess cash flow will be deposited into a lender-controlled account, to be held by the lender as additional collateral for the 350 South Beverly Drive Loan. The debt service coverage ratio, for purposes of calculating tests, assumes 30-year amortization, irrespective of any interest only periods. |
A “Cash Trap Event Period” will occur upon the earliest of (i) an event of default under the 350 South Beverly Drive Loan, (ii) (1) notice of non-renewal or termination by Untitled Entertainment of its lease, or (2) 12 months prior to the expiration of the Untitled Entertainment lease if Untitled Entertainment has not renewed its lease in accordance with its terms or (iii) if the debt service coverage ratio (assuming a 30-year amortization, irrespective of any interest only periods) falls below 1.10x. Such Cash Trap Event Period will expire (A) with respect to a Cash Trap Event Period commencing in connection with clause (i) above, upon the cure of such event of default under the 350 South Beverly Drive Loan, (B)(1) with respect to a Cash Trap Event Period commencing in connection with clause (ii)(1) above, (x) upon the unconditional revocation by Untitled Entertainment of all termination or cancellation notices, (y) an extension of the Untitled Entertainment lease on terms and conditions reasonably acceptable to the lender and otherwise in accordance with the loan documents or (z) a new tenant has entered into a lease for the Untitled Entertainment premises on terms and conditions reasonably acceptable
B-66 |
west la office – 350 south beverly drive
to the lender and otherwise in accordance with the loan documents; (B)(2) with respect to a Cash Trap Event Period commencing in connection with clause (ii)(2) above, upon (x) an extension of the Untitled Entertainment Lease on terms and conditions in accordance with the loan documents or (y) a new tenant has entered into a lease for the Untitled Entertainment premises, with such lease on terms and conditions in accordance with the loan documents and (C) with respect to a Cash Trap Event Period commencing in connection with clause (iii) above, upon the date that the debt service coverage ratio is equal to or greater than 1.20x for one calendar quarter.
■ | Property Management. The 350 South Beverly Drive Property is managed by Beverly Management Group, Inc., an affiliate of the borrower. The 350 South Beverly Drive Loan documents prohibit the borrower from terminating or amending the management agreement without the lender’s prior consent. The borrower is obligated to provide notice to the lender if the property manager sub-contracts its management responsibilities under the management agreement to an affiliate or third party manager. The lender has the right to (or require the borrower to) terminate the management agreement and replace the property manager if (a) the property manager becomes a debtor in (i) any involuntary bankruptcy or insolvency proceeding that is not dismissed within 90 days of the filing thereof or (ii) any voluntary bankruptcy or insolvency proceeding, (b) there exists any event of default under the 350 South Beverly Drive Loan, (c) the property manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds, (d) there is a change in control of the property manager or (e) there exists a monetary default or material nonmonetary default by the property manager beyond all applicable notice and cure periods under the management agreement. |
■ | Mezzanine or Subordinate Indebtedness.None. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy, with a deductible no greater than $25,000, that provides coverage for terrorism in an amount equal to the full replacement cost of the350 South Beverly Drive Property (plus 12 months of rental loss and/or business interruption coverage with an additional period of indemnity covering the six months following restoration). See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-67 |
600 broadway |
B-68 |
600 broadway |
B-69 |
600 broadway |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | BNYM | ||
Location (City/State) | New York, New York | Cut-off Date Principal Balance(3) | $30,000,000 | ||
Property Type | Retail | Cut-off Date Principal Balance per SF(2) | $1,552.80 | ||
Size (SF) | 77,280 | Percentage of Initial Pool Balance | 4.3% | ||
Total Occupancy as of 12/1/2015 | 100.0% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 12/1/2015 | 100.0% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 1900 / 2008 | Mortgage Rate | 4.69000% | ||
Appraised Value(1) | $220,000,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | NAP | ||||
Original Interest Only Term (Months) | 120 | ||||
Underwritten Revenues | $13,259,893 | ||||
Underwritten Expenses | $3,709,744 | Escrows | |||
Underwritten Net Operating Income (NOI) | $9,550,149 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $9,199,870 | Taxes | $259,197 | $259,197 | |
Cut-off Date LTV Ratio(1)(2) | 54.5% | Insurance | $0 | $0 | |
Maturity Date LTV Ratio(1)(2) | 54.5% | Replacement Reserve | $0 | $1,093 | |
DSCR Based on Underwritten NOI / NCF(2) | 1.67x / 1.61x | TI/LC | $0 | $7,288 | |
Debt Yield Based on Underwritten NOI / NCF(2) | 8.0% / 7.7% | Other(4) | $5,000,000 | $0 |
Sources and Uses | |||||||||||
Sources | $ | % | Uses | $ | % | ||||||
Loan Combination Amount | $120,000,000 | 100.0 | % | Loan Payoff | $69,585,845 | 58.0 | % | ||||
Principal Equity Distribution | 38,122,518 | 31.8 | |||||||||
Reserves | 5,259,197 | 4.4 | |||||||||
Closing Costs | 4,196,440 | 3.5 | |||||||||
Swap Breakage Fee | 2,836,000 | 2.4 | |||||||||
Total Sources | $120,000,000 | 100.0 | % | Total Uses | $120,000,000 | 100.0 | % |
(1) | The Appraised Value represents the “as-is” appraised value. The appraiser also concluded an “as dark” appraised value of $191,000,000, which results in a Cut-off Date LTV and a Maturity Date LTV of 62.8%. |
(2) | Calculated based upon the aggregate outstanding principal balance of the 600 Broadway Loan Combination. |
(3) | The 600 Broadway Loan Combination is evidenced by eightpari passu notes in the aggregate original principal amount of $120,000,000. The non-controlling note A-2-2 and note A-6 (which is being acquired by The Bank of New York Mellon from German American Capital Corporation in connection with this securitization transaction) with an aggregate original balance of $30,000,000 will be contributed to the Issuing Entity. The non-controlling note A-1, note A-2-1 and note A-3 with an aggregate original principal balance of $50,000,000 were contributed to the CGCMT 2016-P3 securitization transaction. The controlling note A-4 and non-controlling note A-5-1 and note A-5-2, with an aggregate original principal balance of $40,000,000, are expected to be contributed to the DBJPM 2016-C1 securitization transaction. For additional information on thepari passu companion loans see“—The Mortgage Loan” below. |
(4) | At closing, the borrower deposited $5,000,000 into the A&F Credit Reserve (as defined below). Upon the occurrence of an A&F Leasing Reserve Trigger Event (as defined below), the borrower must deposit $3,500,000 into the A&F Leasing Reserve. See “—Escrows” below. |
■ | The Mortgage Loan. The mortgage loan (the “600 Broadway Loan”) is part of a $120,000,000 loan combination (the “600 Broadway Loan Combination”) that is evidenced by eightpari passu notes. The 600 Broadway Loan Combination is a fixed rate loan secured by a first mortgage encumbering the borrower’s fee simple interest in a 77,280 SF, anchored retail property located in New York, New York (the “600 Broadway Property”). The 600 Broadway Loan is evidenced by twopari passu non-controlling notes (note A-2-2 and note A-6 (which is being acquired by The Bank of New York Mellon from German American Capital Corporation in connection with this securitization transaction)), has an aggregate original principal balance of $30,000,000, has an aggregate outstanding principal balance as of the Cut-off Date of $30,000,000, and represents approximately 4.3% of the Initial Pool Balance. Thepari passu non-controlling note A-1, note A-2-1 and note A-3, with an aggregate principal balance of $50,000,000,were contributed to the CGCMT 2016-P3 securitization transaction. Thepari passu controlling note A-4 (the “600 Broadway Controlling Pari Passu Companion Loan”) and non-controlling note A-5-1 and note A-5-2, with an aggregate original principal balance of $40,000,000 (and, collectively with note A-1, note A-2-1 and note A-3, the “600 Broadway Companion Loans”),are expected to be contributed to the DBJPM 2016-C1 securitization transaction. The 600 Broadway Loan Combination is being serviced and administered pursuant to the CGCMT 2016-P3 pooling and servicing agreement until the securitization of the 600 Broadway Controlling Pari Passu Companion Loan. However, after the securitization of the 600 Broadway Controlling Pari Passu Companion Loan, the 600 Broadway Loan Combination will be serviced and administered pursuant to the pooling and servicing agreement governing the securitization of the 600 Broadway Controlling Pari Passu Companion Loan, which is expected to be the DBJPM 2016-C1 securitization transaction. The 600 Broadway Loan Combination was co-originated by The Bank of New York Mellon and German American Capital Corporation on December 18, 2015, had an original principal balance of $120,000,000, has an outstanding principal balance as of the Cut-off Date of $120,000,000 and accrues interest at an interest rate of 4.69000%per annum. The proceeds of the 600 Broadway Loan Combination were primarily used to retire existing debt of approximately $69.6 million, pay a swap breakage fee of approximately $2.8 million, fund reserves of approximately $5.3 million, pay closing costs of approximately $4.2 million, and return approximately $38.1 million of equity to the borrower sponsor. |
B-70 |
600 broadway |
The 600 Broadway Loan had an initial term of 120 months and has a remaining term as of the Cut-off Date of 117 months. The 600 Broadway Loan requires interest only payments on each due date through the scheduled maturity date in January 2026. Voluntary prepayment of the 600 Broadway Loan without the payment of any prepayment premium is permitted on or after the due date in September 2025. Provided no event of default under the 600 Broadway Loan Combination documents has occurred and is continuing, at any time prior to the maturity date and after the earlier to occur of (i) the second anniversary of the closing date of the securitization into which the lastpari passu note of the 600 Broadway Loan Combination is deposited and (ii) the third anniversary of the origination of the 600 Broadway Loan Combination, the 600 Broadway Loan may be defeased with certain direct, non-callable obligations of the United States of America or other obligations which are “government securities” permitted under the 600 Broadway Loan documents.
■ | The Mortgaged Property.The 600 Broadway Property is a six-story (plus lower and sub-lower levels) retail building consisting of 77,280 SF in SoHo, New York with frontage spanning from Broadway to Crosby Street. The 600 Broadway Property was developed in 1900 and has since been renovated in 2008. In 2008, the 600 Broadway Property was acquired by its current sponsors for approximately $70.0 million ($906 per SF), which have over the course of their ownership invested approximately $6.0 million in the 600 Broadway Property, including elevator upgrades and buildout costs for Abercrombie & Fitch Co. (“Abercrombie & Fitch”) and 24 Hour Fitness USA, Inc. (“24 Hour Fitness”). Abercrombie & Fitch, through its subsidiaries, Abercrombie & Fitch Stores, Inc. (“Abercrombie”), J.M. Hollister, LLC (“Hollister”) and Gilly Hicks, LLC (“Gilly Hicks”; together with Abercrombie and Hollister, each individually, an “A&F Subsidiary”, and collectively, the “A&F Subsidiaries”) has invested approximately $40.0 million to build out its space. |
As of December 1, 2015, 100.0% of the square footage of the 600 Broadway Property was leased to two major tenants: (i) Abercrombie & Fitch (through its subsidiaries, Abercrombie, Hollister and Gilly Hicks (collectively, “A&F”)); and (ii) 24 Hour Fitness.Additionally, Omnipoint leases 1 SF for a rooftop antenna. The A&F Subsidiaries collectively occupy 47,001 SF (60.8% of NRA) at the 600 Broadway Property,with Hollister as the major frontage store with an entrance on Broadway. The 47,001 SF includes the ground floor (8,600 SF), lower level (8,500 SF), sub-lower level (9,900 SF), second floor (10,000 SF) and third floor (10,000 SF). 24 Hour Fitness occupies 30,279 SF (39.2% of NRA) situated on the fourth through sixth floors.
The following table presents certain information relating to the tenants at the 600 Broadway Property:
Largest Tenants Based on Underwritten Base Rent
Tenant Name | Credit Rating | Tenant | % of GLA | UW Base Rent | % of | UW Base | Lease | Renewal / | |||||||||||||
Abercrombie & Fitch(2) | |||||||||||||||||||||
Hollister | NR / NR / BB- | 30,509 | 39.5 | % | $3,701,596 | 37.0 | % | $121.33 | 5/31/2028 | 1, 5-year option | |||||||||||
Abercrombie | NR / NR / BB- | 8,246 | 10.7 | 1,850,798 | 18.5 | 224.45 | 5/31/2028 | 1, 5-year option | |||||||||||||
Gilly Hicks | NR / NR / BB- | 8,246 | 10.7 | 1,850,798 | 18.5 | 224.45 | 5/31/2028 | 1, 5-year option | |||||||||||||
24 Hour Fitness | NR / NR / NR | 30,279 | 39.2 | 2,576,000 | 25.7 | 85.08 | 12/17/2023 | 3, 5-year options | |||||||||||||
Omnipoint(3) | NR / NR / NR | 0 | 0.0 | 37,080 | 0.4 | 37,080.00 | 12/31/2018 | NA | |||||||||||||
Total Occupied Collateral | 77,280 | 100.0 | % | $10,016,273 | 100.0 | % | $129.61 | ||||||||||||||
Vacant Space | 0 | 0 | 0 | 0.0 | 0.00 | ||||||||||||||||
Total / Wtd. Avg. All Tenants | 77,280 | 100.0 | % | $10,016,273 | 100.0 | % | $129.61 |
(1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
(2) | A&F operates on the ground and second floors; however, the store is currently closed due to water damage caused by a ruptured water pipe and coil malfunction that occurred in February, 2016. All water-impacted surfaces have been demolished. The tenant is in the process of interviewing general contractors to complete required work, which is the tenant’s responsibility. The repair work is estimated to cost in excess of $1.0 million. Part of the second floor and the entire 3rd floor and lower level leased to A&F are currently dark. The Abercrombie, Hollister and Gilly Hicks leases are guaranteed by the parent company, A&F, and are cross-defaulted. |
(3) | Represents a telecommunications antenna lease. Square footage not included in Tenant GLA. |
B-71 |
600 broadway |
The following table presents certain information relating to the major tenants at the 600 Broadway Property:
Tenant Name | Tenant Description | Renewal/Extension Options | ||
Abercrombie & Fitch | Abercrombie & Fitch (47,001 SF; 60.8% of NRA; 73.9% of UW Base Rent; rated BB- by S&P) A&F sells men’s, women’s and kids’ casual style apparel and accessories. A&F operates approximately 965 stores across North America, Asia and Europe. In addition, Abercrombie & Fitch is the parent company to the teen-focused apparel store, Hollister and the Aussie-inspired, just-for-girls brand, Gilly Hicks. Abercrombie & Fitch has averaged $4.0 billion in revenue annually since 2010 and reported revenue of approximately $3.7 billion at fiscal year-end 2014. Three A&F Subsidiaries took occupancy at the 600 Broadway Property in 2008, each pursuant to a 20-year lease expiring in May 2028, with all leases cross-defaulted and guaranteed by the parent company Abercrombie & Fitch. Each A&F Subsidiary space is based on a different Abercrombie & Fitch concept: Hollister (30,509 SF), Gilly Hicks (8,246 SF) and Abercrombie (8,246 SF). Hollister and Abercrombie currently operate on the ground and second floors and the store is currently closed due to recent water damage. The repair work is estimated to cost in excess of $1.0 million. Part of the second floor and the entire 3rd floor and lower level are currently dark, as Abercrombie & Fitch discontinued the Gilly Hicks concept in 2013. At the time of the 600 Broadway loan’s origination, A&F’s annualized 2015 store sales at the 600 Broadway Property were approximately $7.2 million, which is less than its aggregate annual rent at the property. Due to this and struggling corporate level performance, A&F attempted to sublease the entirety of its space unsuccessfully in 2015. Prior to the origination of the 600 Broadway Loan, A&F terminated the broker on the sublease assignment and the space was taken off market. Each A&F Subsidiary has one, five-year renewal option and no termination options.
| 1, 5-year option | ||
24 Hour Fitness | 24 Hour Fitness (30,279 SF; 39.2% of NRA; 25.7% of UW Base Rent) Founded in 1983, 24 Hour Fitness is one of the world’s largest privately owned and operated fitness center chains. 24 Hour Fitness owns and operates approximately 425 fitness centers with over 4.0 million members in more than 15 states in the U.S. as well as throughout Asia. 24 Hour Fitness offers aerobic, cardiovascular and weight lifting activities with some facilities featuring squash, racquetball, basketball courts, swimming pools, and steam and sauna rooms. 24 Hour Fitness signed a 15-year lease in 2008, which expires in December 2023. 24 Hour Fitness has three, five-year renewal options.
| 3, 5-year options |
The following table presents the lease rollover schedule at the 600 Broadway Property, based on initial lease expiration dates:
Lease Expiration Schedule(1)
Year Ending | Expiring Owned | % of Owned | Cumulative % of | UW | % of Total UW | UW Base Rent | # of Expiring | |||||||||||||
MTM | 0 | 0.0 | % | 0.0% | $0 | 0.0 | % | $0.00 | 0 | |||||||||||
2016 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2017 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2018(2) | 0 | 0.0 | 0.0% | 37,080 | 0.4 | 37,080.00 | 1 | |||||||||||||
2019 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2020 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2021 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2022 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2023 | 30,279 | 39.2 | 39.2% | 2,576,000 | 25.7 | 85.08 | 1 | |||||||||||||
2024 | 0 | 0.0 | 39.2% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2025 | 0 | 0.0 | 39.2% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2026 | 0 | 0.0 | 39.2% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2027 & Thereafter | 47,001 | 60.8 | 100.0% | 7,403,193 | 73.9 | 157.51 | 3 | |||||||||||||
Vacant | 0 | 0.0 |
| 100.0% | 0 | 0.0 | 0.00 | 0 | ||||||||||||
Total / Wtd. Avg. | 77,280 | 100.0 | % | $10,016,273 | 100.0 | % | $129.61 | 5 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. |
(2) | The 2018 lease is represented by the Omnipoint telecommunications antenna lease. |
The following table presents certain information relating to historical leasing at the 600 Broadway Property:
Historical Leased %(1)
|
| 2012 |
| 2013 |
| 2014 |
| As of |
Owned Space | 100.0% | 100.0% | 100.0% | 100.0% |
(1) | As provided by the borrower and which reflects occupancy as of December 31 for the specified year unless otherwise indicated. |
B-72 |
600 broadway |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the 600 Broadway Property: |
Cash Flow Analysis(1)
| 2012 | 2013 | 2014 | TTM | Underwritten | Underwritten | ||||||||||||
Base Rent | $9,139,551 | $9,306,197 | $9,761,226 | $9,910,763 | $10,016,273 | $129.61 | ||||||||||||
Contractual Rent Steps(2) | 0 | 0 | 0 | 0 | 186,100 | 2.41 | ||||||||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 0 | 0.00 | ||||||||||||
Total Rent | $9,139,551 | $9,306,197 | $9,761,226 | $9,910,763 | $10,202,372 | $132.02 | ||||||||||||
Total Reimbursables | 1,227,105 | 1,803,766 | 2,458,068 | 3,213,519 | 3,567,639 | 46.17 | ||||||||||||
Vacancy & Credit Loss(3) | 0 | 0 | 0 | 0 | (510,119 | ) | (6.60 | ) | ||||||||||
Effective Gross Income | $10,366,656 | $11,109,963 | $12,219,294 | $13,124,281 | $13,259,893 | $171.58 | ||||||||||||
Real Estate Taxes | $1,239,663 | $1,697,483 | $2,231,210 | $2,782,852 | $3,168,534 | $41.00 | ||||||||||||
Insurance | 32,215 | 30,166 | 34,371 | 29,080 | 30,534 | 0.40 | ||||||||||||
Management Fee | 75,000 | 75,000 | 75,000 | 75,000 | 397,797 | 5.15 | ||||||||||||
Other Operating Expenses | 101,819 | 112,862 | 117,703 | 101,644 | 112,880 | 1.46 | ||||||||||||
Total Operating Expenses | $1,448,697 | $1,915,512 | $2,458,284 | $2,988,576 | $3,709,744 | $48.00 | ||||||||||||
Net Operating Income | $8,917,959 | $9,194,451 | $9,761,011 | $10,135,705 | $9,550,149 | $123.58 | ||||||||||||
TI/LC | 0 | 0 | 0 | 0 | 338,687 | 4.38 | ||||||||||||
Replacement Reserves | 0 | 0 | 0 | 0 | 11,592 | 0.15 | ||||||||||||
Net Cash Flow | $8,917,959 | $9,194,451 | $9,761,011 | $10,135,705 | $9,199,870 | $119.05 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Underwritten Contractual Rent Steps includes contractual rent steps through June 2016. |
(3) | Underwritten Vacancy represents 5.0% of Total Rent. |
■ | Appraisal.According to the appraisal, the 600 Broadway Property had an “as-is” appraised value of $220,000,000 as of December 14, 2015. The appraiser concluded an “as dark” appraised value of $191,000,000, which results in a Cut-off Date LTV of 62.8%. |
■ | Environmental Matters.Based on the Phase I environmental report dated September 17, 2015, there were no recommendations for further action at the 600 Broadway Property other than to implement an asbestos operations and maintenance plan, which is currently in place. |
■ | Market Overview and Competition. The 600 Broadway Property is located in the SoHo neighborhood in the borough of Manhattan, New York. The SoHo neighborhood is generally bounded by Houston Street to the north; Crosby Street to the east; Canal Street to the south; and West Broadway to the west. SoHo is surrounded by the neighborhoods of NoHo to the north; Little Italy to the east; TriBeCa to the south; Hudson Square and the West Village to the west. The 600 Broadway Property is located at the southeast corner of East Houston Street and Broadway with frontage along Broadway and Crosby Street. The SoHo neighborhood is rapidly evolving from an area known for its artistic population residing and working in loft spaces to a top retail location showcasing several well-known retailers. While the heavily traveled arteries of Broadway, Houston Street, Canal Street and West Broadway contain a significant amount of retail space, the central roadways such as Mercer, Greene, Prince, Spring and Wooster Streets are also attracting notable retailers and galleries. Some of the retailers in the SoHo District include Prada, Zara, Fossil, Armani AX, Banana Republic, Hugo Boss, H&M, TopShop, Uniqlo, Zales, Aeropostale, BeBe, Escada, Victoria’s Secret, Billabong, American Eagle and J. Crew. |
The SoHo neighborhood has a transportation network via subway with access to the A, B, C, D, E, F, M, N, R and No. 1 and 6 subway lines along with access to public buses. The Broadway/Lafayette Street Station (B, D, F and M subway lines) is located adjacent to the 600 Broadway Property at the corner of Houston Street and Broadway. The Bleecker Street Station (No. 6 subway line) is located one block north and three blocks east of the 600 Broadway Property at Bleecker Street and Lafayette Street. The Prince Street Station (N and R subway lines) is one block south of the 600 Broadway Property. The C and E subway lines are located 2 blocks south and seven blocks west of the subject at the intersection of Spring Street and 6th Avenue. The No. 1 subway line is located nine blocks west of the 600 Broadway Property at the intersection of West Houston and Varick Streets.
B-73 |
600 broadway |
According to the appraisal, retail rental rates within the SoHo submarket averaged $535 per SF in Q3 2015, a 5.3% increase from $508 per SF in Q2 2015 and a 13.8% increase from the $470 per SF year-over-year. On the high streets of Broadway, Prince, and Spring Streets, the average asking rental rate registered $898 per SF with Prince Street registering the highest average asking rent at $1,033 per SF. The SoHo submarket vacancy rate was 5.6% as of Q3 2015.
The appraiser concluded to market rents of $650 per SF for the ground floor, $200 per SF for the second floor, $150 per SF for the third floor, $65 per SF for the lower level and $40 per SF for the sub-lower level. The appraiser concluded a blended rate per SF of $213.59 for the 47,001 SF A&F Subsidiary leases. Eight competitive properties are detailed below.
The following table presents certain information relating to the leasing comparables identified in the appraisal for the 600 Broadway Property:
Retail Lease Comparables(1)
Property | Tenant Name | Total GLA | Base Rent per SF | |||||
600 Broadway Property(2) | Hollister/Abercrombie/Gilly Hicks(3) | 47,001 | $157.51 | |||||
510 Broadway | Stance Socks | 5,000 | $375.00 | |||||
116 Prince Street | Slowear | 2,250 | $845.00 | |||||
125 Prince Street | Lululemon | 4,100 | $515.00 | |||||
513 Broadway | True Religion | 2,900 | $724.00 | |||||
561 Broadway | Mango | 22,500 | $233.33 | |||||
529 Broadway | Nike | 52,941 | $276.57 | |||||
518 Broadway | Dune | 7,500 | $909.00 | |||||
545 Broadway | Offering | 3,675 | $650.00 | |||||
Total / Wtd. Avg.(4) | 100,866 | $367.67 |
(1) | Source: Appraisal. |
(2) | Based on the rent roll dated December 1, 2015. |
(3) | The A&F Subsidiary leases are all cross-defaulted and guaranteed by the parent company, Abercrombie & Fitch. |
(4) | Total / Wtd. Avg. excludes the 600 Broadway Property. |
■ | The Borrower. The borrower, 600 Broadway Partners LLC, is a single-purpose, single asset New York limited liability company structured to be bankruptcy remote, with two independent directors in its organizational structure. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the 600 Broadway Loan. The sponsors of the borrower and non-recourse carve-out guarantors are Stanley Cayre, Stanley Chera and Harry Adjmi. |
Stanley Cayre is the co-founder and managing member of Aurora Capital Associates. Over the past 40 years, the Cayre family has invested heavily in various commercial real estate properties and currently manages over 2.5 million SF of commercial real estate across the U.S. Aurora Capital Associates owns over 150 properties throughout major U.S. cities and is recognized as one of the largest, single property owners on Broadway in SoHo, New York.
Stanley Chera is the co-founder of Crown Acquisitions, one of the largest private owners of retail and office properties in North America. Crown Acquisitions has acquired and developed billions of dollars of high-profile commercial real estate with a current portfolio of over 15 million SF. Focusing on acquiring and repositioning strategic assets, Crowne Acquisitions’ experience extends to major cities including New York, Chicago, Toronto, Philadelphia, Boston and Miami.
Harry Adjmi is a partial owner of the Adjmi Apparel Group, which has designed, produced and distributed fashion apparel since 1976. The Adjmi Apparel Group consists of recognizable brands such as Skechers, TapouT, South Pole, Disney, Fila and Champion. Harry Adjmi is a large real estate owner throughout Greater New York City owning 110 properties totaling an estimated $220.0 million as of June 2013.
B-74 |
600 broadway |
■ | Escrows. At origination, the borrower deposited (i) $259,197 into a tax reserve account and (ii) $5,000,000 into a reserve account (the “A&F Credit Reserve”). Funds in the A&F Credit Reserve are to be applied to debt service shortfalls, and are required to be released to borrower upon (x) borrower replacing A&F with an “Investment Grade” tenant (as rated by two or more rating agencies) or (y) A&F’s credit rating being upgraded to “Investment Grade” by two or more rating agencies; provided that, in either case, (1) no event of default under the 600 Broadway Loan is then continuing, (2) no Cash Trap Period (defined below) is then continuing, and (3) no A&F Leasing Reserve Trigger Event (defined below) has occurred. |
On a monthly basis, the borrower is required to deposit reserves of (i) one-twelfth of the estimated annual real estate taxes, which currently equates to $259,197, into a tax reserve account, (ii) $1,093 into a replacement reserve account and (iii) $7,288 into a TI/LC reserve account. In addition, upon notice from the lender, the borrower will be required to deposit one-twelfth of the annual insurance premiums into an insurance reserve account if (i) an event of default under the 600 Broadway Loan has occurred, (ii) a blanket or umbrella policy approved by the lender in its reasonable discretion is no longer in place, (iii) the borrower fails to provide evidence of renewal of insurance or (iv) the borrower fails to provide evidence that the insurance premiums have been paid. |
In addition, upon the occurrence of an A&F Leasing Reserve Trigger Event (defined below), the borrower is required to make a one-time deposit in an amount equal to $3,500,000 into a reserve account (the “A&F Leasing Reserve”). Funds in the A&F Leasing Reserve will be released to borrower for qualified leasing expenses in connection with re-leasing the A&F space. Once the A&F space has been fully leased to one or more replacement tenants at a market net effective rental rate greater than or equal to the then-current net effective rent under the A&F Subsidiary leases (and such replacement tenants have taken occupancy and are paying full unabated rent), then, provided no event of default under the 600 Broadway Loan or Cash Trap Period (defined below) is then continuing, funds remaining in the A&F Leasing Reserve will be disbursed to borrower.
An “A&F Leasing Reserve Trigger Event” will commence upon the earlier to occur of (i) the date that A&F commits a monetary or material non-monetary default under any A&F Subsidiary lease, (ii) the date upon which A&F terminates or gives notice of its intent to terminate any A&F Subsidiary lease, and (iii) a bankruptcy or insolvency proceeding of any A&F Subsidiary. |
■ | Lockbox and Cash Management. The 600 Broadway Loan is structured with a hard lockbox and springing cash management. The borrower was required to send tenant direction letters to all tenants instructing them to deposit all rents and other payments into the lockbox account controlled by the lender. Provided no Cash Trap Period exists, all funds in the lockbox account are swept on each business day to the borrower’s operating account. Upon the occurrence and during the continuance of a Cash Trap Period, amounts on deposit in the clearing account are required to be swept to a cash management account established and maintained by the lender, and applied to payment of all required payments and reserves as set forth in the 600 Broadway Loan documents. |
A “Cash Trap Period” will commence upon the occurrence of (i) an event of default under the 600 Broadway Loan or (ii) the assumed amortizing DSCR falling below 1.10x for two consecutive calendar quarters and will end upon (a) with respect to clause (i), the date on which such event of default under the 600 Broadway Loan is cured (and no other Cash Trap Period is then continuing) and (b) with respect to clause (ii), the assumed amortizing DSCR being at least 1.10x for two consecutive calendar quarters (and no other Cash Trap Period is then continuing). |
B-75 |
600 broadway |
■ | Property Management. The 600 Broadway Property is managed by ACHS Management Corp., a borrower affiliate. The 600 Broadway Loan documents prohibit the borrower from terminating or amending the management agreement without the lender’s prior consent. The borrower is obligated to provide notice to the lender if the property manager sub-contracts its management responsibilities under the management agreement to an affiliate or third party manager. The lender has the right to (or to require the borrower to) terminate the management agreement and replace the property manager if (a) the property manager becomes a debtor in (i) any involuntary bankruptcy or insolvency proceeding that is not dismissed within 90 days of the filing thereof or (ii) any voluntary bankruptcy or insolvency proceeding, (b) there exists any event of default under the 600 Broadway Loan, (c) there exists a monetary default or material nonmonetary default by the property manager beyond all applicable notice and cure periods under the management agreement, (d) there is a change in control of the property manager, or (e) the property manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds. |
■ | Mezzanine or Subordinate Indebtedness. Not Permitted. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy, with a deductible no greater than $25,000 (excluding windstorm and earthquake insurance, which may have a deductible of 5% of the total insurable value), which provides coverage for among other things, terrorism, in an amount equal to the full replacement cost of the 600 Broadway Property (plus 24 months of rental loss and/or business interruption coverage with an additional period of indemnity covering the six months following restoration). See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-76 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
B-77 |
5 PENN PLAZA |
B-78 |
5 PENN PLAZA |
B-79 |
5 PENN PLAZA |
B-80 |
5 PENN PLAZA |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | CGMRC | ||
Location (City/State) | New York, New York | Cut-off Date Principal Balance(3) | $25,000,000 | ||
Property Type | Office | Cut-off Date Principal Balance per SF(2) | $399.80 | ||
Size (SF) | 650,329 | Percentage of Initial Pool Balance | 3.6% | ||
Total Occupancy as of 11/1/2015(1) | 97.2% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 11/1/2015(1) | 97.2% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 1917 / 2015 | Mortgage Rate | 4.86153% | ||
Appraised Value | $540,000,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | NAP | ||||
Original Interest Only Term (Months) | 120 | ||||
Underwritten Revenues | $38,272,463 | ||||
Underwritten Expenses | $15,542,394 | Escrows | |||
Underwritten Net Operating Income (NOI) | $22,730,069 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $21,073,984 | Taxes | $1,168,977 | $584,489 | |
Cut-off Date LTV Ratio(2) | 48.1% | Insurance | $0 | $0 | |
Maturity Date LTV Ratio(2) | 48.1% | Replacement Reserve | $0 | $10,839 | |
DSCR Based on Underwritten NOI / NCF(2) | 1.77x / 1.64x | TI/LC | $0 | $0 | |
Debt Yield Based on Underwritten NOI / NCF(2) | 8.7% / 8.1% | Other(4) | $23,524,035 | $0 |
Sources and Uses | ||||||||||
Sources | $ | % | Uses | $ | % | |||||
Loan Combination Amount | $260,000,000 | 86.6 | % | Loan Payoff(5) | $213,091,475 | 71.0 | % | |||
Mezzanine Loan Amount | 40,000,000 | 13.3 | Principal Equity Distribution | 55,730,831 | 18.6 | |||||
Other Sources | 300,000 | 0.1 | Mortgage Loan Reserves | 24,693,011 | 8.2 | |||||
Closing Costs | 3,919,961 | 1.3 | ||||||||
Mezzanine Loan Reserves(6) | 2,864,722 | 1.0 | ||||||||
Total Sources | $300,300,000 | 100.0 | % | Total Uses | $300,300,000 | 100.0 | % |
(1) | Total Occupancy and Owned Occupancy as of November 1, 2015 includes TD Bank, as the tenant has executed a lease at the 5 Penn Plaza Property, but does not take occupancy or commence paying rent until June 2016. In connection with the origination of the 5 Penn Plaza Loan, CGMRC required a reserve of $726,630 for gap rent related to TD Bank. |
(2) | Calculated based on the aggregate outstanding principal balance of the 5 Penn Plaza Loan Combination. |
(3) | The 5 Penn Plaza Loan has an outstanding principal balance as of the Cut-off Date of $25,000,000 and is evidenced by the non-controlling note A-2-II of the $260,000,000 5 Penn Plaza Loan Combination, which is evidenced by fourpari passu notes. The companion loan evidenced by the controlling note A-1 has an outstanding principal balance as of the Cut-off Date of $115,000,000 and has been contributed to the CGCMT 2016-GC36 securitization transaction. The companion loan evidenced by the non-controlling note A-2-I has an outstanding principal balance as of the Cut-off Date of $42,000,000 and was contributed to the CGCMT 2016-P3 securitization transaction. The companion loan evidenced by the non-controlling note A-3 has an outstanding principal balance as of the Cut-off Date of $78,000,000 and has been contributed to the JPMBB 2016-C1 securitization transaction. See “—The Mortgage Loan” below. |
(4) | Other Upfront reserves represents (i) $17,333,334 to be used for any recourse carveouts under the 5 Penn Plaza Loan documents (up to $7,333,333 of which can also be made available to the Mezzanine Lender in certain circumstances in connection with the recourse carveouts under the 5 Penn Plaza Mezzanine Loan, provided that the mortgage lender does not have a competing claim against the guarantor), (ii) unfunded obligations of $3,069,378 for existing tenant improvements, leasing commissions and free rent related to TD Bank’s and Sirius XM Radio’s spaces, (iii) deferred maintenance of $1,306,250, (iv) 1,088,443 in a contingency reserve, which represents 31 days of interest due under the 5 Penn Plaza Loan documents, to be used to pay debt service and/or pay reserve account deposits on the 5 Penn Plaza Loan in the event of any late payment under the 5 Penn Plaza Loan documents and (v) $726,630 for gap rent related to TD Bank, as the tenant does not commence paying rent until June 2016. See “—Escrows” below. |
(5) | The Loan Payoff of $213,091,475 consists of $203,000,000 to pay off the principal balance of the 5 Penn Plaza Property’s prior CMBS loan, which was securitized in the JPMCC 2007-LD11 securitization transaction and $10,091,475 in defeasance costs. |
(6) | In connection with the origination of the 5 Penn Plaza Mezzanine Loan, the Mezzanine Borrower delivered the following escrows to the Mezzanine Lender: (i) $2,666,666 to be used solely for any amounts due from the guarantor under the 5 Penn Plaza Mezzanine Loan recourse carveout guaranty and/or the 5 Penn Plaza Mezzanine Loan environmental indemnity; and (ii) $198,056 in a contingency reserve, which represents 31 days of interest due under the 5 Penn Plaza Mezzanine Loan documents, to be used to pay debt service and/or pay reserve deposits on the 5 Penn Plaza Mezzanine Loan in the event of any late payment under the 5 Penn Plaza Mezzanine Loan documents. |
■ | The Mortgage Loan. The mortgage loan (the “5 Penn Plaza Loan”) is part of a loan combination (the “5 Penn Plaza Loan Combination”) evidenced by fourpari passu notes that are together secured by a first mortgage encumbering the borrower’s fee simple interest in a 26-story office and retail building located in Midtown Manhattan, New York (the “5 Penn Plaza Property”). The 5 Penn Plaza Loan, which is evidenced by note A-2-II and represents a non-controlling interest in the 5 Penn Plaza Loan Combination, had an original principal balance of $25,000,000, has an outstanding principal balance as of the Cut-off Date of $25,000,000 and represents approximately 3.6% of the Initial Pool Balance. The companion loan evidenced by the controlling note A-1 has an original principal balance as of the Cut-off Date of $115,000,000, has an outstanding principal balance as of the Cut-off Date of $115,000,000 and was contributed to the CGCMT 2016-GC36 securitization transaction. The companion loan evidenced by the non-controlling note A-2-I had an original principal balance of $42,000,000, has an outstanding principal balance as of the Cut-off Date of $42,000,000 and was contributed to the CGCMT 2016-P3 securitization transaction. The companion loan evidenced by the non-controlling note A-3 had an original principal balance of $78,000,000, has an outstanding principal balance as of the Cut-off Date of $78,000,000, and was contributed to the JPMBB 2016-C1 securitization transaction. The 5 Penn Plaza Loan Combination was co-originated by Citigroup Global Markets Realty Corp. and Barclays Bank PLC on January 6, 2016, had an original principal balance of $260,000,000, has an outstanding principal balance as of the Cut-off Date of $260,000,000 and accrues interest at an interest rate of 4.86153%per annum. The proceeds of the 5 Penn Plaza Loan Combination were primarily used to refinance the 5 Penn Plaza Property, return equity to the borrower sponsor, pay origination costs and fund reserves. |
B-81 |
5 PENN PLAZA |
The 5 Penn Plaza Loan had an initial term of 120 months and has a remaining term as of the Cut-off Date of 117 months. The 5 Penn Plaza Loan requires interest only payments on each due date through the scheduled maturity date in January 2026. Voluntary prepayment of the 5 Penn Plaza Loan without payment of any prepayment premium is permitted on or after the due date in November 2025. Provided no event of default under the 5 Penn Plaza Loan Combination documents has occurred and is continuing, at any time prior to the maturity date and after the earlier to occur of (i) the second anniversary of the closing date of the securitization into which the last piece of the 5 Penn Plaza Loan Combination is deposited and (ii) the third anniversary of the origination of the 5 Penn Plaza Loan Combination, the 5 Penn Plaza Loan may be defeased with certain direct, non-callable obligations of the United States of America or other obligations which are “government securities” permitted under the 5 Penn Plaza Loan documents.
■ | The Mortgaged Property.The 5 Penn Plaza Property consists of a 26-story, 650,329 SF, LEED Gold certified Class A- office building with ground floor retail located on Eighth Avenue between West 33rd and West 34th Streets in Midtown Manhattan. The 5 Penn Plaza Property contains 17,180 SF of ground floor retail space with the remaining 633,149 SF of building space consisting of 621,951 SF of office space and 11,198 SF of miscellaneous non-revenue, concourse and sub-concourse space. The 5 Penn Plaza Property was built in 1917 and is currently undergoing a projected $10.6 million renovation of its lobby, elevators and facade. The typical floor plate (on floors 3 through 23) at the 5 Penn Plaza Property is approximately 28,642 SF. Total Occupancy and Owned Occupancy at the 5 Penn Plaza Property were both 97.2% as of November 1, 2015. The office space at the 5 Penn Plaza Property is approximately 98.0% occupied. The ground floor retail space at the 5 Penn Plaza Property is approximately 79.0% occupied. Two of the three ground floor retail spaces are leased to CVS and TD Bank with leases extending through March 2030 and May 2026, respectively. The third ground floor retail space, which is 3,600 SF, is currently being utilized as the temporary entranceway during the 5 Penn Plaza Property’s lobby renovation. Following the completion of the lobby renovation in the first half of 2016, the third ground floor retail space will be available for leasing. |
The following table presents certain information relating to the major tenants at the 5 Penn Plaza Property:
Ten Largest Tenants Based on Underwritten Base Rent
Tenant Name | Credit Rating (Fitch/MIS/S&P)(1) | Tenant GLA | % of GLA | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | Lease Expiration | Renewal / Extension Options | |||||||||||||
Sirius XM Radio | NR / NR / NR | 99,754 | 15.3 | % | $4,235,991 | 13.3 | % | $42.46 | 11/30/2029 | (2) | |||||||||||
Thomas Publishing Company | NR / NR / NR | 93,072 | 14.3 | 3,899,310 | 12.2 | 41.90 | 12/31/2025 | 1, 5-year option | |||||||||||||
CVS (Retail) | NR / Baa1 / BBB+ | 12,437 | 1.9 | 3,103,449 | 9.7 | 249.53 | 3/31/2030 | 1, 10-year option | |||||||||||||
Visiting Nurse Service NY | NR / NR / NR | 55,754 | 8.6 | 3,010,716 | 9.5 | 54.00 | 9/30/2020 | NA | |||||||||||||
HQ Global Workplace | NR / NR / NR | 55,754 | 8.6 | 2,899,208 | 9.1 | 52.00 | Various(3) | (3) | |||||||||||||
TD Bank (Retail)(4) | NR / Aa1 / AA- | 3,882 | 0.6 | 1,743,913 | 5.5 | 449.23 | 5/31/2026 | 3, 5-year options | |||||||||||||
Covenant House | NR / NR / NR | 39,254 | 6.0 | 1,570,160 | 4.9 | 40.00 | 3/31/2022 | (5) | |||||||||||||
HNTB Corporation(6) | NR / NR / NR | 36,844 | 5.7 | 1,427,583 | 4.5 | 38.75 | 2/29/2016 | NA | |||||||||||||
Railworks Corporation | NR / NR / NR | 26,561 | 4.1 | 1,351,821 | 4.2 | 50.89 | 9/30/2025 | NA | |||||||||||||
Town Sports International | NR / NR / NR | 27,877 | 4.3 | 1,115,080 | 3.5 | 40.00 | 4/30/2017 | 1, 5-year option | |||||||||||||
Ten Largest Tenants | 451,189 | 69.4 | % | $24,357,231 | 76.5 | % | $53.98 | ||||||||||||||
Remaining Owned Tenants | 180,827 | 27.8 | 7,476,782 | 23.5 | 41.35 | ||||||||||||||||
Vacant Spaces (Owned Space) | 18,313 | 2.8 | 0 | 0.0 | 0.00 | ||||||||||||||||
Total / Wtd. Avg. All Tenants | 650,329 | 100.0 | % | $31,834,013 | 100.0 | % | $50.37 |
(1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
(2) | Sirius XM Radio has the option to extend its term for either (i) one additional period of five years or (ii) one additional period of ten years. |
(3) | HQ Global Workplace occupies the entire 19th and 23rd floor spaces at the 5 Penn Plaza Property under two separate leases. The lease on the 23rd floor expires on February 28, 2019 and HQ Global Workplace has the option to renew this space for either (i) one additional period of five years or (ii) one additional period of ten years. The lease on the 19th floor expires on August 31, 2020 and HQ Global Workplace has the option to renew this space for an additional period so as to expire on the same date as HQ Global Workplace’s 23rd floor space. |
(4) | TD Bank has executed a lease but will not take occupancy or commence paying rent until June 2016. In connection with the origination of the 5 Penn Plaza Loan Combination, the lender escrowed $726,630 for gap rent related to TD Bank. |
(5) | Covenant House has the option to extend its term for either (i) one additional period of five years or (ii) one additional period of ten years. |
(6) | According to the rent roll dated November 1, 2015, HNTB Corporation leased (i) 27,877 SF on the sixth floor at a rental rate equal to $35.16 per SF, (ii) 7,800 SF on the 24th floor at a rental rate equal to $53.52 per SF and (iii) 1,167 SF of concourse space at a rental rate equal to $25.71 per SF. The tenant has vacated all of its space due to its lease expiration on February 29, 2016. The Doman Group, LLC and Browne George Ross LLP have both executed leases for the vacated 24th floor space at a weighted average rental rate equal to $66.52 per SF resulting in a total increase in base rent of $103,120 for that space. According to the appraisal, the market rent for the sixth floor space (which is currently being marketed) is equal to $60.00 per SF which would result in a total increase in base rent of $692,488 if a lease(s) were executed at that level. |
B-82 |
5 PENN PLAZA |
The following table presents the lease rollover schedule at the 5 Penn Plaza Property, based on initial lease expiration dates:
Lease Expiration Schedule(1)
Year Ending December 31, | Expiring Owned GLA | % of Owned GLA | Cumulative % of Owned GLA | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | # of Expiring Tenants | ||||||||||||||
MTM | 8,162 | 1.3 | % | 1.3% | $385,540 | 1.2 | % | $47.24 | 5 | ||||||||||||
2016(2)(3) | 64,373 | 9.9 | 11.2% | 2,635,006 | 8.3 | 40.93 | 7 | ||||||||||||||
2017 | 71,136 | 10.9 | 22.1% | 2,724,324 | 8.6 | 38.30 | 3 | ||||||||||||||
2018 | 24,645 | 3.8 | 25.9% | 1,188,002 | 3.7 | 48.20 | 3 | ||||||||||||||
2019 | 55,866 | 8.6 | 34.5% | 2,180,406 | 6.8 | 39.03 | 3 | ||||||||||||||
2020 | 90,110 | 13.9 | 48.3% | 5,116,605 | 16.1 | 56.78 | 3 | ||||||||||||||
2021 | 42,530 | 6.5 | 54.9% | 1,705,487 | 5.4 | 40.10 | 3 | ||||||||||||||
2022 | 39,254 | 6.0 | 60.9% | 1,570,160 | 4.9 | 40.00 | 1 | ||||||||||||||
2023 | 524 | 0.1 | 61.0% | 6,000 | 0.0 | 11.45 | 1 | ||||||||||||||
2024 | 0 | 0.0 | 61.0% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
2025 | 119,343 | 18.4 | 79.3% | 5,239,131 | 16.5 | 43.90 | 2 | ||||||||||||||
2026 | 3,882 | 0.6 | 79.9% | 1,743,913 | 5.5 | 449.23 | 1 | ||||||||||||||
2027 & Thereafter | 112,191 | 17.3 | 97.2% | 7,339,440 | 23.1 | 65.42 | 2 | ||||||||||||||
Vacant | 18,313 | 2.8 | 100.0% | 0 | 0.0 | 0.00 | 0 | ||||||||||||||
Total / Wtd. Avg. | 650,329 | 100.0 | % | $31,834,013 | 100.0 | % | $50.37 | 34 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. |
(2) | According to the rent roll dated November 1, 2015, HNTB Corporation leased (i) 27,877 SF on the sixth floor at a rental rate equal to $35.16 per SF, (ii) 7,800 SF on the 24th floor at a rental rate equal to $53.52 per SF and (iii) 1,167 SF of concourse space at a rental rate equal to $25.71 per SF. The tenant has vacated all of its space due to its lease expiration on February 29, 2016. The Doman Group, LLC and Browne George Ross LLP have both executed leases for the vacated 24th floor space at a weighted average rental rate equal to $66.52 per SF resulting in a total increase in base rent of $103,120 for that space. According to the appraisal, the market rent for the sixth floor space (which is currently being marketed) is equal to $60.00 per SF which would result in a total increase in base rent of $692,488 if a lease(s) were executed at that level. |
(3) | Abovenet Communications’ lease expires in March 31, 2016. The tenant only leases 133 SF of space in the concourse. |
The following table presents certain information relating to historical leasing at the 5 Penn Plaza Property:
Historical Leased %(1)
2012 | 2013 | 2014 | As of 11/1/2015(2) | |||||
Owned Space | 99.9% | 99.0% | 99.0% | 97.2% |
(1) | As provided by the borrower and which reflects average occupancy for the specified year unless otherwise indicated. |
(2) | Occupancy as of November 1, 2015 includes TD Bank, as the tenant has executed a lease at the 5 Penn Plaza Property but does not take occupancy or commence paying rent until June 2016. In connection with the origination of the 5 Penn Plaza Loan, the lenders required a reserve of $726,630 for gap rent related to TD Bank. |
B-83 |
5 PENN PLAZA |
n | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the 5 Penn Plaza Property: |
Cash Flow Analysis(1)
2012 | 2013 | 2014 | TTM 9/30/2015 | Underwritten | Underwritten $ per SF | |||||||||||||
Base Rent(2) | $25,432,229 | $27,243,371 | $26,655,881 | $28,643,579 | $30,552,942 | $46.98 | ||||||||||||
Contractual Rent Steps(3) | 0 | 0 | 0 | 0 | 1,281,071 | 1.97 | ||||||||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 1,851,975 | 2.85 | ||||||||||||
Total Rent | $25,432,229 | $27,243,371 | $26,655,881 | $28,643,579 | $33,685,988 | $51.80 | ||||||||||||
Total Reimbursables | 1,241,799 | 2,059,774 | 2,461,092 | 2,591,608 | 3,452,319 | 5.31 | ||||||||||||
Other Income(4) | 3,349,215 | 3,173,699 | 3,063,531 | 2,991,072 | 2,991,072 | 4.60 | ||||||||||||
Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (1,856,915 | ) | (2.86 | ) | ||||||||||
Effective Gross Income | $30,023,243 | $32,476,844 | $32,180,504 | $34,226,259 | $38,272,463 | $58.85 | ||||||||||||
Real Estate Taxes | $5,160,259 | $5,592,081 | $6,048,976 | $6,770,415 | $6,941,473 | $10.67 | ||||||||||||
Insurance | 587,783 | 517,709 | 479,972 | 455,813 | 590,150 | 0.91 | ||||||||||||
Management Fee | 425,000 | 475,000 | 485,000 | 485,000 | 1,000,000 | 1.54 | ||||||||||||
Other Operating Expenses | 6,427,824 | 6,885,766 | 6,684,253 | 6,962,164 | 7,010,771 | 10.78 | ||||||||||||
Total Operating Expenses | $12,600,866 | $13,470,556 | $13,698,201 | $14,673,392 | $15,542,394 | $23.90 | ||||||||||||
Net Operating Income | $17,422,377 | $19,006,288 | $18,482,303 | $19,552,867 | $22,730,069 | $34.95 | ||||||||||||
TI/LC | 0 | 0 | 0 | 0 | 1,526,020 | 2.35 | ||||||||||||
Replacement Reserves | 0 | 0 | 0 | 0 | 130,066 | 0.20 | ||||||||||||
Net Cash Flow | $17,422,377 | $19,006,288 | $18,482,303 | $19,552,867 | $21,073,984 | $32.41 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten net cash flow. |
(2) | The increase from TTM 9/30/2015 Base Rent to Underwritten Base Rent is primarily from (i) the expiration of the free rent period offered under the terms of CVS’ lease and (ii) TD Bank executing a lease at a market rental rate to occupy one of the ground floor retail spaces which was previously rented at a below market rental rate. |
(3) | Contractual Rent Steps are underwritten based upon actual scheduled rent increases through January 1, 2017 from six office tenants and the present value of rent steps for TD Bank and CVS during the term of the 5 Penn Plaza Loan. |
(4) | Other Income includes sub-metered electricity, condenser water, overtime heating, ventilating and air conditioning, cleaning, trash removal and tenant sundry charges. |
■ | Appraisal.According to the appraisal, the 5 Penn Plaza Property had an “as-is” appraised value of $540,000,000 as of November 1, 2015. |
■ | Environmental Matters.Based on the Phase I environmental report dated November 12, 2015, there were no recommendations for further action at the 5 Penn Plaza Property other than the implementation of an asbestos operations and maintenance plan. |
■ | Market Overview and Competition. The 5 Penn Plaza Property is located in Midtown Manhattan on Eighth Avenue between West 33rd and West 34th Streets across the street from Penn Station. Penn Station is one of the busiest transportation hubs in the United States, providing direct access to Amtrak, New Jersey Transit, and the Long Island Railroad, as well as the 1, 2, 3, A, C, and E subway lines. Additionally, PATH trains and the Q, R, B, D, F, and M subway lines all stop two avenues east of the 5 Penn Plaza Property at 33rd Street and Broadway. |
The 5 Penn Plaza Property is located within the Penn Station Office submarket in Midtown Manhattan. According to a third party report, as of the third quarter of 2015, the Penn Station Class A submarket contained approximately 6.5 million SF of office space with a 2.0% direct vacancy rate and average gross rental rate of $63.59 per SF. The appraiser concluded a gross market rent of $60.00 per SF for floors 2 through 9, $63.00 per SF for floors 10 through 18, $66.00 per SF for floors 19 through 23 and $69.00 per SF for floors 24 through 26 at the 5 Penn Plaza Property. The appraiser’s concluded weighted average gross market rent for the office space at the 5 Penn Plaza Property is $62.87 per SF. The weighted average in-place office rent at the 5 Penn Plaza Property is $42.86 per SF, or 31.8% below the market office rent concluded to by the appraiser.
B-84 |
5 PENN PLAZA |
The following table presents certain information relating to the directly competitive office buildings identified in the appraisal for the 5 Penn Plaza Property: |
Directly Competitive Office Buildings(1)
370 Seventh Avenue | 393 Seventh Avenue | 132 West 31st Street | 1250 Broadway | 330 West 34th Street | 112 West 34th Street | |||||||
Total GLA | 306,017 | 980,000 | 348,946 | 604,279 | 654,000 | 548,000 | ||||||
Direct Occupancy | 98.9% | 100.0% | 98.2% | 97.5% | 73.9% | 90.6% | ||||||
Direct Asking Gross Rent (per SF) | $64 | N/A | $85 | $72 | $70-$74 | $65-$69 |
(1) | Source: Appraisal. |
■ | The Borrower. The borrower is 5 Penn Plaza LLC, a single-purpose, single-asset Delaware limited liability company. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the 5 Penn Plaza Loan. The guarantors of the non-recourse carveouts under the 5 Penn Plaza Loan are Stephen D. Haymes and The Stephen D. Haymes Revocable Trust Dated October 8, 2014. |
Stephen D. Haymes is a partner of Haymes Investment Company, a family-owned and operated real estate enterprise established by his father, Morice Haymes, in 1925. Haymes Investment Company is headquartered at the 5 Penn Plaza Property. Stephen D. Haymes has been involved in the real estate industry for over 40 years and has owned and operated over 3 million SF of office buildings, 500,000 SF of shopping centers and 5,000 units in residential buildings. Stephen D. Haymes also owns interests in other Manhattan office properties, including the nearby 330 West 34th Street.
■ | Escrows. On the origination date of the 5 Penn Plaza Loan Combination, the borrower funded a reserve of (i) $1,168,977 for real estate taxes, (ii) unfunded obligations of $3,069,378 for existing tenant improvements, leasing commissions and free rent related to TD Bank’s and Sirius XM Radio’s spaces, (iii) deferred maintenance of $1,306,250, (iv) $1,088,443 in a contingency reserve, which represents 31 days of interest due under the5 Penn Plaza Loan documents, to be used to pay debt service and/or pay reserve account deposits on the5 Penn Plaza Loan in the event of any late payment under the 5 Penn Plaza Loan documents, (v) $726,630 for gap rent related to TD Bank, as the tenant does not commence paying rent until June 2016 and (vi) $17,333,334 (the “Guaranty Collateral”) to be used solely for any amounts due from the guarantor under the recourse carveout guaranty and/or the environmental indemnity under the 5 Penn Plaza Loan documents (the “Guaranty Obligations”) prior to the enforcement of any judgment against the guarantor, provided that, (x) if the Mezzanine Lender obtains a judgment against the guarantor in connection with the 5 Penn Plaza Mezzanine Loan documents and the mortgage lender does not have any competing claim against the guarantor, the mortgage lender may make up to $7,333,333 of the Guaranty Collateral available to the Mezzanine Lender to satisfy the claim and (y) the Guaranty Collateral is not general collateral for the 5 Penn Plaza Loan but only collateral for the Guaranty Obligations. |
On each due date, the borrower will be required to fund (i) one-twelfth of the taxes that the lender estimates will be payable over the then-succeeding 12-month period, which currently equates to $584,489, (ii) at the option of the lender, if the liability or casualty policy maintained by the borrower does not constitute an approved blanket or umbrella insurance policy under the 5 Penn Plaza Loan documents, an insurance reserve in an amount equal to one-twelfth of the amount that the lender estimates will be necessary to pay insurance premiums over the then succeeding 12-month period and (iii) a replacement reserve in the amount of $10,839. During any period (A) commencing upon the debt service coverage ratio being less than 1.20x and (B) expiring upon the date that the debt service coverage ratio is equal to or greater than 1.25x for two consecutive calendar quarters, the borrower will be obligated to make monthly deposits of $125,000 into a reserve for payments of future tenant improvements and leasing commissions.
B-85 |
5 PENN PLAZA |
■ | Lockbox and Cash Management. The 5 Penn Plaza Loan documents require a hard lockbox with springing cash management. The 5 Penn Plaza Loan documents require the borrower to direct all tenants to pay rent directly to a lender-controlled lockbox account and require that all other money received by the borrower with respect to the 5 Penn Plaza Property be promptly deposited into such lockbox account following receipt. So long as a 5 Penn Plaza Trigger Period is not in effect, all funds in the lockbox account are required to be swept on each business day to the borrower’s operating account. During the continuance of a 5 Penn Plaza Trigger Period, all funds in the lockbox account are required to be transferred on each business day to a lender-controlled cash management account, and applied to pay debt service and operating expenses of the 5 Penn Plaza Property, to fund required reserves in accordance with the 5 Penn Plaza Loan documents and, provided no event of default is continuing pursuant to the 5 Penn Plaza Loan documents, to fund mezzanine loan debt service. After the foregoing disbursements are made and so long as a 5 Penn Plaza Trigger Period is continuing, all excess cash is trapped in an excess cash account and held as additional collateral for the 5 Penn Plaza Loan, provided, however, that if a 5 Penn Plaza Trigger Period is continuing solely because a mezzanine loan event of default has occurred and is continuing or the Mezzanine Lender has provided the lender notice it is entitled to sums under the 5 Penn Plaza Loan documents, then all excess cash flow will be provided to the Mezzanine Lender to be held and applied pursuant to the terms of the 5 Penn Plaza Mezzanine Loan documents. During the continuance of an event of default under the 5 Penn Plaza Loan documents, the lender may apply any funds in the cash management account to amounts payable under the 5 Penn Plaza Loan and/or toward the payment of expenses of the 5 Penn Plaza Property, in such order of priority as the lender may determine, provided, however, that until the lender (or its affiliates or nominees) takes title to the 5 Penn Plaza Property in connection with an exercise of remedies under the 5 Penn Plaza Loan documents or the receiver appointed in connection with the lender’s remedies under the 5 Penn Plaza Loan documents takes physical possession of and controls the 5 Penn Plaza Property, funds in the cash management account will be applied to the payment of taxes and insurance premiums as if no event of default were ongoing. |
A “5 Penn Plaza Trigger Period” means a period (i) commencing upon the occurrence of an event of default under the 5 Penn Plaza Loan documents and continuing until the same is cured, (ii) commencing on the date that the debt service coverage ratio as calculated under the 5 Penn Plaza Loan documents based on a trailing 12-month period is less than 1.10x and continuing until the debt service coverage ratio is equal to or greater than 1.15x for two consecutive calendar quarters or (iii) commencing upon the occurrence of the lender’s notice of a mezzanine event of default under the 5 Penn Plaza Loan documents and continuing until the same is cured. Notwithstanding the foregoing, no 5 Penn Plaza Trigger Period will be deemed to exist solely with respect to clause (ii) of this definition during any period that the Collateral Cure Conditions are satisfied.
“Collateral Cure Conditions” exist if the borrower: (i) deposits cash into an account with the lender or delivers to the lender a letter of credit which, in either case, serves as additional collateral for the 5 Penn Plaza Loan, in an amount equal to $2,600,000 (the “Collateral Deposit Amount”) and on each one-year anniversary date thereafter, the borrower deposits additional cash collateral in the amount of the Collateral Deposit Amount or increases the amount of the letter of credit (as applicable) by an amount equal to the Collateral Deposit Amount and (ii) provides evidence to the lender that the Mezzanine Borrower has deposited $400,000 with the Mezzanine Lender (in the form of cash or a letter of credit) as and when required by the 5 Penn Plaza Mezzanine Loan documents.
■ | Property Management. The 5 Penn Plaza Property is currently managed by CBRE, Inc. Under the 5 Penn Plaza Loan documents, the 5 Penn Plaza Property may not be managed by any party other than CBRE, Inc.; provided, however, that so long as no event of default under the 5 Penn Plaza Loan documents exists, the borrower can replace CBRE, Inc. with a property manager upon notice to the lender, provided that the replacement property manager is reasonably approved by the lender in writing (which approval may be conditioned upon receipt of a rating agency confirmation) unless pre-approved as described below and the replacement manager meets certain criteria under the 5 Penn Plaza Loan documents.The lender has pre-approved each of (i) Newmark Grubb Knight Frank, (ii) Jones Lang LaSalle, (iii) Cushman & Wakefield, Inc., (iv) Colliers International and (v) Jeffrey Management Corporation provided that the applicable replacement property manager has not had a material adverse change in reputation or financial condition since the origination of the 5 Penn Plaza Loan.The lender has the right to (or to require that the borrower) terminate the management agreement and replace the property manager if (a) the property manager becomes a debtor in (i) any involuntary |
B-86 |
5 PENN PLAZA |
bankruptcy or insolvency proceeding that is not dismissed within 90 days of the filing thereof or (ii) any voluntary bankruptcy or insolvency proceeding, (b) there exists a 5 Penn Plaza Trigger Period, (c) the property manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds or (d) there exists a default by the property manager beyond all applicable notice and cure periods under the management agreement. |
■ | Mezzanine or Subordinate Indebtedness.Concurrently with the origination of the 5 Penn Plaza Loan, SM Core Credit Finance, LLC (the “Mezzanine Lender”) made a $40,000,000 mezzanine loan (the “5 Penn Plaza Mezzanine Loan”) to 461 Eighth Holdings LLC (the “Mezzanine Borrower”), a Delaware limited liability company, secured by a pledge of 100% of the Mezzanine Borrower’s equity interest in the borrower. The 5 Penn Plaza Mezzanine Loan carries an interest rate of 5.75000%per annumand is co-terminous with the 5 Penn Plaza Loan. The lender entered into an intercreditor agreement with the Mezzanine Lender. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy, with a deductible no greater than $50,000, that provides coverage for terrorism in an amount equal to the full replacement cost of the 5 Penn Plaza Property (plus eighteen months of rental loss and/or business interruption coverage with an additional period of indemnity covering the six months following restoration). If TRIPRA or a similar or subsequent statute is not in effect, provided that terrorism coverage is commercially available, the borrower is required to carry terrorism insurance throughout the term of the 5 Penn Plaza Loan Combination, but the borrower is not required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable at such time in respect of the property and business interruption/rental loss insurance required under the 5 Penn Plaza Loan documents (without giving effect to the cost of the terrorism component of such property and business interruption/rental loss insurance), and if the cost of terrorism insurance exceeds such amount, the borrower must purchase the maximum amount of terrorism insurance available with funds equal to such amount. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-87 |
HAMPSHIRE TOWER APARTMENTS |
B-88 |
HAMPSHIRE TOWER APARTMENTS |
B-89 |
HAMPSHIRE TOWER APARTMENTS |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | RMF | ||
Location (City/State) | Takoma Park, Maryland | Cut-off Date Principal Balance | $22,000,000 | ||
Property Type | Multifamily | Cut-off Date Principal Balance per Unit | $101,851.85 | ||
Size (Units) | 216 | Percentage of Initial Pool Balance | 3.2% | ||
Total Occupancy as of 2/29/2016 | 99.1% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 2/29/2016 | 99.1% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 1967 / 2006, 2015 | Mortgage Rate | 4.87000% | ||
Appraised Value | $32,900,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | 60 | ||||
Underwritten Revenues | $3,381,181 | ||||
Underwritten Expenses | $1,499,290 | Escrows | |||
Underwritten Net Operating Income (NOI) | $1,881,890 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $1,827,890 | Taxes | $165,311 | $26,240 | |
Cut-off Date LTV Ratio | 66.9% | Insurance | $45,084 | $3,578 | |
Maturity Date LTV Ratio | 61.5% | Replacement Reserves | $0 | $4,500 | |
DSCR Based on Underwritten NOI / NCF | 1.35x / 1.31x | Deferred Maintenance | $3,406 | $0 | |
Debt Yield Based on Underwritten NOI / NCF | 8.6% / 8.3% | Other(1) | $210,722 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % |
Loan Amount | $22,000,000 | 99.8% | Loan Payoff | $14,978,471 | 67.9% |
Other Sources | 50,000 | 0.2 | Principal Equity Distribution | 6,288,193 | 28.5 |
Reserves | 424,523 | 1.9 | |||
Closing Costs | 358,813 | 1.6 | |||
Total Sources | $22,050,000 | 100.0% | Total Uses | $22,050,000 | 100.0% |
(1) | Other Upfront reserves represent a $210,722 rent subsidy reserve. See “—Escrows” below. |
■ | The Mortgage Loan. The mortgage loan (the “Hampshire Tower Apartments Loan”) is evidenced by a note in the original principal amount of $22,000,000 and is secured by a first mortgage encumbering the borrower’s fee simple interest in a 216-unit multifamily complex located in Takoma Park, Maryland (the “Hampshire Tower Apartments Property”). The Hampshire Tower Apartments Loan was originated by Rialto Mortgage Finance, LLC on January 12, 2016. The Hampshire Tower Apartments Loan has an outstanding principal balance as of the Cut-off Date of $22,000,000 which represents approximately 3.2% of the Initial Pool Balance, and accrues interest at an interest rate of 4.87000%per annum. The proceeds of the Hampshire Tower Apartments Loan were primarily used to refinance the existing debt on the Hampshire Tower Apartments Property, pay loan origination costs, fund upfront reserves and return equity to the borrower sponsor. |
The Hampshire Tower Apartments Loan had an initial term of 120 months and has a remaining term of 118 months as of the Cut-off Date. The Hampshire Tower Apartments Loan requires payments of interest only for the initial 60 months, followed by monthly payments of principal and interest sufficient to amortize the Hampshire Tower Apartments Loan over a 30-year amortization schedule. The scheduled maturity date of the Hampshire Tower Apartments Loan is the due date in February 2026. Voluntary prepayment of the Hampshire Tower Apartments Loan is permitted after the due date in November 2025. Provided no event of default under the Hampshire Tower Apartments Loan has occurred and is continuing, at any time after the second anniversary of the Closing Date, the Hampshire Tower Apartments Loan may be defeased with certain direct, non-callable obligations of the United States of America or other obligations which are “government securities” permitted under the Hampshire Tower Apartments Loan documents.
■ | The Mortgaged Property. The Hampshire Tower Apartments Property is a 216-unit, 11-story high-rise multifamily building situated on approximately 5.14 acres and located in Takoma Park, Maryland. The Hampshire Tower Apartments Property is located approximately seven miles northeast of the Washington D.C. central business district. The Hampshire Tower Apartments Property was built in 1967 and features 30 studio units, 52 one-bedroom units, 114 two-bedroom units and 20 three-bedroom units. Studio units have two floor plans ranging from 450 to 505 SF, one-bedroom/one-bathroom units have three floor plans ranging from 740 to 900 SF, two-bedroom/one-bathroom units are 990 SF, two-bedroom/two-bathroom units are 1,119 SF and three-bedroom/two-bathroom units are 1,278 SF. Community amenities consist of a controlled-access lobby, community center and party rooms, laundry facilities on each floor, garage parking, central air, outdoor pool with pool house, children’s splash park, playground, tennis courts, grill areas, upper sitting areas, and 244 security cameras throughout the Hampshire Tower Apartments Property. The Hampshire Tower Apartments Property is an all utilities included community. Unit amenities include standard kitchen appliances such as a refrigerator, gas range/oven, garbage |
B-90 |
HAMPSHIRE TOWER APARTMENTS |
disposal and dishwasher (except studios) and tile floors. All units either have a balcony or patio. The Hampshire Tower Apartments Property contains 189 surface parking spaces and 62 garage spaces for a total of 251 parking spaces, reflecting an overall parking ratio of 1.2 spaces per unit. As of February 29, 2016, Total Occupancy and Owned Occupancy were both 99.1%. |
The City of Takoma Park adopted a rent stabilization law in 1981 under which all individual condominium units and multi-family rental properties within the city are subject. Under this law, rental rate increases are limited to the rent stabilization allowance published annually by the city effective July 1. Landlords with tenants receiving rental assistance (i.e. Section 8 Housing Choice Voucher program), and those who provide affordable housing to low and moderate income households under contract with a governmental agency such as the State of Maryland, may apply to the city for an exemption from rent stabilization. Newly constructed multi-family rental facilities are also eligible for an exemption. |
Prior to 2008, the Hampshire Tower Apartments Property and an adjacent multifamily building were under common ownership. In 2008, the ownership converted the adjacent building into a residential condominium and created a land condominium with two units, the Hampshire Tower Apartments Property and the adjacent residential condominium building to apportion rights and responsibilities regarding the shared swimming pool and tennis court. Each unit owner has a voting right with respect to the land condominium. Because of this, the Hampshire Tower Apartments Property is a unit of Hampshire Towers Land Condominium, which is comprised of the two adjacent properties. During this process, the Hampshire Tower Apartments Property obtained an exemption to Takoma Park’s rent stabilization law for 20 years beginning in September 2008, through a rental agreement with Montgomery County Department of Housing. Under the terms of this agreement, the Hampshire Tower Apartments Property is required to lease at least 30 units to Very Low Income Tenants across an agreed-upon mix of unit types. Very Low Income Tenants are tenants with income that is at or below forty percent (40%) of the adjusted area median income (“AMI”). Rents for these tenants must not exceed 30% of 40% of the adjusted AMI. In addition, there were other restrictions on the rest of the tenants. |
In January 2015, the borrower executed a revised rental agreement with Montgomery County Department of Housing expiring in 2028. The rental agreement became effective at the close of the borrower’s purchase in March 2015. In October 2015, the borrower negotiated an amendment which allows for higher rent increases on Remaining Tenants (defined below). The rental agreement and subsequent amendment stipulate the following unit designations: |
“Very Low Income Units”: Thirty units must be allocated to Very Low Income Units and the owners must undertake a good faith effort to cause the make-up of the Very Low Income Units to be as follows: 10% efficiency units, 28% one bedroom units, 52% two bedroom units and 10% three bedroom units. Rents payable for these units must not exceed 30% of 40% adjusted AMI. Twenty-four of these 30 required units are covered in Relocated Tenants and Special Tenants (each as defined below). |
“Qualified Tenants”: Tenants who (i) occupied the Hampshire Tower Apartments Property prior to December 19, 2008, and (ii) have provided annually, since 2008, complete, accurate and timely income verification documents. The rental rate for any unit occupied by a Qualified Tenant must not exceed the lesser of (i) the Rent Cap (defined as 30% of the Qualified Tenant’s total household income), or (ii) the Market Rate (defined as 30% of 60% of the adjusted AMI until 2020, and 30% of 80% of the adjusted AMI thereafter). The rights of Qualified Tenants are not assignable or otherwise transferable. There are four units on the February 29, 2016 rent roll that are designated as Qualified Tenant units. |
“Relocated Tenants”: Tenants who were relocated from the adjacent property (that was converted to a residential condominium). The rental rate for Relocated Tenants will not be increased in any calendar year by more than the percentage increase of CPI, but must provide income verification annually. Relocated Tenants are entitled to a tenancy for such tenant’s lifetime and will have the right to terminate his/her lease upon 30 days written notice to the landlord. There are 14 units on the February 29, 2016 rent roll that are designated as Relocated Tenant units. |
B-91 |
HAMPSHIRE TOWER APARTMENTS |
“Special Tenants”: Certain tenants of the Hampshire Tower Apartments Property who have received annual rent increases based on CPI although their respective leases do not limit rent increases to CPI. The rental rate for Special Tenants whose household income does not exceed 80% of the adjusted AMI must not be increased in any calendar year by more than the CPI. Special Tenants are entitled to tenancy for such tenant’s lifetime and have the right to terminate his/her lease upon 30 days written notice to the landlord. The rights of the Special Tenants are not assignable or transferable. There are 18 units on the February 29, 2016 rent roll that are designated as Special Tenants. |
“Remaining Tenants”: (Per the October 2015 Amendment) Tenants who do not qualify, or fail to re-qualify, as Relocated Tenants, Special Tenants, Qualified Tenants or Very Low Income Tenants will not be responsible for paying more than a rental rate equal to the rental rate in their respective leases in effect on September 30, 2015, plus up to a 15% increase annually. The rents on the Remaining Tenants are still capped at the Market Rent which is defined as 30% of 60% of the adjusted AMI for until 2020, and 30% of 80% of the adjusted AMI for the remaining term. |
The landlord is not permitted to lease any unit in the Hampshire Tower Apartments Property for a rental rate in excess of the Market Rent which is defined as 30% of 60% of the adjusted AMI until 2020 and 30% of 80% of the adjusted AMI for the remaining term. As of March 2015, the AMI per Montgomery County is $109,200. Per Montgomery County, the Market Rate based on 30% of 60% of adjusted AMI is $1,229 for a one-bedroom unit, $1,474 for a two-bedroom unit, and $1,704 for a three-bedroom unit. |
As part of an October 2015 amendment to the rental agreement, Montgomery County agreed to provide a rental subsidy to the borrower for the Remaining Tenants in the aggregate amount of $276,930 during the three year period from September 2015 to 2018. The rental subsidy is defined as the difference between the current Market Rate (as defined in the rental agreement) for the Remaining Tenant units and the current rent being paid by the tenant. On October 1, 2015, the borrower increased the rents on the Remaining Units by 15%. There are currently 171 units at the Hampshire Tower Apartments Property that are designated as Remaining Tenants. Of those 171 units, the borrower is receiving a rent subsidy for 86 units for a total of $16,552 per month which is being applied to rental collections each month. As a result of the rent increase on October 1, 2015, plus the $16,552 in monthly rent subsidy, monthly rental collections increased from $226,356 in September 2015 to $257,861 in October 2015. The entire $276,930 subsidy was paid upfront to the borrower. The remaining unapplied $210,722 subsidy was escrowed at the Hampshire Tower Apartments Loan closing and will be released on a monthly basis through September 2018 in amounts specified in the loan documents.
B-92 |
HAMPSHIRE TOWER APARTMENTS |
The following table presents certain information relating to the units and rent at the Hampshire Tower Apartments Property:
Unit Mix(1)
Unit Type | Occupied Units | Vacant Units | Total | % of | Average | Monthly Market Rent per Unit(2) | Yearly Market Rent (2) | Monthly Actual | Yearly | ||||||||||
Studio-Small | 9 | 1 | 10 | 4.6 | % | 450 | $950 | $102,600 | $861 | $93,018 | |||||||||
Studio-Large | 20 | 0 | 20 | 9.3 | 505 | 1,000 | 240,000 | 949 | 227,700 | ||||||||||
1 Bedroom /1 Bath - Small | 10 | 0 | 10 | 4.6 | 740 | 1,100 | 132,000 | 1,088 | 130,560 | ||||||||||
1 Bedroom /1 Bath - Med | 22 | 0 | 22 | 10.2 | 837 | 1,200 | 316,800 | 1,103 | 291,162 | ||||||||||
1 Bedroom /1 Bath - Large | 20 | 0 | 20 | 9.3 | 900 | 1,229 | 294,960 | 1,123 | 269,556 | ||||||||||
2 Bedroom /1 Bath | 22 | 1 | 23 | 10.6 | 990 | 1,374 | 362,736 | 1,271 | 335,532 | ||||||||||
2 Bedroom /2 Bath | 91 | 0 | 91 | 42.1 | 1,119 | 1,474 | 1,609,608 | 1,354 | 1,478,980 | ||||||||||
3 Bedroom /2 Bath | 20 | 0 | 20 | 9.3 | 1,278 | 1,704 | 408,960 | 1,646 | 395,108 | ||||||||||
Total / Wtd. Avg. | 214 | 2 | 216 | 100.0 | % | 966 | $1,349 | $3,467,664 | $1,255 | $3,221,616 |
(1) | As provided by the borrower per the February 29, 2016 rent roll. |
(2) | Source: Appraisal |
The following table presents certain information relating to historical leasing at the Hampshire Tower Apartments Property:
Historical Leased %(1)
October | 2012(2) | 2013(2) | October | As of | |
Owned Space | 98.1% | 99.5% | 100.0% | 100.0% | 99.1% |
(1) | As provided by the borrower. |
(2) | Occupancy is based on 211 units. Five units were added to the property in 2015. |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the Hampshire Tower Apartments Property: |
Cash Flow Analysis(1)
T-11 2/29/2016 | Underwritten | Underwritten | |||||||
Base Rent | $2,953,781 | $3,221,616 | $14,915 | ||||||
Gross Up Vacancy | 0 | 27,888 | 129 | ||||||
Gross Potential Rent | $2,953,781 | $3,249,504 | $15,044 | ||||||
Vacancy, Credit Loss & Concessions | (63,624 | ) | (161,118 | ) | (746 | ) | |||
Total Rent Revenue | $2,890,157 | $3,088,387 | $14,298 | ||||||
Other Revenue(2) | 259,835 | 292,794 | 1,356 | ||||||
Effective Gross Income | $3,149,993 | $3,381,181 | $15,654 | ||||||
Total Operating Expenses | $1,406,513 | $1,499,290 | $6,941 | ||||||
Net Operating Income | $1,743,480 | $1,881,890 | $8,712 | ||||||
Replacement Reserves | 0 | 54,000 | 250 | ||||||
Net Cash Flow | $1,743,480 | $1,827,890 | $8,462 |
(1) | Certain items such as straight line rent, interest expense, interest income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Other Revenue includes parking, late fees, application fees, laundry and vending income, forfeited security deposits, termination fees, miscellaneous revenues, bad check charges and antenna income. |
■ | Appraisal. According to the appraisal, the Hampshire Tower Apartments Property had an “as-is” appraised value of $32,900,000 as of an effective date of November 20, 2015. |
B-93 |
HAMPSHIRE TOWER APARTMENTS |
■ | Environmental Matters. According to a Phase I environmental report, dated December 2, 2015, there are no recommendations for further action at the Hampshire Tower Apartments Property other than a recommendation for an asbestos and lead-based paint operations and maintenance (O&M) plan. |
■ | Market Overview and Competition. The Hampshire Tower Apartments Property is located in Takoma Park, Maryland, approximately seven miles northeast of the Washington D.C. central business district, and is within the Washington-Arlington-Alexandria, DC-VA-MD-WV metropolitan statistical area. The city of Takoma Park is approximately is 2.4 square miles and is largely residential and offers a mix of small to large apartment buildings, a large historic district, two major commercial districts, numerous parks and walkable neighborhoods. Primary regional access to the neighborhood is provided by New Hampshire Avenue, a north/south primary thoroughfare that connects to the I-475 Loop to the north and downtown Washington, DC to the south. I-475 (2.6 miles north) encircles the Washington, DC metro area and connects to a network of freeways providing access throughout the area and the greater eastern seaboard. Approximately two miles southwest of the Hampshire Tower Apartments Property is the nearest MetroRail station, Takoma Park, providing access to downtown Washington, DC. The Hampshire Tower Apartments Property is situated approximately 3.0 miles east of Highway 29, which travels north/south and offers direct access into the Washington, DC central business district. |
The 2015 estimated population within a one, three, and five-mile radius of the Hampshire Tower Apartments Property is 40,898, 266,446, and 603,095, respectively. The 2015 average household income within a one, three, and five-mile radius is $76,818, $86,285, and $97,696, respectively. The Hampshire Tower Apartments Property is within close proximity to the University of Maryland, the Capital Beltway, the Redline Metro, as well as a variety of shopping, dining, and entertainment opportunities.
The following table presents certain information relating to the primary competition for the Hampshire Tower Apartments Property:
Competitive Set(1)
Hampshire | Suburban Hill | Bedford Towers | Maple View | Park Ritche | Takoma Landing | |
Location | Takoma Park | Silver Spring | Takoma Park | Takoma Park | Takoma Park | Takoma Park |
Year Built | 1967 | 1960 | 1968 | 1963 | 1968 | 1964 |
Occupancy | 99.5% | 93.0% | 94.0% | 96.0% | 99.0% | 95.0% |
No. of Units | 216 | 158 | 468 | 120 | 189 | 222 |
Distance | - | 1.1 miles | 0.9 miles | 0.9 miles | 1.0 mile | 0.7 miles |
(1) | Source: Appraisal. |
■ | The Borrower. The borrower is Orlo Takoma, LLC, a single-purpose, single-asset entity. The non-recourse carve-out guarantor under the Hampshire Tower Apartments Loan is Aaron Orlofsky. |
■ | Escrows. On the origination date of the Hampshire Tower Apartments Loan, the borrower funded escrow reserves of $165,311 with respect to real estate taxes, $45,084 with respect to insurance, $3,406 with respect to deferred maintenance and a $210,722 rent subsidy reserve. |
On each due date, the borrower is required to fund the following reserves with respect to the Hampshire Tower Apartments Loan: (i) a tax reserve in an amount equal to one-twelfth of the amount that the lender estimates will be necessary to pay taxes over the then succeeding 12-month period; (ii) an insurance reserve in an amount equal to one-twelfth of the amount that the lender estimates will be necessary to pay insurance premiums over the then succeeding 12-month period; and (iii) a replacement reserve in an amount equal to $4,500.
B-94 |
HAMPSHIRE TOWER APARTMENTS |
■ | Lockbox and Cash Management. The Hampshire Tower Apartments Loan requires a springing lockboxand a springing cash management, which will be established upon written notification from the lender to the lockbox bank. Upon the occurrence of a Cash Management Trigger Event (as defined below), the loan documents require the borrower to deposit or cause to be deposited all revenue generated by the Hampshire Tower Apartments Property into the lockbox account and to set up the cash management account for the sole and exclusive benefit of the lender. Following the occurrence of a Cash Management Trigger Event, the funds on deposit in the lockbox account are required to be transferred within one business day to the cash management account. On each due date after the occurrence of a Cash Management Trigger Event, the related loan documents require that all amounts on deposit in the lockbox account be applied in the following order of priority: (i) real estate taxes; (ii) insurance; (iii) fees and expenses of the cash management bank in accordance with the cash management agreement; (iv) monthly debt service payment; (v) monthly replacement reserves; (vi) funds sufficient to pay any interest accruing at the default rate with respect to any event of default that has occurred; (vii) funds sufficient to be applied to the operating expenses set forth in the annual operating budget; (viii) funds sufficient to pay for extraordinary or other operating expenses; and (ix) all excess cash flow will be applied to the excess cash flow account. |
A “Cash Management Trigger Event” means the occurrence of (i) an event of default; and/or (ii) any bankruptcy action of the borrower, guarantor or property manager.
■ | Property Management. The Hampshire Tower Apartments Property is currently managed by AJO Realty, LLC, an affiliate of the borrower, pursuant to a management agreement. The Hampshire Tower Apartments Loan documents provide that the borrower may terminate the property manager or consent to the assignment of the property manager’s rights under the management agreement upon lender’s consent, in each case, to the extent that (i) an event of default under the Hampshire Tower Apartments Loan documents has occurred and is continuing; (ii) the property manager is in default under the management agreement beyond any applicable notice and cure period; (iii) the property manager becomes insolvent or a debtor in any bankruptcy action; (iv) at any time the property manager has engaged in negligence, fraud, willful misconduct or misappropriation of funds; and/or (v) at any time the debt service coverage ratio (based on the trailing 12-month period immediately preceding the date of such determination) is less than 1.00x. |
■ | Mezzanine or Subordinate Indebtedness. Not permitted. |
■ | Terrorism Insurance. The borrower is required to maintain an “all-risk” insurance policy that provides coverage for terrorism in an amount equal to the full replacement cost of the Hampshire Tower Apartments Property, plus 18 months of business interruption coverage as calculated under the Hampshire Tower Apartments Loan documents (with an additional extended period of indemnity as reasonably required by the lender) in an amount equal to 100% of the projected gross income from the Hampshire Tower Apartments Property (on an actual loss sustained basis) for a period continuing until the restoration of the Hampshire Tower Apartments Property is completed and containing an extended period endorsement which provides for up to 12 months of additional coverage. The terrorism insurance is required to contain a deductible that is acceptable to the lender and is no larger than $10,000. See “Risk Factors—Terrorism Insurance May Not Be Available for All Mortgaged Properties” in the Prospectus. |
B-95 |
PARK PLACE |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | CGMRC | ||
Location (City/State) | Chandler, Arizona | Cut-off Date Principal Balance(4) | $20,000,000 | ||
Property Type | Office | Cut-off Date Principal Balance per SF(2) | $177.59 | ||
Size (SF) | 523,673 | Percentage of Initial Pool Balance | 2.9% | ||
Total Occupancy as of 12/1/2015(1) | 100.0% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 12/1/2015(1) | 100.0% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 2009-2014 / NAP | Mortgage Rate | 4.92000% | ||
Appraised Value | $140,000,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | 36 | ||||
Underwritten Revenues | $12,323,925 | Borrower Sponsors(5) | David Allred, Allred Family Revocable Trust Dated April 1, 1998 and the Douglas Allred Family Investments, LLC | ||
Underwritten Expenses | $2,954,962 | Escrows | |||
Underwritten Net Operating Income (NOI) | $9,368,963 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $8,544,373 | Taxes | $587,243 | $117,449 | |
Cut-off Date LTV Ratio(2) | 66.4% | Insurance | $102,602 | $11,400 | |
Maturity Date LTV Ratio(2)(3) | 56.1% | Replacement Reserves | $0 | $8,728 | |
DSCR Based on Underwritten NOI / NCF(2) | 1.58x / 1.44x | TI/LC(6) | $500,000 | $43,640 | |
Debt Yield Based on Underwritten NOI / NCF(2) | 10.1% / 9.2% | Other(7) | $7,618,460 | $0 |
Sources and Uses | ||||||||||
Sources | $ | % | Uses | $ | % | |||||
Loan Combination Amount | $93,000,000 | 99.9 | % | Loan Payoff | $64,124,118 | 68.9 | % | |||
Other Sources | 85,000 | 0.1 | Principal Equity Distribution | 19,145,950 | 20.6 | |||||
Reserves | 8,808,305 | 9.5 | ||||||||
Closing Costs | 1,006,627 | 1.1 | ||||||||
Total Sources | $93,085,000 | 100.0 | % | Total Uses | $93,085,000 | 100.0 | % |
(1) | Total Occupancy and Owned Occupancy as of December 1, 2015 includes Infusion Software’s lease for 100,622 SF which has a lease start date of January 1, 2017. The tenant has executed a lease but does not take occupancy or commence paying rent until January 1, 2017. In connection with the origination of the Park Place Loan, CGMRC required a reserve of $2,217,788 for gap rent related to Infusion Software. |
(2) | Calculated based on the aggregate original principal balance of the Park Place Loan Combination. |
(3) | The Maturity Date LTV Ratio is calculated based on the “as stabilized” appraised value of $146,500,000 as of January 1, 2017. The Maturity Date LTV Ratio calculated based on the “as-is” appraised value of $140,000,000 is 58.7%. |
(4) | The Cut-off Date Principal Balance of $20,000,000 is evidenced by the non-controlling note A-2-1, which is part of a $93,000,000 loan combination evidenced by threepari passunotes. Thepari passu companion loan evidenced by the controlling note A-1 with a principal balance of $50,000,000 as of the Cut-off Date was contributed to the CGCMT 2016-GC36 securitization transaction and the non-controlling note A-2-2 with a principal balance of $23,000,000 as of the Cut-off Date is currently held by Citigroup Global Markets Realty Corp. and is expected to be contributed to one or more future securitization transactions. |
(5) | David Allred, Allred Family Revocable Trust Dated April 1, 1998 and the Douglas Allred Family Investments, LLC are the non-recourse carveout guarantors. |
(6) | The TI/LC reserve is capped at $2,094,692. |
(7) | Other upfront reserves represent reserves for unfunded landlord obligations including tenant improvements and free rent. |
The following table presents certain information relating to the major tenants at the Park Place Property:
Largest Tenants Based on Underwritten Base Rent
Tenant Name | Credit Rating | Tenant GLA | % of GLA | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | Lease Expiration | Renewal / Extension Options | ||||||||
Infusion Software(1) | NR / NR / NR | 261,591 | 50.0% | $5,174,507 | 44.2% | $19.78 | Various(2) | 1, 10-year option | ||||||||
Healthways, Inc | NR / NR / NR | 92,109 | 17.6 | 2,781,265 | 23.8 | 30.20 | 4/30/2020 | 2, 5-year options | ||||||||
Education Management | NR / NR / NR | 100,885 | 19.3 | 1,902,703 | 16.3 | 18.86 | 1/31/2022 | 2, 5-year options | ||||||||
Insys Therapeutics, Inc. | NR / NR / NR | 34,945 | 6.7 | 944,563 | 8.1 | 27.03 | 6/30/2021 | 2, 5-year options | ||||||||
Infineon Technologies | NR / NR / NR | 25,941 | 5.0 | 695,219 | 5.9 | 26.80 | 5/31/2019 | 2, 5-year options | ||||||||
League for Innovation(3) | NR / NR / NR | 8,202 | 1.6 | 205,050 | 1.8 | 25.00 | 2/28/2022 | NA | ||||||||
Largest Tenants | 523,673 | 100.0% | $11,703,307 | 100.0% | $22.35 | |||||||||||
Vacant Spaces (Owned Space) | 0 | 0.0 | 0 | 0.0 | 0.00 | |||||||||||
Total / Wtd. Avg. All Owned Tenants | 523,673 | 100.0% | $11,703,307 | 100.0% | $22.35 |
(1) | Infusion Software recently executed a lease to expand its space by 100,622 SF at an annual base rent of $1,760,885 that commences on January 1, 2017. As such, Infusion Software is currently paying an aggregate annual base rent of $3,413,622 for 160,969 SF and is expected to be paying an aggregate annual base rent of $5,174,507 commencing on January 1, 2017. |
(2) | Infusion Software has expanded its space two times since January 2013 and is subject to three separate leases: (i) the first lease commenced in 2013, expires on September 30, 2021 and is for 92,102 SF at an annual base rent of $2,008,736 ($21.81 per SF); (ii) the second lease commenced in 2014, expires on September 30, 2021 and is for 68,867 SF at an annual base rent of $1,404,887 ($20.40 per SF); and (iii) the third lease was executed on June 9, 2015 and requires annual base rent of $1,760,885 ($17.50 per SF) for 100,622 SF that commences on January 1, 2017 and expires December 31, 2024. |
(3) | League for Innovation has a termination option effective February 28, 2019 with six months’ notice and payment of unamortized tenant allowance and broker’s commissions according to the lease. |
B-96 |
PARK PLACE |
The following table presents certain information relating to the lease rollover schedule for the Park Place Property:
Lease Expiration Schedule(1)
Year Ending December 31, | Expiring Owned GLA | % of Owned GLA | Cumulative % of Owned GLA | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | # of Expiring Tenants(2) | |||||||||||||
2016 | 0 | 0.0 | % | 0.0% | $0 | 0.0 | % | $0.0 | 0 | |||||||||||
2017 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.0 | 0 | |||||||||||||
2018 | 0 | 0.0 | 0.0% | 0 | 0.0 | 0.0 | 0 | |||||||||||||
2019 | 25,941 | 5.0 | 5.0% | 695,219 | 5.9 | 26.80 | 1 | |||||||||||||
2020 | 92,109 | 17.6 | 22.6% | 2,781,265 | 23.8 | 30.20 | 1 | |||||||||||||
2021 | 195,914 | 37.4 | 60.0% | 4,358,186 | 37.2 | 22.25 | 2 | |||||||||||||
2022 | 109,087 | 20.8 | 80.8% | 2,107,753 | 18.0 | 19.32 | 2 | |||||||||||||
2023 | 0 | 0.0 | 80.8% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2024 | 100,622 | 19.2 | 100.0% | 1,760,885 | 15.0 | 17.50 | 1 | |||||||||||||
2025 | 0 | 0.0 | 100.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
2026 & Thereafter | 0 | 0.0 | 100.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
Vacant | 0 | 0.0 | 100.0% | 0 | 0.0 | 0.00 | 0 | |||||||||||||
Total / Wtd. Avg. | 523,673 | 100.0 | % | $11,703,307 | 100.0 | % | $22.35 | 7 |
(1) | Calculated based on approximate square footage by each Owned Tenant. |
(2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and which are not reflected in the Lease Expiration Schedule. |
The following table presents certain information relating to historical leasing at the Park Place Property:
Historical Leased %(1)
2012 | 2013 | 2014 | As of 12/1/2015(2) | |||||
Owned Space | 86.7% | 90.1% | 100.0% | 100.0% |
(1) | As provided by the borrower. |
(2) | Total Occupancy and Owned Occupancy as of December 1, 2015 includes Infusion Software’s lease for 100,622 SF which has a lease start date of January 1, 2017. The tenant has executed a lease but does not take occupancy or commence paying rent until January 1, 2017. In connection with the origination of the Park Place Loan, CGMRC required a reserve of $2,217,788 for gap rent related to Infusion Software. |
B-97 |
PARK PLACE |
n | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the Park Place Property: |
Cash Flow Analysis(1)
2012(2) | 2013(2) | 2014(2) | TTM 9/30/2015(2) | Underwritten | Underwritten $ per SF | |||||||||||||
Base Rent(3) | $3,576,700 | $5,534,685 | $6,877,219 | $8,659,536 | $11,390,303 | $21.75 | ||||||||||||
Contractual Rent Steps | 0 | 0 | 0 | 0 | 313,004 | 0.60 | ||||||||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 0 | 0.00 | ||||||||||||
Total Rent | $3,576,700 | $5,534,685 | $6,877,219 | $8,659,536 | $11,703,307 | $22.35 | ||||||||||||
Total Reimbursables | 44,679 | 533,853 | 631,099 | 997,770 | 1,391,645 | 2.66 | ||||||||||||
Parking | 11,980 | 115,545 | 138,420 | 138,420 | 145,620 | 0.28 | ||||||||||||
Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (916,647 | ) | (1.75 | ) | ||||||||||
Effective Gross Income | $3,633,359 | $6,184,083 | $7,646,738 | $9,795,726 | $12,323,925 | $23.53 | ||||||||||||
Real Estate Taxes | $436,518 | $679,674 | $669,930 | $829,804 | $1,132,350 | $2.16 | �� | |||||||||||
Insurance | 65,137 | 97,024 | 101,094 | 117,854 | 130,288 | 0.25 | ||||||||||||
Management Fee | 109,001 | 185,522 | 229,402 | 293,872 | 369,718 | 0.71 | ||||||||||||
Repairs & Maintenance | 336,222 | 458,210 | 581,159 | 597,925 | 721,091 | 1.38 | ||||||||||||
Utilities | 214,669 | 242,007 | 264,522 | 295,174 | 325,746 | 0.62 | ||||||||||||
Contract Services | 51,020 | 52,174 | 49,335 | 53,996 | 47,118 | 0.09 | ||||||||||||
General & Administrative | 0 | 0 | 40 | 534 | 5,000 | 0.01 | ||||||||||||
Other Operating Expenses | 292,479 | 296,656 | 297,578 | 297,623 | 223,652 | 0.43 | ||||||||||||
Total Operating Expenses | $1,505,046 | $2,011,268 | $2,193,060 | $2,486,782 | $2,954,962 | $5.64 | ||||||||||||
Net Operating Income(2) | $2,128,313 | $4,172,815 | $5,453,678 | $7,308,944 | $9,368,963 | $17.89 | ||||||||||||
TI/LC | 0 | 0 | 0 | 0 | 719,855 | 1.37 | ||||||||||||
Replacement Reserve | 0 | 0 | 0 | 0 | 104,735 | 0.20 | ||||||||||||
Net Cash Flow | $2,128,313 | $4,172,815 | $5,453,678 | $7,308,944 | $8,544,373 | $16.32 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were are not considered for the underwritten cash flow. |
(2) | The annual increase in the Base Rent since 2012 and the increase in Underwritten Net Operating Income are primarily attributed to the expansion and lease-up of the Park Place Property. The Park Place Property is comprised of six buildings that were built in phases between 2009 and 2014. Three buildings totaling 262,082 SF were built in 2009, one building totaling 92,102 SF was built in 2012, one building totaling 68,867 SF was built in 2013 and one building totaling 100,622 was built in 2014. As such, the net rentable area of the Park Place Property was 262,082 SF through 2011 (after construction of the 92,102 SF building), 354,184 SF in 2012 (after construction), 423,051 SF in 2013 and 523,673 SF in 2014. |
(3) | Underwritten Base Rent includes $1,760,855 of rental income that does not commence until January 1, 2017 attributable to 100,622 SF of expansion space leased to Infusion Software. The lease for the expansion space was executed on June 9,’ 2015. $2,217,788 was reserved for gap rent associated with the Infusion Software expansion lease. $5,246,634 was reserved for unfunded tenant improvements and leasing commissions associated with the Infusion Software expansion lease. |
B-98 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
B-99 |
MCCALLUM COURTS AND MCCALLUM GLEN |
Mortgaged Property Information | Mortgage Loan Information | |||||
Number of Mortgaged Properties | 2 | Loan Seller | CGMRC | |||
Location (City/State) | Various | Cut-off Date Principal Balance | $19,143,750 | |||
Property Type | Multifamily | Cut-off Date Principal Balance per Unit | $45,689.14 | |||
Size (Units) | 419 | Percentage of Initial Pool Balance | 2.8% | |||
Total TTM Occupancy as of 10/5/2015 | 99.3% | Number of Related Mortgage Loans | None | |||
Owned Occupancy as of 10/5/2015 | 99.3% | Type of Security | Fee Simple | |||
Year Built / Latest Renovation | Various / 2014 | Mortgage Rate | 4.79000% | |||
Appraised Value | $25,700,000 | Original Term to Maturity (Months) | 120 | |||
Original Amortization Term (Months) | 360 | |||||
Original Interest Only Term (Months) | 60 | |||||
Borrower Sponsors(1) | Chad A. Doty, Daniel R. Chamberlain, Andrew C. McClellan, Brady J. McClellan and William C. Mara | |||||
Underwritten Revenues | $3,578,423 | |||||
Underwritten Expenses | $1,702,802 | |||||
Underwritten Net Operating Income (NOI) | $1,875,621 | Escrows | ||||
Underwritten Net Cash Flow (NCF) | $1,749,921 | Upfront | Monthly | |||
Cut-off Date LTV Ratio | 74.5% | Taxes | $65,239 | $32,619 | ||
Maturity Date LTV Ratio | 68.5% | Insurance | $18,287 | $9,143 | ||
DSCR Based on Underwritten NOI / NCF | 1.56x / 1.45x | Replacement Reserves | $0 | $9,833 | ||
Debt Yield Based on Underwritten NOI / NCF | 9.8% / 9.1% | Deferred Maintenance | $21,875 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % | |
Loan Amount | $19,143,750 | 71.8% | Purchase Price | $25,525,000 | 95.7% | |
Principal’s New Cash Contribution | 7,019,060 | 26.3 | Closing Costs | 1,037,415 | 3.9 | |
Other Sources | 505,005 | 1.9 | Reserves | 105,400 | 0.4 | |
Total Sources | $26,667,815 | 100.0% | Total Uses | $26,667,815 | 100.0% |
(1) | Chad A. Doty, Daniel R. Chamberlain, Andrew C. McClellan, Brady J. McClellan and William C. Mara are the non-recourse carveout guarantors under the McCallum Courts and McCallum Glen Loan. |
The following table presents certain information relating to the McCallum Courts and McCallum Glen Properties:
Property Name | City | State | Allocated Cut-off Date Loan Amount(1) | Total | Occupancy(2) | Year Built / Renovated | Appraised Value | UW NCF | ||||||||
McCallum Glen | Dallas | TX | $12,318,750 | 275 | 99.6% | 1985 / 2014 | $16,650,000 | $1,115,114 | ||||||||
McCallum Courts | Dallas | TX | 6,825,000 | 144 | 98.6% | 1983 / 2014 | 9,050,000 | 634,808 | ||||||||
Total / Wtd. Avg. | $19,143,750 | 419 | 99.3% | $25,700,000 | $1,749,921 |
(1) | The McCallum Courts and McCallum Glen Loan documents permit the release of an individual property upon the satisfaction of certain conditions with partial defeasance or payment of yield maintenance of the greater of (a) 115% of the allocated loan amount with respect to such individual property and (b) 90% of the net sales proceeds applicable to such individual property, provided that clause (b) does not apply in the event the debt yield with respect to the remaining individual property following the release is at least 12%. |
(2) | Occupancy as of October 5, 2015. |
The following table presents certain information relating to historical leasing at the McCallum Courts and McCallum Glen Properties:
Historical Leased %(1)
| 2014 | As of | ||
Owned Space | 96.4% | 99.3% |
(1) | As provided by the borrowers and which reflects occupancy as of December 31 for the specified year unless otherwise indicated. |
B-100 |
MCCALLUM COURTS AND MCCALLUM GLEN |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the McCallum Courts and McCallum Glen Properties: |
Cash Flow Analysis(1)
2014 | TTM 9/30/2015 | Underwritten | Underwritten | |||||
Base Rent | $2,980,800 | $3,127,470 | $3,500,848 | $8,355 | ||||
Gross Up Vacancy | 0 | 0 | 26,340 | 63 | ||||
Total Rent | $2,980,800 | $3,127,470 | $3,527,188 | $8,418 | ||||
Total Reimbursables | 0 | 0 | 0 | 0 | ||||
Other Income(2) | 442,709 | 462,158 | 462,158 | 1,103 | ||||
Vacancy & Credit Loss | (6,300) | (11,205) | (410,923) | (981) | ||||
Effective Gross Income | $3,417,210 | $3,578,424 | $3,578,423 | $8,540 | ||||
Real Estate Taxes | $359,517 | $239,529 | $372,793 | $890 | ||||
Insurance | 97,705 | 5,657 | 104,495 | 249 | ||||
Payroll & Benefits | 328,916 | 269,580 | 328,622 | 784 | ||||
Repairs & Maintenance | 148,158 | 286,678 | 295,755 | 706 | ||||
Utilities | 349,777 | 331,600 | 333,366 | 796 | ||||
Management Fee | 102,516 | 107,353 | 107,353 | 256 | ||||
Other Operating Expenses | 177,209 | 160,418 | 160,418 | 383 | ||||
Total Operating Expenses | $1,563,797 | $1,400,814 | $1,702,802 | $4,064 | ||||
Net Operating Income | $1,853,412 | $2,177,610 | $1,875,621 | $4,476 | ||||
TI/LC | 0 | 0 | 0 | 0 | ||||
Replacement Reserves | 0 | 0 | 125,700 | 300 | ||||
Net Cash Flow | $1,853,412 | $2,177,610 | $1,749,921 | $4,176 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were not considered for the underwritten cash flow. |
(2) | Other Income includes contract services, general & administrative and miscellaneous income. |
B-101 |
Arbors at turnberry |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | KGS | ||
Location (City/State) | Pickerington, Ohio | Cut-off Date Principal Balance | $18,700,000 | ||
Property Type | Multifamily | Cut-off Date Principal Balance per Unit | $100,000.00 | ||
Size (Units) | 187 | Percentage of Initial Pool Balance | 2.7% | ||
Total Occupancy as of 12/18/2015 | 97.3% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 12/18/2015 | 97.3% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 2009 / 2012 | Mortgage Rate | 5.66000% | ||
Appraised Value | $24,900,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | 60 | ||||
Borrower Sponsors(1) | Rod E. Wilt, Brian G. Uffelman and Lisa M. Boyd | ||||
Underwritten Revenues | $2,510,008 | ||||
Underwritten Expenses | $845,977 | Escrows | |||
Underwritten Net Operating Income (NOI) | $1,664,031 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $1,624,948 | Taxes | $87,408 | $29,136 | |
Cut-off Date LTV Ratio | 75.1% | Insurance | $9,005 | $4,502 | |
Maturity Date LTV Ratio | 69.9% | Replacement Reserves | $0 | $3,257 | |
DSCR Based on Underwritten NOI / NCF | 1.28x / 1.25x | TI/LC | $0 | $0 | |
Debt Yield Based on Underwritten NOI / NCF | 8.9% / 8.7% | Other | $0 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % | |
Loan Amount | $18,700,000 | 80.1% | Purchase Price | $22,000,000 | 94.2% | |
Principal’s New Cash Contribution | 4,654,275 | 19.9 | Closing Costs | 1,257,862 | 5.4 | |
Reserves | 96,413 | 0.4 | ||||
Total Sources | $23,354,275 | 100.0% | Total Uses | $23,354,275 | 100.0% |
(1) | Rod E. Wilt, Brian G. Uffelman and Lisa M. Boyd are the non-recourse carveout guarantors under the Arbors at Turnberry Loan. |
The following table presents certain information relating to the units and rent at the Arbors at Turnberry Property:
Unit Mix(1)
Unit Type | Occupied Units | Vacant | Total Units | Average SF per Unit | Monthly Market Rent per Unit(2) | Annual Market Rent(2) | Monthly Actual Rent per Unit | Underwritten Annual Rent | ||||||||
2 bedroom /2 bath | 12 | 0 | 12 | 1,197 | $975 | $140,400 | $919 | $133,056 | ||||||||
2 bedroom /2.5 bath | 55 | 1 | 56 | 1,206 | 1,000 | 672,000 | 938 | 623,040 | ||||||||
3 bedroom /2.5 bath | 48 | 2 | 50 | 1,568 | 1,250 | 750,000 | 1,218 | 705,600 | ||||||||
3 bedroom /2.5 bath | 22 | 0 | 22 | 1,347 | 1,150 | 303,600 | 1,120 | 296,736 | ||||||||
3 bedroom /2.5 bath | 45 | 2 | 47 | 1,363 | 1,150 | 648,600 | 1,117 | 606,960 | ||||||||
Total / Avg. | 182 | 5 | 187 | 1,358 | $1,121 | $2,514,600 | $1,078 | $2,365,392 |
(1) | As provided by the borrower per the December 18, 2015 rent roll. |
(2) | Source: Appraisal |
The following table presents certain information relating to historical leasing at the Arbors at Turnberry Property:
Historical Leased %(1)
2012 | 2013 | 2014 | As of 12/18/2015 | |||||
Owned Space | 97.3% | 97.2% | 96.7% | 97.3% |
(1) | As provided by the borrower and reflects average occupancy for the indicated year unless specified otherwise. |
B-102 |
Arbors at turnberry |
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the Arbors at Turnberry Property: |
Cash Flow Analysis(1)
2013 | 2014 | TTM 7/30/2015 | T-6 Annualized 7/30/2015 | Underwritten | Underwritten | |||||||
Base Rent | $2,370,272 | $2,421,280 | $2,433,098 | $2,432,488 | $2,365,392 | $12,649 | ||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 67,706 | 362 | ||||||
Gross Potential Rent | $2,370,272 | $2,421,280 | $2,433,098 | $2,432,488 | $2,433,098 | $13,011 | ||||||
Vacancy, Credit Loss & Concessions | (95,014) | (121,076) | (99,760) | (84,398) | (122,017) | (652) | ||||||
Total Rent | $2,275,258 | $2,300,204 | $2,333,338 | $2,348,090 | $2,311,081 | $12,359 | ||||||
Other Revenue(2) | 163,501 | 205,380 | 192,848 | 199,819 | 198,927 | 1,064 | ||||||
Effective Gross Income | $2,438,759 | $2,505,584 | $2,526,186 | $2,547,909 | $2,510,008 | $13,423 | ||||||
Total Operating Expenses | $692,712 | $821,192 | $849,819 | $836,879 | $845,977 | $4,524 | ||||||
Net Operating Income | $1,746,047 | $1,684,392 | $1,676,368 | $1,711,030 | $1,664,031 | $8,899 | ||||||
Replacement Reserves | 6,908 | 34,748 | 0 | 0 | 39,083 | 209 | ||||||
Net Cash Flow | $1,739,139 | $1,649,644 | $1,676,368 | $1,711,030 | $1,624,948 | $8,690 |
(1) | Certain items such as straight line rent, interest expense, interest income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Other Revenue includes utility reimbursement, laundry and vending income, pets, damage and cleaning and other miscellaneous sources. |
B-103 |
deerfield plaza |
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 1 | Loan Seller | RMF | ||
Location (City/State) | Orlando, Florida | Cut-off Date Principal Balance | $18,000,000 | ||
Property Type | Retail | Cut-off Date Principal Balance per SF | $169.34 | ||
Size (SF) | 106,292 | Percentage of Initial Pool Balance | 2.6% | ||
Total Occupancy as of 2/29/2016 | 93.6% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of 2/29/2016 | 93.6% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | 2003 / NAP | Mortgage Rate | 5.04000% | ||
Appraised Value | $26,600,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | 48 | ||||
Underwritten Revenues | $2,297,548 | Borrower Sponsors(1) | Thomas Joseph Delahanty, Jr. and Yacob Blatt a/k/a Jacob Blatt | ||
Underwritten Expenses | $487,242 | Escrows | |||
Underwritten Net Operating Income (NOI) | $1,810,305 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $1,741,215 | Taxes | $39,255 | $18,693 | |
Cut-off Date LTV Ratio | 67.7% | Insurance | $95,563 | $6,501 | |
Maturity Date LTV Ratio | 61.2% | Replacement Reserves(2) | $0 | $1,329 | |
DSCR Based on Underwritten NOI / NCF | 1.55x / 1.49x | TI/LC(3) | $250,000 | $0 | |
Debt Yield Based on Underwritten NOI / NCF | 10.1% / 9.7% | Other | $0 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % |
Loan Amount | $18,000,000 | 99.8% | Loan Payoff | $12,228,876 | 67.8% |
Other Sources | 45,000 | 0.2 | Principal Equity Distribution | 5,154,548 | 28.6 |
Reserves | 384,818 | 2.1 | |||
Closing Costs | 276,758 | 1.5 | |||
Total Sources | $18,045,000 | 100.0% | Total Uses | $18,045,000 | 100.0% |
(1) | Thomas Joseph Delahanty, Jr. and Yacob Blatt a/k/a Jacob Blatt are the non-recourse carveout guarantors under the Deerfield Plaza mortgage loan. |
(2) | The Replacement Reserves are subject to a cap of $200,000. |
(3) | The TI/LC reserves are capped at $250,000. If at any time after closing, the TI/LC reserves fall below $250,000, the borrower is required to make monthly deposits to the TI/LC reserve account in the amount of $4,428.83 until such time as the funds in the reserve account reach $250,000. |
The following table presents certain information relating to the major tenants (of which, certain tenants may have co-tenancy provisions) at the Deerfield Plaza Property:
Ten Largest Owned Tenants Based On Underwritten Base Rent
Tenant Name | Credit Rating | Tenant GLA | % of | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | Lease Expiration | Tenant Sales $ per SF(2) | Occupancy Cost | Renewal / Extension Options | ||||||||||
LA Fitness | NR/NR/NR | 49,015 | 46.1% | $863,661 | 45.9% | $17.62 | 6/30/2026 | NA | NA | 3, 5-year options | ||||||||||
Cool Stuff Games | NR/NR/NR | 5,450 | 5.1 | 87,200 | 4.6 | 16.00 | 6/30/2021 | NA | NA | NA | ||||||||||
Wendy’s | NR/B2/B | 3,498 | 3.3 | 78,635 | 4.2 | 22.48 | 12/31/2020 | $449 | 5.4% | 5, 5-year options | ||||||||||
Meat Emporium | NR/NR/NR | 4,488 | 4.2 | 78,584 | 4.2 | 17.51 | 2/28/2020 | NA | NA | 1, 5-year option | ||||||||||
Salon Centric | NR/NR/NR | 2,850 | 2.7 | 66,861 | 3.6 | 23.46 | 12/31/2016 | NA | NA | NA | ||||||||||
Saman Arepas Bistro | NR/NR/NR | 2,880 | 2.7 | 61,066 | 3.2 | 21.20 | 5/31/2017 | NA | NA | NA | ||||||||||
Uceda School | NR/NR/NR | 3,231 | 3.0 | 59,774 | 3.2 | 18.50 | 1/31/2023 | NA | NA | 1, 5-year option | ||||||||||
Avon Products Inc. | NR/NR/NR | 2,900 | 2.7 | 58,696 | 3.1 | 20.24 | 12/31/2017 | NA | NA | NA | ||||||||||
Smile Solutions | NR/NR/NR | 1,980 | 1.9 | 53,638 | 2.9 | 27.09 | 2/28/2019 | NA | NA | NA | ||||||||||
South Beach - SBT - Hunters Creek LLC | NR/NR/NR | 2,500 | 2.4 | 52,800 | 2.8 | 21.12 | 12/31/2024 | NA | NA | 2, 5-year options | ||||||||||
Ten Largest Owned Tenants | 78,792 | 74.1% | $1,460,915 | 77.7% | $18.54 | |||||||||||||||
Remaining Owned Tenants | 20,650 | 19.4 | 420,493 | 22.3 | 20.36 | |||||||||||||||
Vacant Spaces (Owned Space) | 6,850 | 6.4 | 0 | 0 | 0.00 | |||||||||||||||
Total / Wtd. Avg. All Owned Tenants | 106,292 | 100.0% | $1,881,407 | 100.0% | $18.92 |
(1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
(2) | Tenant Sales are as of December 31, 2014. |
B-104 |
deerfield plaza |
The following table presents the lease rollover schedule at the Deerfield Plaza Property, based on initial lease expiration dates:
Lease Expiration Schedule(1)
Year Ending December 31, | Expiring Owned GLA | % of Owned GLA | Cumulative % of Owned GLA | UW Base Rent | % of Total UW Base Rent | UW Base Rent $ per SF | # of Expiring Tenants | |||||||
MTM | 0 | 0.0% | 0.0% | $0 | 0.0% | $0.00 | 0 | |||||||
2016 | 2,850 | 2.7 | 2.7% | 66,861 | 3.6 | 23.46 | 1 | |||||||
2017 | 8,610 | 8.1 | 10.8% | 180,605 | 9.6 | 20.98 | 4 | |||||||
2018 | 2,677 | 2.5 | 13.3% | 52,187 | 2.8 | 19.49 | 2 | |||||||
2019 | 12,629 | 11.9 | 25.2% | 267,187 | 14.2 | 21.16 | 7 | |||||||
2020 | 11,040 | 10.4 | 35.6% | 207,549 | 11.0 | 18.80 | 3 | |||||||
2021 | 6,890 | 6.5 | 42.1% | 130,784 | 7.0 | 18.98 | 2 | |||||||
2022 | 0 | 0.0 | 42.1% | 0 | 0.0 | 0.00 | 0 | |||||||
2023 | 3,231 | 3.0 | 45.1% | 59,774 | 3.2 | 18.50 | 1 | |||||||
2024 | 2,500 | 2.4 | 47.4% | 52,800 | 2.8 | 21.12 | 1 | |||||||
2025 | 0 | 0.0 | 47.4% | 0 | 0.0 | 0.00 | 0 | |||||||
2026 | 49,015 | 46.1 | 93.6% | 863,661 | 45.9 | 17.62 | 1 | |||||||
2027 & Thereafter | 0 | 0.0 | 93.6% | 0 | 0.0 | 0.00 | 0 | |||||||
Vacant | 6,850 | 6.4 | 100.0% | 0 | 0.0 | 0.00 | 0 | |||||||
Total / Wtd. Avg. | 106,292 | 100.0% | $1,881,407 | 100.0% | $18.92 | 22 |
(1) | Calculated based on approximate square footage occupied by each Owned Tenant. |
The following table presents certain information relating to historical leasing at the Deerfield Plaza Property:
Historical Leased %(1)
2012 | 2013 | 2014 | 2015 | As of 2/29/2016 | ||||||
Owned Space | 89.0% | 87.3% | 82.5% | 85.2% | 93.6% |
(1) | As provided by the borrower which reflects average occupancy for the specified year unless specified otherwise. |
B-105 |
deerfield plaza |
n | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the Deerfield Plaza Property: |
Cash Flow Analysis(1)
2012 | 2013 | 2014 | TTM 1/31/2016 | Underwritten(2) | Underwritten | |||||||
Base Rent | $1,659,896 | $1,699,972 | $1,598,507 | $1,664,934 | $1,844,864 | $17.36 | ||||||
Contractual Rent Steps | 0 | 0 | 0 | 0 | 36,543 | 0.34 | ||||||
Overage Rent | 0 | 0 | 0 | 0 | 0 | 0.00 | ||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 137,000 | 1.29 | ||||||
Total Rent | $1,659,896 | $1,699,972 | $1,598,507 | $1,664,934 | $2,018,407 | $18.99 | ||||||
Total Reimbursables | 365,793 | 380,617 | 381,205 | 397,714 | 439,705 | 4.14 | ||||||
Other Income(3) | 6,546 | 7,696 | 20,300 | 7,499 | 7,499 | 0.07 | ||||||
Less Vacancy & Credit Loss | 0 | 0 | 0 | (23,210) | (168,064) | (1.58) | ||||||
Effective Gross Income | $2,032,235 | $2,088,284 | $2,000,013 | $2,046,937 | $2,297,548 | $21.62 | ||||||
Total Operating Expenses | $411,033 | $457,623 | $448,416 | $489,543 | $487,242 | $4.58 | ||||||
Net Operating Income | $1,621,202 | $1,630,661 | $1,551,596 | $1,557,395 | $1,810,305 | $17.03 | ||||||
TI/LC | 0 | 0 | 0 | 0 | 53,146 | 0.50 | ||||||
Capital Expenditures | 0 | 0 | 0 | 0 | 15,944 | 0.15 | ||||||
Net Cash Flow | $1,621,202 | $1,630,661 | $1,551,596 | $1,557,395 | $1,741,215 | $16.38 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Underwritten cash flow based on contractual rents as of February 29, 2016 and contractual rent steps through November 30, 2016. |
(3) | Other income includes signage income and other miscellaneous items. |
B-106 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
B-107 |
amsdell self storage – cincinnati portfolio
Mortgaged Property Information | Mortgage Loan Information | ||||
Number of Mortgaged Properties | 4 | Loan Seller | CGMRC | ||
Location (City/State) | Various, Various | Cut-off Date Principal Balance | $14,150,000 | ||
Property Type | Self Storage | Cut-off Date Principal Balance per SF | $60.28 | ||
Size (SF) | 234,747 | Percentage of Initial Pool Balance | 2.0% | ||
Total Occupancy as of 12/31/2015(1) | 85.4% | Number of Related Mortgage Loans | None | ||
Owned Occupancy as of12/31/2015(1) | 85.4% | Type of Security | Fee Simple | ||
Year Built / Latest Renovation | Various / Various | Mortgage Rate | 5.08000% | ||
Appraised Value | $18,490,000 | Original Term to Maturity (Months) | 120 | ||
Original Amortization Term (Months) | 360 | ||||
Original Interest Only Period (Months) | 36 | ||||
Underwritten Revenues | $2,176,714 | Borrower Sponsors(3) | Robert J. Amsdell and Barry L. Amsdell | ||
Underwritten Expenses | $936,204 | Escrows | |||
Underwritten Net Operating Income (NOI) | $1,240,510 | Upfront | Monthly | ||
Underwritten Net Cash Flow (NCF) | $1,200,348 | Taxes | $42,485 | $14,162 | |
Cut-off Date LTV Ratio(2) | 72.7% | Insurance | $0 | $0 | |
Maturity Date LTV Ratio | 64.8% | Replacement Reserves | $0 | $13,387 | |
DSCR Based on Underwritten NOI / NCF | 1.35x / 1.30x | Defered Maintenance | $0 | $0 | |
Debt Yield Based on Underwritten NOI / NCF | 8.8% / 8.5% | Other(4) | $700,000 | $0 |
Sources and Uses
Sources | $ | % | Uses | $ | % | |
Loan Amount | $14,150,000 | 98.0% | Loan Payoff | $5,785,566 | 40.1% | |
Other Sources | 283,561 | 2.0 | Purchase Price | 4,000,000 | 27.7 | |
Principal Equity Distribution | 3,623,896 | 25.1 | ||||
Reserves | 742,485 | 5.1 | ||||
Closing Costs | 281,614 | 2.0 | ||||
Total Sources | $14,433,561 | 100.0% | Total Uses | $14,433,561 | 100.0% |
(1) | CubeSmart Self Storage – Taunton occupancy is based on the rent roll dated November 30, 2015. |
(2) | The Cut-off Date balance was reduced by the amount of the $700,000 economic holdback reserve for purposes of calculating the Cut-off Date LTV Ratio. |
(3) | Robert J. Amsdell and Barry L. Amsdell are the non-recourse carveout guarantors under the Amsdell Self Storage – Cincinnati Portfolio Loan. |
(4) | Other reserve represents an upfront economic holdback reserve of $700,000 for (i) capital improvements during the first 35 months of the Amsdell Self Storage – Cincinnati Portfolio Loan and (ii) certain other costs. Disbursement requires a minimum debt yield of at least 9.0%. |
The following table presents certain information relating to the Amsdell Self Storage – Cincinnati Portfolio properties:
Property Address | City | State | Allocated Cut-off Date Loan | Total GLA | Occupancy(1) | Year Built | Year Renovated | UW NCF |
10000 Sam Neace Drive | Florence | KY | $4,290,000 | 65,125 | 88.6% | 1997 | NAP | $382,948 |
3951 Nine Mile Tobasco Road | Cincinnati | OH | 3,800,000 | 73,125 | 83.5% | 1998 | NAP | 314,550 |
33 Chandler Avenue | Taunton | MA | 3,345,000 | 44,997 | 93.6% | 1898 | 2000, 2016 | 274,965 |
2020 Northside Drive | Hebron | KY | 2,715,000 | 51,500 | 76.9% | 1994 | NAP | 227,886 |
Total / Wtd. Avg. Portfolio | $14,150,000 | 234,747 | 85.4% | $1,200,348 |
(1) | As provided by the borrowers and represents physical occupancy based on square footage as of December 31, 2015 for the Florence, Cincinnati and Hebron properties and as of November 30, 2015 for the Taunton property. |
The following table presents certain information relating to historical leasing at the Amsdell Self Storage – Cincinnati Portfolio properties:
Historical Leased %(1)
Property Address | 2012 | 2013 | 2014 | 2015 |
10000 Sam Neace Drive | 75.7% | 82.1% | 88.9% | 88.6% |
3951 Nine Mile Tobasco Road | 94.6% | 89.7% | 91.2% | 83.5% |
33 Chandler Avenue | 80.8% | 86.5% | 90.1% | 93.6%(2) |
2020 Northside Drive | 87.8% | 87.2% | 85.3% | 76.9% |
Total / Wtd. Avg. Portfolio | 85.2% | 86.4% | 89.1% | 85.4% |
(1) | As provided by the borrowers and which reflects occupancy as of December 31 for the specified year unless otherwise indicated. |
(2) | Based on the November 30, 2015 rent roll. |
B-108 |
amsdell self storage – cincinnati portfolio
■ | Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and the Underwritten Net Cash Flow at the Amsdell Self Storage – Cincinnati Portfolio properties: |
Cash Flow Analysis(1)
2012(2) | 2013 | 2014 | 2015(3) | Underwritten | Underwritten | |||||||
Base Rent | $1,860,054 | $1,939,924 | $2,090,083 | $2,294,847 | $2,031,705 | $8.65 | ||||||
Gross Up Vacancy | 0 | 0 | 0 | 0 | 338,381 | 1.44 | ||||||
Total Rent Revenue | $1,860,054 | $1,939,924 | $2,090,083 | $2,294,847 | $2,370,086 | $10.10 | ||||||
Other Income(4) | 155,682 | 227,246 | 259,096 | 262,273 | 263,717 | 1.12 | ||||||
Vacancy & Credit Loss | (390,787) | (404,058) | (336,802) | (381,851) | (457,089) | (1.95) | ||||||
Effective Gross Income | $1,624,950 | $1,763,111 | $2,012,377 | $2,175,270 | $2,176,714 | $9.27 | ||||||
Real Estate Taxes | 107,203 | 172,392 | 155,413 | 161,001 | 162,511 | 0.69 | ||||||
Insurance | 15,926 | 16,238 | 20,464 | 20,870 | 17,366 | 0.07 | ||||||
Management Fee | 64,998 | 70,524 | 80,495 | 87,011 | 87,069 | 0.37 | ||||||
Other Operating Expenses | 510,612 | 569,186 | 643,359 | 662,784 | 669,258 | 2.85 | ||||||
Total Operating Expenses | $698,739 | $828,340 | $899,731 | $931,666 | $936,204 | $3.99 | ||||||
Net Operating Income | $926,211 | $934,771 | $1,112,646 | $1,243,604 | $1,240,510 | $5.28 | ||||||
Replacement Reserves | 0 | 0 | 0 | 0 | 40,162 | 0.17 | ||||||
Net Cash Flow | $926,211 | $934,771 | $1,112,646 | $1,243,604 | $1,200,348 | $5.11 |
(1) | Certain items such as straight line rent, interest expense, interest income, lease cancellation income, depreciation, amortization, debt service payments and any other non-recurring or non-operating items were excluded from the historical presentation and are not considered for the underwritten cash flow. |
(2) | Represents six months (July – December) annualized. |
(3) | 2015 cash flows are as of December 31, 2015 for the Florence, Cincinnati and Hebron properties and as of November 30, 2015 for the Taunton property. |
(4) | Other Income consists of tenant paid insurance, U-Haul rental/commission, ancillary sales, cell tower income, garage income, and miscellaneous income. |
B-109 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX C
MORTGAGE POOL INFORMATION
(THIS PAGE INTENTIONALLY LEFT BLANK)
Distribution of Loan Purpose
Loan Purpose | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
Acquisition | 25 | $ | 352,114,797 | 50.7 | % | $ | 14,084,592 | 1.42x | 4.908% | 117.0 | 70.0% | 61.0% | |||||||||
Refinance | 24 | 316,294,805 | 45.5 | $ | 13,178,950 | 1.52x | 4.996% | 114.0 | 59.9% | 53.4% | |||||||||||
Refinance/Acquisition | 1 | 14,150,000 | 2.0 | $ | 14,150,000 | 1.30x | 5.080% | 118.0 | 72.7% | 64.8% | |||||||||||
Recapitalization | 4 | 12,167,122 | 1.8 | $ | 3,041,780 | 1.45x | 4.519% | 115.0 | 66.6% | 54.3% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
Distribution of Amortization Types(1)
Amortization Type | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
Interest Only, Then Amortizing(2) | 29 | $ | 352,927,500 | 50.8 | % | $ | 12,169,914 | 1.44x | 5.018% | 116.0 | 68.2% | 59.4% | |||||||||
Interest Only | 7 | 184,300,000 | 26.5 | $ | 26,328,571 | 1.50x | 4.667% | 117.0 | 59.9% | 59.9% | |||||||||||
Amortizing (30 Years) | 16 | 104,439,873 | 15.0 | $ | 6,527,492 | 1.57x | 5.187% | 110.8 | 66.2% | 55.4% | |||||||||||
Amortizing (20 Years) | 1 | 51,744,943 | 7.4 | $ | 51,744,943 | 1.31x | 4.950% | 118.0 | 64.3% | 40.6% | |||||||||||
Amortizing (25 Years) | 1 | 1,314,409 | 0.2 | $ | 1,314,409 | 1.80x | 4.870% | 113.0 | 70.1% | 52.8% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
(1) All of the mortgage loans will have balloon payments at maturity date.
(2) Original partial interest only months range from 12 to 60 months.
Distribution of Cut-off Date Balances
Range of Cut-off Date Balances ($) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
847,077 - 4,999,999 | 22 | $ | 61,289,437 | 8.8 | % | $ | 2,785,883 | 1.51x | 4.979% | 116.1 | 68.1% | 57.6% | |||||||||
5,000,000 - 14,999,999 | 18 | 167,872,359 | 24.2 | $ | 9,326,242 | 1.56x | 4.951% | 111.1 | 69.1% | 59.9% | |||||||||||
15,000,000 - 24,999,999 | 5 | 97,843,750 | 14.1 | $ | 19,568,750 | 1.39x | 5.047% | 116.5 | 70.0% | 63.3% | |||||||||||
25,000,000 - 29,999,999 | 1 | 25,000,000 | 3.6 | $ | 25,000,000 | 1.64x | 4.862% | 117.0 | 48.1% | 48.1% | |||||||||||
30,000,000 - 34,999,999 | 2 | 64,600,000 | 9.3 | $ | 32,300,000 | 1.40x | 4.894% | 117.0 | 63.8% | 60.1% | |||||||||||
35,000,000 - 49,999,999 | 4 | 156,376,237 | 22.5 | $ | 39,094,059 | 1.52x | 5.093% | 117.5 | 57.1% | 49.5% | |||||||||||
50,000,000 - 54,999,999 | 1 | 51,744,943 | 7.4 | $ | 51,744,943 | 1.31x | 4.950% | 118.0 | 64.3% | 40.6% | |||||||||||
55,000,000 - 70,000,000 | 1 | 70,000,000 | 10.1 | $ | 70,000,000 | 1.28x | 4.500% | 117.0 | 75.0% | 75.0% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | |||||||||
Min | $ | 847,077 | |||||||||||||||||||
Max | $ | 70,000,000 | |||||||||||||||||||
Average | $ | 12,865,310 |
C-1 |
Distribution of Underwritten Debt Service Coverage Ratios
Range of Underwritten Debt Service Coverage Ratios (x) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
1.20 - 1.29 | 7 | $ | 157,175,000 | 22.6 | % | $ | 22,453,571 | 1.25x | 4.867% | 114.1 | 73.5% | 69.3% | |||||||||
1.30 - 1.49 | 19 | 238,442,789 | 34.3 | $ | 12,549,620 | 1.38x | 4.960% | 115.0 | 66.7% | 54.8% | |||||||||||
1.50 - 1.69 | 14 | 237,022,422 | 34.1 | $ | 16,930,173 | 1.58x | 4.996% | 116.9 | 59.1% | 52.9% | |||||||||||
1.70 - 1.89 | 10 | 42,689,438 | 6.1 | $ | 4,268,944 | 1.81x | 4.919% | 117.0 | 66.4% | 57.2% | |||||||||||
1.90 - 2.09 | 2 | 7,147,077 | 1.0 | $ | 3,573,538 | 1.97x | 4.738% | 115.2 | 56.8% | 55.7% | |||||||||||
2.10 - 2.18 | 2 | 12,250,000 | 1.8 | $ | 6,125,000 | 2.17x | 4.843% | 117.6 | 62.3% | 49.7% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | |||||||||
Min | 1.20x | ||||||||||||||||||||
Max | 2.18x | ||||||||||||||||||||
Average | 1.46x |
Distribution of Mortgage Interest Rates
Range of Mortgage Interest Rates (%) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
4.340 - 4.499 | 2 | $ | 5,905,556 | 0.9 | % | $ | 2,952,778 | 1.51x | 4.433% | 115.0 | 66.1% | 53.7% | |||||||||
4.500 - 4.749 | 7 | 124,861,565 | 18.0 | $ | 17,837,366 | 1.42x | 4.571% | 116.6 | 68.8% | 67.3% | |||||||||||
4.750 - 4.999 | 21 | 315,556,642 | 45.4 | $ | 15,026,507 | 1.49x | 4.883% | 115.4 | 61.7% | 52.2% | |||||||||||
5.000 - 5.249 | 19 | 176,426,725 | 25.4 | $ | 9,285,617 | 1.47x | 5.073% | 117.3 | 69.1% | 60.1% | |||||||||||
5.250 - 5.900 | 5 | 71,976,237 | 10.4 | $ | 14,395,247 | 1.41x | 5.591% | 110.8 | 66.8% | 57.7% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | |||||||||
Min | 4.340% | ||||||||||||||||||||
Max | 5.900% | ||||||||||||||||||||
Average | 4.945% |
C-2 |
Distribution of Cut-off Date Loan-to-Value Ratios(1)
Range of Cut-off Date Loan-to-Value Ratios (%) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
44.7 - 49.9 | 3 | $ | 65,847,077 | 9.5 | % | $ | 21,949,026 | 1.57x | 4.796% | 117.0 | 46.1% | 45.9% | |||||||||
50.0 - 54.9 | 1 | 30,000,000 | 4.3 | $ | 30,000,000 | 1.61x | 4.690% | 117.0 | 54.5% | 54.5% | |||||||||||
55.0 - 59.9 | 3 | 46,800,000 | 6.7 | $ | 15,600,000 | 1.53x | 4.911% | 118.4 | 55.8% | 47.7% | |||||||||||
60.0 - 64.9 | 10 | 138,663,603 | 20.0 | $ | 13,866,360 | 1.51x | 5.118% | 114.5 | 63.3% | 48.7% | |||||||||||
65.0 - 69.9 | 15 | 156,763,071 | 22.6 | $ | 10,450,871 | 1.55x | 4.995% | 117.3 | 66.8% | 56.7% | |||||||||||
70.0 - 75.1 | 22 | 256,652,974 | 36.9 | $ | 11,666,044 | 1.33x | 4.895% | 114.1 | 73.7% | 67.9% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
(1) Unless otherwise indicated, the Cut-off Date Loan-to-Value Ratio is calculated utilizing the “as-is” appraised value. With respect to 8 mortgage loans, representing approximately 14.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the respective Cut-off Loan-to-Value Ratio was calculated using either (i) an “as-is” appraised value plus related property improvement plan (“PIP”) costs, (ii) the cut-off date principal balance of a mortgage loan less a reserve taken at origination or (iii) the cut-off date principal balance of a mortgage loan less an earnout. The weighted average Cut-off Date Loan-to-Value Ratio for the mortgage pool without making such adjustments is 66.2%.
Min | 44.7% | ||||||||||||||||||||
Max | 75.1% | ||||||||||||||||||||
Average | 65.4% |
Distribution of Maturity Date Loan-to-Value Ratios(1)
Range of Maturity Date Loan-to-Value Ratios (%) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | ||||||||||||
40.6 - 49.9 | 7 | $ | 167,892,019 | 24.2 | % | $ | 23,984,574 | 1.50x | 4.894% | 117.9 | 55.1% | 44.4% | |||||||||
50.0 - 54.9 | 11 | 111,023,060 | 16.0 | $ | 10,093,005 | 1.59x | 5.084% | 116.9 | 60.9% | 52.7% | |||||||||||
55.0 - 59.9 | 14 | 119,441,217 | 17.2 | $ | 8,531,515 | 1.57x | 5.033% | 113.7 | 66.1% | 56.3% | |||||||||||
60.0 - 64.9 | 12 | 114,180,925 | 16.4 | $ | 9,515,077 | 1.43x | 4.954% | 117.1 | 70.2% | 62.6% | |||||||||||
65.0 - 69.9 | 9 | 112,189,504 | 16.1 | $ | 12,465,500 | 1.33x | 5.057% | 110.6 | 73.7% | 67.0% | |||||||||||
70.0 - 75.0 | 1 | 70,000,000 | 10.1 | $ | 70,000,000 | 1.28x | 4.500% | 117.0 | 75.0% | 75.0% | |||||||||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
(1) Unless otherwise indicated, the Maturity Date Loan-to-Value Ratio is calculated utilizing the “as-is” appraised value. With respect to 12 mortgage loans, representing approximately 25.7% of the aggregate principal balance of the mortgage loan as of the cut-off date, the respective Maturity Date Loan-to-Value Ratios were each calculated using the related “as stabilized”, “as stabilized / as completed” or “prospective market value upon stabilization” appraised value instead of the related “as-is” appraised value. The weighted average Maturity Date Loan-to-Value Ratio for the mortgage pool without making such adjustments is 58.9%.
Min | 40.6% | ||||||||||||||||||||
Max | 75.0% | ||||||||||||||||||||
Average | 57.5% |
C-3 |
Distribution of Original Terms to Maturity | ||||||||||||||
Original Term to Maturity (Mos) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | WeightedAverage Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
60 | 2 | $ | 17,177,004 | 2.5 | % | $ | 8,588,502 | 1.33x | 5.089% | 57.6 | 70.8% | 64.4% | ||
120 | 52 | 677,549,721 | 97.5 | $ | 13,029,802 | 1.47x | 4.941% | 117.1 | 65.3% | 57.3% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | ||
Min | 60 | months | ||||||||||||
Max | 120 | months | ||||||||||||
Average | 119 | months | ||||||||||||
Distribution of Remaining Terms to Maturity | ||||||||||||||
Range of Remaining Term to Maturity (Mos) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
56 - 60 | 2 | $ | 17,177,004 | 2.5 | % | $ | 8,588,502 | 1.33x | 5.089% | 57.6 | 70.8% | 64.4% | ||
113 - 115 | 14 | 72,264,667 | 10.4 | $ | 5,161,762 | 1.50x | 4.987% | 114.3 | 71.3% | 62.8% | ||||
116 - 120 | 38 | 605,285,054 | 87.1 | $ | 15,928,554 | 1.46x | 4.936% | 117.4 | 64.6% | 56.7% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | ||
Min | 56 | months | ||||||||||||
Max | 120 | months | ||||||||||||
Average | 116 | months | ||||||||||||
Distribution of Original Amortization Term(1) | ||||||||||||||
Original Amortization Terms (Mos) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
Interest Only | 7 | $ | 184,300,000 | 26.5 | % | $ | 26,328,571 | 1.50x | 4.667% | 117.0 | 59.9% | 59.9% | ||
240 | 1 | 51,744,943 | 7.4 | $ | 51,744,943 | 1.31x | 4.950% | 118.0 | 64.3% | 40.6% | ||||
300 | 2 | 5,314,409 | 0.8 | $ | 2,657,204 | 1.45x | 5.645% | 117.5 | 71.6% | 56.6% | ||||
360 | 44 | 453,367,373 | 65.3 | $ | 10,303,804 | 1.47x | 5.049% | 114.7 | 67.7% | 58.5% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | ||
(1) All of the mortgage loans will have balloon payments at maturity. | ||||||||||||||
Min | 240 | months | ||||||||||||
Max | 360 | months | ||||||||||||
Average | 347 | months |
C-4 |
Distribution of Remaining Amortization Term(1) | ||||||||||||||
Range of Remaining Amortization Terms (Mos) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
Interest Only | 7 | $ | 184,300,000 | 26.5 | % | $ | 26,328,571 | 1.50x | 4.667% | 117.0 | 59.9% | 59.9% | ||
238 | 1 | 51,744,943 | 7.4 | $ | 51,744,943 | 1.31x | 4.950% | 118.0 | 64.3% | 40.6% | ||||
293 - 300 | 2 | 5,314,409 | 0.8 | $ | 2,657,204 | 1.45x | 5.645% | 117.5 | 71.6% | 56.6% | ||||
353 - 360 | 44 | 453,367,373 | 65.3 | $ | 10,303,804 | 1.47x | 5.049% | 114.7 | 67.7% | 58.5% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | ||
(1) All of the Mortgage Loans will have balloon payments at maturity. | ||||||||||||||
Min | 238 | months | ||||||||||||
Max | 360 | months | ||||||||||||
Average | 346 | months | ||||||||||||
Mortgage Loans with Original Partial Interest Only Period | ||||||||||||||
Original Partial Interest Only Period (Mos) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
12 | 5 | $ | 16,590,000 | 2.4 | % | $ | 3,318,000 | 1.42x | 5.402% | 93.9 | 68.4% | 56.6% | ||
24 | 4 | $ | 34,100,000 | 4.9 | % | $ | 8,525,000 | 1.81x | 4.947% | 116.7 | 67.8% | 55.9% | ||
36 | 12 | $ | 140,868,750 | 20.3 | % | $ | 11,739,063 | 1.46x | 4.953% | 117.0 | 69.0% | 59.2% | ||
48 | 4 | $ | 65,025,000 | 9.4 | % | $ | 16,256,250 | 1.30x | 5.060% | 117.1 | 70.7% | 63.9% | ||
60 | 4 | $ | 96,343,750 | 13.9 | % | $ | 24,085,938 | 1.37x | 5.042% | 117.2 | 65.6% | 58.2% | ||
Distribution of Prepayment Provisions | ||||||||||||||
Prepayment Provision | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
Defeasance | 48 | $ | 587,532,975 | 84.6 | % | $ | 12,240,270 | 1.46x | 4.934% | 115.4 | 64.7% | 56.8% | ||
Yield Maintenance | 5 | 88,050,000 | 12.7 | $ | 17,610,000 | 1.46x | 5.050% | 116.9 | 68.0% | 60.1% | ||||
Defeasance or Yield Maintenance | 1 | 19,143,750 | 2.8 | $ | 19,143,750 | 1.45x | 4.790% | 117.0 | 74.5% | 68.5% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
C-5 |
Distribution of Debt Yields on Underwritten Net Operating Income | ||||||||||||||
Range of Debt Yields on Underwritten Net Operating Income (%) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
5.8 - 7.9 | 3 | $ | 85,525,000 | 12.3 | % | $ | 28,508,333 | 1.27x | 4.567% | 117.0 | 74.4% | 73.0% | ||
8.0 - 8.9 | 13 | 217,347,600 | 31.3 | $ | 16,719,046 | 1.41x | 4.944% | 115.0 | 61.1% | 57.0% | ||||
9.0 - 9.9 | 10 | 72,062,730 | 10.4 | $ | 7,206,273 | 1.51x | 4.907% | 108.0 | 70.3% | 64.5% | ||||
10.0 - 10.9 | 13 | 180,544,760 | 26.0 | $ | 13,888,058 | 1.43x | 4.953% | 117.4 | 64.6% | 50.8% | ||||
11.0 - 11.9 | 4 | 46,775,266 | 6.7 | $ | 11,693,816 | 1.54x | 5.487% | 116.7 | 63.9% | 53.7% | ||||
12.0 - 12.9 | 5 | 60,871,257 | 8.8 | $ | 12,174,251 | 1.65x | 5.083% | 117.3 | 66.4% | 55.1% | ||||
13.0 - 13.9 | 5 | 20,400,113 | 2.9 | $ | 4,080,023 | 1.84x | 5.003% | 117.6 | 66.5% | 53.3% | ||||
14.0 - 15.2 | 1 | 11,200,000 | 1.6 | $ | 11,200,000 | 2.18x | 4.840% | 118.0 | 62.3% | 49.5% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | ||
Min | 5.8% | |||||||||||||
Max | 15.2% | |||||||||||||
Average | 9.6% | |||||||||||||
Distribution of Debt Yields on Underwritten Net Cash Flow | ||||||||||||||
Range of Debt Yields on Underwritten Net Cash Flow (%) | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | Average Cut-off Date Balance | WeightedAverage Debt Service CoverageRatio | Weighted Average Mortgage Interest Rate | Weighted Average Remaining Terms to Maturity (Mos) | Weighted Average Cut- off Date LTV | Weighted Average Maturity Date LTV | |||||
5.8 - 7.9 | 6 | $ | 190,125,000 | 27.4 | % | $ | 31,687,500 | 1.36x | 4.716% | 117.0 | 64.5% | 62.7% | ||
8.0 - 8.9 | 14 | 142,268,353 | 20.5 | $ | 10,162,025 | 1.38x | 5.036% | 109.7 | 66.9% | 60.8% | ||||
9.0 - 9.9 | 13 | 144,441,976 | 20.8 | $ | 11,110,921 | 1.50x | 4.896% | 117.1 | 64.7% | 56.4% | ||||
10.0 - 10.9 | 12 | 179,501,920 | 25.8 | $ | 14,958,493 | 1.50x | 5.152% | 117.3 | 65.7% | 51.3% | ||||
11.0 - 11.9 | 5 | 23,977,990 | 3.5 | $ | 4,795,598 | 1.80x | 5.007% | 117.4 | 68.1% | 54.8% | ||||
12.0 - 12.9 | 1 | 1,314,409 | 0.2 | $ | 1,314,409 | 1.80x | 4.870% | 113.0 | 70.1% | 52.8% | ||||
13.0 - 13.8 | 3 | 13,097,077 | 1.9 | $ | 4,365,692 | 2.16x | 4.857% | 117.5 | 61.5% | 49.2% | ||||
Total/Avg./Wtd.Avg. | 54 | $ | 694,726,725 | 100.0 | % | $ | 12,865,310 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% | ||
Min | 5.8% | |||||||||||||
Max | 13.8% | |||||||||||||
Average | 9.0% |
C-6 |
Distribution of Lockbox Types | ||||||||
Lockbox Type | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | |||||
Springing | 42 | $ | 357,564,622 | 51.5 | % | |||
Hard | 9 | $ | 275,244,943 | 39.6 | ||||
Hard (Hotel, Office, Retail) / Soft (Music Venue) | 1 | $ | 39,876,237 | 5.7 | ||||
Soft Springing | 2 | $ | 22,040,924 | 3.2 | ||||
Total | 54 | $ | 694,726,725 | 100.0 | % | |||
Distribution of Escrows | |||||||
Escrow Type | Number of Mortgage Loans | Cut-off Date Balance | % of Initial Pool Balance | ||||
Real Estate Tax | 50 | $ | 612,553,208 | 88.2% | |||
Replacement Reserves(1) | 48 | $ | 593,753,208 | 85.5% | |||
Insurance | 40 | $ | 391,533,498 | 56.4% | |||
TI/LC(2) | 20 | $ | 279,903,627 | 77.0% |
(1) Includes mortgage loans with FF&E reserves. | ||||||||||||
(2) Percentage of total office, retail and mixed use properties only. |
C-7 |
Distribution of Property Types | ||||||||||||||
Property Type / Detail | Number of Mortgaged Properties | Cut-off Date Balance(1) | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio(2) | Weighted Average Mortgage Interest Rate(2) | Weighted Average Remaining Terms to Maturity (Mos)(2) | Weighted Average Cut- off Date LTV(2) | Weighted Average Maturity Date LTV(2) | |||||
Office | 6 | $ | 180,335,866 | 26.0 | % | $ | 30,055,978 | 1.41x | 4.927% | 117.4 | 59.6% | 49.8% | ||
CBD | 4 | 151,344,943 | 21.8 | $ | 37,836,236 | 1.40x | 4.910% | 117.3 | 58.2% | 48.5% | ||||
General Suburban | 2 | 28,990,924 | 4.2 | $ | 14,495,462 | 1.49x | 5.013% | 117.6 | 67.1% | 56.3% | ||||
Retail | 21 | $ | 136,865,041 | 19.7 | % | $ | 6,517,383 | 1.49x | 4.852% | 109.1 | 66.0% | 60.2% | ||
Anchored | 6 | 77,220,754 | 11.1 | $ | 12,870,126 | 1.51x | 4.825% | 108.6 | 65.3% | 60.8% | ||||
Shadow Anchored | 5 | 27,952,165 | 4.0 | $ | 5,590,433 | 1.55x | 5.070% | 102.4 | 66.0% | 59.7% | ||||
Single Tenant Retail | 8 | 18,704,639 | 2.7 | $ | 2,338,080 | 1.46x | 4.723% | 116.1 | 65.5% | 57.2% | ||||
Unanchored | 2 | 12,987,483 | 1.9 | $ | 6,493,742 | 1.25x | 4.727% | 116.7 | 71.5% | 62.2% | ||||
Multifamily | 13 | $ | 113,077,030 | 16.3 | % | $ | 8,698,233 | 1.39x | 5.056% | 116.4 | 71.2% | 63.2% | ||
Garden | 11 | 79,527,030 | 11.4 | $ | 7,229,730 | 1.43x | 5.123% | 115.7 | 71.9% | 64.0% | ||||
High-Rise | 1 | 22,000,000 | 3.2 | $ | 22,000,000 | 1.31x | 4.870% | 118.0 | 66.9% | 61.5% | ||||
Mid-Rise | 1 | 11,550,000 | 1.7 | $ | 11,550,000 | 1.28x | 4.950% | 118.0 | 74.1% | 60.8% | ||||
Hospitality | 6 | $ | 112,535,681 | 16.2 | % | $ | 18,755,947 | 1.65x | 4.999% | 118.0 | 62.2% | 50.8% | ||
Full Service | 2 | 76,500,000 | 11.0 | $ | 38,250,000 | 1.54x | 5.018% | 118.0 | 60.7% | 50.3% | ||||
Limited Service | 3 | 24,835,681 | 3.6 | $ | 8,278,560 | 1.78x | 5.012% | 118.0 | 66.8% | 52.9% | ||||
Extended Stay | 1 | 11,200,000 | 1.6 | $ | 11,200,000 | 2.18x | 4.840% | 118.0 | 62.3% | 49.5% | ||||
Land (Hospitality) | 1 | $ | 70,000,000 | 10.1 | % | $ | 70,000,000 | 1.28x | 4.500% | 117.0 | 75.0% | 75.0% | ||
Mixed Use | 2 | $ | 46,176,237 | 6.6 | % | $ | 23,088,118 | 1.57x | 5.459% | 116.7 | 61.9% | 53.3% | ||
Hospitality/Office/Retail | 1 | 39,876,237 | 5.7 | $ | 39,876,237 | 1.51x | 5.580% | 117.0 | 62.6% | 52.6% | ||||
Multifamily/Retail | 1 | 6,300,000 | 0.9 | $ | 6,300,000 | 1.96x | 4.695% | 115.0 | 57.7% | 57.7% | ||||
Self Storage | 11 | $ | 29,957,461 | 4.3 | % | $ | 2,723,406 | 1.42x | 5.111% | 117.7 | 70.0% | 60.6% | ||
Manufactured Housing | 4 | $ | 5,779,409 | 0.8 | % | $ | 1,444,852 | 1.79x | 4.891% | 113.8 | 71.5% | 59.1% | ||
Total/Avg./Wtd.Avg. | 64 | $ | 694,726,725 | 100.0 | % | $ | 10,855,105 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
(1) Calculated based on the mortgaged property’s allocated loan amount for the mortgage loans secured by more than one mortgaged property. | ||||||||||||
(2) Weighted average based on the mortgaged property’s allocated loan amount for mortgage loans secured by more than one mortgaged property. |
C-8 |
Geographic Distribution | ||||||||||||||
Property Location | Number of Mortgaged Properties | Cut-off Date Balance(1) | % of Initial Pool Balance | Average Cut-off Date Balance | Weighted Average Debt Service Coverage Ratio(2) | Weighted Average Mortgage Interest Rate(2) | Weighted Average Remaining Terms to Maturity (Mos)(2) | Weighted Average Cut- off Date LTV(2) | Weighted Average Maturity Date LTV(2) | |||||
New York | 4 | $ | 131,500,000 | 18.9 | % | $ | 32,875,000 | 1.54x | 4.816% | 117.6 | 50.5% | 47.6% | ||
Colorado | 2 | 74,700,000 | 10.8 | $ | 37,350,000 | 1.28x | 4.538% | 117.0 | 74.4% | 74.0% | ||||
Texas | 4 | 69,396,990 | 10.0 | $ | 17,349,248 | 1.47x | 5.268% | 107.9 | 67.7% | 59.5% | ||||
Illinois | 4 | 63,575,000 | 9.2 | $ | 15,893,750 | 1.55x | 5.064% | 117.3 | 67.2% | 56.4% | ||||
Virginia | 1 | 51,744,943 | 7.4 | $ | 51,744,943 | 1.31x | 4.950% | 118.0 | 64.3% | 40.6% | ||||
Michigan | 9 | 49,331,166 | 7.1 | $ | 5,481,241 | 1.54x | 5.015% | 117.4 | 71.6% | 60.2% | ||||
Ohio | 10 | 44,844,565 | 6.5 | $ | 4,484,457 | 1.55x | 5.178% | 115.1 | 70.5% | 61.6% | ||||
California | 2 | 38,568,136 | 5.6 | $ | 19,284,068 | 1.23x | 5.071% | 116.6 | 71.6% | 64.3% | ||||
Florida | 5 | 34,998,517 | 5.0 | $ | 6,999,703 | 1.50x | 4.826% | 116.0 | 70.1% | 61.9% | ||||
Arizona | 3 | 30,284,029 | 4.4 | $ | 10,094,676 | 1.43x | 5.014% | 104.1 | 66.2% | 56.3% | ||||
Nevada | 3 | 24,100,000 | 3.5 | $ | 8,033,333 | 1.63x | 4.934% | 116.8 | 63.4% | 56.1% | ||||
Maryland | 1 | 22,000,000 | 3.2 | $ | 22,000,000 | 1.31x | 4.870% | 118.0 | 66.9% | 61.5% | ||||
Wisconsin | 3 | 17,752,508 | 2.6 | $ | 5,917,503 | 1.67x | 4.967% | 117.7 | 65.1% | 55.4% | ||||
Indiana | 2 | 9,214,409 | 1.3 | $ | 4,607,204 | 1.41x | 4.990% | 117.3 | 72.3% | 63.9% | ||||
South Carolina | 3 | 8,125,000 | 1.2 | $ | 2,708,333 | 1.50x | 5.055% | 117.0 | 71.8% | 63.7% | ||||
Georgia | 4 | 7,941,461 | 1.1 | $ | 1,985,365 | 1.60x | 5.028% | 116.3 | 64.9% | 54.7% | ||||
Kentucky | 2 | 7,005,000 | 1.0 | $ | 3,502,500 | 1.30x | 5.080% | 118.0 | 72.7% | 64.8% | ||||
Oregon | 1 | 6,300,000 | 0.9 | $ | 6,300,000 | 1.96x | 4.695% | 115.0 | 57.7% | 57.7% | ||||
Massachusetts | 1 | 3,345,000 | 0.5 | $ | 3,345,000 | 1.30x | 5.080% | 118.0 | 72.7% | 64.8% | ||||
Total/Avg./Wtd.Avg. | 64 | $ | 694,726,725 | 100.0 | % | $ | 10,855,105 | 1.46x | 4.945% | 115.6 | 65.4% | 57.5% |
(1) Calculated based on the mortgaged property’s allocated loan amount for the mortgage loans secured by more than one mortgaged property. | ||||||||||||
(2) Weighted average based on the mortgaged property’s allocated loan amount for mortgage loans secured by more than one mortgaged property. |
C-9 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX D
FORM OF DISTRIBUTION DATE STATEMENT
(THIS PAGE INTENTIONALLY LEFT BLANK)
Distribution Date: Determination Date: | Citigroup Commercial Mortgage Trust 2016-GC37 Commercial Mortgage Pass-Through Certificates Series 2016-GC37 | ![]() |
CONTACT INFORMATION | CONTENTS | ||||||
Depositor | Citigroup Commercial Mortgage Securities Inc. | Distribution Summary | 2 | ||||
Distribution Summary (Factors) | 3 | ||||||
Interest Distribution Detail | 4 | ||||||
Master Servicer | Wells Fargo Bank, National Association | Principal Distribution Detail | 5 | ||||
Reconciliation Detail | 6 | ||||||
Stratification Detail | 7 | ||||||
Operating Advisor | Park Bridge Lender Services LLC | ||||||
Mortgage Loan Detail | 11 | ||||||
NOI Detail | 12 | ||||||
Delinquency Loan Detail | 13 | ||||||
Trustee / Custodian | Deutsche Bank Trust Company Americas | ||||||
Appraisal Reduction Detail | 15 | ||||||
Loan Modification Detail | 17 | ||||||
Special Servicer | Midland Loan Services, a Division of PNC Bank, National Association | Specially Serviced Loan Detail | 19 | ||||
Unscheduled Principal Detail | 21 | ||||||
| Liquidated Loan Detail | 23 | |||||
Deal Contact: | Cirino Emanuele | Citibank, N.A. | ||
cirino.emanuele@citi.com | Agency and Trust | |||
Tel: (212) 816-5614 | 388 Greenwich Street, 14th Floor | |||
Fax: (347) 767-2638 | New York, NY 10013 | |||
Reports Available atwww.sf.citidirect.com | D-1 | © Copyright 2015 Citigroup |
Distribution Date: Determination Date: | Citigroup Commercial Mortgage Trust 2016-GC37 Commercial Mortgage Pass-Through Certificates Series 2016-GC37 | ![]() |
Distribution Summary
DISTRIBUTION IN DOLLARS | ||||||||||||||
Prior | Pass- | Accrual | Yield | Prepayment | Current | |||||||||
Original | Principal | Through | Day Count | Accrual | Interest | Principal | Maintenance | Penalties | Total | Deferred | Realized | Principal | ||
Class | Balance | Balance | Rate | Fraction | Dates | Distributed | Distributed | Distributed | Distributed | Distributed | Interest | Loss | Balance | |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11)=(7+8+9+10) | (12) | (13) | (14)=(3-8+12-13) | |
Totals | ||||||||||||||
Notional Classes | ||||||||||||||
Totals | ||||||||||||||
Reports Available atwww.sf.citidirect.com | D-2 | © Copyright 2015 Citigroup |
Distribution Date: Determination Date: | Citigroup Commercial Mortgage Trust 2016-GC37 Commercial Mortgage Pass-Through Certificates Series 2016-GC37 | ![]() |
PER $1,000 OF ORIGINAL BALANCE | |||||||||||
Class | CUSIP | Record Date | Prior Principal Balance (3/2 x 1000) | Interest Distributed (7/2 x 1000) | Principal Distributed (8/2 x 1000) | Yield Maintenance Distributed (9)/(2) x 1000 | Prepayment Penalties Distributed (10)/(2) x 1000 | Total Distributed (11/2 x 1000) | Deferred Interest (12/2 x 1000) | Realized Loss (13/2 x 1000) | Current Principal Balance (142 x 1000) |
Reports Available atwww.sf.citidirect.com | D-3 | © Copyright 2015 Citigroup |
Distribution Date: Determination Date: | Citigroup Commercial Mortgage Trust 2016-GC37 Commercial Mortgage Pass-Through Certificates Series 2016-GC37 | ![]() |
Interest Distribution Detail
DISTRIBUTION IN DOLLARS | ||||||||||||
Prior | Pass- | Next Pass- | Accrual | Optimal | Prior | Interest on | Non-Recov. | Current | ||||
Principal | Through | Through | Day Count | Accrued | Unpaid | Prior Unpaid | Interest | Interest | Deferred | Interest | Unpaid | |
Class | Balance | Rate | Rate | Fraction | Interest | Interest | Interest | Shortfall | Due | Interest | Distributed | Interest |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10)=(6)+(7)+(8)-(9) | (11) | (12) | (13)=(10)-(11)-(12) |
Totals | ||||||||||||
Notional Classes | ||||||||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-4 | © Copyright 2015 Citigroup |
Distribution Date: Determination Date: | Citigroup Commercial Mortgage Trust 2016-GC37 Commercial Mortgage Pass-Through Certificates Series 2016-GC37 | ![]() |
Principal Distribution Detail
DISTRIBUTION IN DOLLARS | |||||||||||||
Prior | Scheduled | Unscheduled | Current | Current | Current | Cumulative | Original | Current | Original | Current | |||
Original | Principal | Principal | Principal | Accreted | Realized | Principal | Principal | Realized | Class | Class | Credit | Credit | |
Class | Balance | Balance | Distribution | Distribution | Principal | Loss | Recoveries | Balance | Loss | (%) | (%) | Support | Support |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9)=(3)-(4)-(5)+(6)-(7)+(8) | (10) | (11) | (12) | (13) | (14) |
Reports Available atwww.sf.citidirect.com | D-5 | © Copyright 2015 Citigroup |
Distribution Date: Determination Date: | Citigroup Commercial Mortgage Trust 2016-GC37 Commercial Mortgage Pass-Through Certificates Series 2016-GC37 | ![]() |
Reconciliation Detail
SOURCE OF FUNDS | ALLOCATION OF FUNDS | ||||||||
Interest Funds Available | Scheduled Fees | ||||||||
Scheduled Interest | Servicing Fee | ||||||||
Prepayment Interest Shortfall | Operating Advisor Fee | ||||||||
Interest Adjustments | Trustee/Certificate Administrator Fee | ||||||||
Realized Loss in Excess of Principal Balance | CREFC® Intellectual Property Royalty License Fee | ||||||||
Total Interest Funds Available: | Total Scheduled Fees: | ||||||||
Principal Funds Available | Additional Fees, Expenses, etc. | ||||||||
Scheduled Principal | Additional Servicing Fee | ||||||||
Curtailments | Special Servicing Fee | ||||||||
Principal Prepayments | Workout Fee | ||||||||
Net Liquidation Proceeds | Liquidation Fee | ||||||||
Repurchased Principal | Additional Trust Fund Expenses | ||||||||
Substitution Principal | Reimbursement for Interest on Advances | ||||||||
Other Principal | Other Expenses | ||||||||
Total Principal Funds Available: | Total Additional Fees, Expenses, etc.: | ||||||||
Other Funds Available | Distribution to Certificateholders | ||||||||
Yield Maintenance Charges | Interest Distribution | ||||||||
Prepayment Premiums | Principal Distribution | ||||||||
Other Charges | Yield Maintenance Charges Distribution | ||||||||
Total Other Funds Available: | Prepayment Premiums Distribution | ||||||||
Total Funds Available | Total Distribution to Certificateholders: | ||||||||
Total Funds Allocated | |||||||||
Reports Available atwww.sf.citidirect.com | D-6 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Stratification Detail |
Ending Scheduled Balance | State | |||||||||||||
Ending Scheduled Balance | # of Loans | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | State | # of Properties | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | |
Totals | Totals | |||||||||||||
Reports Available atwww.sf.citidirect.com | D-7 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Stratification Detail |
Seasoning | Property Type | |||||||||||||
Seasoning | # of Loans | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | Property Type | # of Properties | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | |
Totals | ||||||||||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-8 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Stratification Detail |
Debt Service Coverage Ratio | Loan Rate | |||||||||||||
Debt Service Coverage Ratio | # of Loans | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | Loan Rate | # of Loans | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | |
Totals | ||||||||||||||
Totals | ||||||||||||||
Reports Available atwww.sf.citidirect.com | D-9 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Stratification Detail |
Anticipated Remaining Term | Remaining Amortization Term | |||||||||||||
Anticipated Remaining Term | # of Loans | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | Remaining Amortization Term | # of Loans | Ending Scheduled Balance | % of Agg. End. Sched. Bal. | WAC | WART | WA DSCR | |
Totals | ||||||||||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-10 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 |
Mortgage Loan Detail | |||||||||||||||||
Loan | OMCR | Property Type | City | State | Interest Payment | Principal Payment | Gross Coupon | Maturity Date | Neg Am Flag | Beginning Scheduled Balance | Ending Scheduled Balance | Paid Through Date | Apprasial Reduction Date | Apprasial Reduction Amount | Payment Status of Loan (1) | Workout Strategy (2) | Mod. Code (3) |
Totals |
Payment Status of Loan (1) | Workout Strategy (2) | Mod. Code (3) | ||||
A. In Grace Period | 3. 90+ Days Delinquent | 1. Modification | 7. REO | 13. Other or TBD | 1. Maturity Date Extension | 7. Capitalization of Taxes |
B. Late, but less than 30 Days | 4. Performing Matured Balloon | 2. Foreclosure | 8. Resolved | 98. Not Provided By Servicer | 2. Amortization Change | 8. Other |
0. Current | 5. Non Performing Matured Balloon | 3. Bankruptcy | 9. Pending Return to Master Servicer | 3. Principal Write-Off | 9. Combination | |
1. 30-59 Days Delinquent | 7. Foreclosure | 4. Extension | 10. Deed In Lieu of Foreclosure | 4. Blank (formerly Combination) | ||
2. 60-89 Days Delinquent | 9. REO | 5. Note Sale | 11. Full Payoff | 5. Temporary Rate Reduction | ||
6. DPO | 12. Reps and Warranties | 6. Capitalization of Interest |
Reports Available atwww.sf.citidirect.com | D-11 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 |
NOI Detail
Loan Number | OMCR | Property Type | City | State | Ending Scheduled Balance | Most Recent Fiscal NOI | Most Recent NOI | Most Recent NOI Start Date | Most Recent NOI End Date |
| |||||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-12 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Delinquency Loan Detail | ||
Actual | Paid | Current P & I | Total P & I | Cumulative | Other Expense | Payment | Workout | Most Recent | ||||||
Loan | # of Months | Principal | Through | Advances (Net | Advances | Accrued Unpaid | Advance | Status of | Strategy | Special Serv | Foreclosure | Bankruptcy | REO | |
Number | OMCR | Delinq | Balance | Date | of ASER) | Outstanding | Advance Interest | Outstanding | Loan (1) | (2) | Transfer Date | Date | Date | Date |
There is no Delinquency Loan Detail for the current distribution period. | ||||||||||||||
Totals |
Payment Status of Loan (1) | Workout Strategy (2) | |||
A. In Grace Period | 3. 90+ Days Delinquent | 1. Modification | 7. REO | 13. Other or TBD |
B. Late, but less than 30 Days | 4. Performing Matured Balloon | 2. Foreclosure | 8. Resolved | 98. Not Provided By Servicer |
0. Current | 5. Non Performing Matured Balloon | 3. Bankruptcy | 9. Pending Return to Master Servicer | |
1. 30-59 Days Delinquent | 7. Foreclosure | 4. Extension | 10. Deed In Lieu of Foreclosure | |
2. 60-89 Days Delinquent | 9. REO | 5. Note Sale | 11. Full Payoff | |
6. DPO | 12. Reps and Warranties |
Reports Available atwww.sf.citidirect.com | D-13 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Historical Delinquency Information |
Distribution | Less Than 1 Month | 1 Month | 2 Month | 3+ Month | Bankruptcy | Foreclosure | REO | |||||||
Date | ||||||||||||||
End. Sched. Bal. | # | End. Sched. Bal. | # | End. Sched. Bal. | # | End. Sched. Bal. | # | End. Sched. Bal. | # | End. Sched. Bal. | # | End. Sched. Bal. | # | |
0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | |
0.000% | 0.0% | 0.000% | 0.0% | 0.000% | 0.0% | 0.000% | 0.0% | 0.000% | 0.0% | 0.000% | 0.0% | 0.000% | 0.0% |
Reports Available atwww.sf.citidirect.com | D-14 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Appraisal Reduction Detail |
Appraisal | Appraisal | Most Recent | Cumulative | |||
Loan Number | OMCR | Property Name | Reduction Amount | Reduction Date | ASER Amount | ASER Amount |
There is no Appraisal Reduction activity for the current distribution period. | ||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-15 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Historical Appraisal Reduction Detail |
Distribution | Appraisal | Appraisal | Most Recent | Cumulative | |||
Date | Loan Number | OMCR | Property Name | Reduction Amount | Reduction Date | ASER Amount | ASER Amount |
There is no historical Appraisal Reduction activity. | |||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-16 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Loan Modification Detail |
Modification | Modification | Modification | |||
Loan Number | OMCR | Property Name | Date | Code (1) | Description |
There is no Loan Modification activity for the current distribution period. | |||||
Totals |
Modification Code (1) | |
1. Maturity Date Extension | 7. Capitalization of Taxes |
2. Amortization Change | 8. Other |
3. Principal Write-Off | 9. Combination |
4. Blank (formerly Combination) | |
5. Temporary Rate Reduction | |
6. Capitalization of Interest |
Reports Available atwww.sf.citidirect.com | D-17 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates | |
Series 2016-GC37 | ||
Historical Loan Modification Detail |
Distribution | Modification | Modification | Modification | |||
Date | Loan | OMCR | Property Name | Date | Code (1) | Description |
There is no historical Loan Modification activity. | ||||||
Totals |
Modification Code (1) | |
1. Maturity Date Extension | 7. Capitalization of Taxes |
2. Amortization Change | 8. Other |
3. Principal Write-Off | 9. Combination |
4. Blank (formerly Combination) | |
5. Temporary Rate Reduction | |
6. Capitalization of Interest |
Reports Available atwww.sf.citidirect.com | D-18 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates Series 2016-GC37 Specially Serviced Loan Detail |
Loan | OMCR | Workout Strategy (1) | Most Recent Inspection Date | Most Recent Specially Serviced Transfer Date | Most Recent Appraisal Date | Most Recent Appraisal Value | Other REO Property Value | Comment from Special Servicer | ||||||||
There is no Specially Serviced Loan activity for the current distribution period. | ||||||||||||||||
Totals |
Workout Strategy (1) | |||||
1. Modification | 7. REO | 13. Other or TBD | |||
2. Foreclosure | 8. Resolved | 98. Not Provided By Servicer | |||
3. Bankruptcy | 9. Pending Return to Master Servicer | ||||
4. Extension | 10. Deed In Lieu of Foreclosure | ||||
5. Note Sale | 11. Full Payoff | ||||
6. DPO | 12. Reps and Warranties |
Reports Available atwww.sf.citidirect.com | D-19 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates Series 2016-GC37 Historical Specially Serviced Loan Detail |
Distribution Date | Loan Number | OMCR | Spec. Serviced Transfer Date | Workout Strategy (1) | Spec. Serviced Loan to MS | Scheduled Balance | Actual Balance | Property Type (2) | State | Interest Rate | Note Date | Net Operating Income | Net Operating Income Date | DSC Ratio | DSC Date | Maturity Date | WART | |||||||||||||||||
There is no historical Specially Serviced Loan activity. | ||||||||||||||||||||||||||||||||||
Totals |
Workout Strategy (1) | |||||
1. Modification | 7. REO | 13. Other or TBD | |||
2. Foreclosure | 8. Resolved | 98. Not Provided By Servicer | |||
3. Bankruptcy | 9. Pending Return to Master Servicer | ||||
4. Extension | 10. Deed In Lieu of Foreclosure | ||||
5. Note Sale | 11. Full Payoff | ||||
6. DPO | 12. Reps and Warranties |
Reports Available atwww.sf.citidirect.com | D-20 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates Series 2016-GC37 Unscheduled Principal Detail |
Loan Number | OMCR | Liquidation / Prepayment Date | Liquidation / Prepayment Code | Unscheduled Principal Collections | Unscheduled Principal Adjustments | Other Interest Adjustment | Prepayment Interest Excess (Shortfall) | Prepayment Penalties | Yield Maintenance Charges | |||||||||
Totals | ||||||||||||||||||
Liquidation / Prepayment Code (1) | |||||
1. Partial Liquidation (Curtailment) | 7. Not Used | ||||
2. Payoff Prior To Maturity | 8. Payoff With Penalty | ||||
3. Disposition / Liquidation | 9. Payoff With Yield Maintenance | ||||
4. Repurchase / Substitution | 10. Curtailment With Penalty | ||||
5. Full Payoff At Maturity | 11. Curtailment With Yield | ||||
6. DPO | Maintenance |
Reports Available atwww.sf.citidirect.com | D-21 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates Series 2016-GC37 Historical Unscheduled Principal Detail |
Distribution Date | Loan Number OMCR | Liquidation / Prepayment Date | Liquidation / Prepayment Code | Unscheduled Principal Collections | Unscheduled Principal Adjustments | Other Interest Adjustment | Prepayment Interest Excess (Shortfall) | Prepayment Penalty | Yield Maintenance Premium | |||||||||
Totals | ||||||||||||||||||
Liquidation / Prepayment Code (1) | |||||
1. Partial Liquidation (Curtailment) | 7. Not Used | ||||
2. Payoff Prior To Maturity | 8. Payoff With Penalty | ||||
3. Disposition / Liquidation | 9. Payoff With Yield Maintenance | ||||
4. Repurchase / Substitution | 10. Curtailment With Penalty | ||||
5. Full Payoff At Maturity | 11. Curtailment With Yield | ||||
6. DPO | Maintenance |
Reports Available atwww.sf.citidirect.com | D-22 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates Series 2016-GC37 Liquidated Loan Detail |
Loan Number | OMCR | Final Recovery Determ Date | Most Recent Appraisal Date | Most Recent Appraisal Value | Actual Balance | Gross Proceeds | Proceeds as a % of Act Bal | Liquidation Expenses | Net Liquidation Proceeds | Net Proceeds as a % of Act Bal | Realized Loss | Repurchased by Seller (Y/N) | ||||||||||||
There is no Liquidated Loan activity for the current distribution period. | ||||||||||||||||||||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-23 | © Copyright 2015 Citigroup |
Distribution Date: | Citigroup Commercial Mortgage Trust 2016-GC37 | ![]() |
Determination Date: | Commercial Mortgage Pass-Through Certificates Series 2016-GC37 Historical Liquidated Loan Detail |
Distribution Date | Loan Number | OMCR | Final Recovery Determ Date | Most Recent Appraisal Date | Most Recent Appraisal Value | Actual Balance | Gross Proceeds | Gross Proceeds as a % of Act Bal | Liquidation Expenses | Net Liquidation Proceeds | Net Proceeds as a % of Act Bal | Realized Loss | Repurchased by Seller (Y/N) | |||||||||||||
There is no historical Liquidated Loan activity. | ||||||||||||||||||||||||||
Totals |
Reports Available atwww.sf.citidirect.com | D-24 | © Copyright 2015 Citigroup |
ANNEX E-1
SPONSOR REPRESENTATIONS AND WARRANTIES
Each Sponsor will make, as of the Cut-off Date or such other date as set forth below, with respect to each Mortgage Loan sold by it that we include in the Issuing Entity, representations and warranties generally to the effect set forth below. The exceptions to the representations and warranties set forth below are identified on Annex E-2 to this prospectus. Capitalized terms used but not otherwise defined in this Annex E-1 will have the meanings set forth in this prospectus or, if not defined in this prospectus, in the related Mortgage Loan Purchase Agreement.
Each Mortgage Loan Purchase Agreement, together with the related representations and warranties, serves to contractually allocate risk between the related Sponsor, on the one hand, and the Issuing Entity, on the other. We present the related representations and warranties set forth below for the sole purpose of describing some of the terms and conditions of that risk allocation. The presentation of representations and warranties below is not intended as statements regarding the actual characteristics of the Mortgage Loans, the Mortgaged Properties or other matters. We cannot assure you that the Mortgage Loans actually conform to the statements made in the representations and warranties that we present below.
(1) | Whole Loan; Ownership of Mortgage Loans. Except with respect to a Mortgage Loan that is part of a Loan Combination, each Mortgage Loan is a whole loan and not a participation interest in a Mortgage Loan. Each Mortgage Loan that is part of a Loan Combination is a senior orpari passu portion of a whole loan evidenced by a senior orpari passu note. At the time of the sale, transfer and assignment to Depositor, no Mortgage Note or Mortgage was subject to any assignment (other than assignments to the Sponsor), participation or pledge, and the Sponsor had good title to, and was the sole owner of, each Mortgage Loan free and clear of any and all liens, charges, pledges, encumbrances, participations, any other ownership interests on, in or to such Mortgage Loan other than any servicing rights appointment or similar agreement, any Outside Servicing Agreement with respect to an Outside Serviced Mortgage Loan and rights of the holder of a related Companion Loan pursuant to a Co-Lender Agreement. The Sponsor has full right and authority to sell, assign and transfer each Mortgage Loan, and the assignment to Depositor constitutes a legal, valid and binding assignment of such Mortgage Loan free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Mortgage Loan other than the rights of the holder of a related Companion Loan pursuant to a Co-Lender Agreement. |
(2) | Loan Document Status. Each related Mortgage Note, Mortgage, Assignment of Leases (if a separate instrument), guaranty and other agreement executed by or on behalf of the related Mortgagor, guarantor or other obligor in connection with such Mortgage Loan is the legal, valid and binding obligation of the related Mortgagor, guarantor or other obligor (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except (i) as such enforcement may be limited by (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (ii) that certain provisions in such Loan Documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment/yield maintenance fees, charges and/or premiums) are, or may be, further limited or rendered unenforceable by or under applicable law, but (subject to the limitations set forth in clause (i) above) such limitations or unenforceability will not render such Loan Documents invalid as a whole or materially interfere with the Mortgagee’s realization of the principal benefits and/or security provided thereby (clauses (i) and (ii) collectively, the “Standard Qualifications”). |
Except as set forth in the immediately preceding sentence, there is no valid offset, defense, counterclaim or right of rescission available to the related Mortgagor with respect to any of the related Mortgage Notes, Mortgages or other Loan Documents, including, without limitation, any such valid offset, defense, counterclaim or right based on intentional fraud by the Sponsor in connection with the origination of the Mortgage Loan, that would deny the Mortgagee the principal benefits intended to be provided by the Mortgage Note, Mortgage or other Loan Documents. |
(3) | Mortgage Provisions. The Loan Documents for each Mortgage Loan contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged |
E-1-1 |
Property of the principal benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, nonjudicial foreclosure subject to the limitations set forth in the Standard Qualifications.
(4) | Mortgage Status; Waivers and Modifications. Since origination and except by written instruments set forth in the related Mortgage File (a) the material terms of such Mortgage, Mortgage Note, Mortgage Loan guaranty, and related Loan Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect which materially interferes with the security intended to be provided by such Mortgage; (b) no related Mortgaged Property or any portion thereof has been released from the lien of the related Mortgage in any manner which materially interferes with the security intended to be provided by such Mortgage or the use or operation of the remaining portion of such Mortgaged Property; and (c) neither the related Mortgagor nor the related guarantor has been released from its material obligations under the Mortgage Loan. |
(5) | Lien; Valid Assignment. Subject to the Standard Qualifications, each assignment of Mortgage and assignment of Assignment of Leases to the Issuing Entity constitutes a legal, valid and binding assignment to the Issuing Entity. Each related Mortgage and Assignment of Leases is freely assignable without the consent of the related Mortgagor. Each related Mortgage is a legal, valid and enforceable first lien on the related Mortgagor’s fee (or if identified on the loan schedule attached as an exhibit to the applicable Mortgage Loan Purchase Agreement, leasehold) interest in the Mortgaged Property in the principal amount of such Mortgage Loan or allocated loan amount (subject only to Permitted Encumbrances (as defined below) and the exceptions to paragraph (6) set forth on Annex E-2 (each such exception, a “Title Exception”)), except as the enforcement thereof may be limited by the Standard Qualifications. Such Mortgaged Property (subject to and excepting Permitted Encumbrances and the Title Exceptions) as of origination was, and as of the Cut-off Date, to the Sponsor’s knowledge, is free and clear of any recorded mechanics’ liens, recorded materialmen’s liens and other recorded encumbrances which are prior to or equal with the lien of the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy (as described below), and, to the Sponsor’s knowledge and subject to the rights of tenants (as tenants only) (subject to and excepting Permitted Encumbrances and the Title Exceptions), no rights exist which under law could give rise to any such lien or encumbrance that would be prior to or equal with the lien of the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy (as described below). Notwithstanding anything herein to the contrary, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of Uniform Commercial Code financing statements is required in order to effect such perfection. |
(6) | Permitted Liens; Title Insurance. Each Mortgaged Property securing a Mortgage Loan is covered by an American Land Title Association loan title insurance policy or a comparable form of loan title insurance policy approved for use in the applicable jurisdiction (or, if such policy is yet to be issued, by a pro forma policy, a preliminary title policy with escrow instructions or a “marked up” commitment, in each case binding on the title insurer) (the “Title Policy”) in the original principal amount of such Mortgage Loan (or with respect to a Mortgage Loan secured by multiple properties, an amount equal to at least the allocated loan amount with respect to the Title Policy for each such property) after all advances of principal (including any advances held in escrow or reserves), that insures for the benefit of the owner of the indebtedness secured by the Mortgage, the first priority lien of the Mortgage, which lien is subject only to (a) the lien of current real property taxes, water charges, sewer rents and assessments due and payable but not yet delinquent; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record; (c) the exceptions (general and specific) and exclusions set forth in such Title Policy; (d) other matters to which like properties are commonly subject; (e) the rights of tenants (as tenants only) under leases (including subleases) pertaining to the related Mortgaged Property and condominium declarations; (f) if the related Mortgage Loan constitutes a Cross-Collateralized Mortgage Loan, the lien of the Mortgage for another Mortgage Loan contained in the same Cross-Collateralized Group; and (g) if the related Mortgage Loan is part of a Loan Combination, the rights of the holder(s) of the related Companion Loan(s) pursuant to the related Co-Lender Agreement;provided that none of items (a) through (g), individually or in the aggregate, materially and adversely interferes with the value or current use of the Mortgaged Property or the security intended to be provided by such Mortgage or the Mortgagor’s ability to pay its obligations when they become due (collectively, the “Permitted |
E-1-2 |
Encumbrances”). Except as contemplated by clauses (f) and (g) of the preceding sentence, none of the Permitted Encumbrances are mortgage liens that are senior to or coordinate and co-equal with the lien of the related Mortgage. Such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no claims have been made by the Sponsor thereunder and no claims have been paid thereunder. Neither the Sponsor, nor to the Sponsor’s knowledge, any other holder of the Mortgage Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.
(7) | Junior Liens. It being understood that B notes secured by the same Mortgage as a Mortgage Loan are not subordinate mortgages or junior liens, except for any Mortgage Loan that is cross-collateralized and cross-defaulted with another Mortgage Loan, there are no subordinate mortgages or junior liens securing the payment of money encumbering the related Mortgaged Property (other than Permitted Encumbrances and the Title Exceptions, taxes and assessments, mechanics’ and materialmen’s liens (which are the subject of the representation in paragraph (5) above), and equipment and other personal property financing). Except as set forth on an exhibit to the applicable Mortgage Loan Purchase Agreement, the Sponsor has no knowledge of any mezzanine debt secured directly by interests in the related Mortgagor. |
(8) | Assignment of Leases and Rents. There exists as part of the related Mortgage File an Assignment of Leases (either as a separate instrument or incorporated into the related Mortgage). Subject to the Permitted Encumbrances and the Title Exceptions, each related Assignment of Leases creates a valid first-priority collateral assignment of, or a valid first-priority lien or security interest in, rents and certain rights under the related lease or leases, subject only to a license granted to the related Mortgagor to exercise certain rights and to perform certain obligations of the lessor under such lease or leases, including the right to operate the related leased property, except as the enforcement thereof may be limited by the Standard Qualifications. The related Mortgage or related Assignment of Leases, subject to applicable law, provides that, upon an event of default under the Mortgage Loan, a receiver is permitted to be appointed for the collection of rents or for the related Mortgagee to enter into possession to collect the rents or for rents to be paid directly to the Mortgagee. |
(9) | UCC Filings. If the related Mortgaged Property is operated as a hospitality property, the Sponsor has filed and/or recorded or caused to be filed and/or recorded (or, if not filed and/or recorded, submitted in proper form for filing and/or recording), UCC financing statements in the appropriate public filing and/or recording offices necessary at the time of the origination of the Mortgage Loan to perfect a valid security interest in all items of physical personal property reasonably necessary to operate such Mortgaged Property owned by such Mortgagor and located on the related Mortgaged Property (other than any non-material personal property, any personal property subject to a purchase money security interest, a sale and leaseback financing arrangement as permitted under the terms of the related Mortgage Loan documents or any other personal property leases applicable to such personal property), to the extent perfection may be effected pursuant to applicable law by recording or filing, as the case may be. Subject to the Standard Qualifications, each related Mortgage (or equivalent document) creates a valid and enforceable lien and security interest on the items of personalty described above. No representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC financing statements are required in order to effect such perfection. |
(10) | Condition of Property. The Sponsor or the originator of the Mortgage Loan inspected or caused to be inspected each related Mortgaged Property within six months of origination of the Mortgage Loan and within thirteen months of the Cut-off Date. |
An engineering report or property condition assessment was prepared in connection with the origination of each Mortgage Loan no more than 13 months prior to the Cut-off Date. To the Sponsor’s knowledge, based solely upon due diligence customarily performed in connection with the origination of comparable mortgage loans, as of the Closing Date, each related Mortgaged Property was free and clear of any material damage (other than deferred maintenance for which escrows were established at origination) that would affect materially and adversely the use or value of such Mortgaged Property as security for the Mortgage Loan. |
E-1-3 |
(11) | Taxes and Assessments. All taxes, governmental assessments and other outstanding governmental charges (including, without limitation, water and sewage charges), or installments thereof, which could be a lien on the related Mortgaged Property that would be of equal or superior priority to the lien of the Mortgage and that prior to the Cut-off Date have become delinquent in respect of each related Mortgaged Property have been paid, or an escrow of funds has been established in an amount sufficient to cover such payments and reasonably estimated interest and penalties, if any, thereon. For purposes of this representation and warranty, real estate taxes and governmental assessments and other outstanding governmental charges and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority. |
(12) | Condemnation. As of the date of origination and to the Sponsor’s knowledge as of the Cut-off Date, there is no proceeding pending, and, to the Sponsor’s knowledge as of the date of origination and as of the Cut-off Date, there is no proceeding threatened, for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the value, use or operation of the Mortgaged Property. |
(13) | Actions Concerning Mortgage Loan. As of the date of origination and to the Sponsor’s knowledge as of the Cut-off Date, there was no pending or filed action, suit or proceeding, arbitration or governmental investigation involving any Mortgagor, guarantor, or Mortgagor’s interest in the Mortgaged Property, an adverse outcome of which would reasonably be expected to materially and adversely affect (a) such Mortgagor’s title to the Mortgaged Property, (b) the validity or enforceability of the Mortgage, (c) such Mortgagor’s ability to perform under the related Mortgage Loan, (d) such guarantor’s ability to perform under the related guaranty, (e) the principal benefit of the security intended to be provided by the Mortgage Loan documents or (f) the current principal use of the Mortgaged Property. |
(14) | Escrow Deposits. All escrow deposits and payments required to be escrowed with Mortgagee pursuant to each Mortgage Loan are in the possession, or under the control, of the Sponsor or its servicer, and there are no deficiencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required to be escrowed with Mortgagee under the related Loan Documents are being conveyed by the Sponsor to Depositor or its servicer. |
(15) | No Holdbacks. The principal amount of the Mortgage Loan stated on the loan schedule attached as an exhibit to the applicable Mortgage Loan Purchase Agreement has been fully disbursed as of the Closing Date and there is no requirement for future advances thereunder (except in those cases where the full amount of the Mortgage Loan has been disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the related Mortgaged Property, the Mortgagor or other considerations determined by the Sponsor to merit such holdback). |
(16) | Insurance. Each related Mortgaged Property is, and is required pursuant to the related Mortgage to be, insured by a property insurance policy providing coverage for loss in accordance with coverage found under a “special cause of loss form” or “all risk form” that includes replacement cost valuation issued by an insurer meeting the requirements of the related Loan Documents and having a claims-paying or financial strength rating of at least “A-:VIII” from A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-” from Standard & Poor’s Ratings Services (collectively the “Insurance Rating Requirements”), in an amount (subject to a customary deductible) not less than the lesser of (1) the original principal balance of the Mortgage Loan and (2) the full insurable value on a replacement cost basis of the improvements, furniture, furnishings, fixtures and equipment owned by the Mortgagor and included in the Mortgaged Property (with no deduction for physical depreciation), but, in any event, not less than the amount necessary or containing such endorsements as are necessary to avoid the operation of any coinsurance provisions with respect to the related Mortgaged Property. |
Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Loan Documents, by business interruption or rental loss insurance which (subject to a customary deductible) covers a period of not less than 12 months (or with respect to each Mortgage Loan on a single asset with a principal balance of $50 million or more, 18 months). |
E-1-4 |
If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as a “Special Flood Hazard Area,” the related Mortgagor is required to maintain insurance in the maximum amount available under the National Flood Insurance Program. |
If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, the related Mortgagor is required to maintain coverage for windstorm and/or windstorm related perils and/or “named storms” issued by an insurer meeting the Insurance Rating Requirements or endorsement covering damage from windstorm and/or windstorm related perils and/or named storms. |
The Mortgaged Property is covered, and required to be covered pursuant to the related Loan Documents, by a commercial general liability insurance policy issued by an insurer meeting the Insurance Rating Requirements including coverage for property damage, contractual damage and personal injury (including bodily injury and death) in amounts as are generally required by prudent institutional commercial mortgage lenders, and in any event not less than $1 million per occurrence and $2 million in the aggregate. |
An architectural or engineering consultant has performed an analysis of each of the Mortgaged Properties located in seismic zones 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the scenario expected limit (“SEL”) for the Mortgaged Property in the event of an earthquake. In such instance, the SEL was based on a 475-year return period, an exposure period of 50 years and a 10% probability of exceedance. If the resulting report concluded that the SEL would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained from an insurer rated at least “A:VIII” by A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-” by Standard & Poor’s Ratings Services in an amount not less than 100% of the SEL. |
The Loan Documents require insurance proceeds in respect of a property loss to be applied either (a) to the repair or restoration of all or part of the related Mortgaged Property, with respect to all property losses in excess of 5% of the then outstanding principal amount of the related Mortgage Loan (or related Loan Combination), the Mortgagee (or a trustee appointed by it) having the right to hold and disburse such proceeds as the repair or restoration progresses, or (b) to the payment of the outstanding principal balance of such Mortgage Loan together with any accrued interest thereon. |
All premiums on all insurance policies referred to in this section required to be paid as of the Cut-off Date have been paid, and such insurance policies name the Mortgagee under the Mortgage Loan and its successors and assigns as a loss payee under a mortgagee endorsement clause or, in the case of the general liability insurance policy, as named or additional insured. Such insurance policies will inure to the benefit of the Trustee. Each related Mortgage Loan obligates the related Mortgagor to maintain all such insurance and, at such Mortgagor’s failure to do so, authorizes the Mortgagee to maintain such insurance at the Mortgagor’s reasonable cost and expense and to charge such Mortgagor for related premiums. All such insurance policies (other than commercial liability policies) require at least 10 days’ prior notice to the Mortgagee of termination or cancellation arising because of nonpayment of a premium and at least 30 days’ prior notice to the Mortgagee of termination or cancellation (or such lesser period, not less than 10 days, as may be required by applicable law) arising for any reason other than non-payment of a premium and no such notice has been received by the Sponsor. |
(17) | Access; Utilities; Separate Tax Lots. Each Mortgaged Property (a) is located on or adjacent to a public road and has direct legal access to such road, or has access via an irrevocable easement or irrevocable right of way permitting ingress and egress to/from a public road, (b) is served by or has uninhibited access rights to public or private water and sewer (or well and septic) and all required utilities, all of which are appropriate for the current use of the Mortgaged Property, and (c) constitutes one or more separate tax parcels which do not include any property which is not part of the Mortgaged Property or is subject to an endorsement under the related Title Policy insuring the Mortgaged Property, or in certain cases, an application has been, or will be, made to the applicable governing authority for creation of separate tax lots, in which case the Mortgage Loan requires the Mortgagor to escrow an amount sufficient to pay taxes for the existing tax parcel of which the Mortgaged Property is a part until the separate tax lots are created. |
E-1-5 |
(18) | No Encroachments. To the Sponsor’s knowledge based solely on surveys obtained in connection with origination and the Mortgagee’s Title Policy (or, if such policy is not yet issued, a pro forma title policy, a preliminary title policy with escrow instructions or a “marked up” commitment) obtained in connection with the origination of each Mortgage Loan, all material improvements that were included for the purpose of determining the appraised value of the related Mortgaged Property at the time of the origination of such Mortgage Loan are within the boundaries of the related Mortgaged Property, except encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy. No improvements on adjoining parcels encroach onto the related Mortgaged Property except for encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy. No improvements encroach upon any easements except for encroachments the removal of which would not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy. |
(19) | No Contingent Interest or Equity Participation. No Mortgage Loan has a shared appreciation feature, any other contingent interest feature or a negative amortization feature or an equity participation by the Sponsor (except that any ARD Loan may provide for the accrual of the portion of interest in excess of the rate in effect prior to its related Anticipated Repayment Date). |
(20) | REMIC. The Mortgage Loan is a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code (but determined without regard to the rule in Treasury Regulations Section 1.860G-2(f)(2) that treats certain defective mortgage loans as qualified mortgages), and, accordingly, (A) the issue price of the Mortgage Loan to the related Mortgagor at origination did not exceed the non-contingent principal amount of the Mortgage Loan and (B) either: (a) such Mortgage Loan is secured by an interest in real property (including buildings and structural components thereof, but excluding personal property) having a fair market value (i) at the date the Mortgage Loan (or related Loan Combination) was originated at least equal to 80% of the adjusted issue price of the Mortgage Loan (or related Loan Combination) on such date or (ii) at the Closing Date at least equal to 80% of the adjusted issue price of the Mortgage Loan (or related Loan Combination) on such date,provided that for purposes hereof, the fair market value of the real property interest must first be reduced by (A) the amount of any lien on the real property interest that is senior to the Mortgage Loan and (B) a proportionate amount of any lien that is in parity with the Mortgage Loan; or (b) substantially all of the proceeds of such Mortgage Loan were used to acquire, improve or protect the real property which served as the only security for such Mortgage Loan (other than a recourse feature or other third-party credit enhancement within the meaning of Treasury Regulations Section 1.860G-2(a)(1)(ii)). If the Mortgage Loan was “significantly modified” prior to the Closing Date so as to result in a taxable exchange under Section 1001 of the Code, it either (x) was modified as a result of the default or reasonably foreseeable default of such Mortgage Loan or (y) satisfies the provisions of either sub-clause (B)(a)(i) above (substituting the date of the last such modification for the date the Mortgage Loan was originated) or sub-clause (B)(a)(ii), including the proviso thereto. Any prepayment premium and yield maintenance charges applicable to the Mortgage Loan constitute “customary prepayment penalties” within the meaning of Treasury Regulations Section 1.860G-1(b)(2). All terms used in this paragraph shall have the same meanings as set forth in the related Treasury Regulations. |
(21) | Compliance with Usury Laws. The Mortgage Rate (exclusive of any default interest, late charges, yield maintenance charge, or prepayment premiums) of such Mortgage Loan complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury. |
(22) | Authorized to do Business. To the extent required under applicable law, as of the Cut-off Date or as of the date that such entity held the Mortgage Note, each holder of the Mortgage Note was authorized to originate, acquire and/or hold (as applicable) the Mortgage Note in the jurisdiction in which each related Mortgaged Property is located, or the failure to be so authorized does not materially and adversely affect the enforceability of such Mortgage Loan by the Trust. |
(23) | Trustee under Deed of Trust. With respect to each Mortgage which is a deed of trust, as of the date of origination and, to the Sponsor’s knowledge, as of the Closing Date, a trustee, duly qualified under |
E-1-6 |
applicable law to serve as such, currently so serves and is named in the deed of trust or has been substituted in accordance with the Mortgage and applicable law or may be substituted in accordance with the Mortgage and applicable law by the related Mortgagee.
(24) | Local Law Compliance. To the Sponsor’s knowledge, based upon any of a letter from any governmental authorities, a legal opinion, an architect’s letter, a zoning consultant’s report, an endorsement to the related Title Policy, a survey or other affirmative investigation of local law compliance consistent with the investigation conducted by the Sponsor for similar commercial and multifamily mortgage loans intended for securitization, there are no material violations of applicable zoning ordinances, building codes and land laws (collectively “Zoning Regulations”) with respect to the improvements located on or forming part of each Mortgaged Property securing a Mortgage Loan as of the date of origination of such Mortgage Loan (or related Loan Combination, as applicable) or as of the Cut-off Date, other than those which (i) are insured by the Title Policy or a law and ordinance insurance policy or (ii) would not have a material adverse effect on the value, operation or net operating income of the Mortgaged Property. The terms of the Loan Documents require the Mortgagor to comply in all material respects with all applicable governmental regulations, zoning and building laws. |
(25) | Licenses and Permits. Each Mortgagor covenants in the Loan Documents that it shall keep all material licenses, permits and applicable governmental authorizations necessary for its operation of the Mortgaged Property in full force and effect, and to the Sponsor’s knowledge based upon any of a letter from any government authorities or other affirmative investigation of local law compliance consistent with the investigation conducted by the Sponsor for similar commercial and multifamily mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect. The Mortgage Loan requires the related Mortgagor to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located. |
(26) | Recourse Obligations. The Loan Documents for each Mortgage Loan provide that such Mortgage Loan (a) becomes full recourse to the Mortgagor and guarantor (which is a natural person or persons, or an entity distinct from the Mortgagor (but may be affiliated with the Mortgagor) that has assets other than equity in the related Mortgaged Property that are not de minimis) in any of the following events: (i) if any voluntary petition for bankruptcy, insolvency, dissolution or liquidation pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by the Mortgagor; (ii) the Mortgagor or guarantor shall have colluded with (or, alternatively, solicited or caused to be solicited) other creditors to cause an involuntary bankruptcy filing with respect to the Mortgagor or (iii) voluntary transfers of either the Mortgaged Property or equity interests in Mortgagor made in violation of the Loan Documents; and (b) contains provisions providing for recourse against the Mortgagor and guarantor (which is a natural person or persons, or an entity distinct from the Mortgagor (but may be affiliated with the Mortgagor) that has assets other than equity in the related Mortgaged Property that are not de minimis), for losses and damages sustained by reason of Mortgagor’s (i) misappropriation of rents after the occurrence of an event of default under the Mortgage Loan; (ii) misappropriation of (A) insurance proceeds or condemnation awards or (B) security deposits or, alternatively, the failure of any security deposits to be delivered to Mortgagee upon foreclosure or action in lieu thereof (except to the extent applied in accordance with leases prior to a Mortgage Loan event of default); (iii) fraud or intentional material misrepresentation; (iv) breaches of the environmental covenants in the Loan Documents; or (v) commission of intentional material physical waste at the Mortgaged Property (but, in some cases, only to the extent there is sufficient cash flow generated by the related Mortgaged Property to prevent such waste). |
(27) | Mortgage Releases. The terms of the related Mortgage or related Loan Documents do not provide for release of any material portion of the Mortgaged Property from the lien of the Mortgage except (a) a partial release, accompanied by principal repayment, of not less than a specified percentage at least equal to the lesser of (i) 110% of the related allocated loan amount of such portion of the Mortgaged Property and (ii) the outstanding principal balance of the Mortgage Loan, (b) upon payment in full of such Mortgage Loan, (c) upon a Defeasance defined in (32) below, (d) releases of out-parcels that are unimproved or other portions of the Mortgaged Property which will not have a material adverse effect on the underwritten value of the Mortgaged Property and which were not afforded any material value in the appraisal obtained at the origination of the Mortgage Loan and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (e) as required pursuant to an order |
E-1-7 |
of condemnation or taking by a State or any political subdivision or authority thereof. With respect to any partial release under the preceding clauses (a) or (d), either: (x) such release of collateral (i) would not constitute a “significant modification” of the subject Mortgage Loan within the meaning of Treasury Regulations Section 1.860G-2(b)(2) and (ii) would not cause the subject Mortgage Loan to fail to be a “qualified mortgage” within the meaning of Section 860G(a)(3)(A) of the Code; or (y) the Mortgagee or servicer can, in accordance with the related Loan Documents, condition such release of collateral on the related Mortgagor’s delivery of an opinion of tax counsel to the effect specified in the immediately preceding clause (x). For purposes of the preceding clause (x), for all Mortgage Loans originated after December 6, 2010, if the fair market value of the real property constituting such Mortgaged Property (reduced by (1) the amount of any lien on the real property that is senior to the Mortgage Loan and (2) a proportionate amount of any lien on the real property that is in parity with the Mortgage Loan) after the release is not equal to at least 80% of the principal balance of the Mortgage Loan (or related Loan Combination) outstanding after the release, the Mortgagor is required to make a payment of principal in an amount not less than the amount required by the REMIC Provisions.
With respect to any partial release under the preceding clause (e), for all Mortgage Loans originated after December 6, 2010, the Mortgagor can be required to pay down the principal balance of the Mortgage Loan (or related Loan Combination) in an amount not less than the amount required by the REMIC Provisions and, to such extent, such amount may not be required to be applied to the restoration of the Mortgaged Property or released to the Mortgagor, if, immediately after the release of such portion of the Mortgaged Property from the lien of the Mortgage (but taking into account the planned restoration) the fair market value of the real property constituting the remaining Mortgaged Property (reduced by (1) the amount of any lien on the real property that is senior to the Mortgage Loan and (2) a proportionate amount of any lien on the real property that is in parity with the Mortgage Loan) is not equal to at least 80% of the remaining principal balance of the Mortgage Loan (or related Loan Combination). |
No Mortgage Loan that is secured by more than one Mortgaged Property or that is cross-collateralized with another Mortgage Loan permits the release of cross-collateralization of the related Mortgaged Properties or a portion thereof, including due to partial condemnation, other than in compliance with the REMIC Provisions. |
(28) | Financial Reporting and Rent Rolls. The Mortgage Loan documents for each Mortgage Loan require the Mortgagor to provide the owner or holder of the Mortgage with quarterly (other than for single-tenant properties) and annual operating statements, and quarterly (other than for single-tenant properties) rent rolls for properties that have leases contributing more than 5% of the in-place base rent and annual financial statements, which annual financial statements with respect to each Mortgage Loan with more than one Mortgagor are in the form of an annual combined balance sheet of the Mortgagor entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combining balance sheet and statement of income for the Mortgaged Properties on a combined basis. |
(29) | Acts of Terrorism Exclusion. With respect to each Mortgage Loan over $20 million, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) do not specifically exclude Acts of Terrorism, as defined in the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007, and as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (collectively referred to as “TRIA”), from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy. With respect to each other Mortgage Loan, the related special all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) did not, as of the date of origination of the Mortgage Loan, and, to the Sponsor’s knowledge, do not, as of the Cut-off Date, specifically exclude Acts of Terrorism, as defined in TRIA, from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy. With respect to each Mortgage Loan, the related Loan Documents do not expressly waive or prohibit the Mortgagee from requiring coverage for Acts of Terrorism, as defined in TRIA, or damages related thereto;provided,however, that if TRIA or a similar or subsequent statute is not in effect, then,providedthat terrorism insurance is commercially available, the Mortgagor under each Mortgage Loan is required to carry terrorism insurance, but in such event the Mortgagor shall not be required to spend more than the Terrorism Cap Amount on terrorism insurance coverage, and if the cost of terrorism insurance exceeds |
E-1-8 |
the Terrorism Cap Amount, the Mortgagor is required to purchase the maximum amount of terrorism insurance available with funds equal to the Terrorism Cap Amount. The “Terrorism Cap Amount” is the specified percentage (which is at least equal to 200%) of the amount of the insurance premium that is payable at such time in respect of the property and business interruption/rental loss insurance required under the related Loan Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance).
(30) | Due on Sale or Encumbrance. Subject to specific exceptions set forth below, each Mortgage Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Mortgage Loan if, without the consent of the holder of the Mortgage (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Loan Documents (which provide for transfers without the consent of the Mortgagee which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property, including, without limitation, transfers of worn-out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers by leases entered into in accordance with the Loan Documents), (a) the related Mortgaged Property, or any equity interest of greater than 50% in the related Mortgagor, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers or transfers upon death or legal incapacity, (ii) transfers to certain affiliates as defined in the related Loan Documents, (iii) transfers of less than, or other than, a controlling interest in the related Mortgagor, (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific Person designated in the related Loan Documents or a Person satisfying specific criteria identified in the related Loan Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies or (vi) a substitution or release of collateral within the parameters of paragraphs (27) and (32) of this Annex E-1 or the exceptions thereto set forth on Annex E-2, or (vii) as set forth on an exhibit to the applicable Mortgage Loan Purchase Agreement by reason of any mezzanine debt that existed at the origination of the related Mortgage Loan, or future permitted mezzanine debt as set forth on an exhibit to the applicable Mortgage Loan Purchase Agreement or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any Companion Loan of any Mortgage Loan or any subordinate debt that existed at origination and is permitted under the related Loan Documents, (ii) purchase money security interests (iii) any Mortgage Loan that is cross-collateralized and cross-defaulted with another Mortgage Loan, as set forth on an exhibit to the applicable Mortgage Loan Purchase Agreement or (iv) Permitted Encumbrances. The Mortgage or other Loan Documents provide that to the extent any Rating Agency fees are incurred in connection with the review of and consent to any transfer or encumbrance, the Mortgagor is responsible for such payment along with all other reasonable out-of-pocket fees and expenses incurred by the Mortgagee relative to such transfer or encumbrance. |
(31) | Single-Purpose Entity. Each Mortgage Loan requires the Mortgagor to be a Single-Purpose Entity for at least as long as the Mortgage Loan is outstanding. Both the Loan Documents and the organizational documents of the Mortgagor with respect to each Mortgage Loan with a Cut-off Date Balance in excess of $5 million provide that the Mortgagor is a Single-Purpose Entity, and each Mortgage Loan with a Cut-off Date Balance of $20 million or more has a counsel’s opinion regarding non-consolidation of the Mortgagor. For this purpose, a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents (or if the Mortgage Loan has a Cut-off Date Balance equal to $5 million or less, its organizational documents or the related Loan Documents) provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more of the Mortgaged Properties securing the Mortgage Loans and prohibit it from engaging in any business unrelated to such Mortgaged Property or Properties, and whose organizational documents further provide, or which entity represented in the related Loan Documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Mortgaged Property or Properties, or any indebtedness other than as permitted by the related Mortgage(s) or the other related Loan Documents, that it has its own books and records and accounts separate and apart from those of any other person (other than a Mortgagor for a Mortgage Loan that is cross-collateralized and cross-defaulted with the related Mortgage Loan), and that it holds itself out as a legal entity, separate and apart from any other person or entity. |
E-1-9 |
(32) | Defeasance. With respect to any Mortgage Loan that, pursuant to the Loan Documents, can be defeased (a “Defeasance”), (i) the Loan Documents provide for defeasance as a unilateral right of the Mortgagor, subject to satisfaction of conditions specified in the Loan Documents; (ii) the Mortgage Loan cannot be defeased within two years after the Closing Date; (iii) the Mortgagor is permitted to pledge only United States “government securities” within the meaning of Treasury Regulations Section 1.860G-2(a)(8)(ii), the revenues from which will, in the case of a full Defeasance, be sufficient to make all scheduled payments under the Mortgage Loan when due, including the entire remaining principal balance on the maturity date (or on or after the first date on which payment may be made without payment of a yield maintenance charge or prepayment penalty) or, if the Mortgage Loan is an ARD Loan, the entire principal balance outstanding on the related Anticipated Repayment Date (or on or after the first date on which payment may be made without payment of a yield maintenance charge or prepayment penalty), and if the Mortgage Loan permits partial releases of real property in connection with partial defeasance, the revenues from the collateral will be sufficient to pay all such scheduled payments calculated on a principal amount equal to a specified percentage at least equal to the lesser of (A) 110% of the allocated loan amount for the real property to be released and (B) the outstanding principal balance of the Mortgage Loan; (iv) the Mortgagor is required to provide a certification from an independent certified public accountant that the collateral is sufficient to make all scheduled payments under the Mortgage Note as set forth in (iii) above; (v) if the Mortgagor would continue to own assets in addition to the defeasance collateral, the portion of the Mortgage Loan secured by defeasance collateral is required to be assumed (or the Mortgagee may require such assumption) by a Single-Purpose Entity; (vi) the Mortgagor is required to provide an opinion of counsel that the Mortgagee has a perfected security interest in such collateral prior to any other claim or interest; and (vii) the Mortgagor is required to pay all rating agency fees associated with defeasance (if rating confirmation is a specific condition precedent thereto) and all other reasonable out-of-pocket expenses associated with defeasance, including, but not limited to, accountant’s fees and opinions of counsel. |
(33) | Fixed Interest Rates. Each Mortgage Loan bears interest at a rate that remains fixed throughout the remaining term of such Mortgage Loan, except in the case of ARD Loans and in situations where default interest is imposed. |
(34) | Ground Leases. For purposes of this Annex E-1, a “Ground Lease” shall mean a lease creating a leasehold estate in real property where the fee owner as the ground lessor conveys for a term or terms of years its entire interest in the land and buildings and other improvements, if any, comprising the premises demised under such lease to the ground lessee (who may, in certain circumstances, own the building and improvements on the land), subject to the reversionary interest of the ground lessor as fee owner and does not include industrial development agency (IDA) or similar leases for purposes of conferring a tax abatement or other benefit. |
With respect to any Mortgage Loan where the Mortgage Loan is secured by a leasehold estate under a Ground Lease in whole or in part, and the related Mortgage does not also encumber the related lessor’s fee interest in such Mortgaged Property, based upon the terms of the Ground Lease and any estoppel or other agreement received from the ground lessor in favor of the Sponsor, its successors and assigns, the Sponsor represents and warrants that: |
(a) | The Ground Lease or a memorandum regarding such Ground Lease has been duly recorded or submitted for recordation in a form that is acceptable for recording in the applicable jurisdiction. The Ground Lease or an estoppel or other agreement received from the ground lessor permits the interest of the lessee to be encumbered by the related Mortgage and does not restrict the use of the related Mortgaged Property by such lessee, its successors or assigns in a manner that would materially adversely affect the security provided by the related Mortgage. No material change in the terms of the Ground Lease had occurred since the origination of the Mortgage Loan, except as reflected in any written instruments which are included in the related Mortgage File; |
(b) | The lessor under such Ground Lease has agreed in a writing included in the related Mortgage File (or in such Ground Lease) that the Ground Lease may not be amended or modified, or canceled or terminated by agreement of lessor and lessee, without the prior written consent of the Mortgagee; |
E-1-10 |
(c) | The Ground Lease has an original term (or an original term plus one or more optional renewal terms, which, under all circumstances, may be exercised, and will be enforceable, by either Mortgagor or the Mortgagee) that extends not less than 20 years beyond the stated maturity of the related Mortgage Loan, or ten years past the stated maturity if such Mortgage Loan fully amortizes by the stated maturity (or with respect to a Mortgage Loan that accrues on an Actual/360 Basis, substantially amortizes); |
(d) | The Ground Lease either (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, except for the related fee interest of the ground lessor and the Permitted Encumbrances, or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Mortgaged Property is subject; |
(e) | The Ground Lease does not place commercially unreasonable restrictions on the identity of the Mortgagee and the Ground Lease is assignable to the holder of the Mortgage Loan and its successors and assigns without the consent of the lessor thereunder (provided that proper notice is delivered to the extent required in accordance with the Ground Lease), and in the event it is so assigned, it is further assignable by the holder of the Mortgage Loan and its successors and assigns without the consent of (but with prior notice to) the lessor; |
(f) | The Sponsor has not received any written notice of material default under or notice of termination of such Ground Lease. To the Sponsor’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to the Sponsor’s knowledge, such Ground Lease is in full force and effect as of the Closing Date; |
(g) | The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give to the Mortgagee written notice of any default, and provides that no notice of default or termination is effective against the Mortgagee unless such notice is given to the Mortgagee; |
(h) | The Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease through legal proceedings) to cure any default under the Ground Lease which is curable after the Mortgagee’s receipt of notice of any default before the lessor may terminate the Ground Lease; |
(i) | The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial mortgage lender; |
(j) | Under the terms of the Ground Lease, an estoppel or other agreement received from the ground lessor and the related Mortgage (taken together), any related insurance proceeds or the portion of the condemnation award allocable to the ground lessee’s interest (other than (i) de minimis amounts for minor casualties or (ii) in respect of a total or substantially total loss or taking as addressed in subpart (k)) will be applied either to the repair or to restoration of all or part of the related Mortgaged Property with (so long as such proceeds are in excess of the threshold amount specified in the related Loan Documents) the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest; |
(k) | In the case of a total or substantially total taking or loss, under the terms of the Ground Lease, an estoppel or other agreement and the related Mortgage (taken together), any related insurance proceeds, or portion of the condemnation award allocable to the ground lessee’s interest in respect of a total or substantially total loss or taking of the related Mortgaged Property to the extent not applied to restoration, will be applied first to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest; and |
(l) | Provided that the Mortgagee cures any defaults which are susceptible to being cured, the ground lessor has agreed to enter into a new lease with the Mortgagee upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding. |
E-1-11 |
(35) | Servicing. The servicing and collection practices used by the Sponsor with respect to the Mortgage Loan have been, in all respects, legal and have met customary industry standards for servicing of commercial loans for conduit loan programs. |
(36) | Origination and Underwriting. The origination practices of the Sponsor (or the related originator if the Sponsor was not the originator) with respect to each Mortgage Loan have been, in all material respects, legal and as of the date of its origination, such Mortgage Loan (or the related Loan Combination, as applicable) and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the origination of such Mortgage Loan;provided that such representation and warranty does not address or otherwise cover any matters with respect to federal, state or local law otherwise covered in this Annex E-1. |
(37) | No Material Default; Payment Record. No Mortgage Loan has been more than 30 days delinquent, without giving effect to any grace or cure period, in making required debt service payments since origination and, as of the Cut-off Date, no Mortgage Loan is more than 30 days delinquent (beyond any applicable grace or cure period) in making required payments as of the Closing Date. To the Sponsor’s knowledge, there is (a) no material default, breach, violation or event of acceleration existing under the related Mortgage Loan, or (b) no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, which default, breach, violation or event of acceleration, in the case of either (a) or (b), materially and adversely affects the value of the Mortgage Loan or the value, use or operation of the related Mortgaged Property,provided,however, that this representation and warranty does not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by the Sponsor in this Annex E-1 (including, but not limited to, the prior sentence). No person other than the holder of such Mortgage Loan may declare any event of default under the Mortgage Loan or accelerate any indebtedness under the Mortgage Loan documents. |
(38) | Bankruptcy. As of the date of origination of the related Mortgage Loan and to the Sponsor’s knowledge as of the Cut-off Date, neither the Mortgaged Property (other than any tenants of such Mortgaged Property), nor any portion thereof, is the subject of, and no Mortgagor, guarantor or tenant occupying a single-tenant property is a debtor in a state or federal bankruptcy, insolvency or similar proceeding. |
(39) | Organization of Mortgagor. With respect to each Mortgage Loan, in reliance on certified copies of the organizational documents of the Mortgagor delivered by the Mortgagor in connection with the origination of such Mortgage Loan (or related Loan Combination, as applicable), the Mortgagor is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico. Except with respect to any Mortgage Loan that is cross-collateralized and cross-defaulted with another Mortgage Loan, no Mortgage Loan has a Mortgagor that is an affiliate of another Mortgagor under another Mortgage Loan. |
(40) | Environmental Conditions. A Phase I environmental site assessment (or update of a previous Phase I and or Phase II site assessment) and, with respect to certain Mortgage Loans, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements were conducted by a reputable environmental consultant in connection with such Mortgage Loan within 12 months prior to its origination date (or an update of a previous ESA was prepared), and such ESA (i) did not identify the existence of recognized environmental conditions (as such term is defined in ASTM E1527-05 or its successor, an “Environmental Condition”) at the related Mortgaged Property or the need for further investigation, or (ii) if the existence of an Environmental Condition or need for further investigation was indicated in any such ESA, then at least one of the following statements is true: (A) an amount reasonably estimated by a reputable environmental consultant to be sufficient to cover the estimated cost to cure any material noncompliance with applicable Environmental Laws or the Environmental Condition has been escrowed by the related Mortgagor and is held or controlled by the related Mortgagee; (B) if the only Environmental Condition relates to the presence of asbestos-containing materials, radon in indoor air, lead based paint or lead in drinking water, the only recommended action in the ESA is the institution of such a plan, an operations or maintenance plan has been required to be instituted by the related Mortgagor that, based on the ESA, can reasonably be expected to mitigate the identified risk; (C) the Environmental Condition identified in the related environmental report was remediated or abated in all material respects prior to the |
E-1-12 |
date hereof, and, if and as appropriate, a no further action or closure letter was obtained from the applicable governmental regulatory authority (or the environmental issue affecting the related Mortgaged Property was otherwise listed by such governmental authority as “closed” or a reputable environmental consultant has concluded that no further action is required); (D) an environmental policy or a lender’s pollution legal liability insurance policy meeting the requirements set forth below that covers liability for the identified circumstance or condition was obtained from an insurer rated no less than A- (or the equivalent) by Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and/or Fitch Ratings, Inc.; (E) a party not related to the Mortgagor was identified as the responsible party for such condition or circumstance and such responsible party has financial resources reasonably estimated to be adequate to address the situation; or (F) a party related to the Mortgagor having financial resources reasonably estimated to be adequate to address the situation is required to take action. To the Sponsor’s knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property.
(41) | Appraisal. The Mortgage File contains an appraisal of the related Mortgaged Property with an appraisal date within six months of the Mortgage Loan origination date, and within 12 months of the Closing Date. The appraisal is signed by an appraiser who is a Member of the Appraisal Institute (“MAI”) and, to the Sponsor’s knowledge, had no interest, direct or indirect, in the Mortgaged Property or the Mortgagor or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan. Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation. Each appraisal contains a statement, or is accompanied by a letter from the appraiser, to the effect that the appraisal was performed in accordance with the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as in effect on the date such Mortgage Loan was originated. |
(42) | Mortgage Loan Schedule. The information pertaining to each Mortgage Loan which is set forth in the loan schedule attached as an exhibit to the related Mortgage Loan Purchase Agreement is true and correct in all material respects as of the Cut-off Date and contains all information required by the Pooling and Servicing Agreement to be contained therein. |
(43) | Cross-Collateralization. Except with respect to a Mortgage Loan that is part of a Loan Combination, no Mortgage Loan is cross-collateralized or cross-defaulted with any other Mortgage Loan that is outside the Mortgage Pool, except as set forth on Annex E-2. |
(44) | Advance of Funds by the Sponsor. After origination, no advance of funds has been made by the Sponsor to the related Mortgagor other than in accordance with the Loan Documents, and, to the Sponsor’s knowledge, no funds have been received from any person other than the related Mortgagor or an affiliate for, or on account of, payments due on the Mortgage Loan (other than as contemplated by the Loan Documents, such as, by way of example and not in limitation of the foregoing, amounts paid by the tenant(s) into a Mortgagee-controlled lockbox if required or contemplated under the related lease or Loan Documents). Neither the Sponsor nor any affiliate thereof has any obligation to make any capital contribution to any Mortgagor under a Mortgage Loan, other than contributions made on or prior to the date hereof. |
(45) | Compliance with Anti-Money Laundering Laws. The Sponsor has complied in all material respects with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 with respect to the origination of the Mortgage Loan. |
For purposes of these representations and warranties, “Mortgagee” means the mortgagee, grantee or beneficiary under any Mortgage, any holder of legal title to any portion of any Mortgage Loan or, if applicable, any agent or servicer on behalf of such party.
For purposes of these representations and warranties, the phrases “the Sponsor’s knowledge” or “the Sponsor’s belief” and other words and phrases of like import mean, except where otherwise expressly set forth in these representations and warranties, the actual state of knowledge or belief of the Sponsor, its officers and employees directly responsible for the underwriting, origination, servicing or sale of the Mortgage Loans regarding the matters expressly set forth in these representations and warranties.
E-1-13 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX E-2
EXCEPTIONS TO SPONSOR REPRESENTATIONS AND WARRANTIES
The exceptions to the representations and warranties set forth below are grouped by Sponsor and listed by the number of the related representation and warranty set forth on Annex E-1 to this prospectus and the Mortgaged Property name and number identified on Annex A to this prospectus. Capitalized terms used but not otherwise defined in this Annex E-2 will have the meanings set forth in this prospectus or, if not defined in this prospectus, in the related Mortgage Loan Purchase Agreement.
Citigroup Global Markets Realty Corp.
Representation Number | Mortgaged Property | Description of Exception | ||
(6) Permitted Liens; Title Insurance | Sheraton Denver Downtown Fee (Loan No. 1)
| The sole tenant under the ground lease at the Mortgaged Property has the option to purchase the Mortgaged Property in the event of a casualty affecting more than 25% of the Mortgaged Property or the tenant’s determination that a condemnation has affected substantially all of the Mortgaged Property. | ||
(6) Permitted Liens; Title Insurance | Franklin Center (Loan No. 24)
| The tenant Children’s Hospital of Michigan has a right of first refusal to purchase the tenant’s building. The right does not apply in the event that the related lender takes title to the Mortgaged Property by means of foreclosure or a deed-in-lieu of foreclosure, or to the subsequent first sale by the lender thereafter. | ||
(16) Insurance | Sheraton Denver Downtown Fee (Loan No. 1)
| The restoration threshold is $9,000,000. | ||
(16) Insurance | 79 Madison Avenue (Loan No. 3)
| The casualty threshold is $4,250,000. | ||
(17) Access; Utilities; Separate Tax Lots | Hilton Garden Inn – Saint Charles (Loan No. 25)
| The Mortgaged Property is part of a tax lot that includes real property that is not part of the collateral for the Mortgage Loan. The Mortgage Loan Documents require the Mortgagor to reserve for and pay all taxes for any tax lot for which the Mortgaged Property is a part and to use commercially reasonable efforts to cause the Mortgaged Property to be assessed as a separate tax lot. | ||
(26) Recourse Obligations | Franklin Center (Loan No. 24)
| Transfers of the Mortgaged Property or any indirect or direct equity interest in the Mortgagor except in accordance with the Mortgage Loan Documents, in the case of transfers other than the voluntary sale or pledge of a direct interest in the Mortgaged Property, only become full recourse to the Mortgagor and related guarantors in the event the Mortgagor fails to correct such violation within 30 days notice from the related lender. | ||
E-2-1 |
Rialto Mortgage Finance, LLC
Representation Number | Mortgaged Property | Description of Exception | ||
(6) Permitted Liens; Title Insurance | Walgreens West Bend (Loan No. 37)
| The sole tenant, Walgreen Co., has a right of first refusal to purchase the entire Mortgaged Property if the Mortgagor elects to sell the Mortgaged Property to a bona fide third party. Such right of first refusal has been subordinated to the Mortgage Loan, and will not apply to a successor mortgagor through a foreclosure, deed-in-lieu of foreclosure or any other enforcement action under the Mortgage; provided, however, such right of first refusal will apply to subsequent purchasers of the leased premises. | ||
(10) Condition of Property | Hilton Orrington Evanston (Loan No. 4) | At Mortgage Loan origination, the Mortgagor escrowed $3,750,000 with Mortgagee in connection with the renovation of the parking garage on the Mortgaged Property. On the monthly payment dates in February 2016, March 2016, April 2016 and May 2016, provided no event of default is continuing under the Mortgage Loan, the Mortgagee is required to disburse $1,000,000, $1,000,000, $1,000,000 and $750,000, respectively, into a Mortgagor account (the “Renovation Account”). Upon deposit into the Renovation Account, the Mortgagor has the right to use funds in such account in connection with the garage renovation. The Mortgagor has granted the Mortgagee a security interest in the Renovation Account, and upon the occurrence of an event of default under the Mortgage Loan, the Mortgagor shall no longer have access to the Renovation Account and any remaining funds on deposit in that account will be transferred to the Mortgagee. Upon completion of the scheduled renovation, provided no event of default is continuing under the Mortgage Loan, the Mortgagor may transfer any funds remaining on deposit in the Renovation Account to the Mortgagor. | ||
(13) Actions Concerning Mortgage Loan | Oak Lawn Apartments (Loan No. 38) | Joseph Junkovic, (a 50% owner of the Mortgagor and the guarantor), is currently subject to a collections matter that may lead to litigation. A real estate broker, DB Matterhorn Group (DB Matterhorn), currently asserts an entitlement of $382,300 against Mr. Junkovic. Mr. Junkovic attempted a financing through DB Matterhorn in 2013, and was unsuccessful. In May 2015, DB Matterhorn introduced Mr. Junkovic to Cressida Capital, a mortgage broker. Cressida Capital closed a loan with Mr. Junkovic and collected a 1.0% success fee at closing. After closing, DB Matterhorn asserted that they were owned a 3.0% fee as a result of the financing. Mr. Junkovic denies that an agreement was ever made with DB Matterhorn. | ||
(16) Insurance | Walgreens West Bend (Loan No. 37)
| Under the Mortgage Loan documents, the sole tenant, Walgreen Co., is permitted to provide any insurance required to be maintained by the Mortgagor. The sole tenant is also permitted to self-insure, provided, among other things, the tenant maintains a “BBB” rating by S&P (or an equivalent rating by another rating agency) and the sole tenant satisfies the net worth requirements under its lease (which is $250 million). | ||
(24) Local Law Compliance | Storage R Us – Aiken (Loan No. 32.01)
| The Mortgaged Property is a pre-existing legally nonconforming use, as self-storage facilities are not a permitted use under current zoning laws. In the event of a casualty to the Mortgaged Property that impacts more 50% of the replacement valuation of a building or structure, or if the nonconforming use has ceased for more than twelve (12) months, the building or structure may only be rebuilt in compliance with the then-current zoning code. The Mortgage Loan is recourse to the Mortgagor and the guarantor for losses related to the inability to restore the Mortgaged Property to its current use. | ||
(24) Local Law Compliance | American Self Storage (Loan No. 43) | The Mortgaged Property contains 50 modular storage containers which are permitted on the Mortgaged Property pursuant to current zoning laws provided (i) they are not stacked vertically, (ii) they are not used for any purpose other than storage, and (iii) the Mortgagor obtains approval of the applicable zoning authorities. The Mortgagor has covenanted to either (i) use commercially reasonable efforts to obtain approval of the applicable zoning authorities, or (ii) convert the modular storage containers to permanent structures and obtain any applicable zoning approvals. The Mortgage Loan is full recourse to the Mortgagor and guarantor until either (i) the modular storage containers on the Mortgaged Property have been |
E-2-2 |
Representation Number | Mortgaged Property | Description of Exception | ||
approved by all applicable zoning authorities, (ii) the modular storage containers on the Mortgaged Property have been converted to permanent structures, which have been approved by the applicable zoning authorities, to the extent necessary or (iii) the modular storage containers have been removed from the Mortgaged Property. The Mortgage Loan is also recourse to the Mortgagor and the guarantor for any losses related to the inability to bring the modular storage containers into compliance with the applicable zoning requirements. | ||||
(25) Licenses and Permits | American Self Storage (Loan No. 43) | See exception to representation 24 above. | ||
(31) Single Purpose Entity | Hampshire Tower Apartments (Loan No. 10) | A non-consolidation opinion was not obtained at origination of the Mortgage Loan. | ||
(38) Bankruptcy | Oak Lawn Apartments (Loan No. 38) | Joseph Junkovic (a 50% owner of the Mortgagor and the guarantor) filed Chapter 11 bankruptcy December 20, 2010. The bankruptcy court approved a bankruptcy plan on October 17, 2012 and the guarantor is current on all payments due under the bankruptcy plan. |
E-2-3 |
The Bank of New York Mellon
Representation Number | Mortgaged Property | Description of Exception | ||
(10) Condition of Property | 600 Broadway (Loan No. 8)
| The largest tenant by net rentable area operates on the ground and second floors; however, the store is currently closed due to water damage caused by a ruptured water pipe and coil malfunction that occurred in February, 2016. All water-impacted surfaces have been demolished and the tenant is in the process of interviewing general contractors to complete required work, which is the tenant’s responsibility. The repair work is estimated to cost in excess of $1.0 million. |
E-2-4 |
KGS-Alpha Real Estate Capital Markets, LLC
Representation Number | Mortgaged Property | Description of Exception | ||
(6) Permitted Liens; Title Insurance | Walgreens Sarasota (Loan No. 40) | The sole tenant holds a right of first refusal to purchase the Mortgaged Property (or a portion thereof) in the event the Mortgagor receives a bona fide offer to purchase the Mortgaged Property (or a portion thereof). The sole tenant has agreed that such right of right refusal will not apply to a foreclosure, deed-in-lieu of foreclosure or other enforcement action under the Mortgage but will apply to subsequent purchases of the Mortgaged Property. | ||
(16) Insurance | Walgreens Sarasota (Loan No. 40) | The Mortgagor is not required to carry insurance if, among other things, (i) the sole tenant (Walgreens) maintains through a program of self-insurance or otherwise the insurance required to be maintained under its lease, (ii) the tenant and/or guarantor under such lease maintains a credit rating from S&P of at least “BBB”, (iii) such lease remains in full force and effect following a casualty and requires the tenant to rebuild and/or repair the Mortgaged Property at its sole cost and expense with no entitlement to rent abatement and (iv) no default beyond any applicable notice and cure period has occurred and is continuing under such lease. | ||
(16) Insurance | Suncoast MHC (Loan No. 53) | The Mortgagor is permitted to obtain insurance from First Community Insurance Company (rated “B+ VII” with A.M. Best) for as long as its rating is not withdrawn or downgraded. | ||
(17) Access; Utilities; Separate Tax Lots | Parkside Apartments (Loan No. 45) | The Mortgaged Property is located on a tax parcel that includes property that is not part of the Mortgaged Property and is assessed together with the Mortgaged Property. The Mortgage Loan documents require the Mortgagor to apply for the creation of separate tax lots and, until such time as separate tax lots are created, to pay taxes for the existing tax parcel. | ||
(24) Local Law Compliance | Lemoore Plaza (Loan No. 39) | The use of a portion of the Mortgaged Property as a cash checking store is legal nonconforming and requires a conditional use permit. The related zoning ordinance provides that a nonconforming use (i) may not be resumed if the related structure is damaged, destroyed or razed (whether voluntarily or as required by law) to the extent of at least 75% (to be determined based on the ratio of the estimated cost of restoration to the condition prior to damage to the estimated cost of duplicating the entire structure) and (ii) may be resumed if less than 75% of the structure is damaged or destroyed and restoration commences within one year and is diligently pursued to completion. The related zoning ordinance also prohibits a nonconforming use from being re-established after it has been abandoned or discontinued for a continuous period of 12 months. | ||
(24) Local Law Compliance | Maplewood MHC (Loan No. 47) | The Mortgaged Property’s use as a mobile home community is legal nonconforming. The related zoning ordinance provides that if such use is damaged to an extent of (i) no greater than 60% of the related principal structure’s value, such use and structure may be re-established to the same size and intensity of use as was previously existing immediately prior to the related damage or destruction, but such re-establishment requires the issuance of a zoning certificate, or (ii) greater than 60% of the related principal structure’s value, such use and structure may be reestablished only with approval by the related board of zoning appeals. The Mortgage Loan documents provide for full recourse to the Mortgagor and the guarantor in the event the Mortgaged Property is no longer permitted to be operated as a mobile home community, unless the Mortgagor submits to the Mortgagee a letter from the related zoning authority that provides that (a) the Mortgagor is permitted to continue operating a mobile home community regardless of the Mortgaged Property’s existing zoning designation and (b) such zoning authority will not require the Mortgagor to re-apply for a special use permit to continue the Mortgaged Property’s use as mobile home community in the event of damage by a casualty. |
E-2-5 |
Representation Number | Mortgaged Property | Description of Exception | ||
(24) Local Law Compliance | Glen Cove Apartments (Loan No. 49) | The Mortgaged Property’s use as a multifamily dwelling is legal nonconforming. The related zoning ordinance provides that if a structure containing a nonconforming use is damaged or destroyed by more than 60% of the structure’s assessed valuation at the time of damage, the structure’s use must thereafter comply with existing zoning requirements. In addition, the zoning ordinance prohibits a nonconforming use from being resumed after it has been abandoned. The Mortgage Loan documents provide for recourse to the Mortgagor and the guarantor for losses arising from the Mortgagor’s failure to continuously maintain and preserve the Mortgaged Property’s use as a residential apartment complex and ancillary uses. | ||
(24) Local Law Compliance | Elkhart MHC (Loan No. 51) | The Mortgaged Property’s use as a mobile home community is legal nonconforming and requires a special use permit. The related zoning ordinance provides that (i) if a legal nonconforming use is discontinued or abandoned for 12 consecutive months, use of the related land and structure must thereafter conform to existing zoning regulations and (ii) removal or destruction of 66% or more of the gross floor area of the structure and land to which a legal nonconforming use status applies will eliminate such legal nonconforming use status unless the structure is reconstructed within 12 months of the related casualty with no greater cubic content than before the casualty and no greater square footage than that of the original building footprint. | ||
(24) Local Law Compliance | Buford Self Storage (Loan No. 54) | The Mortgaged Property’s use as a self-storage facility is legal nonconforming and requires a special use permit. The related zoning ordinance provides that a legal nonconforming use may not be re-established after discontinuance for 12 months. | ||
(25) Licenses and Permits | Lemoore Plaza (Loan No. 39) | The use of a portion of the Mortgaged Property as a cash checking store is legal nonconforming and requires a conditional use permit. The related zoning ordinance provides that a nonconforming use (i) may not be resumed if the related structure is damaged, destroyed or razed (whether voluntarily or as required by law) to the extent of at least 75% (to be determined based on the ratio of the estimated cost of restoration to the condition prior to damage to the estimated cost of duplicating the entire structure) and (ii) may be resumed if less than 75% of the structure is damaged or destroyed and restoration commences within one year and is diligently pursued to completion. The related zoning ordinance also prohibits a nonconforming use from being re-established after it has been abandoned or discontinued for a continuous period of 12 months. | ||
(25) Licenses and Permits | Elkhart MHC (Loan No. 51) | The Mortgaged Property’s use as a mobile home community is legal nonconforming and requires a special use permit. The related zoning ordinance provides that (i) if a legal nonconforming use is discontinued or abandoned for 12 consecutive months, use of the related land and structure must thereafter conform to existing zoning regulations and (ii) removal or destruction of 66% or more of the gross floor area of the structure and land to which a legal nonconforming use status applies will eliminate such legal nonconforming use status unless the structure is reconstructed within 12 months of the related casualty with no greater cubic content than before the casualty and no greater square footage than that of the original building footprint. | ||
(25) Licenses and Permits | Buford Self Storage (Loan No. 54) | The Mortgaged Property’s use as a self-storage facility is legal nonconforming and requires a special use permit. The related zoning ordinance provides that a legal nonconforming use may not be re-established after discontinuance for 12 months. | ||
(39) Organization of Mortgagor | Northwood Oaks (Loan No. 26)
Providence Plaza (Loan No. 36) | The Mortgagors are affiliated with each other. |
E-2-6 |
Representation Number | Mortgaged Property | Description of Exception | ||
(39) Organization of Mortgagor | Ohio Retail Portfolio (Loan No. 35)
Walgreens Sarasota (Loan No. 40)
Sherwin Williams Portfolio (Loan No. 44)
27810 Chagrin Boulevard (Loan No. 50) | The Mortgagors are affiliated with each other. | ||
(39) Organization of Mortgagor | Parkside Apartments (Loan No. 45)
Glen Cove Apartments (Loan No. 49) | The Mortgagors are affiliated with each other. | ||
(39) Organization of Mortgagor | Midway Self Storage (Loan No. 46)
Acworth Self Storage (Loan No. 48)
Buford Self Storage (Loan No. 54) | The Mortgagors are affiliated with each other. | ||
(39) Organization of Mortgagor | Maplewood MHC (Loan No. 47)
Elkhart MHC (Loan No. 51)
Suncoast MHC (Loan No. 53) | The Mortgagors are affiliated with each other. | ||
(40) Environmental Conditions | Northwood Oaks (Loan No. 26) | The ESA reported that a 1997 subsurface investigation identified volatile organic compounds in soil samples in connection with prior on-site dry cleaning operations of a tenant that has since transitioned from on-site dry cleaning activities to operating a drop-off location. The related site was approved for the Florida Department of Environmental Protection’s (the “FDEP”) Drycleaning Solvent Cleanup Program (“DSCP”) in May 1997 and is reportedly awaiting assignment by the FDEP for investigation and possible remediation, which will require payment of a $1,000 deductible by the responsible party (which the FDEP has identified as the dry cleaning tenant) with the remainder of any clean-up costs to be the FDEP’s responsibility. The environmental consultant noted that a potential vapor encroachment condition may exist for on-site occupants, but recommended no further investigation based on the extent of the soil contamination, the reduction of contaminant concentrations over the last 18 years, the presence of a poured concrete floor immediately above the impacted soil, use of HVAC and the limited occupancy of the related space. The Mortgage Loan documents provide for recourse to the Mortgagor and the guarantor (i) for losses arising from the Mortgagor’s failure to pay any applicable annual registration fees, deductibles or other fees, costs or expenses required by the FDEP or required to remain eligible for the FDEP’s DSCP and (ii) in the full amount of the Mortgage Loan if the Mortgagor fails to cooperate with the FDEP or to comply with any requirements of the FDEP’s DSCP with respect to such Environmental Condition, but only to the extent such non-cooperation or noncompliance results in the Mortgagor’s being removed from the FDEP’s DSCP. | ||
(40) Environmental Conditions | Providence Plaza (Loan No. 36) | The ESA noted the presence of groundwater contamination at levels exceeding the FDEP’s groundwater cleanup target levels, which constitutes an Environmental Concern. The ESA reported that dry cleaning solvent concentrations were identified in soil and groundwater at concentrations above the FDEP’s cleanup target levels during cleanup assessment and remediation activities conducted between 1999 and 2001 under the FDEP’s regulatory oversight after a dry cleaning tenant had reported a release of chlorinated solvents in 1997. Remediation activities were conducted in 2005 and 2006, and confirmatory soil sampling indicated that soil cleanup objectives had been achieved. As such, the |
E-2-7 |
Representation Number | Mortgaged Property | Description of Exception | ||
environmental consultant reported that soil contamination and/or soil vapor intrusion concerns appear to have been addressed and are not expected to represent a significant environmental concern. However, to address groundwater contamination, remediation activities were implemented in March 2008, and a July 2014 post-active remediation monitoring report indicated the presence of groundwater contamination at levels exceeding the FDEP’s groundwater cleanup target levels. According to the environmental consultant, the dry cleaning site is considered part of the Dry Cleaning State Funded Program with the FDEP and that, as such, the state has accepted responsibility and all associated costs for cleanup. The environmental consultant noted that post-action remedial monitoring is expected to continue for approximately 3 to 5 years until groundwater contamination is below groundwater cleanup target levels and a no further action status can be issued. The environmental consultant concluded that no further investigation appears to be warranted other than as part of the post-active remediation monitoring. The Mortgage Loan documents provide for full recourse to the Mortgagor and the guarantor if the Mortgagor fails to perform any post-active remediation monitoring which may be required by the FDEP or fails to pay any applicable annual registration fees, deductible or other fees, costs or expenses required by the FDEP or required to remain eligible with the FDEP’s drycleaning solvent cleanup program. |
E-2-8 |
Goldman Sachs Mortgage Company
Representation Number | Mortgaged Property | Description of Exception | ||
(14) Escrow Deposits | Austin Block 21 (Loan No. 5) | In some cases, certain reserve requirements related to the hotel portion of the Mortgaged Property are waived for so long as an equivalent reserve is being maintained by the hotel property manager. | ||
(16) Insurance | Austin Block 21 (Loan No. 5) | All policies may be issued by a syndicate of insurers through which at least 75% of the coverage (if there are 4 or fewer members of the syndicate) or at least 60% of the coverage (if there are 5 or more members of the syndicate) is with insurers having ratings of at least “A” by S&P and “A2” by Moody’s (or, if Moody’s does not rate such insurer, at least “A: VIII” by A.M. Best) (provided that the first layers of coverage are from insurers rated at least “A” by S&P and “A2” by Moody’s (or, if Moody’s does not rate such insurer, at least “A: VIII” by A.M. Best), and all such insurers are required to have ratings of not less than “BBB+” by S&P and “Baa1” by Moody’s (or, if Moody’s does not rate such insurer, at least “A: VIII” by A.M. Best). | ||
(31) Single-Purpose Entity | Austin Block 21 (Loan No. 5) | The Mortgagor previously owned interests in other entities which were involved in the operation of the Mortgaged Property. | ||
(39) Organization of Mortgagor | Holiday Inn Express & Suites Wisconsin
Holiday Inn Express & Suites Traverse City | The Mortgagors under each of the related Mortgage Loans are affiliates of each other. | ||
E-2-9 |
RAIT Funding, LLC
Representation Number | Mortgaged Property | Description of Exception | ||
(24) Local Law Compliance | Triangle Shopping Center (Loan No. 21) | The Mortgaged Property is legal non-conforming as to use due to (i) three tenants that each operate as a medical office, (ii) one tenant that operates as a financial advisor, and (iii) one tenant that operates as a religious chapel. The legal non-conforming uses may be maintained after a casualty so long as the necessary building permits are acquired within 2 years from the date of the casualty. The Mortgagor is obligated under the related Mortgage Loan documents to obtain the necessary building permits within 2 years from the date of any casualty to preserve such legal non-conformities, and the Lender is permitted to seek recourse against the Mortgagor and the related guarantors for any losses suffered as a result of Mortgagor’s failure to comply with such obligation. |
E-2-10 |
ANNEX F
CLASS A-AB SCHEDULED PRINCIPAL BALANCE SCHEDULE
Distribution | Balance | Distribution | Balance | |||
5/10/2016 | $42,462,000.00 | 2/10/2021 | $42,462,000.00 | |||
6/10/2016 | $42,462,000.00 | 3/10/2021 | $42,462,000.00 | |||
7/10/2016 | $42,462,000.00 | 4/10/2021 | $42,461,004.85 | |||
8/10/2016 | $42,462,000.00 | 5/10/2021 | $41,700,603.71 | |||
9/10/2016 | $42,462,000.00 | 6/10/2021 | $41,002,610.46 | |||
10/10/2016 | $42,462,000.00 | 7/10/2021 | $40,236,098.12 | |||
11/10/2016 | $42,462,000.00 | 8/10/2021 | $39,531,763.44 | |||
12/10/2016 | $42,462,000.00 | 9/10/2021 | $38,824,379.69 | |||
1/10/2017 | $42,462,000.00 | 10/10/2021 | $38,048,740.32 | |||
2/10/2017 | $42,462,000.00 | 11/10/2021 | $37,334,934.76 | |||
3/10/2017 | $42,462,000.00 | 12/10/2021 | $36,553,053.76 | |||
4/10/2017 | $42,462,000.00 | 1/10/2022 | $35,832,771.42 | |||
5/10/2017 | $42,462,000.00 | 2/10/2022 | $35,109,370.79 | |||
6/10/2017 | $42,462,000.00 | 3/10/2022 | $34,188,815.14 | |||
7/10/2017 | $42,462,000.00 | 4/10/2022 | $33,458,292.28 | |||
8/10/2017 | $42,462,000.00 | 5/10/2022 | $32,660,163.01 | |||
9/10/2017 | $42,462,000.00 | 6/10/2022 | $31,923,020.25 | |||
10/10/2017 | $42,462,000.00 | 7/10/2022 | $31,118,456.81 | |||
11/10/2017 | $42,462,000.00 | 8/10/2022 | $30,374,637.46 | |||
12/10/2017 | $42,462,000.00 | 9/10/2022 | $29,627,597.62 | |||
1/10/2018 | $42,462,000.00 | 10/10/2022 | $28,813,414.79 | |||
2/10/2018 | $42,462,000.00 | 11/10/2022 | $28,059,613.65 | |||
3/10/2018 | $42,462,000.00 | 12/10/2022 | $27,238,859.21 | |||
4/10/2018 | $42,462,000.00 | 1/10/2023 | $26,478,238.88 | |||
5/10/2018 | $42,462,000.00 | 2/10/2023 | $25,714,325.12 | |||
6/10/2018 | $42,462,000.00 | 3/10/2023 | $24,757,018.10 | |||
7/10/2018 | $42,462,000.00 | 4/10/2023 | $23,985,646.66 | |||
8/10/2018 | $42,462,000.00 | 5/10/2023 | $23,147,814.87 | |||
9/10/2018 | $42,462,000.00 | 6/10/2023 | $22,369,473.79 | |||
10/10/2018 | $42,462,000.00 | 7/10/2023 | $21,524,867.90 | |||
11/10/2018 | $42,462,000.00 | 8/10/2023 | $20,739,497.50 | |||
12/10/2018 | $42,462,000.00 | 9/10/2023 | $19,950,726.20 | |||
1/10/2019 | $42,462,000.00 | 10/10/2023 | $19,095,982.72 | |||
2/10/2019 | $42,462,000.00 | 11/10/2023 | $18,300,092.80 | |||
3/10/2019 | $42,462,000.00 | 12/10/2023 | $17,438,430.43 | |||
4/10/2019 | $42,462,000.00 | 1/10/2024 | $16,635,360.93 | |||
5/10/2019 | $42,462,000.00 | 2/10/2024 | $15,828,813.68 | |||
6/10/2019 | $42,462,000.00 | 3/10/2024 | $14,894,812.39 | |||
7/10/2019 | $42,462,000.00 | 4/10/2024 | $14,080,724.36 | |||
8/10/2019 | $42,462,000.00 | 5/10/2024 | $13,201,374.44 | |||
9/10/2019 | $42,462,000.00 | 6/10/2024 | $12,379,951.00 | |||
10/10/2019 | $42,462,000.00 | 7/10/2024 | $11,493,471.47 | |||
11/10/2019 | $42,462,000.00 | 8/10/2024 | $10,664,649.81 | |||
12/10/2019 | $42,462,000.00 | 9/10/2024 | $9,832,238.56 | |||
1/10/2020 | $42,462,000.00 | 10/10/2024 | $8,935,079.49 | |||
2/10/2020 | $42,462,000.00 | 11/10/2024 | $8,095,175.93 | |||
3/10/2020 | $42,462,000.00 | 12/10/2024 | $7,190,734.75 | |||
4/10/2020 | $42,462,000.00 | 1/10/2025 | $6,343,274.72 | |||
5/10/2020 | $42,462,000.00 | 2/10/2025 | $5,492,144.17 | |||
6/10/2020 | $42,462,000.00 | 3/10/2025 | $4,455,718.61 | |||
7/10/2020 | $42,462,000.00 | 4/10/2025 | $3,596,408.07 | |||
8/10/2020 | $42,462,000.00 | 5/10/2025 | $2,673,104.37 | |||
9/10/2020 | $42,462,000.00 | 6/10/2025 | $1,806,071.14 | |||
10/10/2020 | $42,462,000.00 | 7/10/2025 | $875,261.40 | |||
11/10/2020 | $42,462,000.00 | 8/10/2025 | $439.33 | |||
12/10/2020 | $42,462,000.00 | 9/10/2025 | $0.00 | |||
1/10/2021 | $42,462,000.00 | and thereafter |
F-1 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the Certificates offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
Prospectus
Certificate Summary | 3 |
Summary of Terms | 17 |
Risk Factors | 59 |
Description of the Mortgage Pool | 146 |
Transaction Parties | 226 |
Description of the Certificates | 300 |
The Mortgage Loan Purchase Agreements | 334 |
The Pooling and Servicing Agreement | 344 |
Use of Proceeds | 438 |
Yield, Prepayment and Maturity Considerations | 439 |
Material Federal Income Tax Consequences | 451 |
Certain State, Local and Other Tax Considerations | 464 |
ERISA Considerations | 464 |
Legal Investment | 472 |
Certain Legal Aspects of the Mortgage Loans | 473 |
Ratings | 494 |
Plan of Distribution (Underwriter Conflicts of Interest) | 497 |
Incorporation of Certain Information by Reference | 498 |
Where You Can Find More Information | 499 |
Financial Information | 499 |
Legal Matters | 499 |
Index of Certain Defined Terms | 500 |
Annex A – | Certain Characteristics of the Mortgage Loans | A-1 |
Annex B – | Significant Loan Summaries | B-1 |
Annex C – | Mortgage Pool Information | C-1 |
Annex D – | Form of Distribution Date Statement | D-1 |
Annex E-1 – | Sponsor Representations and Warranties | E-1-1 |
Annex E-2 – | Exceptions to Sponsor Representations and Warranties | E-2-1 |
Annex F – | Class A-AB Scheduled Principal Balance Schedule | F-1 |
Until 90 days after the date of this prospectus, all dealers that effect transactions in the offered Certificates, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
$593,122,000
(Approximate)
Citigroup Commercial
Mortgage Trust 2016-GC37
(as Issuing Entity)
Citigroup Commercial
Mortgage Securities Inc.
(as Depositor)
Commercial Mortgage
Pass-Through Certificates,
Series 2016-GC37
Class A-1 | $ | 21,993,000 |
Class A-2 | $ | 19,474,000 |
Class A-3 | $ | 175,000,000 |
Class A-4 | $ | 227,379,000 |
Class A-AB | $ | 42,462,000 |
Class X-A | $ | 526,255,000 |
Class X-B | $ | 33,868,000 |
Class A-S | $ | 39,947,000 |
Class B | $ | 33,868,000 |
Class EC | $ | 106,814,000 |
Class C | $ | 32,999,000 |
PROSPECTUS
Co-Lead Managers and Joint Bookrunners
Citigroup
Goldman, Sachs & Co.
Co-Manager
Academy Securities
April 13, 2016