| FILED PURSUANT TO RULE 424(h) | ||
| REGISTRATION FILE NO.: 333-206677-25 | ||
The information in this preliminary prospectus is not complete and may be changed. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
This preliminary prospectus, dated June 19, 2018, may be amended or completed prior to time of sale.
$571,479,000 (Approximate)
WELLS FARGO COMMERCIAL MORTGAGE TRUST 2018-C45
(Central Index Key Number 0001741690)
as Issuing Entity
Wells Fargo Commercial Mortgage Securities, Inc.
(Central Index Key Number 0000850779)
as Depositor
Wells Fargo Bank, National Association
(Central Index Key Number 0000740906)
Barclays Bank PLC
(Central Index Key Number 0000312070)
Rialto Mortgage Finance, LLC
(Central Index Key Number 0001592182)
C-III Commercial Mortgage LLC
(Central Index Key Number 0001541214)
as Sponsors and Mortgage Loan Sellers
Commercial Mortgage Pass-Through Certificates, Series 2018-C45
Wells Fargo Commercial Mortgage Securities, Inc. is offering certain classes of the Commercial Mortgage Pass-Through Certificates, Series 2018-C45 consisting of the certificate classes identified in the table below. The certificates being offered by this prospectus (and the non-offered Class X-D, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR, Class V and Class R certificates) represent the beneficial ownership interests in the issuing entity, which will be a New York common law trust named Wells Fargo Commercial Mortgage Trust 2018-C45. The assets of the issuing entity will primarily consist of a pool of fixed-rate commercial mortgage loans, which are generally the sole source of payments on the certificates. Credit enhancement will be provided solely by certain classes of subordinate certificates that will be subordinate to certain classes of senior certificates as described under “Description of the Certificates—Subordination; Allocation of Realized Losses”. Each class of certificates will be entitled to receive monthly distributions of interest and/or principal on the 4th business day following the 11th day of each month (or if the 11th day is not a business day, the next business day), commencing in August 2018. The rated final distribution date for the certificates is the distribution date in June 2051.
Class | Approximate Initial | Approximate Initial Pass-Through Rate | Pass-Through Rate | Assumed Final | ||||||
| Class A-1 | $ | 14,405,000 | % | (5) | March 2023 | |||||
| Class A-2 | $ | 5,559,000 | % | (5) | March 2023 | |||||
| Class A-SB | $ | 37,388,000 | % | (5) | December 2027 | |||||
| Class A-3 | (6) | % | (5) | (6) | ||||||
| Class A-4 | (6) | % | (5) | (6) | ||||||
| Class X-A | $ | 461,135,000 | (7) | % | Variable(8) | NAP | ||||
| Class X-B | $ | 110,344,000 | (9) | % | Variable(10) | NAP | ||||
| Class A-S | $ | 46,114,000 | % | (5) | June 2028 | |||||
| Class B | $ | 32,115,000 | % | (5) | June 2028 | |||||
| Class C | $ | 32,115,000 | % | (5) | June 2028 | |||||
(Footnotes on table on pages 3 and 4)
You should carefully consider the risk factors beginning on page 56 of this prospectus.
Neither the certificates nor the mortgage loans are insured or guaranteed by any governmental agency, instrumentality or private issuer or any other person or entity.
The certificates will represent interests in the issuing entity only. They will not represent interests in or obligations of the sponsors, depositor, any of their affiliates or any other entity. |
The United States Securities and Exchange Commission and state regulators have not approved or disapproved of the offered certificates or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. Wells Fargo Commercial Mortgage Securities, Inc. will not list the offered certificates on any securities exchange or on any automated quotation system of any securities association.
The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended, contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act (both as defined in this prospectus).
The underwriters, Wells Fargo Securities, LLC, Barclays Capital Inc. and Academy Securities, Inc. will purchase the offered certificates from Wells Fargo Commercial Mortgage Securities, Inc. and will offer them to the public at negotiated prices, plus, in certain cases, accrued interest, determined at the time of sale. Wells Fargo Securities, LLC and Barclays Capital Inc. are acting as co-lead managers and joint bookrunners in the following manner: Wells Fargo Securities, LLC is acting as sole bookrunning manager with respect to approximately 73.8% of each class of offered certificates, and Barclays Capital Inc. is acting as sole bookrunning manager with respect to approximately 26.2% 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, as operator of the Euroclear System, in Europe, against payment in New York, New York on or about July 17, 2018. Wells Fargo Commercial Mortgage Securities, Inc. expects to receive from this offering approximately % of the aggregate certificate balance of the offered certificates, plus accrued interest from July 1, 2018, before deducting expenses payable by the depositor.
CALCULATION OF REGISTRATION FEE
Title of each class of | Amount to be registered | Proposed maximum | Proposed maximum | Amount of |
| Commercial Mortgage Pass-Through Certificates | $571,479,000 | 100% | $571,479,000 | $71,149.14 |
| (1) | Estimated solely for the purpose of calculating the registration fee. |
| (2) | Calculated according to Rule 457(s) of the Securities Act of 1933. Wells Fargo Asset Securities Corporation, a wholly-owned subsidiary of the same parent company of which the Registrant is a wholly-owned subsidiary, previously filed a Registration Statement on Form S-3 (Registration No. 333-194752) with the Securities and Exchange Commission on March 21, 2014 (as modified by two (2) pre-effective amendments, the last of which was filed on March 27, 2015, the “Affiliate Registration Statement”). A filing fee of $1,499,215.54 was paid in connection with the mortgage pass-through certificates registered under the Affiliate Registration Statement, of which $1,339,333.51 remains available. Pursuant to Rule 457(p) under the Securities Act of 1933, as amended, an equivalent portion of the filing fee for such unsold mortgage pass-through certificates under the Affiliate Registration Statement is being offset against the filing fee currently due in connection with this Registration Statement. Accordingly, the net amount of the registration fee due in connection with this filing is $0. The remaining filing fee associated with the Affiliate Registration Statement available for future use is $1,268,184.37. |
| Wells Fargo Securities Co-Lead Manager and Joint Bookrunner | Barclays Co-Lead Manager and Joint Bookrunner |
| Academy Securities Co-Manager | |
, 2018
Summary of Certificates
Class | Approx. Initial Certificate Balance or Notional Amount(1) | Approx. | Approx. | Pass- | Assumed | Weighted Average | Expected Principal Window(4) | |||||||||
| Offered Certificates | ||||||||||||||||
| A-1 | $ | 14,405,000 | 30.000% | % | (5) | March 2023 | 2.87 | 08/18 – 03/23 | ||||||||
| A-2 | $ | 5,559,000 | 30.000% | % | (5) | March 2023 | 4.66 | 03/23 – 03/23 | ||||||||
| A-SB | $ | 37,388,000 | 30.000% | % | (5) | December 2027 | 7.20 | 03/23 – 12/27 | ||||||||
| A-3 | (6) | 30.000% | % | (5) | (6) | (6) | (6) | |||||||||
| A-4 | (6) | 30.000% | % | (5) | (6) | (6) | (6) | |||||||||
| X-A | $ | 461,135,000 | (7) | NAP | % | Variable(8) | NAP | NAP | NAP | |||||||
| X-B | $ | 110,344,000 | (9) | NAP | % | Variable(10) | NAP | NAP | NAP | |||||||
| A-S | $ | 46,114,000 | 23.000% | % | (5) | June 2028 | 9.91 | 06/28 – 06/28 | ||||||||
| B | $ | 32,115,000 | 18.125% | % | (5) | June 2028 | 9.91 | 06/28 – 06/28 | ||||||||
| C | $ | 32,115,000 | 13.250% | % | (5) | June 2028 | 9.91 | 06/28 – 06/28 | ||||||||
| Non-Offered Certificates | ||||||||||||||||
| X-D | $ | 21,174,000 | (11)(12) | NAP | % | Variable(13) | NAP | NAP | NAP | |||||||
| D | $ | 21,174,000 | (12) | 10.036% | % | (5) | June 2028 | 9.91 | 06/28 – 06/28 | |||||||
| E-RR | $ | 14,234,000 | (12) | 7.875% | % | (5) | July 2028 | 9.92 | 06/28 – 07/28 | |||||||
| F-RR | $ | 8,235,000 | 6.625% | % | (5) | July 2028 | 9.99 | 07/28 – 07/28 | ||||||||
| G-RR | $ | 9,881,000 | 5.125% | % | (5) | July 2028 | 9.99 | 07/28 – 07/28 | ||||||||
| H-RR | $ | 7,411,000 | 4.000% | % | (5) | July 2028 | 9.99 | 07/28 – 07/28 | ||||||||
| J-RR | $ | 26,351,419 | 0.000% | % | (5) | July 2028 | 9.99 | 07/28 – 07/28 | ||||||||
| V(14) | NAP | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||
| R(15) | NAP | NAP | NAP | NAP | NAP | NAP | NAP | |||||||||
| (1) | Approximate, subject to a permitted variance of plus or minus 5%. In addition, the notional amounts of the Class X-A, Class X-B and Class X-D certificates may vary depending upon the final pricing of the classes of principal balance certificates whose certificate balances comprise such notional amounts, and, if as a result of such pricing the pass-through rate of any class of the Class X-A, Class X-B and Class X-D certificates, as applicable, would be equal to zero at all times, such class of certificates will not be issued on the closing date of this securitization. |
| (2) | The approximate initial credit support percentages set forth for the certificates are approximate and, for the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, are represented in the aggregate. |
| (3) | The assumed final distribution dates set forth in this prospectus have been determined on the basis of the assumptions described in “Description of the Certificates—Assumed Final Distribution Date; Rated Final Distribution Date”. |
| (4) | The weighted average life and expected principal window during which distributions of principal would be received as set forth in the foregoing table with respect to each class of certificates having a certificate balance are based on the assumptions set forth under “Yield and Maturity Considerations—Weighted Average Life” and on the assumptions that there are no prepayments, modifications or losses in respect of the mortgage loans and that there are no extensions or forbearances of maturity dates or anticipated repayment dates of the mortgage loans. |
| (5) | The pass-through rates for the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates will be one of the following: (i) a fixed rate per annum, (ii) a variable rate per annum equal to the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, (iii) a variable rate per annum equal to the lesser of (a) a fixed rate and (b) the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date or (iv) a variable rate per annum equal to the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date minus a specified percentage. For purposes of the calculation of the weighted average of the net mortgage interest rates on the mortgage loans for each distribution date, the mortgage interest rates will be adjusted as necessary to a 30/360 basis. |
| (6) | The exact initial certificate balances of the Class A-3 and Class A-4 certificates are unknown and will be determined based on the final pricing of those classes of certificates. However, the respective initial certificate balances, final distribution dates, weighted average lives and principal windows of the Class A-3 and Class A-4 certificates are expected to be within the applicable ranges reflected in the following chart. The aggregate initial certificate balance of the Class A-3 and Class A-4 certificates is expected to be approximately $403,783,000, subject to a variance of plus or minus 5%. |
3
Class of Certificates | Expected Range of Approximate | Expected Range of Assumed | Expected Range of Weighted Average | Expected Range of Principal Window |
| Class A-3 | $150,000,000 - $200,000,000 | May 2028 / May 2028 | 9.74 – 9.76 | 12/27 – 05/28 / 12/27 – 05/28 |
| Class A-4 | $203,783,000 - $253,783,000 | June 2028 / June 2028 | 9.87 – 9.88 | 05/28 – 06/28 / 05/28 – 06/28 |
| (7) | The Class X-A certificates are notional amount certificates. The notional amount of the Class X-A certificates will be equal to the aggregate certificate balance of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates outstanding from time to time. The Class X-A certificates will not be entitled to distributions of principal. |
| (8) | The pass-through rate for the Class X-A certificates for any distribution date will be a per annum rate equal to the excess, if any, of (a) the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, over (b) the weighted average of the pass-through rates on the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates for the related distribution date, weighted on the basis of their respective aggregate certificate balances outstanding immediately prior to that distribution date. For purposes of the calculation of the weighted average of the net mortgage interest rates on the mortgage loans for each distribution date, the mortgage interest rates will be adjusted as necessary to a 30/360 basis. |
| (9) | The Class X-B certificates are notional amount certificates. The notional amount of the Class X-B certificates will be equal to the aggregate certificate balance of the Class A-S, Class B and Class C certificates outstanding from time to time. The Class X-B certificates will not be entitled to distributions of principal. |
| (10) | The pass-through rate for the Class X-B certificates for any distribution date will be a per annum rate equal to the excess, if any, of (a) the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, over (b) the weighted average of the pass-through rates on the Class A-S, Class B and Class C certificates for the related distribution date, weighted on the basis of their respective aggregate certificate balances outstanding immediately prior to that distribution date. For purposes of the calculation of the weighted average of the net mortgage interest rates on the mortgage loans for each distribution date, the mortgage interest rates will be adjusted as necessary to a 30/360 basis. |
| (11) | The Class X-D certificates are notional amount certificates. The notional amount of the Class X-D certificates will be equal to the certificate balance of the Class D certificates outstanding from time to time. The Class X-D certificates will not be entitled to distributions of principal. |
| (12) | The initial certificate balance of each of the Class D and Class E-RR certificates is estimated based in part on the estimated ranges of certificate balances and estimated fair values described in “Credit Risk Retention”. The initial certificate balance of the Class D certificates is expected to fall within a range of $19,581,000 and $22,767,000, and the initial certificate balance of the Class E-RR certificates is expected to fall within a range of $12,641,000 and $15,827,000, with the ultimate initial certificate balance of each determined such that the aggregate fair value of the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates will equal at least 5% of the estimated fair value as of the Closing Date of all of the classes of certificates (other than the Class R certificates) issued by the issuing entity. Any variation in the initial certificate balance of the Class D certificates would affect the initial notional amount of the Class X-D certificates. |
| (13) | The pass-through rate for the Class X-D certificates for any distribution date will be a per annum rate equal to the excess, if any, of (a) the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, over (b) the pass-through rate on the Class D certificates for the related distribution date. For purposes of the calculation of the weighted average of the net mortgage interest rates on the mortgage loans for each distribution date, the mortgage interest rates will be adjusted as necessary to a 30/360 basis. |
| (14) | The Class V certificates will not have a certificate balance, notional amount, credit support, pass-through rate, assumed final distribution date, rated final distribution date or rating. The Class V certificates will only be entitled to a specified portion of distributions of excess interest accrued on the mortgage loans with an anticipated repayment date. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—ARD Loans” in this prospectus. |
| (15) | The Class R certificates will not have a certificate balance, notional amount, credit support, pass-through rate, assumed final distribution date, rated final distribution date or rating. The Class R certificates represent the residual interest in each Trust REMIC as further described in this prospectus. The Class R certificates will not be entitled to distributions of principal or interest. |
The Class X-D, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR, Class V and Class R certificates are not offered by this prospectus. Any information in this prospectus concerning certificates other than the offered certificates is presented solely to enhance your understanding of the offered certificates.
4
Table of Contents
| Summary of Certificates | 3 |
| Important Notice Regarding the Offered Certificates | 16 |
| Important Notice About Information Presented in this Prospectus | 17 |
| Summary of Terms | 23 |
| Risk Factors | 56 |
| The Certificates May Not Be a Suitable Investment for You | 56 |
| Combination or “Layering” of Multiple Risks May Significantly Increase Risk of Loss | 56 |
| Risks Related to Market Conditions and Other External Factors | 56 |
| The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Adversely Affected the Value of CMBS and Similar Factors May in the Future Adversely Affect the Value of CMBS | 56 |
| Other Events May Affect the Value and Liquidity of Your Investment | 57 |
| Risks Relating to the Mortgage Loans | 57 |
| Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed | 57 |
| Risks of Commercial and Multifamily Lending Generally | 58 |
| Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases | 59 |
| General | 59 |
| A Tenant Concentration May Result in Increased Losses | 60 |
| Mortgaged Properties Leased to Multiple Tenants Also Have Risks | 61 |
| Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks | 61 |
| Tenant Bankruptcy Could Result in a Rejection of the Related Lease | 62 |
| Leases That Are Not Subordinated to the Lien of the Mortgage or Do Not Contain Attornment Provisions May Have an Adverse Impact at Foreclosure | 62 |
| Early Lease Termination Options May Reduce Cash Flow | 63 |
| Mortgaged Properties Leased to Not-for-Profit Tenants Also Have Risks | 64 |
| Retail Properties Have Special Risks | 64 |
| Changes in the Retail Sector, Such as Online Shopping and Other Uses of Technology, Could Affect the Business Models and Viability of Retailers | 65 |
| The Performance of the Retail Properties is Subject to Conditions Affecting the Retail Sector | 65 |
| Some Retail Properties Depend on Anchor Stores or Major Tenants to Attract Shoppers and Could be Materially Adversely Affected by the Loss of, or a Store Closure by, One or More of These Anchor Stores or Major Tenants | 66 |
| Office Properties Have Special Risks | 67 |
| Self Storage Properties Have Special Risks | 68 |
| Multifamily Properties Have Special Risks | 69 |
| Hotel Properties Have Special Risks | 71 |
| Risks Relating to Affiliation with a Franchise or Hotel Management Company | 73 |
| Manufactured Housing Community Properties Have Special Risks | 74 |
| Industrial Properties Have Special Risks | 75 |
| Mixed Use Properties Have Special Risks | 76 |
| Condominium Ownership May Limit Use and Improvements | 77 |
| Operation of a Mortgaged Property Depends on the Property Manager’s Performance | 78 |
| Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses | 79 |
| Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses | 80 |
5
| Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties | 81 |
| Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses | 83 |
| Risks Related to Zoning Non-Compliance and Use Restrictions | 85 |
| Risks Relating to Inspections of Properties | 86 |
| Risks Relating to Costs of Compliance with Applicable Laws and Regulations | 86 |
| Insurance May Not Be Available or Adequate | 87 |
| Inadequacy of Title Insurers May Adversely Affect Distributions on Your Certificates | 88 |
| Terrorism Insurance May Not Be Available for All Mortgaged Properties | 88 |
| Risks Associated with Blanket Insurance Policies or Self-Insurance | 90 |
| Condemnation of a Mortgaged Property May Adversely Affect Distributions on Certificates | 90 |
| Limited Information Causes Uncertainty | 90 |
| Historical Information | 90 |
| Ongoing Information | 91 |
| Underwritten Net Cash Flow Could Be Based On Incorrect or Flawed Assumptions | 91 |
| Frequent and Early Occurrence of Borrower Delinquencies and Defaults May Adversely Affect Your Investment | 92 |
| The Mortgage Loans Have Not Been Reviewed or Re-Underwritten by Us; Some Mortgage Loans May Not Have Complied With Another Originator’s Underwriting Criteria | 93 |
| Static Pool Data Would Not Be Indicative of the Performance of this Pool | 94 |
| Appraisals May Not Reflect Current or Future Market Value of Each Property | 94 |
| The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property | 95 |
| The Borrower’s Form of Entity May Cause Special Risks | 96 |
| A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans | 99 |
| Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions | 99 |
| Other Financings or Ability to Incur Other Indebtedness Entails Risk | 100 |
| Tenancies-in-Common May Hinder Recovery | 102 |
| Risks Relating to Delaware Statutory Trusts | 102 |
| Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions | 103 |
| Risks Associated with One Action Rules | 103 |
| State Law Limitations on Assignments of Leases and Rents May Entail Risks | 103 |
| Various Other Laws Could Affect the Exercise of Lender’s Rights | 104 |
| Risks of Anticipated Repayment Date Loans | 104 |
| The Absence of Lockboxes Entails Risks That Could Adversely Affect Distributions on Your Certificates | 105 |
| Borrower May Be Unable to Repay Remaining Principal Balance on Maturity Date or Anticipated Repayment Date; Longer Amortization Schedules and Interest-Only Provisions Increase Risk | 105 |
| Risks Related to Ground Leases and Other Leasehold Interests | 106 |
| Increases in Real Estate Taxes May Reduce Available Funds | 108 |
| State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed-in-Lieu of Foreclosure and Reduce Net Proceeds | 109 |
| Risks Related to Conflicts of Interest | 109 |
| Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned With Your Interests | 109 |
6
| The Servicing of the 181 Fremont Street Whole Loan Will Shift to Other Servicers | 111 |
| Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests | 111 |
| Potential Conflicts of Interest of the Master Servicer and the Special Servicer | 113 |
| Potential Conflicts of Interest of the Operating Advisor | 116 |
| Potential Conflicts of Interest of the Asset Representations Reviewer | 116 |
| Potential Conflicts of Interest of the Directing Certificateholder and the Companion Holders | 117 |
| Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans | 119 |
| Conflicts of Interest May Occur as a Result of the Rights of the Applicable Directing Certificateholder To Terminate the Special Servicer of the Applicable Whole Loan | 120 |
| Other Potential Conflicts of Interest May Affect Your Investment | 120 |
| Other Risks Relating to the Certificates | 121 |
| The Certificates Are Limited Obligations | 121 |
| The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline | 121 |
| Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity of the Offered Certificates | 122 |
| 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 | 125 |
| Your Yield May Be Affected by Defaults, Prepayments and Other Factors | 128 |
| General | 128 |
| The Timing of Prepayments and Repurchases May Change Your Anticipated Yield | 129 |
| Your Yield May Be Adversely Affected By Prepayments Resulting From Earnout Reserves | 131 |
| Losses and Shortfalls May Change Your Anticipated Yield | 131 |
| Risk of Early Termination | 132 |
| Subordination of the Subordinated Certificates Will Affect the Timing of Distributions and the Application of Losses on the Subordinated Certificates | 132 |
| Your Lack of Control Over the Issuing Entity and the Mortgage Loans Can Impact Your Investment | 132 |
| You Have Limited Voting Rights | 132 |
| The Rights of the Directing Certificateholder and the Operating Advisor Could Adversely Affect Your Investment | 133 |
| You Have Limited Rights to Replace the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator, the Operating Advisor or the Asset Representations Reviewer | 135 |
| The Rights of Companion Holders and Mezzanine Debt May Adversely Affect Your Investment | 136 |
| Risks Relating to Modifications of the Mortgage Loans | 138 |
| Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan | 139 |
| Risks Relating to Interest on Advances and Special Servicing Compensation | 140 |
| Bankruptcy of a Servicer May Adversely Affect Collections on the Mortgage Loans and the Ability to Replace the Servicer | 140 |
7
| The Sponsors, the Depositor and the Issuing Entity Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans | 140 |
| The Requirement of the Special Servicer to Obtain FIRREA-Compliant Appraisals May Result in an Increased Cost to the Issuing Entity | 144 |
| Tax Matters and Changes in Tax Law May Adversely Impact the Mortgage Loans or Your Investment | 144 |
| Tax Considerations Relating to Foreclosure | 144 |
| REMIC Status | 145 |
| Material Federal Tax Considerations Regarding Original Issue Discount | 145 |
| Description of the Mortgage Pool | 145 |
| General | 145 |
| Co-Originated or Third-Party Originated Mortgage Loans | 147 |
| Certain Calculations and Definitions | 147 |
| Definitions | 148 |
| Mortgage Pool Characteristics | 160 |
| Overview | 160 |
| Property Types | 162 |
| Retail Properties | 162 |
| Office Properties | 163 |
| Self Storage Properties | 163 |
| Multifamily Properties | 164 |
| Hospitality Properties | 165 |
| Manufactured Housing Community Properties | 166 |
| Industrial Properties | 167 |
| Mixed Use Properties | 167 |
| Specialty Use Concentrations | 168 |
| Mortgage Loan Concentrations | 169 |
| Top Fifteen Mortgage Loans | 169 |
| Multi-Property Mortgage Loans and Related Borrower Mortgage Loans | 169 |
| Geographic Concentrations | 171 |
| Mortgaged Properties with Limited Prior Operating History | 172 |
| Tenancies-in-Common or Diversified Ownership | 172 |
| Delaware Statutory Trusts | 173 |
| Condominium Interests | 173 |
| Fee & Leasehold Estates; Ground Leases | 174 |
| Environmental Considerations | 175 |
| Redevelopment, Renovation and Expansion | 177 |
| Assessment of Property Value and Condition | 178 |
| Litigation and Other Considerations | 179 |
| Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings | 181 |
| Tenant Issues | 183 |
| Tenant Concentrations | 183 |
| Lease Expirations and Terminations | 183 |
| Expirations | 183 |
| Terminations | 185 |
| Other | 185 |
| Purchase Options and Rights of First Refusal | 186 |
| Affiliated Leases | 188 |
| Insurance Considerations | 188 |
| Use Restrictions | 190 |
| Appraised Value | 191 |
| Non-Recourse Carveout Limitations | 191 |
8
| Real Estate and Other Tax Considerations | 192 |
| Delinquency Information | 192 |
| Certain Terms of the Mortgage Loans | 193 |
| Amortization of Principal | 193 |
| Due Dates; Mortgage Rates; Calculations of Interest | 193 |
| ARD Loans | 194 |
| Prepayment Protections and Certain Involuntary Prepayments and Voluntary Prepayments | 195 |
| Voluntary Prepayments | 196 |
| “Due-On-Sale” and “Due-On-Encumbrance” Provisions | 197 |
| Defeasance | 198 |
| Releases; Partial Releases | 199 |
| Escrows | 201 |
| Mortgaged Property Accounts | 203 |
| Exceptions to Underwriting Guidelines | 204 |
| Additional Indebtedness | 207 |
| General | 207 |
| Whole Loans | 208 |
| Mezzanine Indebtedness | 208 |
| Other Secured Indebtedness | 211 |
| Other Unsecured Indebtedness | 212 |
| The Whole Loans | 212 |
| General | 212 |
| The Non-Serviced Pari Passu Whole Loans | 216 |
| Intercreditor Agreement | 217 |
| Control Rights | 217 |
| Certain Rights of each Non-Controlling Holder | 218 |
| Custody of the Mortgage File | 219 |
| Sale of Defaulted Mortgage Loan | 219 |
| The Non-Serviced AB Whole Loan | 219 |
| The Flats at East Bank Whole Loan | 219 |
| Additional Information | 231 |
| Transaction Parties | 232 |
| The Sponsors and Mortgage Loan Sellers | 232 |
| Wells Fargo Bank, National Association | 232 |
| General | 232 |
| Wells Fargo Bank, National Association’s Commercial Mortgage Securitization Program | 232 |
| Wells Fargo Bank’s Commercial Mortgage Loan Underwriting | 233 |
| Review of Mortgage Loans for Which Wells Fargo Bank is the Sponsor | 238 |
| Compliance with Rule 15Ga-1 under the Exchange Act | 241 |
| Retained Interests in This Securitization | 244 |
| Barclays Bank PLC | 244 |
| General | 244 |
| Barclays’ Securitization Program | 244 |
| Review of Barclays Mortgage Loans | 245 |
| Barclays’ Underwriting Guidelines and Processes | 247 |
| Compliance with Rule 15Ga-1 under the Exchange Act | 251 |
| Retained Interests in This Securitization | 251 |
| Rialto Mortgage Finance, LLC | 251 |
| General | 251 |
| Rialto Mortgage’s Securitization Program | 252 |
| Rialto Mortgage’s Underwriting Standards and Loan Analysis | 252 |
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| Review of Mortgage Loans for Which Rialto Mortgage is the Sponsor | 257 |
| Compliance with Rule 15Ga-1 under the Exchange Act | 258 |
| Retained Interests in This Securitization | 259 |
| C-III Commercial Mortgage LLC | 259 |
| General | 259 |
| C-III CM’s Underwriting Guidelines and Processes | 261 |
| Exceptions | 268 |
| Review of Mortgage Loans for Which C-III CM is the Sponsor | 268 |
| Compliance with Rule 15Ga-1 under the Exchange Act | 269 |
| Retained Interests in This Securitization | 270 |
| The Depositor | 270 |
| The Issuing Entity | 271 |
| The Trustee | 271 |
| The Certificate Administrator | 273 |
| The Master Servicer | 275 |
| The Special Servicer | 279 |
| Affiliated Servicer | 284 |
| The Operating Advisor and Asset Representations Reviewer | 287 |
| Credit Risk Retention | 289 |
| General | 289 |
| Qualifying CRE Loans | 289 |
| Third-Party Purchaser | 290 |
| Horizontal Risk Retention Certificates | 291 |
| General | 291 |
| Material Terms of the Eligible Horizontal Residual Interest | 291 |
| Determination of Amount of Required Horizontal Credit Risk Retention | 292 |
| General | 292 |
| Swap-Priced Principal Balance Certificates | 292 |
| Swap Yield Curve | 292 |
| Discount Yield Determination | 294 |
| Determination of Class Sizes | 294 |
| Target Price Determination | 295 |
| Determination of Assumed Certificate Coupon | 295 |
| Determination of Swap-Priced Expected Price | 296 |
| Interest-Only Certificates | 296 |
| Treasury Yield Curve | 297 |
| Credit Spread Determination | 297 |
| Discount Yield Determination | 298 |
| Determination of Scheduled Certificate Interest Payments | 298 |
| Determination of Interest-Only Expected Price | 298 |
| Yield-Priced Principal Balance Certificates | 298 |
| Determination of Class Size | 299 |
| Determination of Yield-Priced Expected Price | 299 |
| Calculation of Fair Value | 299 |
| Hedging, Transfer and Financing Restrictions | 300 |
| Operating Advisor | 301 |
| Representations and Warranties | 302 |
| Description of the Certificates | 304 |
| General | 304 |
| Distributions | 306 |
| Method, Timing and Amount | 306 |
| Available Funds | 307 |
| Priority of Distributions | 309 |
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| Pass-Through Rates | 313 |
| Interest Distribution Amount | 315 |
| Principal Distribution Amount | 315 |
| Certain Calculations with Respect to Individual Mortgage Loans | 317 |
| Excess Interest | 319 |
| Application Priority of Mortgage Loan Collections or Whole Loan Collections | 319 |
| Allocation of Yield Maintenance Charges and Prepayment Premiums | 322 |
| Assumed Final Distribution Date; Rated Final Distribution Date | 323 |
| Prepayment Interest Shortfalls | 324 |
| Subordination; Allocation of Realized Losses | 325 |
| Reports to Certificateholders; Certain Available Information | 328 |
| Certificate Administrator Reports | 328 |
| Information Available Electronically | 334 |
| Voting Rights | 339 |
| Delivery, Form, Transfer and Denomination | 340 |
| Book-Entry Registration | 340 |
| Definitive Certificates | 343 |
| Certificateholder Communication | 344 |
| Access to Certificateholders’ Names and Addresses | 344 |
| Requests to Communicate | 344 |
| List of Certificateholders | 345 |
| Description of the Mortgage Loan Purchase Agreements | 345 |
| General | 345 |
| Dispute Resolution Provisions | 354 |
| Asset Review Obligations | 354 |
| Pooling and Servicing Agreement | 355 |
| General | 355 |
| Assignment of the Mortgage Loans | 355 |
| Servicing Standard | 356 |
| Subservicing | 357 |
| Advances | 358 |
| P&I Advances | 358 |
| Servicing Advances | 359 |
| Nonrecoverable Advances | 360 |
| Recovery of Advances | 361 |
| Accounts | 363 |
| Withdrawals from the Collection Account | 365 |
| Servicing and Other Compensation and Payment of Expenses | 367 |
| General | 367 |
| Master Servicing Compensation | 372 |
| Special Servicing Compensation | 375 |
| Disclosable Special Servicer Fees | 379 |
| Certificate Administrator and Trustee Compensation | 380 |
| Operating Advisor Compensation | 380 |
| Asset Representations Reviewer Compensation | 381 |
| CREFC® Intellectual Property Royalty License Fee | 382 |
| Appraisal Reduction Amounts | 382 |
| Maintenance of Insurance | 389 |
| Modifications, Waivers and Amendments | 392 |
| Enforcement of “Due-on-Sale” and “Due-on-Encumbrance” Provisions | 396 |
| Inspections | 398 |
| Collection of Operating Information | 399 |
| Special Servicing Transfer Event | 399 |
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| Asset Status Report | 402 |
| Realization Upon Mortgage Loans | 405 |
| Sale of Defaulted Loans and REO Properties | 408 |
| The Directing Certificateholder | 411 |
| General | 411 |
| Major Decisions | 412 |
| Asset Status Report | 415 |
| Replacement of the Special Servicer | 415 |
| Control Termination Event, Operating Advisor Consultation Event and Consultation Termination Event | 415 |
| Servicing Override | 417 |
| Rights of the Directing Certificateholder with respect to Non-Serviced Mortgage Loans | 418 |
| Limitation on Liability of Directing Certificateholder | 418 |
| The Operating Advisor | 419 |
| General | 419 |
| Duties of Operating Advisor At All Times | 420 |
| Annual Report | 421 |
| Additional Duties of the Operating Advisor While an Operating Advisor Consultation Event Has Occurred and is Continuing | 423 |
| Recommendation of the Replacement of the Special Servicer | 423 |
| Eligibility of Operating Advisor | 423 |
| Other Obligations of Operating Advisor | 424 |
| Delegation of Operating Advisor’s Duties | 425 |
| Termination of the Operating Advisor With Cause | 425 |
| Rights Upon Operating Advisor Termination Event | 426 |
| Waiver of Operating Advisor Termination Event | 427 |
| Termination of the Operating Advisor Without Cause | 427 |
| Resignation of the Operating Advisor | 427 |
| Operating Advisor Compensation | 428 |
| The Asset Representations Reviewer | 428 |
| Asset Review | 428 |
| Asset Review Trigger | 428 |
| Asset Review Vote | 429 |
| Review Materials | 430 |
| Asset Review | 431 |
| Eligibility of Asset Representations Reviewer | 433 |
| Other Obligations of Asset Representations Reviewer | 434 |
| Delegation of Asset Representations Reviewer’s Duties | 434 |
| Asset Representations Reviewer Termination Events | 435 |
| Rights Upon Asset Representations Reviewer Termination Event | 436 |
| Termination of the Asset Representations Reviewer Without Cause | 436 |
| Resignation of Asset Representations Reviewer | 436 |
| Asset Representations Reviewer Compensation | 437 |
| Replacement of the Special Servicer Without Cause | 437 |
| Replacement of the Special Servicer After Operating Advisor Recommendation and Certificateholder Vote | 439 |
| Resignation of Master Servicer, Trustee, Certificate Administrator, Operating Advisor or Asset Representations Reviewer Upon Prohibited Risk Retention Affiliation | 440 |
| Termination of the Master Servicer or Special Servicer for Cause | 441 |
| Servicer Termination Events | 441 |
| Rights Upon Servicer Termination Event | 442 |
| Waiver of Servicer Termination Event | 443 |
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| Resignation of the Master Servicer or Special Servicer | 443 |
| Limitation on Liability; Indemnification | 444 |
| Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA | 447 |
| Dispute Resolution Provisions | 448 |
| Certificateholder’s Rights When a Repurchase Request Is Initially Delivered by a Certificateholder | 448 |
| Repurchase Request Delivered by a Party to the PSA | 448 |
| Resolution of a Repurchase Request | 449 |
| Mediation and Arbitration Provisions | 452 |
| Servicing of the Non-Serviced Mortgage Loans | 453 |
| General | 454 |
| Servicing of the Village at Leesburg Mortgage Loan | 457 |
| Servicing of the 181 Fremont Street Mortgage Loan | 458 |
| Servicing of the CoolSprings Galleria Mortgage Loan | 459 |
| Servicing of the Flats at East Bank Mortgage Loan | 460 |
| Rating Agency Confirmations | 460 |
| Evidence as to Compliance | 462 |
| Limitation on Rights of Certificateholders to Institute a Proceeding | 464 |
| Termination; Retirement of Certificates | 464 |
| Amendment | 465 |
| Resignation and Removal of the Trustee and the Certificate Administrator | 468 |
| Governing Law; Waiver of Jury Trial; and Consent to Jurisdiction | 469 |
| Certain Legal Aspects of Mortgage Loans | 470 |
| California | 470 |
| Texas | 470 |
| Virginia | 471 |
| General | 472 |
| Types of Mortgage Instruments | 472 |
| Leases and Rents | 472 |
| Personalty | 473 |
| Foreclosure | 473 |
| General | 473 |
| Foreclosure Procedures Vary from State to State | 473 |
| Judicial Foreclosure | 474 |
| Equitable and Other Limitations on Enforceability of Certain Provisions | 474 |
| Nonjudicial Foreclosure/Power of Sale | 474 |
| Public Sale | 475 |
| Rights of Redemption | 476 |
| Anti-Deficiency Legislation | 476 |
| Leasehold Considerations | 477 |
| Cooperative Shares | 477 |
| Bankruptcy Laws | 478 |
| Environmental Considerations | 484 |
| General | 484 |
| Superlien Laws | 484 |
| CERCLA | 484 |
| Certain Other Federal and State Laws | 485 |
| Additional Considerations | 486 |
| Due-on-Sale and Due-on-Encumbrance Provisions | 486 |
| Subordinate Financing | 486 |
| Default Interest and Limitations on Prepayments | 487 |
| Applicability of Usury Laws | 487 |
| Americans with Disabilities Act | 487 |
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| Servicemembers Civil Relief Act | 488 |
| Anti-Money Laundering, Economic Sanctions and Bribery | 488 |
| Potential Forfeiture of Assets | 489 |
| Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties | 489 |
| Pending Legal Proceedings Involving Transaction Parties | 491 |
| Use of Proceeds | 492 |
| Yield and Maturity Considerations | 492 |
| Yield Considerations | 492 |
| General | 492 |
| Rate and Timing of Principal Payments | 492 |
| Losses and Shortfalls | 494 |
| Certain Relevant Factors Affecting Loan Payments and Defaults | 494 |
| Delay in Payment of Distributions | 495 |
| Yield on the Certificates with Notional Amounts | 495 |
| Weighted Average Life | 496 |
| Pre-Tax Yield to Maturity Tables | 502 |
| Material Federal Income Tax Considerations | 506 |
| General | 506 |
| Qualification as a REMIC | 507 |
| Status of Offered Certificates | 509 |
| Taxation of Regular Interests | 509 |
| General | 509 |
| Original Issue Discount | 510 |
| Acquisition Premium | 512 |
| Market Discount | 512 |
| Premium | 513 |
| Election To Treat All Interest Under the Constant Yield Method | 514 |
| Treatment of Losses | 514 |
| Yield Maintenance Charges and Prepayment Premiums | 515 |
| Sale or Exchange of Regular Interests | 515 |
| Taxes That May Be Imposed on a REMIC | 516 |
| Prohibited Transactions | 516 |
| Contributions to a REMIC After the Startup Day | 516 |
| Net Income from Foreclosure Property | 516 |
| Bipartisan Budget Act of 2015 | 517 |
| Taxation of Certain Foreign Investors | 517 |
| FATCA | 519 |
| Backup Withholding | 519 |
| Information Reporting | 519 |
| 3.8% Medicare Tax on “Net Investment Income” | 519 |
| Reporting Requirements | 520 |
| Certain State and Local Tax Considerations | 520 |
| Method of Distribution (Underwriter) | 521 |
| Incorporation of Certain Information by Reference | 524 |
| Where You Can Find More Information | 524 |
| Financial Information | 525 |
| Certain ERISA Considerations | 525 |
| General | 525 |
| Plan Asset Regulations | 526 |
| Administrative Exemptions | 526 |
| Insurance Company General Accounts | 530 |
| Legal Investment | 530 |
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| Legal Matters | 531 |
| Ratings | 532 |
| Index of Defined Terms | 535 |
| Annex A-1: | Certain Characteristics of the Mortgage Loans and Mortgaged Properties | A-1-1 |
| Annex A-2: | Mortgage Pool Information (Tables) | A-2-1 |
| Annex A-3: | Summaries of the Fifteen Largest Mortgage Loans | A-3-1 |
| Annex B: | Form of Distribution Date Statement | B-1 |
| Annex C: | Form of Operating Advisor Annual Report | C-1 |
| Annex D-1: | Mortgage Loan Representations and Warranties | D-1-1 |
| Annex D-2: | Exceptions to Mortgage Loan Representations and Warranties | D-2-1 |
| Annex E: | Class A-SB Planned Principal Balance Schedule | E-1 |
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Important Notice Regarding the Offered Certificates
WE HAVE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT TO THE CERTIFICATES OFFERED IN THIS PROSPECTUS. HOWEVER, THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION CONTAINED IN OUR REGISTRATION STATEMENT. FOR FURTHER INFORMATION REGARDING THE DOCUMENTS REFERRED TO IN THIS PROSPECTUS, YOU SHOULD REFER TO OUR REGISTRATION STATEMENT AND THE EXHIBITS TO IT. OUR REGISTRATION STATEMENT AND THE EXHIBITS TO IT CAN BE INSPECTED AND COPIED AT PRESCRIBED RATES AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC AT ITS PUBLIC REFERENCE ROOM, 100 F STREET, N.E., WASHINGTON, D.C. 20549. YOU MAY OBTAIN INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM BY CALLING THE SEC AT 1-800-SEC-0330. COPIES OF THESE MATERIALS CAN ALSO BE OBTAINED ELECTRONICALLY THROUGH THE SEC’S INTERNET WEBSITE (HTTP://WWW.SEC.GOV).
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE OR OTHER JURISDICTION WHERE SUCH OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
THE INFORMATION IN THIS PROSPECTUS IS PRELIMINARY AND MAY BE SUPPLEMENTED OR AMENDED PRIOR TO THE TIME OF SALE. IN ADDITION, THE OFFERED CERTIFICATES REFERRED TO IN THIS PROSPECTUS, AND THE ASSET POOL BACKING THEM, ARE SUBJECT TO MODIFICATION OR REVISION (INCLUDING THE POSSIBILITY THAT ONE OR MORE CLASSES OF OFFERED CERTIFICATES MAY BE SPLIT, COMBINED OR ELIMINATED) AT ANY TIME PRIOR TO ISSUANCE, AND ARE OFFERED ON A “WHEN, AS AND IF ISSUED” BASIS.
THE UNDERWRITERS DESCRIBED IN THESE MATERIALS MAY FROM TIME TO TIME PERFORM INVESTMENT BANKING SERVICES FOR, OR SOLICIT INVESTMENT BANKING BUSINESS FROM, ANY COMPANY NAMED IN THESE MATERIALS. THE UNDERWRITERS AND/OR THEIR RESPECTIVE EMPLOYEES MAY FROM TIME TO TIME HAVE A LONG OR SHORT POSITION IN ANY CONTRACT OR CERTIFICATE DISCUSSED IN THESE MATERIALS.
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPERSEDES ANY PREVIOUS SUCH INFORMATION DELIVERED TO ANY PROSPECTIVE INVESTOR AND MAY BE SUPERSEDED BY INFORMATION DELIVERED TO SUCH PROSPECTIVE INVESTOR PRIOR TO THE TIME OF SALE.
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE SPONSORS, THE MORTGAGE LOAN SELLERS, THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE OPERATING ADVISOR, THE ASSET REPRESENTATIONS REVIEWER, THE CERTIFICATE ADMINISTRATOR, THE DIRECTING CERTIFICATEHOLDER, THE UNDERWRITERS OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR PRIVATE INSURER.
THERE IS CURRENTLY NO SECONDARY MARKET FOR THE OFFERED CERTIFICATES. WE CANNOT ASSURE YOU THAT A SECONDARY MARKET WILL DEVELOP OR, IF A SECONDARY MARKET DOES DEVELOP, THAT IT WILL PROVIDE HOLDERS OF THE OFFERED CERTIFICATES WITH LIQUIDITY OF INVESTMENT OR THAT IT WILL CONTINUE FOR THE TERM OF THE OFFERED CERTIFICATES. THE UNDERWRITERS CURRENTLY INTEND TO MAKE A MARKET IN THE OFFERED CERTIFICATES BUT ARE UNDER NO OBLIGATION TO DO SO. ACCORDINGLY, PURCHASERS MUST BE PREPARED TO BEAR THE RISKS OF THEIR
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INVESTMENTS FOR AN INDEFINITE PERIOD. SEE “RISK FACTORS—OTHER RISKS RELATING TO THE CERTIFICATES—THE CERTIFICATES MAY HAVE LIMITED LIQUIDITY AND THE MARKET VALUE OF THE CERTIFICATES MAY DECLINE” IN THIS PROSPECTUS.
Important Notice About Information Presented in this Prospectus
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus.
This prospectus begins with several introductory sections describing the certificates and the issuing entity in abbreviated form:
| ● | Summary of Certificates, commencing on the page set forth on the table of contents of this prospectus, which sets forth important statistical information relating to the certificates; |
| ● | Summary of Terms, commencing on the page set forth on the table of contents of this prospectus, which gives a brief introduction of the key features of the certificates and a description of the mortgage loans; and |
| ● | Risk Factors, commencing on the page set forth on the table of contents of this prospectus, which describes risks that apply to the certificates. |
This prospectus includes cross references to sections in this prospectus where you can find further related discussions. The table of contents in this prospectus identifies the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus to assist you in understanding the terms of the offered certificates and this offering. The capitalized terms used in this prospectus are defined on the pages indicated under the caption “Index of Defined Terms” in this prospectus.
All annexes and schedules attached to this prospectus are a part of this prospectus.
In this prospectus:
| ● | the terms “depositor”, “we”, “us” and “our” refer to Wells Fargo Commercial Mortgage Securities, Inc.; |
| ● | references to any specified mortgage loan should be construed to refer to the mortgage loan secured by the mortgaged property (or portfolio of mortgaged properties) with the same name identified on Annex A-1, representing the approximate percentage of the initial pool balance set forth on Annex A-1; |
| ● | references to a “pooling and servicing agreement” (other than the WFCM 2018-C45 pooling and servicing agreement) governing the servicing of any mortgage loan should be construed to refer to any relevant pooling and servicing agreement, trust and servicing agreement or other primary transaction agreement governing the servicing of such mortgage loan; and |
| ● | references to “lender” or “mortgage lender” with respect to a mortgage loan generally should be construed to mean, from and after the date of initial issuance of the offered certificates, the trustee on behalf of the issuing entity as the holder of |
17
record title to the mortgage loans or the master servicer or special servicer, as applicable, with respect to the obligations and rights of the lender as described under “Pooling and Servicing Agreement”.
NOTICE TO RESIDENTS WITHIN EUROPEAN ECONOMIC AREA
THIS PROSPECTUS IS NOT A PROSPECTUS FOR THE PURPOSES OF DIRECTIVE 2003/71/EC (AS AMENDED, INCLUDING BY DIRECTIVE 2010/73/EU) OR ANY RELEVANT IMPLEMENTING MEASURE IN THE RELEVANT EUROPEAN ECONOMIC MEMBER STATE (TOGETHER, THE “PROSPECTUS DIRECTIVE”).
THE OFFERED CERTIFICATES ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA (“EEA”). FOR THESE PURPOSES, A RETAIL INVESTOR MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU, AS AMENDED (“MIFID II” ); OR (II) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE 2002/92/EC, AS AMENDED (THE “INSURANCE MEDIATION DIRECTIVE” ), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (III) NOT A QUALIFIED INVESTOR AS DEFINED IN THE PROSPECTUS DIRECTIVE.
CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (THE “PRIIPS REGULATION” ) FOR OFFERING OR SELLING THE OFFERED CERTIFICATES OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE CERTIFICATES OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.
THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF OFFERED CERTIFICATES IN ANY MEMBER STATE OF THE EEA WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A “RELEVANT MEMBER STATE”) WILL ONLY BE MADE TO A LEGAL ENTITY WHICH IS A QUALIFIED INVESTOR UNDER THE PROSPECTUS DIRECTIVE (”QUALIFIED INVESTOR”). 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 MAY ONLY DO SO WITH RESPECT TO QUALIFIED INVESTORS. NONE OF THE DEPOSITOR, THE ISSUING ENTITY OR ANY OF THE UNDERWRITERS HAS AUTHORIZED, NOR DOES ANY OF THEM AUTHORIZE, THE MAKING OF ANY OFFER OF OFFERED CERTIFICATES OTHER THAN TO QUALIFIED INVESTORS.
NOTICE TO RESIDENTS OF THE UNITED KINGDOM
THE ISSUING ENTITY MAY CONSTITUTE A “COLLECTIVE INVESTMENT SCHEME” AS DEFINED BY SECTION 235 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (AS AMENDED, “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) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO
18
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 (II) 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) 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 (II) 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 (III) PERSONS TO WHOM THE ISSUING ENTITY MAY LAWFULLY BE PROMOTED IN ACCORDANCE WITH CHAPTER 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.
PEOPLE’S REPUBLIC OF CHINA
THE OFFERED CERTIFICATES WILL NOT BE OFFERED OR SOLD IN THE PEOPLE’S REPUBLIC OF CHINA (EXCLUDING HONG KONG, MACAU AND TAIWAN, THE “PRC”) AS PART OF THE INITIAL DISTRIBUTION OF THE OFFERED CERTIFICATES BUT MAY BE AVAILABLE FOR PURCHASE BY INVESTORS RESIDENT IN THE PRC FROM OUTSIDE THE PRC.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE PRC TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN THE PRC.
THE DEPOSITOR DOES NOT REPRESENT THAT THIS PROSPECTUS MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY OFFERED CERTIFICATES MAY BE LAWFULLY OFFERED, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN THE PRC, 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
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MAY BE DISTRIBUTED OR PUBLISHED IN THE PRC, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS.
HONG KONG
THIS PROSPECTUS HAS NOT BEEN DELIVERED FOR REGISTRATION TO THE REGISTRAR OF COMPANIES IN HONG KONG AND THE CONTENTS OF THIS PROSPECTUS HAVE NOT BEEN REVIEWED OR APPROVED BY ANY REGULATORY AUTHORITY IN HONG KONG. THIS PROSPECTUS DOES NOT CONSTITUTE NOR INTEND TO BE AN OFFER OR INVITATION TO THE PUBLIC IN HONG KONG TO ACQUIRE THE OFFERED CERTIFICATES.
EACH UNDERWRITER HAS REPRESENTED, WARRANTED AND AGREED THAT: (1) IT HAS NOT OFFERED OR SOLD AND WILL NOT OFFER OR SELL IN HONG KONG, BY MEANS OF ANY DOCUMENT, ANY OFFERED CERTIFICATES (EXCEPT FOR CERTIFICATES WHICH ARE A “STRUCTURED PRODUCT” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CAP. 571) (THE “SFO”) OF HONG KONG) OTHER THAN (A) TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SFO AND ANY RULES OR REGULATIONS MADE UNDER THE SFO; OR (B) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT BEING A “PROSPECTUS” AS DEFINED IN THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CAP. 32) (THE “C(WUMP)O”) OF HONG KONG OR WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE C(WUMP)O; AND (2) IT HAS NOT ISSUED OR HAD IN ITS POSSESSION FOR THE PURPOSES OF ISSUE, AND WILL NOT ISSUE OR HAVE IN ITS POSSESSION FOR THE PURPOSES OF ISSUE, WHETHER IN HONG KONG OR ELSEWHERE, ANY ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE OFFERED CERTIFICATES, WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC OF HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO OFFERED CERTIFICATES WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SFO AND ANY RULES MADE UNDER THE SFO.
W A R N I N G
THE CONTENTS OF THIS PROSPECTUS HAVE NOT BEEN REVIEWED OR APPROVED BY ANY REGULATORY AUTHORITY IN HONG KONG. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE OFFER. IF YOU ARE IN ANY DOUBT ABOUT ANY OF THE CONTENTS OF THIS PROSPECTUS, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
SINGAPORE
NEITHER THIS PROSPECTUS NOR ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH 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 WOULD NOT APPLY. ANY PROSPECTIVE INVESTOR SHOULD CONSIDER CAREFULLY WHETHER THE INVESTMENT IS SUITABLE FOR IT. THIS PROSPECTUS AND ANY OTHER DOCUMENT OR MATERIAL IN 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
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INDIRECTLY, TO PERSONS IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA, (II) TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA), OR ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SFA, IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA OR (III) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SFA.
WHERE THE OFFERED CERTIFICATES ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY A RELEVANT PERSON WHICH IS: (A) A CORPORATION (WHICH IS NOT AN ACCREDITED INVESTOR (AS DEFINED IN SECTION 4A OF THE SFA)) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS AND THE ENTIRE SHARE CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN ACCREDITED INVESTOR; OR (B) A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED INVESTOR) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND EACH BENEFICIARY IS AN ACCREDITED INVESTOR, SECURITIES (AS DEFINED IN SECTION 239(1) OF THE SFA) OF THAT CORPORATION OR THE BENEFICIARIES’ RIGHTS AND INTEREST (HOWSOEVER DESCRIBED) IN THAT TRUST SHALL NOT BE TRANSFERABLE FOR 6 MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS ACQUIRED THE OFFERED CERTIFICATES UNDER SECTION 275 OF THE SFA EXCEPT: (1) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA), OR TO ANY PERSON PURSUANT TO AN OFFER THAT IS MADE ON TERMS THAT SUCH SHARES, DEBENTURES AND UNITS OF SHARES AND DEBENTURES OF THAT CORPORATION OR SUCH RIGHTS OR INTEREST IN THAT TRUST ARE ACQUIRED AT A CONSIDERATION OF NOT LESS THAN 200,000 SINGAPORE DOLLARS (OR ITS EQUIVALENT IN A FOREIGN CURRENCY) FOR EACH TRANSACTION, WHETHER SUCH AMOUNT IS TO BE PAID FOR IN CASH OR BY EXCHANGE OF SECURITIES OR OTHER ASSETS, AND FURTHER FOR CORPORATIONS, IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275(1A) OF THE SFA; (2) WHERE NO CONSIDERATION IS GIVEN FOR THE TRANSFER; (3) WHERE THE TRANSFER IS BY OPERATION OF LAW; OR (4) AS SPECIFIED IN SECTION 276(7) OF THE SFA.
REPUBLIC OF KOREA
THESE CERTIFICATES HAVE NOT BEEN REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF THE REPUBLIC OF KOREA FOR A PUBLIC OFFERING IN THE REPUBLIC OF KOREA. THE UNDERWRITERS HAVE THEREFORE REPRESENTED AND AGREED THAT THE CERTIFICATES HAVE NOT BEEN AND WILL NOT BE OFFERED, SOLD OR DELIVERED DIRECTLY OR INDIRECTLY, OR OFFERED, SOLD OR DELIVERED TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN THE REPUBLIC OF KOREA OR TO ANY RESIDENT OF THE REPUBLIC OF KOREA, EXCEPT AS OTHERWISE PERMITTED UNDER APPLICABLE LAWS AND REGULATIONS OF THE REPUBLIC OF KOREA, INCLUDING THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT AND THE FOREIGN EXCHANGE TRANSACTIONS LAW AND THE DECREES AND REGULATIONS THEREUNDER.
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 OFFERED CERTIFICATES IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN (WHICH TERM AS USED IN THIS PROSPECTUS MEANS ANY PERSON RESIDENT IN JAPAN,
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INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF JAPAN) OR TO OTHERS FOR REOFFERING OR RE-SALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE FIEL AND OTHER RELEVANT LAWS, REGULATIONS AND MINISTERIAL GUIDELINES OF JAPAN. AS PART OF THIS OFFERING OF THE OFFERED CERTIFICATES, THE UNDERWRITERS MAY OFFER THE OFFERED CERTIFICATES IN JAPAN TO UP TO 49 OFFEREES IN ACCORDANCE WITH THE ABOVE PROVISIONS.
NOTICE TO RESIDENTS OF CANADA
THE OFFERED CERTIFICATES MAY BE SOLD IN CANADA ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE OFFERED CERTIFICATES MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.
SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS PROSPECTUS (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.
PURSUANT TO SECTION 3A.3 OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (“NI 33-105”), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.
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Summary of Terms
This summary highlights selected information from this prospectus. It does not contain all of the information you need to consider in making your investment decision. To understand all of the terms of the offering of the offered certificates, read this entire document carefully.
Relevant Parties
| Title of Certificates | Commercial Mortgage Pass-Through Certificates, Series 2018-C45. |
| Depositor | Wells Fargo Commercial Mortgage Securities, Inc., a North Carolina corporation, a wholly-owned subsidiary of Wells Fargo Bank, National Association, a national banking association organized under the laws of the United States of America, which is a direct, wholly-owned subsidiary of Wells Fargo & Company, a Delaware corporation. The depositor’s address is 301 South College Street, Charlotte, North Carolina 28202–0901 and its telephone number is (704) 374-6161. See “Transaction Parties—The Depositor”. |
| Issuing Entity | Wells Fargo Commercial Mortgage Trust 2018-C45, a New York common law trust, to be established on the closing date under the pooling and servicing agreement. For more detailed information, see “Transaction Parties—The Issuing Entity”. |
Sponsors; Mortgage
| Loan Sellers; Originators | The sponsors of this transaction are: |
| ● | Wells Fargo Bank, National Association, a national banking association |
| ● | Barclays Bank PLC, a public limited company registered in England and Wales |
| ● | Rialto Mortgage Finance, LLC, a Delaware limited liability company |
| ● | C-III Commercial Mortgage LLC, a Delaware limited liability company |
| The sponsors are sometimes also referred to in this prospectus as the “mortgage loan sellers”. |
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| The mortgage loan sellers will transfer to the depositor the mortgage loans set forth in the following chart, and the depositor will in turn sell the mortgage loans to the issuing entity. |
| Sellers of the Mortgage Loans | ||||||||||
Mortgage Loan Seller | Number | Aggregate | Approx. | |||||||
| Wells Fargo Bank, National Association | 14 | $ | 271,350,036 | 41.2 | % | |||||
| Barclays Bank PLC | 11 | 172,882,585 | 26.2 | |||||||
| Rialto Mortgage Finance, LLC | 7 | 113,800,000 | 17.3 | |||||||
| C-III Commercial Mortgage LLC(1) | 17 | 100,732,798 | 15.3 | |||||||
| Total | 49 | $ | 658,765,419 | 100.0 | % | |||||
| (1) | Two of the mortgage loans sold by C-III Commercial Mortgage LLC, secured by the mortgaged properties identified on Annex A-1 to this prospectus as Securitas Office and 5800 North Course Office, collectively representing approximately 2.4% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, were originated by an affiliate thereof, C-III Mortgage Funding LLC. | |
| All of the mortgage loans were originated by their respective sellers or affiliates thereof, except those certain mortgage loans that are part of larger whole loan structures that were co-originated by the applicable seller with one or more other lenders. |
| See “Transaction Parties—The Sponsors and Mortgage Loan Sellers” and “Description of the Mortgage Pool—General—Co-Originated or Third-Party Originated Mortgage Loans”. |
| Master Servicer | Wells Fargo Bank, National Association will be the master servicer. The master servicer will be responsible for the master servicing and administration of the mortgage loans and any related companion loan pursuant to the pooling and servicing agreement (other than any mortgage loan or companion loan that is part of a whole loan and serviced under the related trust and servicing agreement or pooling and servicing agreement, as applicable, related to the transaction indicated in the table entitled “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans” below). The principal west coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at MAC A0227-020, 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at Three Wells Fargo, MAC D1050-084, 401 South Tryon Street, Charlotte, North Carolina 28202. See “Transaction Parties—The Master Servicer” and “Pooling and Servicing Agreement”. |
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| The non-serviced mortgage loans will be serviced by the master servicer set forth in the table below under the heading “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans”. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Special Servicer | LNR Partners, LLC, a Florida limited liability company, will act as special servicer with respect to the mortgage loans (other than any excluded special servicer loans) and any related companion loan other than with respect to the non-serviced mortgage loans and related companion loan(s) set forth in the table entitled “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans” below. The special servicer will be primarily responsible for (i) making decisions and performing certain servicing functions with respect to such mortgage loans and any related companion loan as to which a special servicing transfer event (such as a default or an imminent default) has occurred and (ii) reviewing, evaluating, processing and providing or withholding consent as to major decisions relating to such mortgage loans and any related companion loan for which a special servicing transfer event has not occurred, in each case pursuant to the pooling and servicing agreement for this transaction. The principal servicing offices of the special servicer is located at 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139. See “Transaction Parties—The Special Servicer” and “Pooling and Servicing Agreement”. |
| If the special servicer obtains knowledge that it has become a borrower party with respect to any mortgage loan (such mortgage loan referred to herein as an “excluded special servicer loan”), the special servicer will be required to resign as special servicer of that excluded special servicer loan. Prior to the occurrence and continuance of a control termination event under the pooling and servicing agreement, the directing certificateholder will be required to select a separate special servicer that is not a borrower party (referred to herein as an “excluded special servicer”) with respect to any excluded special servicer loan, unless such excluded special servicer loan is also an excluded loan. After the occurrence and during the continuance of a control termination event or if at any time the applicable excluded special servicer loan is also an excluded loan, the resigning special servicer will be required to use commercially reasonable efforts to select the related excluded special servicer. See “—Directing Certificateholder” below and “Pooling and Servicing Agreement—Termination of the Master Servicer or Special Servicer for Cause”. Any excluded special |
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| servicer will be required to perform all of the obligations of the special servicer and will be entitled to all special servicing compensation with respect to such excluded special servicer loan earned during such time as the related mortgage loan is an excluded special servicer loan. |
| LNR Partners, LLC is expected to be appointed as special servicer by Prime Finance Long Duration (B-Piece) II Holdco I, L.P., a Delaware limited partnership or an affiliate thereof, which, on the closing date, is expected to be appointed (or to appoint an affiliate) as the initial directing certificateholder. See “Pooling and Servicing Agreement—The Directing Certificateholder”. |
| The special servicer of each non-serviced mortgage loan is set forth in the table below entitled “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans”. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Trustee | Wilmington Trust, National Association will act as trustee. The corporate trust office of the trustee is located at 1100 North Market Street, Wilmington, Delaware 19890, Attention: WFCM 2018-C45. Following the transfer of the mortgage loans, the trustee, on behalf of the issuing entity, will become the mortgagee of record for each mortgage loan (other than a non-serviced mortgage loan) and any related companion loan. See “Transaction Parties—The Trustee” and “Pooling and Servicing Agreement”. |
| With respect to each non-serviced mortgage loan, the entity set forth in the table entitled “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans” below, in its capacity as trustee under the trust and servicing agreement or pooling and servicing agreement, as applicable, for the indicated transaction, is the mortgagee of record for that non-serviced mortgage loan and any related companion loan. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Certificate Administrator | Wells Fargo Bank, National Association will act as certificate administrator. The certificate administrator will also be required to act as custodian, certificate registrar, REMIC administrator, 17g-5 information provider and authenticating agent. The corporate trust offices of Wells Fargo Bank, National Association are located at 9062 Old Annapolis Road, Columbia, Maryland 21045, and for certificate transfer purposes are located at 600 South 4th Street, 7th Floor, Minneapolis, Minnesota 55479. See “Transaction Parties—The |
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| Certificate Administrator” and “Pooling and Servicing Agreement”. |
| The custodian with respect to each non-serviced mortgage loan will be the entity set forth in the table below entitled “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans”, as custodian under the trust and servicing agreement or pooling and servicing agreement, as applicable, for the indicated transaction. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Operating Advisor | Park Bridge Lender Services LLC, a New York limited liability company and an indirect wholly-owned subsidiary of Park Bridge Financial LLC, will be the operating advisor. The operating advisor will have certain review and reporting responsibilities with respect to the performance of the special servicer, and in certain circumstances may recommend to the certificateholders that the special servicer be replaced. The operating advisor will generally have no obligations or consultation rights as operating advisor under the pooling and servicing agreement for this transaction with respect to a non-serviced mortgage loan or any related REO property. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” and “Pooling and Servicing Agreement—The Operating Advisor”. |
Asset Representations
| Reviewer | Park Bridge Lender Services LLC, a New York limited liability company and an indirect wholly-owned subsidiary of Park Bridge Financial LLC, will 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 vote to direct a review of such delinquent mortgage loans. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” and “Pooling and Servicing Agreement—The Asset Representations Reviewer”. |
| Directing Certificateholder | The directing certificateholder will have certain consent and consultation rights in certain circumstances with respect to the mortgage loans (other than certain excluded loans as described in the next paragraph), as further described in this prospectus. The directing certificateholder will generally be the controlling class certificateholder (or its representative) selected by more than a specified percentage of the controlling class certificateholders (by certificate balance, as certified by the certificate registrar from time to time as provided for in the pooling and servicing agreement). |
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| With respect to the directing certificateholder or the holder of the majority of the controlling class certificates, an “excluded loan” is a mortgage loan or whole loan with respect to which the directing certificateholder or the holder of the majority of the controlling class certificates is a borrower, a mortgagor, a manager of a mortgaged property, the holder of a mezzanine loan that has accelerated the related mezzanine loan (subject to certain exceptions) or commenced foreclosure or enforcement proceedings against the equity collateral pledged to secure the related mezzanine loan, or any borrower party affiliate thereof. However, in certain circumstances (such as when no directing certificateholder has been appointed and no one holder owns the largest aggregate certificate balance of the controlling class) there may be no directing certificateholder even if there is a controlling class. See “Pooling and Servicing Agreement—The Directing Certificateholder”. |
| The controlling class will be, as of any date of determination, the most subordinate class of the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR 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. As of the closing date, the controlling class will be the Class J-RR certificates. No class of certificates, other than as described above, will be eligible to act as the controlling class or appoint a directing certificateholder. |
| It is expected that on the closing date, Prime Finance Long Duration (B-Piece) II Holdco I, L.P. or an affiliate will purchase or otherwise acquire a majority of the Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR and Class V certificates, and that Prime Finance Long Duration (B-Piece) II Holdco I, L.P. will be appointed as the initial directing certificateholder with respect to each mortgage loan (other than (i) any non-serviced mortgage loan or (ii) any excluded loan). |
| Each entity identified in the table entitled “Non-Serviced Whole Loans” under “—The Mortgage Pool—Whole Loans” below is the initial directing certificateholder (or the equivalent) under the trust and servicing agreement or pooling and servicing agreement, as applicable, for the indicated transaction and will have certain consent and consultation rights with respect to the related non-serviced whole loan, which are substantially similar, but not identical, to those of the directing certificateholder under the pooling and servicing agreement for this |
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| securitization, subject to similar appraisal mechanics. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans”, “—The Non-Serviced AB Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
Certain Affiliations
| and Relationships | The originators, the sponsors, the underwriters, and parties to the pooling and servicing agreement have various roles in this transaction as well as certain relationships with parties to this transaction and certain of their affiliates. These roles and other potential relationships may give rise to conflicts of interest as further described in this prospectus under “Risk Factors—Risks Related to Conflicts of Interest” and “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”. |
Relevant Dates and Periods
| Cut-off Date | The mortgage loans will be considered part of the trust fund as of their respective cut-off dates. The cut-off date with respect to each mortgage loan is the respective due date for the monthly debt service payment that is due in July 2018 (or, in the case of any mortgage loan that has its first due date in August 2018, the date that would have been its due date in July 2018 under the terms of that mortgage loan if a monthly debt service payment were scheduled to be due in that month). |
| Closing Date | On or about July 17, 2018. |
| Distribution Date | The 4th business day following each determination date. The first distribution date will be in August 2018. |
| Determination Date | The 11th day of each month or, if the 11th day is not a business day, then the business day immediately following such 11th day. |
| Record Date | With respect to any distribution date, the last business day of the month preceding the month in which that distribution date occurs. |
| Business Day | Under the pooling and servicing agreement, a business day will be any day other than a Saturday, a Sunday or a day on which banking institutions in Florida, Maryland, North Carolina, New York, California or any of the jurisdictions in which the respective primary servicing offices of the master servicer or the special servicer or the corporate trust offices of either the certificate administrator or the trustee are located, or the New York Stock Exchange or the Federal Reserve System of the |
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| United States of America, are authorized or obligated by law or executive order to remain closed. |
| Interest Accrual Period | The interest accrual period for each class of offered certificates for each distribution date will be the calendar month immediately preceding the month in which that distribution date occurs. |
| Collection Period | For any mortgage loan to be held by the issuing entity and any distribution date, the period commencing on the day immediately following the due date for such mortgage loan in the month preceding the month in which that distribution date occurs and ending on and including the due date for such mortgage loan in the month in which that distribution date occurs. However, in the event that the last day of a collection period is not a business day, any periodic payments received with respect to the mortgage loans relating to that collection period on the business day immediately following that last day will be deemed to have been received during that collection period and not during any other collection period. |
Assumed Final
Distribution Date; Rated
| Final Distribution Date | The assumed final distribution dates set forth below for each class have been determined on the basis of the assumptions described in “Description of the Certificates—Assumed Final Distribution Date; Rated Final Distribution Date”: |
Class | Assumed Final Distribution Date |
| Class A-1 | March 2023 |
| Class A-2 | March 2023 |
| Class A-SB | December 2027 |
| Class A-3 | May 2028 – May 2028(1) |
| Class A-4 | June 2028 – June 2028(2) |
| Class X-A | NAP |
| Class X-B | NAP |
| Class A-S | June 2028 |
| Class B | June 2028 |
| Class C | June 2028 |
| (1) | The range of Assumed Final Distribution Dates is based on the initial certificate balance of the Class A-3 certificates ranging from $150,000,000 to $200,000,000. | |
| (2) | The range of Assumed Final Distribution Dates is based on the initial certificate balance of the Class A-4 certificates ranging from $203,783,000 to $253,783,000. |
| The rated final distribution date will be the distribution date in June 2051. |
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Transaction Overview
On the closing date, each sponsor will sell its respective mortgage loans to the depositor, which will in turn deposit the mortgage loans into the issuing entity, a common law trust created on the closing date. The issuing entity will be formed by a pooling and servicing agreement to be entered into among the depositor, the master servicer, the special servicer, the certificate administrator, the trustee, the operating advisor and the asset representations reviewer.
The transfers of the mortgage loans from the sponsors to the depositor and from the depositor to the issuing entity in exchange for the offered certificates are illustrated below:
Offered Certificates
| General | We are offering the following classes of commercial mortgage pass-through certificates as part of Series 2018-C45: |
| ● | Class A-1 |
| ● | Class A-2 |
| ● | Class A-SB |
| ● | Class A-3 |
| ● | Class A-4 |
| ● | Class X-A |
| ● | Class X-B |
| ● | Class A-S |
| ● | Class B |
| ● | Class C |
| The certificates of this Series will consist of the above classes and the following classes that are not being offered by this prospectus: Class X-D, Class D, Class E- |
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| RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR, Class V and Class R. |
Certificate Balances and
| Notional Amounts | Your certificates will have the approximate aggregate initial certificate balance or notional amount set forth below, subject to a variance of plus or minus 5%: |
Class | Approx. Initial Aggregate | Approx. % | Approx. | |||||
| Class A-1 | $ | 14,405,000 | 2.187% | 30.000% | ||||
| Class A-2 | $ | 5,559,000 | 0.844% | 30.000% | ||||
| Class A-SB | $ | 37,388,000 | 5.675% | 30.000% | ||||
| Class A-3 | (2) | (2) | 30.000% | |||||
| Class A-4 | (2) | (2) | 30.000% | |||||
| Class X-A | $ | 461,135,000 | NAP | NAP | ||||
| Class X-B | $ | 110,344,000 | NAP | NAP | ||||
| Class A-S | $ | 46,114,000 | 7.000% | 23.000% | ||||
| Class B | $ | 32,115,000 | 4.875% | 18.125% | ||||
| Class C | $ | 32,115,000 | 4.875% | 13.250% | ||||
| (1) | The approximate initial credit support with respect to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates represents the approximate credit enhancement for the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates in the aggregate. | |
| (2) | The exact initial certificate balances of the Class A-3 and Class A-4 certificates are unknown and will be determined based on the final pricing of those classes of certificates. The initial certificate balance of the Class A-3 Certificates is expected to fall within a range of $150,000,000 and $200,000,000, representing between approximately 22.770% and 30.360% of the Initial Pool Balance. The initial certificate balance of the Class A-4 Certificates is expected to fall within a range of $203,783,000 and $253,783,000, representing between approximately 30.934% and 38.524% of the Initial Pool Balance. |
Pass-Through Rates
| A. Offered Certificates | Your certificates will accrue interest at an annual rate called a pass-through rate. The initial approximate pass-through rate is set forth below for each class of certificates: |
Class | Approx. Initial Pass-Through Rate(1) |
| Class A-1 | % |
| Class A-2 | % |
| Class A-SB | % |
| Class A-3 | % |
| Class A-4 | % |
| Class X-A | % |
| Class X-B | % |
| Class A-S | % |
| Class B | % |
| Class C | % |
| (1) | The pass-through rates for the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-S, Class B and Class C certificates for any distribution date will be a per annum rate equal to one of the following: (i) a fixed rate, (ii) a variable rate per annum equal to the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, (iii) a variable rate equal to the lesser of (a) a fixed rate and (b) the | |
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| weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date or (iv) a variable rate equal to the weighted average of the net mortgage interest rates for the related distribution date minus a specified percentage. The pass-through rate for the Class X-A certificates for any distribution date will be a per annum rate equal to the excess, if any, of (a) the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, over (b) the weighted average of the pass-through rates on the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates for the related distribution date, weighted on the basis of their respective aggregate certificate balances outstanding immediately prior to that distribution date. The pass-through rate for the Class X-B certificates for any distribution date will be a per annum rate equal to the excess, if any, of (a) the weighted average of the net mortgage interest rates on the mortgage loans for the related distribution date, over (b) the weighted average of the pass-through rates on the Class A-S, Class B and Class C certificates for the related distribution date, weighted on the basis of their respective aggregate certificate balances outstanding immediately prior to that distribution date. For purposes of the calculation of the weighted average of the net mortgage interest rates on the mortgage loans for each distribution date, the mortgage interest rates will be adjusted as necessary to a 30/360 basis. | ||
B. Interest Rate
| Calculation Convention | Interest on the offered certificates at their applicable pass-through rates will be calculated based on a 360-day year consisting of twelve 30-day months, or a “30/360 basis”. |
| For purposes of calculating the pass-through rates on the Class X-A and Class X-B certificates and any other class of certificates that has a pass-through rate limited by, equal to or based on the weighted average net mortgage interest rate (which calculation does not include any companion loan interest rate), the mortgage loan interest rates will not reflect any default interest rate, any loan term modifications agreed to by the special servicer or any modifications resulting from a borrower’s bankruptcy or insolvency. |
| For purposes of calculating the pass-through rates on the offered certificates, the interest rate for each mortgage loan that accrues interest based on the actual number of days in each month and assuming a 360-day year, or an “actual/360 basis”, will be recalculated, if necessary, so that the amount of interest that would accrue at that recalculated rate in the applicable month, calculated on a 30/360 basis, will equal the amount of interest that is required to be paid on that mortgage loan in that month, subject to certain adjustments as described in “Description of the Certificates—Distributions—Pass-Through Rates” and “—Interest Distribution Amount”. |
C. Servicing and
| Administration Fees | Each of the master servicer and the special servicer is entitled to a servicing fee or special servicing fee, as the case may be, from the interest payments on each mortgage loan (other than any non-serviced mortgage loan with respect to the special servicing fee only), any related serviced companion loan and any related REO |
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| loans and, with respect to the special servicing fees, if the related mortgage loan interest payments (or other collections in respect of the related mortgage loan or mortgaged property) are insufficient, then from general collections on all mortgage loans. |
| The servicing fee for each distribution date, including the master servicing fee and the portion of the servicing fee payable to any primary servicer or subservicer, is calculated on the outstanding principal amount of each mortgage loan (including any non-serviced mortgage loan) at a servicing fee rate equal to a per annum rate ranging from 0.00500% to 0.05500%. |
| The special servicing fee for each distribution date is calculated based on the outstanding principal amount of each mortgage loan (other than any non-serviced mortgage loan) as to which a special servicing transfer event has occurred (including any REO loans), on a loan-by-loan basis at the special servicing fee rate equal to the greater of (i) a per annum rate of 0.25000% and (ii) the per annum rate that would result in a special servicing fee of $3,500 for the related month. The special servicer will not be entitled to a special servicing fee with respect to any non-serviced mortgage loan. |
| Any primary servicing fees or sub-servicing fees with respect to each mortgage loan (other than any non-serviced mortgage loan) will be paid by the master servicer or special servicer, respectively, out of the fees described above. |
| The master servicer and special servicer are also entitled to additional fees and amounts, including income on the amounts held in certain accounts and certain permitted investments, liquidation fees and workout fees. See “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”. |
| The certificate administrator fee for each distribution date is calculated on the outstanding principal amount of each mortgage loan (including any REO loan and any non-serviced mortgage loan, but not any companion loan) at a per annum rate equal to 0.01070%. The trustee fee is payable by the certificate administrator from the certificate administrator fee and is equal to $290 per month. |
| The operating advisor will be entitled to a fee on each distribution date calculated on the outstanding principal amount of each mortgage loan and REO loan (excluding any non-serviced mortgage loan and any related companion loan) at a per annum rate equal to |
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| 0.00297%. The operating advisor will also be entitled under certain circumstances to a consulting fee. |
| The asset representations reviewer will be entitled to an upfront fee of $5,000 on the closing date. As compensation for the performance of its routine duties, the asset representations reviewer will be entitled to a fee on each distribution date calculated on the outstanding principal amount of each mortgage loan and REO loan (including any non-serviced mortgage loan, but excluding any related companion loan(s)) at a per annum rate equal to 0.00046%. 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 “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® as a license fee for use of its names and trademarks, including an investor reporting package. This fee will be payable prior to any distributions to certificateholders. |
| Payment of the fees and reimbursement of the costs and expenses described above will generally have priority over the distribution of amounts payable to the certificateholders. See “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, “—Termination of the Master Servicer or Special Servicer For Cause” and “—Limitation on Liability; Indemnification”. |
| With respect to each non-serviced mortgage loan set forth in the table below, the master servicer under the related trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of that mortgage loan will be entitled to a primary servicing fee at a rate equal to a per annum rate set forth in the table below, and the special servicer under the related trust and servicing agreement or pooling and servicing agreement, as applicable, will be |
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| entitled to a special servicing fee at a rate equal to the per annum rate set forth below. In addition, each party to the trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of a non-serviced whole loan will be entitled to receive other fees and reimbursements with respect to the related non-serviced mortgage loan in amounts, from sources, and at frequencies, that are similar, but not necessarily identical, to those described above and, in certain cases (for example, with respect to unreimbursed special servicing fees and servicing advances with respect to the related non-serviced whole loan), such amounts will be reimbursable from general collections on the mortgage loans to the extent not recoverable from the related non-serviced whole loan and to the extent allocable to the related non-serviced mortgage loan pursuant to the related intercreditor agreement. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans”, “—The Non-Serviced AB Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| NON-SERVICED MORTGAGE LOANS | ||
Non-Serviced Mortgage Loan | Primary Servicing Fee Rate(1) | Special Servicing Fee Rate |
| Village at Leesburg | 0.00250% per annum | 0.25% per annum(2) |
| 181 Fremont Street | 0.00250% per annum | 0.25% per annum(3)(4) |
| CoolSprings Galleria | 0.00250% per annum | 0.25% per annum |
| Flats at East Bank | 0.00500% per annum | 0.25% per annum(5) |
| (1) | Each primary servicing fee rate described in the table and footnotes thereto is included as part of the Servicing Fee Rate. | |
| (2) | The special servicing fee rate is the greater of (i) 0.2500% per annum or (ii) the rate that would result in a special servicing fee of $3,500 per month. |
| (3) | The special servicing fee rate is the greater of (i) 0.2500% per annum or (ii) the rate that would result in a special servicing fee of $3,500 per month. |
| (4) | From and after the securitization of the related controlling pari passu companion loan, such mortgage loan will be serviced under the pooling and servicing agreement governing such securitization and the related special servicing fee rate will be as specified in such pooling and servicing agreement. |
| (5) | The special servicing fee rate is the greater of (i) 0.2500% per annum or (ii) the rate that would result in a special servicing fee of $3,500 per month. |
Distributions
A. Amount and Order
of Distributions on
| Certificates | On each distribution date, funds available for distribution to the certificates (other than any yield maintenance charges and prepayment premiums and any excess interest distributable to the Class V certificates) will be |
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| distributed in the following amounts and order of priority: |
| First, to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B and Class X-D certificates, in respect of interest, up to an amount equal to, and pro rata in accordance with, the interest entitlements for those classes; |
| Second, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, as follows: (i) to the extent of funds allocated to principal and available for distribution: (a) first, to principal on the Class A-SB certificates, until the certificate balance of the Class A-SB certificates is reduced to the planned principal balance for the related distribution date set forth in Annex E to this prospectus, (b) second, to principal on the Class A-1 certificates, until the certificate balance of the Class A-1 certificates has been reduced to zero, (c) third, to principal on the Class A-2 certificates, until the certificate balance of the Class A-2 certificates has been reduced to zero, (d) fourth, to principal on the Class A-3 certificates until the certificate balance of the Class A-3 certificates has been reduced to zero, (e) fifth, to principal on the Class A-4 certificates until the certificate balance of the Class A-4 certificates has been reduced to zero, and (f) sixth, to principal on the Class A-SB certificates, until the certificate balance of the Class A-SB certificates has been reduced to zero, or (ii) if the certificate balance of each class of certificates other than the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates has been reduced to zero as a result of the allocation of mortgage loan losses to those classes of certificates, funds available for distributions of principal will be distributed to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, pro rata, without regard to the distribution priorities described above or the planned principal balance of the Class A-SB certificates. |
| Third, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, to reimburse the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, pro rata, based upon the aggregate unreimbursed losses previously allocated to each such class, up to the amount of any previously unreimbursed losses on the mortgage loans allocable to principal that were previously borne by those classes, together with interest on that amount at the pass-through rate for such class; |
| Fourth, to the Class A-S certificates as follows: (a) to interest on the Class A-S certificates up to the amount of its interest entitlement; (b) to the extent of funds |
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| allocable to principal remaining after distributions in respect of principal to each class with a higher priority (as set forth in prior enumerated clauses set forth above), to principal on the Class A-S certificates until its certificate balance has been reduced to zero; and (c) to reimburse the Class A-S certificates up to the amount of any previously unreimbursed losses on the mortgage loans that were previously allocated to those certificates, together with interest on that amount at the pass-through rate for such class; |
| Fifth, to the Class B certificates as follows: (a) to interest on the Class B certificates up to the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class with a higher priority (as set forth in prior enumerated clauses set forth above), to principal on the Class B certificates until its certificate balance has been reduced to zero; and (c) to reimburse the Class B certificates up to the amount of any previously unreimbursed losses on the mortgage loans that were previously allocated to those certificates, together with interest on that amount at the pass-through rate for such class; |
| Sixth, to the Class C certificates as follows: (a) to interest on the Class C certificates up to the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class with a higher priority (as set forth in prior enumerated clauses set forth above), to principal on the Class C certificates until its certificate balance has been reduced to zero; and (c) to reimburse the Class C certificates up to the amount of any previously unreimbursed losses on the mortgage loans that were previously allocated to those certificates, together with interest on that amount at the pass-through rate for such class; |
| Seventh, to the non-offered certificates (other than the Class X-D, Class V and Class R certificates) in the amounts and order of priority described in “Description of the Certificates—Distributions”; and |
| Eighth, to the Class R certificates, any remaining amounts. |
| For more detailed information regarding distributions on the certificates, see “Description of the Certificates—Distributions—Priority of Distributions”. |
B. Interest and Principal
| Entitlements | A description of the interest entitlement of each class of certificates (other than the Class V and Class R |
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| certificates) can be found in “Description of the Certificates—Distributions—Interest Distribution Amount”. As described in that section, there are circumstances in which your interest entitlement for a distribution date could be less than one full month’s interest at the pass-through rate on your certificate’s balance or notional amount. |
| A description of the amount of principal required to be distributed to each class of certificates entitled to principal on a particular distribution date can be found in “Description of the Certificates—Distributions—Principal Distribution Amount”. |
C. Yield Maintenance
Charges, Prepayment
| Premiums | Yield maintenance charges and prepayment premiums with respect to the mortgage loans will be allocated to the certificates as described in “Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums”. |
| For an explanation of the calculation of yield maintenance charges, see “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”. |
D. Subordination,
Allocation of Losses
| and Certain Expenses | The chart below describes the manner in which the payment rights of certain classes of certificates will be senior or subordinate, as the case may be, to the payment rights of other classes of certificates. The chart also shows the manner in which mortgage loan losses are allocated to certain classes of the certificates in ascending order (beginning with the non-offered certificates, other than the Class X-D, Class V and Class R certificates) to reduce the balance of each such class to zero; provided that no principal payments or mortgage loan losses will be allocated to the Class X-A, Class X-B, Class X-D, Class V or Class R certificates, although principal payments and mortgage loan losses may reduce the notional amounts of the Class X-A, Class X-B and Class X-D certificates and, therefore, the amount of interest they accrue. |
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 |
| (1) | The Class X-A, Class X-B and Class X-D certificates are interest-only certificates. |
| (2) | The Class X-D certificates are non-offered certificates. |
| (3) | Other than the Class X-D, Class V and Class R certificates. |
| Other than the subordination of certain classes of certificates, as described above, no other form of credit enhancement will be available for the benefit of the holders of the offered certificates. |
| The notional amount of the Class X-A certificates will be reduced by the amount of principal losses or principal payments, if any, allocated to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates. The notional amount of the Class X-B certificates will be reduced by the amount of principal losses or principal payments, if any, allocated to the Class A-S, Class B and Class C certificates. |
| To the extent funds are available on a subsequent distribution date for distribution on your offered certificates, you will be reimbursed for any losses allocated to your offered certificates with interest at the pass-through rate on those offered certificates in accordance with the distribution priorities. |
| See “Description of the Certificates—Subordination; Allocation of Realized Losses” for more detailed information regarding the subordination provisions applicable to the certificates and the allocation of losses to the certificates. |
E. Shortfalls in Available
| Funds | Shortfalls will reduce distributions to the classes of certificates with the lowest payment priorities. Shortfalls may occur as a result of: |
| ● | the payment of special servicing fees and other additional compensation that the special servicer is entitled to receive; |
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| ● | interest on advances made by the master servicer, the special servicer or the trustee (to the extent not covered by late payment charges or default interest paid by the related borrower); |
| ● | the application of appraisal reductions to reduce interest advances; |
| ● | extraordinary expenses of the issuing entity including indemnification payments payable to the parties to the pooling and servicing agreement; |
| ● | a modification of a mortgage loan’s interest rate or principal balance; and |
| ● | other unanticipated or default-related expenses of the issuing entity. |
| In addition, prepayment interest shortfalls on the mortgage loans that are not covered by certain compensating interest payments made by the master servicer are required to be allocated among the classes of certificates (other than the Class V certificates) entitled to interest, on a pro rata basis, to reduce the amount of interest payable on each such class of certificates to the extent described in this prospectus. See “Description of the Certificates—Prepayment Interest Shortfalls”. |
| F. Excess Interest | On each distribution date, any excess interest in respect of the increase in the interest rate on any mortgage loan with an anticipated repayment date after the related anticipated repayment date to the extent actually collected and applied as interest during a collection period will be distributed to the holders of the Class V certificates on the related distribution date as set forth in “Description of the Certificates—Distributions—Excess Interest”. This excess interest will not be available to make distributions to any other class of certificates or to provide credit support for other classes of certificates or offset any interest shortfalls or to pay any other amounts to any other party under the pooling and servicing agreement. |
Advances
| A. P&I Advances | The master servicer is required to advance a delinquent periodic payment on each mortgage loan (including any non-serviced mortgage loan) or any REO loan (other than any portion of an REO loan related to a companion loan), unless in each case, the master servicer or the special servicer determines that the advance would be nonrecoverable. Neither the master servicer nor the trustee will be required to advance balloon payments |
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| due at maturity or outstanding on the related anticipated repayment date, as applicable, in excess of the regular periodic payment, interest in excess of a mortgage loan’s regular interest rate, default interest, late payment charges, prepayment premiums or yield maintenance charges. |
| The amount of the interest portion of any advance will be subject to reduction to the extent that an appraisal reduction of the related mortgage loan has occurred (and with respect to any mortgage loan that is part of a whole loan, to the extent such appraisal reduction amount is allocated to the related mortgage loan). There may be other circumstances in which the master servicer will not be required to advance a full month of principal and/or interest. If the master servicer fails to make a required advance, the trustee will be required to make the advance, unless the trustee determines that the advance would be nonrecoverable. If an interest advance is made by the master servicer, the master servicer will not advance the portion of interest that constitutes its servicing fee, but will advance the portion of interest that constitutes the monthly fees payable to the certificate administrator, the trustee, the operating advisor, the asset representations reviewer and the CREFC® license fee. |
| Neither the master servicer nor the trustee will make, or be permitted to make, any principal or interest advance with respect to any companion loan and the special servicer will not make any principal or interest advance with respect to any mortgage loan or companion loan. |
| See “Pooling and Servicing Agreement—Advances”. |
B. Property Protection
| Advances | The master servicer may be required to make advances with respect to the mortgage loans (excluding any non-serviced mortgage loan) to pay delinquent real estate taxes, assessments and hazard insurance premiums and similar expenses necessary to: |
| ● | protect and maintain (and in the case of REO properties, lease and manage) the related mortgaged property; |
| ● | maintain the lien on the related mortgaged property; and/or |
| ● | enforce the related mortgage loan documents. |
| The special servicer will have no obligation to make any property protection advances (although it may elect to make them in an emergency circumstance). If the |
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| special servicer makes a property protection advance, the master servicer will be required to reimburse the special servicer for that advance (unless the master servicer determines that the advance would be nonrecoverable, in which case the advance will be reimbursed out of the collection account) and the master servicer will be deemed to have made that advance as of the date made by the special servicer. |
| If the master servicer fails to make a required advance of this type, the trustee will be required to make this advance. None of the master servicer, the special servicer or the trustee is required to advance amounts determined by such party to be nonrecoverable. |
| See “Pooling and Servicing Agreement—Advances”. |
| With respect to each non-serviced mortgage loan, the master servicer (and the trustee, as applicable) under the trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of that non-serviced whole loan will be required to make similar advances with respect to delinquent real estate taxes, assessments and hazard insurance premiums as described above. |
| C. Interest on Advances | The master servicer, the special servicer and the trustee, as applicable, will be entitled to interest on the above described advances at the “Prime Rate” as published in The Wall Street Journal, as described in this prospectus. Interest accrued on outstanding advances may result in reductions in amounts otherwise payable on the certificates. Neither the master servicer nor the trustee will be entitled to interest on advances made with respect to principal and interest due on a mortgage loan until the related due date has passed and any grace period for late payments applicable to the mortgage loan has expired. See “Pooling and Servicing Agreement—Advances”. |
| With respect to each non-serviced mortgage loan, the applicable makers of advances under the related trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of the non-serviced whole loan will similarly be entitled to interest on advances, and any accrued and unpaid interest on property protection advances made in respect of such non-serviced mortgage loan may be reimbursed from general collections on the other mortgage loans included in the issuing entity to the extent not recoverable from such non-serviced whole loan and to the extent allocable to such non-serviced mortgage loan in accordance with the related intercreditor agreement. |
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| The Mortgage Pool |
| The Mortgage Pool | The issuing entity’s primary assets will be forty-nine (49) fixed-rate commercial mortgage loans, each evidenced by one or more promissory notes secured by first mortgages, deeds of trust, deeds to secure debt or similar security instruments on the fee and/or leasehold estate of the related borrower in eighty-nine (89) commercial, multifamily or manufactured housing community properties. See “Description of the Mortgage Pool—General”. |
| The aggregate principal balance of the mortgage loans as of the cut-off date will be approximately $658,765,419. |
| Whole Loans |
| Unless otherwise expressly stated in this prospectus, the term “mortgage loan” refers to each of the forty-nine (49) commercial mortgage loans to be held by the issuing entity. Of the mortgage loans, each mortgage loan in the table below is part of a larger whole loan, which is comprised of the related mortgage loan and one or more loans that are pari passu in right of payment to the related mortgage loan (each referred to in this prospectus as a “pari passu companion loan”) and, in certain cases, one or more loans that are subordinate in right of payment to the related mortgage loan (each referred to in this prospectus as a “subordinate companion loan”, and any pari passu companion loan or subordinate companion loan may also be referred to herein as a “companion loan”). The companion loans, together with their related mortgage loan, are referred to in this prospectus as a “whole loan”. |
Whole Loan Summary(1)
| Mortgage Loan Name | Mortgage Loan Cut-off Date Balance | % of Initial Pool Balance | Pari Passu Companion Loan Cut-off Date Balance | Subordinate Companion Loan Cut-off Date Balance | Mortgage Loan LTV Ratio(2) | Whole Loan LTV Ratio(3) | Mortgage Loan Underwritten NCF DSCR(2) | Whole Loan Underwritten NCF DSCR(3) | ||||||||
| Village at Leesburg | $65,250,000 | 9.9% | $66,000,000 | N/A | 58.1% | 58.1% | 1.28x | 1.28x | ||||||||
| 181 Fremont Street | $20,000,000 | 3.0% | $230,000,000 | N/A | 39.6% | 39.6% | 3.14x | 3.14x | ||||||||
| CoolSprings Galleria | $19,950,390 | 3.0% | $134,665,133 | N/A | 48.0% | 48.0% | 1.91x | 1.91x | ||||||||
| Flats at East Bank | $13,000,000 | 2.0% | $59,000,000 | $20,829,951 | 52.0% | 67.1% | 1.90x | 1.05x |
| (1) | Any unsecuritized pari passu companion loan may be further split. |
| (2) | Calculated including any related pari passu companion loans but excluding any related mezzanine debt and any related subordinate companion loans. |
| (3) | Calculated including any related pari passu companion loans and any related subordinate companion loans but excluding related mezzanine debt. |
| Each whole loan identified in the table below will not be serviced under the pooling and servicing agreement for this transaction and instead will be serviced under a separate trust and servicing agreement or pooling and servicing agreement, as applicable, identified in the |
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| table below entered into in connection with the securitization of one or more related companion loan(s) and is referred to in this prospectus as a “non-serviced whole loan”. The related mortgage loan is referred to as a “non-serviced mortgage loan” and the related companion loans are each referred to in this prospectus as a “non-serviced companion loan” or collectively, as “non-serviced companion loans”. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| For further information regarding the whole loans, see “Description of the Mortgage Pool—The Whole Loans”. |
Non-Serviced Whole Loans(1) | |||||
Mortgage Loan Name | Transaction/Pooling Agreement | % of Initial Pool Balance | Master Servicer | Special Servicer | Trustee |
| Village at Leesburg | WFCM 2018-C44 | 9.9% | Wells Fargo Bank, National Association | Rialto Capital Advisors, LLC | Wilmington Trust, National Association |
| 181 Fremont Street(2) | WFCM 2018-C44 | 3.0% | Wells Fargo Bank, National Association | Rialto Capital Advisors, LLC | Wilmington Trust, National Association |
| CoolSprings Galleria | BANK 2018-BNK12 | 3.0% | Wells Fargo Bank, National Association | Midland Loan Services, a Division of PNC Bank, National Association | Wilmington Trust, National Association |
| Flats at East Bank | CGCMT 2018-C5(3) | 2.0% | Midland Loan Services, a Division of PNC Bank, National Association | KeyBank National Association | Wilmington Trust, National Association |
Mortgage Loan Name | Certificate Administrator | Custodian | Operating Advisor | Initial Directing Party(4) |
| Village at Leesburg | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Pentalpha Surveillance LLC | RREF III-D AIV RR H, LLC |
| 181 Fremont Street(2) | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Pentalpha Surveillance LLC | RREF III-D AIV RR H, LLC |
| CoolSprings Galleria | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | Park Bridge Lender Services LLC | Ellington Management Group, LLC |
| Flats at East Bank | Citibank, N.A. | Citibank, N.A. | Pentalpha Surveillance LLC | ACREFI Mortgage Lending, LLC(5) |
| (1) | As of the closing date of the related securitization. |
| (2) | The 181 Fremont Street whole loan is currently being serviced under the pooling and servicing agreement governing the WFCM 2018-C44 securitization. From and after the securitization of the related controlling pari passu companion loan, such whole loan will be serviced under the pooling and servicing agreement governing such securitization and the related master servicer, special servicer, trustee, certificate administrator, custodian, operating advisor and directing certificateholder will be the parties specified in such pooling and servicing agreement. |
| (3) | The CGCMT 2018-C5 securitization is expected to close on or about June 21, 2018. |
| (4) | The entity with the heading “Initial Directing Party” above reflects the party entitled to exercise control and consultation rights with respect to the related mortgage loan similar to those of the directing certificateholder under the pooling and servicing agreement for this securitization until such party’s rights are terminated pursuant to the related pooling and servicing agreement or intercreditor agreement, as applicable. |
| (5) | The initial Directing Party is the holder of the controlling subordinate companion loan, who will have certain control and consultation rights with respect to the related mortgage loan until the occurrence of a control appraisal period pursuant to the related intercreditor agreement. During the control appraisal period, the directing certificateholder (or equivalent entity) under the identified servicing agreement is expected to exercise such control and consultation rights until such rights are terminated pursuant to such servicing agreement. |
| For further information regarding the whole loans, see “Description of the Mortgage Pool—The Whole Loans”, and for information regarding the servicing of the non-serviced whole loans, see “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
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| Mortgage Loan Characteristics |
| The following tables set forth certain anticipated characteristics of the mortgage loans as of the cut-off date (unless otherwise indicated). Except as specifically provided in this prospectus, various information presented in this prospectus (including loan-to-value ratios, debt service coverage ratios, debt yields and cut-off date balances per net rentable square foot, pad, room or unit, as applicable) with respect to any mortgage loan with a pari passu companion loan or subordinate companion loan is calculated including the principal balance and debt service payment of the related pari passu companion loan(s), but is calculated excluding the principal balance and debt service payment of the related subordinate companion loan (or any other subordinate debt encumbering the related mortgaged property or any related mezzanine debt or preferred equity). |
| The sum of the numerical data in any column may not equal the indicated total due to rounding. Unless otherwise indicated, all figures and percentages presented in this “Summary of Terms” are calculated as described under “Description of the Mortgage Pool—Certain Calculations and Definitions” and, unless otherwise indicated, such figures and percentages are approximate and in each case, represent the indicated figure or percentage of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. The principal balance of each mortgage loan as of the cut-off date assumes (or, in the case of each mortgage loan with a cut-off date prior to the date of this prospectus, reflects) the timely receipt of principal scheduled to be paid on or before the cut-off date and no defaults, delinquencies or prepayments on, or modifications of, any mortgage loan on or prior to the cut-off date. Whenever percentages and other information in this prospectus are presented on the mortgaged property level rather than the mortgage loan level, the information for mortgage loans secured by more than one mortgaged property is based on allocated loan amounts as stated in Annex A-1. All percentages of the mortgage loans and mortgaged properties, or of any specified group of mortgage loans and mortgaged properties, referred to in this prospectus without further description are approximate percentages of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, by cut-off date balances and/or the allocated loan amount allocated to such mortgaged properties as of the cut-off date. |
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| The mortgage loans will have the following approximate characteristics as of the cut-off date: |
| Cut-off Date Mortgage Loan Characteristics | ||
All Mortgage Loans | ||
| Initial Pool Balance(1) | $658,765,419 | |
| Number of mortgage loans | 49 | |
| Number of mortgaged properties | 89 | |
| �� | Range of Cut-off Date Balances | $797,183 to $65,250,000 |
| Average Cut-off Date Balance | $13,444,192 | |
| Range of Mortgage Rates | 3.709% to 6.110% | |
| Weighted average Mortgage Rate | 4.899% | |
| Range of original terms to maturity(2) | 60 months to 120 months | |
| Weighted average original term to maturity(2) | 120 months | |
| Range of remaining terms to maturity(2) | 56 months to 120 months | |
| Weighted average remaining term to maturity(2) | 118 months | |
| Range of original amortization terms(3) | 300 months to 360 months | |
| Weighted average original amortization term(3) | 358 months | |
| Range of remaining amortization terms(3) | 299 months to 360 months | |
| Weighted average remaining amortization term(3) | 358 months | |
| Range of Cut-off Date LTV Ratios(4)(5)(7) | 39.6% to 74.5% | |
| Weighted average Cut-off Date LTV Ratio(4)(5)(7) | 61.2% | |
| Range of LTV Ratios as of the maturity date(2)(4)(5)(7) | 39.0% to 66.4% | |
| Weighted average LTV Ratio as of the maturity date(2)(4)(5)(7) | 55.8% | |
| Range of U/W NCF DSCRs(5)(6)(7) | 1.25x to 3.14x | |
| Weighted average U/W NCF DSCR(5)(6)(7) | 1.66x | |
| Range of U/W NOI Debt Yields(5) | 8.1% to 16.2% | |
| Weighted average U/W NOI Debt Yield(5) | 10.3% | |
| Percentage of Initial Pool Balance consisting of: | ||
| Interest-only, Amortizing Balloon | 54.7% | |
| Interest-only, Balloon | 22.4% | |
| Amortizing Balloon | 17.7% | |
| Interest-only, ARD | 3.0% | |
| Interest-only, Amortizing ARD | 2.1% | |
| (1) | Subject to a permitted variance of plus or minus 5%. |
| (2) | With respect to two (2) mortgage loans with an anticipated repayment date, secured by the mortgaged properties identified on Annex A-1 to this prospectus as 181 Fremont Street and Amcor Industrial Center, representing approximately 5.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, calculated as of the related anticipated repayment date. |
| (3) | Excludes ten (10) mortgage loans secured by the mortgaged properties or portfolios of mortgaged properties identified on Annex A-1 to this prospectus as 1801 L Street, ExchangeRight Net Leased Portfolio #21, 181 Fremont Street, Roseville Corporate Center, Montclair East, Flats at East Bank, Tarheel MHC Portfolio, 63-37/27 108th Street, RC Plaza and 189 Court Street, representing approximately 25.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, that are interest-only for the entire term or until the anticipated repayment date, as applicable. |
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| (4) | Loan-to-value ratios (such as, for example, the loan-to-value ratios as of the cut-off date and the loan-to-value ratios at the maturity date) with respect to the mortgage loans were generally calculated using “as-is” values as described under “Description of the Mortgage Pool—Certain Calculations and Definitions” in this prospectus; provided, that with respect to certain mortgage loans, the related loan-to-value ratios have been calculated using “as-complete”, “as-stabilized” or similar hypothetical values. In addition, with respect to certain mortgage loans secured by multiple mortgaged properties, the appraised value may be an “as-portfolio” value that assigns a premium to the value of the mortgaged properties as a whole, which value exceeds the sum of their individual appraised values. Such mortgage loans are identified under the definition of “LTV Ratio” set forth under “Description of the Mortgage Pool—Certain Calculations and Definitions” in this prospectus. For further information, see Annex A-1 to this prospectus. See also “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property” and “Description of the Mortgage Pool—Appraised Value” in this prospectus. |
| (5) | In the case of four (4) mortgage loans secured by the mortgaged properties identified on Annex A-1 to this prospectus as Village at Leesburg, 181 Fremont Street, CoolSprings Galleria and Flats at East Bank, representing approximately 17.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, each of which has one or more pari passu companion loans and/or subordinate companion loans that are not included in the issuing entity, the debt service coverage ratio, loan-to-value ratio and debt yield have been calculated including the related pari passu companion loan(s) but excluding any related subordinate companion loan. |
| (6) | Debt service coverage ratios are calculated using the average of the principal and interest payments for the first twelve payment periods of the mortgage loan following the cut-off date, provided that (i) in the case of a mortgage loan that provides for interest-only payments through maturity or its anticipated repayment date, as applicable, such items are calculated based on the interest payments scheduled to be due on the first due date following the cut-off date and the 11 due dates thereafter for such mortgage loan and (ii) in the case of a mortgage loan that provides for an initial interest-only period that ends prior to maturity or its anticipated repayment date, as applicable, and provides for scheduled amortization payments thereafter, such items are calculated based on the monthly payment of principal and interest payable for the 12 payment periods immediately following the expiration of the interest-only period. |
| (7) | With respect to the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Mission Center, representing approximately 4.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the LTV Ratio at Maturity or ARD is calculated assuming that the loan is interest-only for the first 5 years of the 10-year loan term, provided, that, if as of June 11, 2023, the NCF Debt Yield equals or exceeds 10.5%, then the interest-only period will be extended for 1 additional year. The LTV Ratio at Maturity or ARD, assuming the borrower has one additional year of interest-only debt service payments, is 63.7%. See Annex A-1 to this prospectus and the footnotes thereto. |
| Forty-eight (48) of the mortgage loans, representing approximately 97.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount, accrue interest on an actual/360 basis. |
| One (1) of the mortgage loans, representing approximately 3.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, accrues interest on a 30/360 basis. |
| For further information regarding the mortgage loans, see “Description of the Mortgage Pool”. |
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Modified and Refinanced
| Loans | As of the cut-off date, none of the mortgage loans were modified due to a delinquency or were refinancings of loans in default at the time of refinancing and/or otherwise involved discounted payoffs in connection with the origination of such mortgage loans. |
| See “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings”. |
Properties with Limited
| Operating History | Twenty-nine (29) of the mortgaged properties or portfolio of mortgaged properties, representing approximately 22.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount, (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 either no prior operating history or limited prior operating history, (ii) have a borrower or an affiliate under the related mortgage loan that acquired the related mortgaged property 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 “Description of the Mortgage Pool—Mortgage Pool Characteristics—Mortgaged Properties With Limited Prior Operating History”. |
Certain Variances from
| Underwriting Standards | Certain of the mortgage loans may vary from the related mortgage loan seller’s underwriting guidelines described under “Transaction Parties—The Sponsors and Mortgage Loan Sellers”. |
| With respect to five (5) mortgage loans, representing approximately 15.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, there was an exception from the applicable mortgage loan seller’s underwriting guidelines with respect to satisfaction of certain underwriting criteria (e.g., occupancy, minimum debt service coverage ratio, underwritten management fees, underwritten vacancies, |
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| underwritten occupancy, single purpose entity covenants, etc.). |
| See “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines”; “Transaction Parties—The Sponsors and Mortgage Loan Sellers—Wells Fargo Bank, National Association—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting”; “—Barclays Bank PLC—Barclays’ Underwriting Guidelines and Processes”; “—Rialto Mortgage Finance, LLC—Rialto Mortgage’s Underwriting Standards and Loan Analysis”; and “—C-III Commercial Mortgage LLC—C-III CM’s Underwriting Guidelines and Processes”. |
Additional Aspects of 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 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”. |
| Credit Risk Retention | For a discussion of the manner in which the U.S. credit risk retention requirements will be satisfied by Wells Fargo Bank, National Association, as retaining sponsor, see “Credit Risk Retention”. |
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| This transaction is being structured with a “third-party purchaser” that will acquire an “eligible horizontal residual interest”, which will be comprised of the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates (the “horizontal risk retention certificates”). Prime Finance Long Duration (B-Piece) II Holdco I, L.P. (in satisfaction of the retention obligations of Wells Fargo Bank, National Association, as the retaining sponsor) will be contractually obligated to retain the horizontal risk retention certificates for a minimum of five years after the closing date, subject to certain permitted exceptions provided for under or changes to the risk retention rules. During this time, Prime Finance Long Duration (B-Piece) II Holdco I, L.P. will agree to comply with hedging, transfer and financing restrictions that are applicable to third-party purchasers under the credit risk retention rules. |
| None of the sponsors, the depositor or any other party to the transaction intends to retain a material net economic interest in the securitization constituted by the issue of the offered certificates in accordance with the EU risk retention and due diligence requirements or to take any other action which may be required by EEA-regulated investors for the purposes of their compliance with the EU risk retention and due diligence requirements or similar requirements. See “Risk Factors—Other Risks Relating to the Certificates—Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity of the Offered Certificates”. |
Information Available to
| Certificateholders | On each distribution date, the certificate administrator will prepare and make available to each certificateholder of record, initially expected to be Cede & Co., a statement as to the distributions being made on that date. Additionally, under certain circumstances, certificateholders of record may be entitled to certain other information regarding the issuing entity. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. |
| Deal Information/Analytics | Certain information concerning the mortgage loans and the certificates may be available to subscribers through the following services: |
| ● | Bloomberg, L.P., Trepp, LLC, Intex Solutions, Inc., Interactive Data Corp., Markit Group Limited, BlackRock Financial Management, Inc., CMBS.com, Inc., Moody’s Analytics, MBS Data, LLC and Thomson Reuters Corporation; |
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| ● | The certificate administrator’s website initially located at www.ctslink.com; and |
| ● | The master servicer’s website initially located at www.wellsfargo.com/com. |
| Optional Termination | On any distribution date on which the aggregate principal balance of the pool of mortgage loans is less than 1.0% of the aggregate principal balance of the mortgage loans as of the cut-off date, certain entities specified in this prospectus will have the option to purchase all of the remaining mortgage loans (and all property acquired through exercise of remedies in respect of any mortgage loan) at the price specified in this prospectus. |
| The issuing entity may also be terminated in connection with a voluntary exchange of all of the then-outstanding certificates (other than the Class V and Class R certificates) and deemed payment of a price specified in this prospectus for the mortgage loans then held by the issuing entity, provided that (i) the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D certificates are no longer outstanding, (ii) there is only one holder (or multiple holders acting unanimously) of the outstanding certificates (other than the Class V and Class R certificates) and (iii) the master servicer consents to the exchange. |
| See “Pooling and Servicing Agreement—Termination; Retirement of Certificates”. |
Required Repurchases or
Substitutions of Mortgage
Loans; Loss of Value
| Payment | Under certain circumstances, the related mortgage loan seller may be obligated to (i) repurchase (without payment of any yield maintenance charge or prepayment premium) or substitute 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 related mortgage loan purchase agreement that materially and adversely affects the value of the mortgage loan, the value of the related mortgaged property or the interests of any certificateholders in the mortgage loan or mortgaged property or causes the mortgage loan to be other than a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Internal Revenue Code of 1986, as amended (but without regard to the rule of |
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| Treasury Regulations Section 1.860G-2(f)(2) that causes a defective loan to be treated as a “qualified mortgage”). See “Description of the Mortgage Loan Purchase Agreements—General”. |
| Sale of Defaulted Loans | Pursuant to the pooling and servicing agreement, under certain circumstances the special servicer is required to use reasonable efforts to solicit offers for defaulted mortgage loans (other than non-serviced mortgage loans) and/or related REO properties and, in the absence of a cash offer at least equal to its outstanding principal balance plus all accrued and unpaid interest and outstanding costs and expenses and certain other amounts under the pooling and servicing agreement, may accept the first (and, if multiple offers are received, the highest) cash offer from any person that constitutes a fair price for the defaulted mortgage loan (other than non-serviced mortgage loans) or related REO property, determined as described in “Pooling and Servicing Agreement—Realization Upon Mortgage Loans” and “—Sale of Defaulted Loans and REO Properties”, unless the special servicer determines, in accordance with the servicing standard (and subject to the requirements of any related intercreditor agreement), that rejection of such offer would be in the best interests of the certificateholders and any related companion loan holders (as a collective whole as if such certificateholders and such companion loan holders constituted a single lender). |
| With respect to any non-serviced mortgage loan, if a related pari passu companion loan becomes a defaulted mortgage loan under the trust and servicing agreement or pooling and servicing agreement for the related pari passu companion loan and the special servicer under the related trust and servicing agreement or pooling and servicing agreement for the related pari passu companion loan(s) determines to sell such pari passu companion loan(s), then such special servicer will be required to sell such non-serviced mortgage loan together with the related pari passu companion loan(s) in a manner similar to that described above. See “Description of the Mortgage Pool—The Whole Loans”. |
| 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—Mezzanine Indebtedness”. Additionally, in the case of mortgage loans that permit certain equity owners of the borrower to incur future mezzanine debt as described in |
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| “Description of the Mortgage Pool—Additional Indebtedness—Mezzanine Indebtedness”, the related mezzanine lender may have the option to purchase the related mortgage loan after certain defaults. See “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”, “—Sale of Defaulted Loans and REO Properties” and “Description of the Mortgage Pool—The Whole Loans”. |
| Tax Status | Elections will be made to treat designated portions of the issuing entity (exclusive of interest that is deferred after the anticipated repayment date of each mortgage loan with an anticipated repayment date and the excess interest distribution account) as two separate REMICs – the lower-tier REMIC and the upper-tier REMIC – for federal income tax purposes. |
| In addition, the portion of the issuing entity consisting of collections of excess interest accrued on any mortgage loan with an anticipated repayment date and the related distribution account, beneficial ownership of which is represented by the Class V certificates will be treated as a grantor trust for federal income tax purposes, as further described under “Material Federal Income Tax Considerations”. |
| Pertinent federal income tax consequences of an investment in the offered certificates include: |
| ● | Each class of offered certificates will constitute REMIC “regular interests”. |
| ● | The offered certificates will be treated as newly originated debt instruments for federal income tax purposes. |
| ● | You will be required to report income on your offered certificates using the accrual method of accounting. |
| ● | It is anticipated that the Class [ ] and Class [_] certificates will be issued with original issue discount and that the Class [ ] certificates will be issued at a premium for federal income tax purposes. |
| See “Material Federal Income Tax Considerations”. |
Certain ERISA
| Considerations | Subject to important considerations described under “Certain ERISA Considerations”, the offered certificates are eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts. |
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| Legal Investment | None of the certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. |
| If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the certificates. You should consult your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership, and sale of the certificates. |
| The issuing entity will not be registered under the Investment Company Act of 1940, as amended. The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended, contained in Section 3(c)(5) of the Investment Company Act of 1940, as amended, or Rule 3a-7 under the Investment Company Act of 1940, as amended, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act (both as defined in this prospectus). See “Legal Investment”. |
| Ratings | The offered certificates will not be issued unless each of the offered classes receives 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—Other Risks Relating to the Certificates—Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded” and “Ratings”. |
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Risk Factors
You should carefully consider the following risks before making an investment decision. In particular, distributions on your certificates will depend on payments received on, and other recoveries with respect to the mortgage loans. Therefore, you should carefully consider the risk factors relating to the mortgage loans and the mortgaged properties.
If any of the following events or circumstances identified as risks actually occur or materialize, your investment could be materially and adversely affected. We note that additional risks and uncertainties not presently known to us may also impair your investment.
This prospectus also contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus.
The Certificates May Not Be a Suitable Investment for You
The certificates will not be suitable investments for all investors. In particular, you should not purchase any class of certificates unless you understand and are able to bear the risk that the yield to maturity and the aggregate amount and timing of distributions on the certificates will be subject to material variability from period to period and give rise to the potential for significant loss over the life of the certificates. The interaction of the foregoing factors and their effects are impossible to predict and are likely to change from time to time. As a result, an investment in the certificates involves substantial risks and uncertainties and should be considered only by sophisticated institutional investors with substantial investment experience with similar types of securities and who have conducted appropriate due diligence on the mortgage loans, the mortgaged properties and the certificates.
Combination or “Layering” of Multiple Risks May Significantly Increase Risk of Loss
Although the various risks discussed in this prospectus are generally described separately, you should consider the potential effects of the interplay of multiple risk factors. Where more than one significant risk factor is present, the risk of loss to an investor in the certificates may be significantly increased.
Risks Related to Market Conditions and Other External Factors
The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Adversely Affected the Value of CMBS and Similar Factors May in the Future Adversely Affect the Value of CMBS
In recent years, the real estate and securitization markets, including the market for commercial mortgage-backed securities (“CMBS”), experienced significant dislocations, illiquidity and volatility. We cannot assure you that another dislocation in CMBS will not occur.
Any economic downturn may adversely affect the financial resources of borrowers under commercial mortgage loans and may result in their inability to make payments on, or refinance, their outstanding mortgage debt when due or to sell their mortgaged properties for an aggregate amount sufficient to pay off the outstanding debt when due. As a result,
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distributions of principal and interest on your certificates, and the value of your certificates, could be adversely affected.
Other Events May Affect the Value and Liquidity of Your Investment
Moreover, other types of events, domestic or international, may affect general economic conditions and financial markets:
| ● | Wars, revolts, terrorist attacks, armed conflicts, energy supply or price disruptions, political crises, natural disasters and man-made disasters may have an adverse effect on the mortgaged properties and/or your certificates; and |
| ● | Trading activity associated with indices of CMBS may drive spreads on those indices wider than spreads on CMBS, thereby resulting in a decrease in value of such CMBS, including your certificates, and spreads on those indices may be affected by a variety of factors, and may or may not be affected for reasons involving the commercial and multifamily real estate markets and may be affected for reasons that are unknown and cannot be discerned. |
You should consider that the foregoing factors may adversely affect the performance of the mortgage loans and accordingly the performance of the offered certificates.
Risks Relating to the Mortgage Loans
Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed
The mortgage loans are not insured or guaranteed by any person or entity, governmental or otherwise, unrelated to the related borrowers.
Investors should treat each mortgage loan as a non-recourse loan. If a default occurs on a non-recourse loan, recourse generally may be had only against the specific mortgaged properties and other assets that have been pledged to secure the mortgage loan. Consequently, payment prior to maturity is dependent primarily on the sufficiency of the net operating income of the mortgaged property. Payment at maturity or an anticipated repayment date is primarily dependent upon the market value of the mortgaged property or the borrower’s ability to refinance or sell the mortgaged property.
Although the mortgage loans generally are non-recourse in nature, certain mortgage loans contain non-recourse carveouts for liabilities such as liabilities 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 all or 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
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representation or warranty as to the obligation or ability of any borrower or guarantor to pay any deficiencies between any foreclosure proceeds and the mortgage loan indebtedness. In addition, certain mortgage loans may provide for recourse to a guarantor for all or a portion of the indebtedness or for any loss or costs that may be incurred by the borrower or the lender with respect to certain borrower obligations under the related mortgage loan documents. In such cases, we cannot assure you any recovery from such guarantor will be made or that such guarantor will have assets sufficient to pay any otherwise recoverable claim under a guaranty.
Risks of Commercial and Multifamily Lending Generally
The mortgage loans will be secured by various income-producing commercial and multifamily properties. The repayment of a commercial or multifamily loan is typically dependent upon the ability of the related mortgaged property to produce cash flow through the collection of rents. Even the liquidation value of a commercial property is determined, in substantial part, by the capitalization of the property’s ability to produce cash flow. However, net operating income can be volatile and may be insufficient to cover debt service on the loan at any given time.
The net operating incomes and property values of the mortgaged properties may be adversely affected by a large number of factors. Some of these factors relate to the properties themselves, such as:
| ● | the age, design and construction quality of the properties; |
| ● | perceptions regarding the safety, convenience and attractiveness of the properties; |
| ● | the characteristics and desirability of the area where the property is located; |
| ● | the strength and nature of the local economy, including labor costs and quality, tax environment and quality of life for employees; |
| ● | the proximity and attractiveness of competing properties; |
| ● | the adequacy of the property’s management and maintenance; |
| ● | increases in interest rates, real estate taxes and operating expenses at the property and in relation to competing properties; |
| ● | an increase in the capital expenditures needed to maintain the properties or make improvements; |
| ● | the dependence upon a single tenant or concentration of tenants in a particular business or industry; |
| ● | a decline in the businesses operated by tenants or in their financial condition; |
| ● | an increase in vacancy rates; and |
| ● | a decline in rental rates as leases are renewed or entered into with new tenants. |
Other factors are more general in nature, such as:
| ● | national or regional economic conditions, including plant closings, military base closings, industry slowdowns, oil and/or gas drilling facility slowdowns or closings and unemployment rates; |
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| ● | local real estate conditions, such as an oversupply of competing properties, retail space, office space, multifamily housing or hotel capacity; |
| ● | demographic factors; |
| ● | consumer confidence; |
| ● | consumer tastes and preferences; |
| ● | political factors; |
| ● | environmental factors; |
| ● | seismic activity risk; |
| ● | retroactive changes in building codes; |
| ● | changes or continued weakness in specific industry segments; |
| ● | location of certain mortgaged properties in less densely populated or less affluent areas; and |
| ● | the public perception of safety for customers and clients. |
The volatility of net operating income will be influenced by many of the foregoing factors, as well as by:
| ● | the length of tenant leases (including that in certain cases, all or substantially all of the tenants, or one or more sole, anchor or other major tenants, at a particular mortgaged property may have leases that expire or permit the tenant(s) to terminate its lease during the term of the loan); |
| ● | the quality and creditworthiness of tenants; |
| ● | tenant defaults; |
| ● | in the case of rental properties, the rate at which new rentals occur; and |
| ● | the property’s “operating leverage”, which is generally the percentage of total property expenses in relation to revenue, the ratio of fixed operating expenses to those that vary with revenues, and the level of capital expenditures required to maintain the property and to retain or replace tenants. |
A decline in the real estate market or in the financial condition of a major tenant will tend to have a more immediate effect on the net operating income of properties with relatively higher operating leverage or short term revenue sources, such as short term or month-to-month leases, and may lead to higher rates of delinquency or defaults.
Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases
General
Any tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a reduction or failure to make rental payments when due. Tenants under certain leases included in the underwritten net cash flow,
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underwritten net operating income or occupancy may nonetheless be in financial distress. 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 tenants 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.
There may be (and there may exist from time to time) pending or threatened legal proceedings against, or disputes with, certain tenants and/or their parent companies that may have a material adverse effect on the related tenant’s ability to pay rent or remain open for business. We cannot assure you that any such litigation or dispute will not result in a material decline in net operating income at the related mortgaged property.
Certain tenants currently may be in a rent abatement period. We cannot assure you that such tenants will be in a position to pay full rent when the abatement period expires. We cannot assure you that the net operating income contributed by the mortgaged properties will remain at its current or past levels.
A Tenant Concentration May Result in Increased Losses
Mortgaged properties that are owner-occupied or leased to a single tenant, or a tenant that makes up a significant portion of the rental income, also are more susceptible to interruptions of cash flow if that tenant’s business operations are negatively impacted or if such tenant fails to renew its lease. This is so because:
| ● | the financial effect of the absence of rental income may be severe; |
| ● | more time may be required to re-lease the space; and |
| ● | substantial capital costs may be incurred to make the space appropriate for replacement tenants. |
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In the event of a default by that tenant, if the related lease expires prior to the mortgage loan maturity date and the related tenant fails to renew its lease or if such tenant exercises an early termination option, there would likely be an interruption of rental payments under the lease and, accordingly, insufficient funds available to the borrower to pay the debt service on the mortgage loan. In certain cases where the tenant owns the improvements on the mortgaged property, the related borrower may be required to purchase such improvements in connection with the exercise of its remedies.
With respect to certain of these mortgaged properties that are leased to a single tenant, the related leases may expire prior to, or soon after, the maturity dates of the mortgage loans or the related tenant may have the right to terminate the lease prior to the maturity date of the mortgage loan. If the current tenant does not renew its lease on comparable economic terms to the expired lease, if a single tenant terminates its lease or if a suitable replacement tenant does not enter into a new lease on similar economic terms, there could be a negative impact on the payments on the related mortgage loan.
A deterioration in the financial condition of a tenant, the failure of a tenant to renew its lease or the exercise by a tenant of an early termination right can be particularly significant if a mortgaged property is owner-occupied, leased to a single tenant, or if any tenant makes up a significant portion of the rental income at the mortgaged property.
Concentrations of particular tenants among the mortgaged properties or within a particular business or industry at one or multiple mortgaged properties increase the possibility that financial problems with such tenants or such business or industry sectors could affect the mortgage loans. In addition, the mortgage loans may be adversely affected if a tenant at the mortgaged property is highly specialized, or dependent on a single industry or only a few customers for its revenue. See “—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” below, and “Description of the Mortgage Pool—Tenant Issues—Tenant Concentrations” for information on tenant concentrations in the mortgage pool.
Mortgaged Properties Leased to Multiple Tenants Also Have Risks
If a mortgaged property has multiple tenants, re-leasing expenditures may be more frequent than in the case of mortgaged properties with fewer tenants, thereby reducing the cash flow available for payments on the related mortgage loan. Multi-tenant mortgaged properties also may experience higher continuing vacancy rates and greater volatility in rental income and expenses. See Annex A-1 for tenant lease expiration dates for the 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.
In certain cases, an affiliated lessee may be a tenant under a master lease with the related borrower, under which the tenant is obligated to make rent payments but does not occupy any space at the mortgaged property. Master leases in these circumstances may be used to bring occupancy to a “stabilized” level with the intent of finding additional tenants to
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occupy some or all of the master leased space, but may not provide additional economic support for the mortgage loan. If a mortgaged property is leased in whole or substantial part to the borrower or to an affiliate of the borrower, a deterioration in the financial condition of the borrower or its affiliate could significantly affect the borrower’s ability to perform under the mortgage loan as it would directly interrupt the cash flow from the mortgaged property if the borrower’s or its affiliate’s financial condition worsens. We cannot assure you that any space leased by a borrower or an affiliate of the borrower will eventually be occupied by third party tenants.
See “—Hotel Properties Have Special Risks” and “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases” for information on properties leased in whole or in part to borrowers and their affiliates.
Tenant Bankruptcy Could Result in a Rejection of the Related Lease
The bankruptcy or insolvency of a major tenant or a number of smaller tenants, such as in retail properties, may have an adverse impact on the mortgaged properties affected and the income produced by such mortgaged properties. Under the federal bankruptcy code, a tenant has the option of assuming or rejecting or, subject to certain conditions, assuming and assigning to a third party, any unexpired lease. If the tenant rejects the lease, the landlord’s claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim against the tenant and a lessor’s damages for lease rejection are generally subject to certain limitations. We cannot assure you that tenants of the mortgaged properties will continue making payments under their leases or that tenants will not file for bankruptcy protection in the future or, if any tenants do file, that they will continue to make rental payments in a timely manner. See “Certain Legal Aspects of Mortgage Loans—Foreclosure—Bankruptcy Laws”. See “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” for information regarding bankruptcy issues with respect to certain mortgage loans.
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”.
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 recognize a successor owner, the tenants may terminate their leases upon the transfer of the property to a foreclosing lender or purchaser at foreclosure. Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated. This is particularly likely if those tenants were paying above-market rents or could not be replaced. If a lease is not subordinate to a mortgage, the issuing entity will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property (unless otherwise agreed to with the tenant). Also, if the lease contains provisions inconsistent with the mortgage (e.g., provisions relating to application of insurance
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proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., a right of first refusal to purchase the property), the provisions of the lease will take precedence over the provisions of the mortgage. Not all leases were reviewed to ascertain the existence of attornment or subordination provisions.
With respect to certain of the mortgage loans, the related borrower may have given to certain tenants or others an option to purchase, a right of first refusal 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 and Rights of First Refusal” for information regarding material purchase options 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
Leases often give tenants the right to terminate the related lease, abate or reduce the related rent, and/or exercise certain remedies against the related borrower for various reasons or upon various conditions, including:
| ● | if the borrower for the applicable mortgaged property allows uses at the mortgaged property in violation of use restrictions in current tenant leases, |
| ● | 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, |
| ● | if the related borrower fails to provide a designated number of parking spaces, |
| ● | if there is construction at the related mortgaged property or an adjacent property (whether or not such adjacent property is owned or controlled by the borrower or any of its affiliates) that may interfere with visibility of, access to or a tenant’s use of the mortgaged property or otherwise violate the terms of a tenant’s lease, |
| ● | upon casualty or condemnation with respect to all or a portion of the mortgaged property that renders such mortgaged property unsuitable for a tenant’s use or if the borrower fails to rebuild such mortgaged property within a certain time, |
| ● | if a tenant’s use is not permitted by zoning or applicable law, |
| ● | if the tenant is unable to exercise an expansion right, |
| ● | if the landlord defaults on its obligations under the lease, |
| ● | if a landlord leases space at the mortgaged property or within a certain radius of the mortgaged property to a competitor, |
| ● | if the tenant fails to meet certain sales targets or other business objectives for a specified period of time, |
| ● | if significant tenants at the subject property go dark or terminate their leases, or if a specified percentage of the mortgaged property is unoccupied, |
| ● | if the landlord violates the tenant’s exclusive use rights for a specified period of time, |
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| ● | if the related borrower violates covenants under the related lease or if third parties take certain actions that adversely affect such tenants’ business or operations, |
| ● | in the case of government sponsored tenants, at any time or for lack of appropriations, or |
| ● | if the related borrower violates covenants under the related lease or if third parties take certain actions that adversely affect such tenants’ business or operations. |
In certain cases, compliance or satisfaction of landlord covenants may be the responsibility of a third party affiliated with the borrower or, in the event that partial releases of the applicable mortgaged property are permitted, an unaffiliated or affiliated third party.
Any exercise of a termination right by a tenant at a mortgaged property could result in vacant space at the related mortgaged property, renegotiation of the lease with the related tenant or re-letting of the space. Any such vacated space may not be re-let. Furthermore, such foregoing termination and/or abatement rights may arise in the future or materially adversely affect the related borrower’s ability to meet its obligations under the related 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 may have tenants that are charitable institutions that generally rely on contributions from individuals and government grants or other subsidies to pay rent on office space and other operating expenses. We cannot assure you that the rate, frequency and level of individual contributions or governmental grants and subsidies will continue with respect to any such institution. A reduction in contributions or grants may impact the ability of the related institution to pay rent, and we cannot assure you that the related borrower will be in a position to meet its obligations under the related mortgage loan documents if such tenant fails to pay its rent.
Retail Properties Have Special Risks
Some of the mortgage loans are secured by retail properties. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Retail Properties.” The value of retail properties is significantly affected by the quality of the tenants as well as fundamental aspects of real estate, such as location and market demographics, and by changes in shopping methods and choices. Some of the risks related to these matters are further described in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, and “—Some Retail Properties Depend on Anchor Stores or Major Tenants to Attract Shoppers and Could be Materially Adversely Affected by the Loss of, or a Store Closure by, One or More of These Anchor Stores or Major Tenants” below.
Rental payments from tenants of retail properties typically comprise the largest portion of the net operating income of those mortgaged properties. The correlation between success of tenant business and a retail property’s value may be more direct with respect to retail properties than other types of commercial property because a component of the total rent paid by certain retail tenants is often tied to a percentage of gross sales. We cannot assure you that the net operating income contributed by the retail mortgaged
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properties or the rates of occupancy at the retail stores will remain at the levels specified in this prospectus or remain consistent with past performance.
Changes in the Retail Sector, Such as Online Shopping and Other Uses of Technology, Could Affect the Business Models and Viability of Retailers.
Online shopping and the use of technology, such as smartphone shopping applications, to transact purchases or to aid purchasing decisions have increased in recent years and are expected to continue to increase in the future. This trend is affecting business models, sales and profitability of some retailers and could adversely affect the demand for retail real estate and occupancy at retail properties securing the mortgage loans. Any resulting decreases in rental revenue could have a material adverse effect on the value of retail properties securing the mortgage loans.
Some of these developments in the retail sector have led to many retailers, including several national retailers, filing for bankruptcy and/or voluntarily closing certain of their stores. Borrowers may be unable to re-lease such space or to re-lease it on comparable or more favorable terms. As a result, the bankruptcy or closure of a national tenant may adversely affect a retail borrower’s revenues. In addition, such closings may allow other tenants to modify their leases to terms that are less favorable for borrowers or to terminate their leases, also adversely impacting their revenues. See also “—Some Retail Properties Depend on Anchor Stores or Major Tenants to Attract Shoppers and Could be Materially Adversely Affected by the Loss of, or a Store Closure by, One or More of These Anchor Stores or Major Tenants” below.
In addition to competition from online shopping, retail properties face competition from sources outside a specific geographical real estate market. For example, all of the following compete with more traditional retail properties for consumer dollars: factory outlet centers, discount shopping centers and clubs, catalog retailers, home shopping networks, and telemarketing. Continued growth of these alternative retail outlets (which often have lower operating costs) could adversely affect the rents collectible at the retail properties included in the pool of mortgage loans, as well as the income from, and market value of, the mortgaged properties and the related borrower’s ability to refinance such property. Moreover, additional competing retail properties may be built in the areas where the retail properties are located.
We cannot assure you that these developments in the retail sector will not adversely affect the performance of retail properties securing the mortgage loans.
The Performance of the Retail Properties is Subject to Conditions Affecting the Retail Sector.
Retail properties are also subject to conditions that could negatively affect the retail sector, such as increased unemployment, increased federal income and payroll taxes, increased health care costs, increased state and local taxes, increased real estate taxes, industry slowdowns, lack of availability of consumer credit, weak income growth, increased levels of consumer debt, poor housing market conditions, adverse weather conditions, natural disasters, plant closings, and other factors. Similarly, local real estate conditions, such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the supply and creditworthiness of current and prospective tenants may negatively impact those retail 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
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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.
Some Retail Properties Depend on Anchor Stores or Major Tenants to Attract Shoppers and Could be Materially Adversely Affected by the Loss of, or a Store Closure by, One or More of These Anchor Stores or Major Tenants.
The presence or absence of an “anchor tenant” or a “shadow anchor tenant” in or near a retail property also can be important to the performance of a retail property because anchors play a key role in generating customer traffic and making a retail property desirable for other tenants. Retail properties may also have shadow anchor tenants. An “anchor tenant” is located on the related mortgaged property, usually proportionately larger in size than most or all other tenants at the mortgaged property, and is vital in attracting customers to a retail property. A “shadow anchor tenant” is usually proportionally larger in size than most tenants at the mortgaged property, is important in attracting customers to a retail property and is located sufficiently close and convenient to the mortgaged property so as to influence and attract potential customers, but is not located on the mortgaged property.
If anchor stores in a mortgaged property were to close, the related borrower may be unable to replace those anchors in a timely manner or without suffering adverse economic consequences. In addition, anchor tenants and non-anchor tenants at anchored or shadow anchored retail centers may have co-tenancy clauses and/or operating covenants in their leases or operating agreements that permit those tenants or anchor stores to cease operating, reduce rent or terminate their leases if the anchor tenant, the shadow anchor tenant or another major tenant goes dark, a specified percentage of the property is vacant or if the subject store is not meeting the minimum sales requirement under its lease. Even if non-anchor tenants do not have termination or rent abatement rights, the loss of an anchor tenant or a shadow anchor tenant may have a material adverse impact on the non-anchor tenant’s ability to operate because the anchor tenant or shadow anchor tenant plays a key role in generating customer traffic and making a center desirable for other tenants. This, in turn, may adversely impact the borrower’s ability to meet its obligations under the related mortgage loan documents. In addition, in the event that a “shadow anchor” fails to renew its lease, terminates its lease or otherwise ceases to conduct business within a close proximity to the mortgaged property, customer traffic at the mortgaged property may be substantially reduced. If an anchor tenant goes dark, generally the borrower’s only remedy may be to terminate that lease after the anchor tenant has been dark for a specified amount of time.
Certain anchor tenants may have the right to demolish and rebuild, or substantially alter, their premises. Exercise of such rights may result in disruptions at the mortgaged property or reduce traffic to the mortgaged property, may trigger co-tenancy clauses if such activities result in the anchor tenants being dark for the period specified in the cotenancy clause, and may result in reduced value of the structure or in loss of the structure if the tenant fails to rebuild.
If anchor tenants or shadow anchor tenants at a particular mortgaged property were to close or otherwise become vacant or remain vacant, we cannot assure you that the related borrower’s ability to repay its mortgage loan would not be materially and adversely affected.
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Certain anchor tenant and tenant estoppels will have been obtained in connection with the origination of the mortgage loans. These estoppels may identify disputes between the related borrower and the applicable anchor tenant or tenant, or alleged defaults or potential defaults by the applicable property owner under the lease or a reciprocal easement and/or operating agreement (each, an “REA”). Such disputes, defaults or potential defaults could lead to a termination or attempted termination of the applicable lease or REA by the anchor tenant or tenant, the tenant withholding some or all of its rental payments or litigation against the related borrower. We cannot assure you that the anchor tenant or tenant estoppels obtained identify all potential disputes that may arise with respect to the retail mortgaged properties, or that anchor tenant or tenant disputes will not have a material adverse effect on the ability of borrowers to repay their mortgage loans.
Certain retail properties have specialty use tenants. See “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses” below. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Retail Properties” and “—Mortgage Pool Characteristics—Specialty Use Concentrations”.
Office Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, other factors may adversely affect the financial performance and value of office properties, including:
| ● | the physical attributes of the building in relation to competing buildings (e.g., age, condition, design, appearance, access to transportation and ability to offer certain amenities, such as sophisticated building systems and/or business wiring requirements); |
| ● | the adaptability of the building to changes in the technological needs of the tenants; |
| ● | an adverse change in population, patterns of telecommuting or sharing of office space, and employment growth (which creates demand for office space); and |
| ● | in the case of a medical office property, (a) the proximity of such property to a hospital or other healthcare establishment, (b) reimbursements for patient fees from private or government sponsored insurers, (c) its ability to attract doctors and nurses to be on staff, and (d) its ability to afford and acquire the latest medical equipment. Issues related to reimbursement (ranging from nonpayment to delays in payment) from such insurers could adversely impact cash flow at such mortgaged property. |
Moreover, the cost of refitting office space for a new tenant is often higher than the cost of refitting other types of properties for new tenants.
If one or more major tenants at a particular office property were to close or remain vacant, we cannot assure you that such tenants would be replaced in a timely manner or without incurring material additional costs to the related borrower and resulting in an adverse effect on the financial performance of the property.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Office Properties”.
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Self Storage Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” above, other factors may adversely affect the financial performance and value of self storage properties, including:
| ● | decreased demand; |
| ● | lack of proximity to apartment complexes or commercial users; |
| ● | apartment tenants moving to single family homes; |
| ● | decline in services rendered, including security; |
| ● | dependence on business activity ancillary to renting units; |
| ● | security concerns; |
| ● | age of improvements; or |
| ● | competition or other factors. |
Self storage properties are considered vulnerable to competition, because both acquisition costs and break-even occupancy are relatively low. The conversion of self storage facilities to alternative uses would generally require substantial capital expenditures. Thus, if the operation of any of the self storage properties becomes unprofitable, the liquidation value of that self storage mortgaged property may be substantially less, relative to the amount owing on the mortgage loan, than if the self storage mortgaged property were readily adaptable to other uses. In addition, storage units are typically engaged for shorter time frames than traditional commercial leases for office or retail space.
Tenants at self storage properties tend to require and receive privacy, anonymity and efficient access, each of which may heighten environmental and other risks related to such property as the borrower may be unaware of the contents in any self storage unit. No environmental assessment of a self storage mortgaged property included an inspection of the contents of the self storage units at that mortgaged property, and there is no assurance that all of the units included in the self storage mortgaged properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future.
Certain mortgage loans secured by self storage properties may be affiliated with a franchise company through a franchise agreement. The performance of a self storage property affiliated with a franchise company may be affected by the continued existence and financial strength of the franchisor, the public perception of a service mark, and the duration of the franchise agreement. The transferability of franchise license agreements is restricted. In the event of a foreclosure, the lender or its agent would not have the right to use the franchise license without the franchisor’s consent. In addition, certain self storage properties may derive a material portion of revenue from business activities ancillary to self storage such as truck rentals, parking fees and similar activities which require special use permits or other discretionary zoning approvals and/or from leasing a portion of the subject property for office or retail purposes. See Annex A-1 and the footnotes related thereto.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Self Storage Properties”.
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Multifamily Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, other factors may adversely affect the financial performance and value of multifamily properties, including:
| ● | the quality of property management; |
| ● | the ability of management to provide adequate maintenance and insurance; |
| ● | the types of services or amenities that the property provides; |
| ● | the property’s reputation; |
| ● | the level of mortgage interest rates, which may encourage tenants to purchase rather than lease housing; |
| ● | the generally short terms of residential leases and the need for continued reletting; |
| ● | rent concessions and month-to-month leases, which may impact cash flow at the property; |
| ● | the tenant mix, such as the tenant population being predominantly students or being heavily dependent on workers from a particular business or industry or personnel from or workers related to a local military base or oil and/or gas drilling industries; |
| ● | in the case of student housing facilities or properties leased primarily to students, which may be more susceptible to damage or wear and tear than other types of multifamily housing, the reliance on the financial well-being of the college or university to which it relates, competition from on campus housing units, which may adversely affect occupancy, the physical layout of the housing, which may not be readily convertible to traditional multifamily use, and that student tenants have a higher turnover rate than other types of multifamily tenants, which in certain cases is compounded by the fact that student leases are available for periods of less than 12 months; |
| ● | certain multifamily properties may be considered to be “flexible apartment properties”. Such properties have a significant percentage of units leased to tenants under short-term leases (less than one year in term), which creates a higher turnover rate than for other types of multifamily properties; |
| ● | restrictions on the age or income of tenants who may reside at the property; |
| ● | dependence upon governmental programs that provide rent subsidies to tenants pursuant to tenant voucher programs, which vouchers may be used at other properties and influence tenant mobility; |
| ● | adverse local, regional or national economic conditions, which may limit the amount of rent that may be charged and may result in a reduction of timely rent payments or a reduction in occupancy levels; |
| ● | state and local regulations, which may affect the building owner’s ability to increase rent to market rent for an equivalent apartment; and |
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| ● | the existence of government assistance/rent subsidy programs, and whether or not they continue and provide the same level of assistance or subsidies. |
Certain states regulate the relationship between an owner and its tenants. Commonly, these laws require a written lease, good cause for eviction, disclosure of fees, and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions, and restrictions on a resident’s choice of unit vendors. Apartment building owners have been the subject of suits under state “Unfair and Deceptive Practices Acts” and other general consumer protection statutes for coercive, abusive or unconscionable leasing and sales practices. A few states offer more significant protection. For example, in some states, there are provisions that limit the bases on which a landlord may terminate a tenancy or increase a tenant’s rent or prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner’s building.
In addition to state regulation of the landlord tenant relationship, numerous counties and municipalities impose rent control on apartment buildings. These ordinances may limit rent increases to fixed percentages, to percentages of increases in the consumer price index, to increases set or approved by a governmental agency, or to increases determined through mediation or binding arbitration. Any limitations on a borrower’s ability to raise property rents may impair such borrower’s ability to repay its multifamily loan from its net operating income or the proceeds of a sale or refinancing of the related multifamily property.
Certain of the mortgage loans may be secured in the future by mortgaged properties that are subject to certain affordable housing covenants and other covenants and restrictions with respect to various tax credit, city, state and federal housing subsidies, rent stabilization or similar programs, in respect of various units within the mortgaged properties. The limitations and restrictions imposed by these programs could result in losses on the mortgage loans. In addition, in the event that the program is cancelled, it could result in less income for the project. These programs may include, among others:
| ● | rent limitations that would adversely affect the ability of borrowers to increase rents to maintain the condition of their mortgaged properties and satisfy operating expenses; and |
| ● | tenant income restrictions that may reduce the number of eligible tenants in those mortgaged properties and result in a reduction in occupancy rates. |
The difference in rents between subsidized or supported properties and other multifamily rental properties in the same area may not be a sufficient economic incentive for some eligible tenants to reside at a subsidized or supported property that may have fewer amenities or be less attractive as a residence. As a result, occupancy levels at a subsidized or supported property may decline, which may adversely affect the value and successful operation of such property.
Moreover, ongoing litigation concerning the status of rent-stabilized properties may adversely affect existing market rent units and a borrower’s ability to convert rent-stabilized units to market rent units in the future and may give rise to liability in connection with previously converted units. For example, the New York State Appellate Division, in Altman v. 285 West Fourth (1st Dept., 2015) held that in order to effectuate vacancy luxury deregulation, the legal rent had to be above the statutory deregulation threshold at the time the outgoing tenant vacated and the fact that the legal rent was above the statutory threshold at the time the incoming tenant moved in was not relevant. The Altman case is currently on appeal and scheduled to be heard by the New York Court of Appeals. Certain
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of the mortgage loans are secured by mortgaged properties that include rent stabilized and/or rent controlled units. Additionally, certain units at such mortgaged properties were previously rent-stabilized units, but such units were converted to market rent units. If the New York Court of Appeals were to uphold the Altman decision, no assurances can be made as to the impact on the existing market rent units at any mortgaged property with rent stabilized and/or rent controlled units or the borrower’s liability in connection therewith.
In addition, New York City’s J-51 program is a tax exemption and/or abatement program for certain eligible multifamily properties. New York State courts have held in a series of decisions that a rent-stabilized apartment in a building for which the owner receives J-51 tax benefits is not subject to the luxury deregulation provisions of the rent stabilization law until the tax benefit expires or, if the lease contained a notice that the unit would be deregulated upon expiration of the tax benefit, until the apartment becomes vacant after expiration of the tax benefit, and that such holding could have retroactive effect. See Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270 (2009), and progeny, e.g., Roberts v. Tishman, 89 A.D. 3d 444 (1st Dep’t 2011); Borden v. 400 East 55th Street Assocs., 24 N.Y.3d 382 (2014).
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Multifamily Properties”.
Hotel Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” above, various other factors may adversely affect the financial performance and value of hotel properties, including:
| ● | adverse economic and social conditions, either local, regional or national (which may limit the amount that can be charged for a room and reduce occupancy levels); |
| ● | continuing expenditures for modernizing, refurbishing and maintaining existing facilities prior to the expiration of their anticipated useful lives; |
| ● | ability to convert to alternative uses which may not be readily made; |
| ● | a deterioration in the financial strength or managerial capabilities of the owner or operator of a hotel property; |
| ● | changes in travel patterns caused by general adverse economic conditions, fear of terrorist attacks, adverse weather conditions and changes in access, energy prices, strikes, travel costs, relocation of highways, the construction of additional highways, concerns about travel safety or other factors; |
| ● | relative illiquidity of hospitality investments which limits the ability of the borrowers and property managers to respond to changes in economic or other conditions; and |
| ● | competition. |
Because hotel rooms are generally rented for short periods of time, the financial performance of hotel properties tends to be affected by adverse economic conditions and competition more quickly than other commercial properties. Additionally, as a result of high operating costs, relatively small decreases in revenue can cause significant stress on a property’s cash flow.
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Moreover, the hospitality and lodging industry is generally seasonal in nature and different seasons affect different hotel properties differently depending on type and location. This seasonality can be expected to cause periodic fluctuations in a hotel property’s room and restaurant revenues, occupancy levels, room rates and operating expenses. We cannot assure you that cash flow will be sufficient to offset any shortfalls that occur at the mortgaged property during slower periods or that the related mortgage loans provide for seasonality reserves, or if seasonality reserves are provided for, that such reserves will be funded or will be sufficient or available to fund such shortfalls.
In addition, certain hotel properties are limited-service, select service or extended stay hotels. Hotel properties that are limited-service, select service or extended stay hotels may subject a lender to more risk than full-service hotel properties as they generally require less capital for construction than full-service hotel properties. In addition, as limited-service, select service or extended stay hotels generally offer fewer amenities than full-service hotel properties, they are less distinguishable from each other. As a result, it is easier for limited-service, select service or extended stay hotels to experience increased or unforeseen competition.
In addition to hotel operations, some hotel properties also operate entertainment complexes that include restaurants, lounges, nightclubs and/or banquet and meeting spaces and may derive a significant portion of the related property’s revenue from such operations. Consumer demand for entertainment resorts is particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences could be driven by factors such as perceived or actual general economic conditions, high energy, fuel and food costs, the increased cost of travel, the weakened job market, perceived or actual disposable consumer income and wealth, fears of recession and changes in consumer confidence in the economy, or fears of war and future acts of terrorism. These factors could reduce consumer demand for the leisure activities that the property offers, thus imposing practical limits on pricing and harming operations. Restaurants and nightclubs are particularly vulnerable to changes in consumer preferences. In addition, a nightclub’s, restaurant’s or bar’s revenue is extremely dependent on its popularity and perception. These characteristics are subject to change rapidly and we cannot assure you that any of a hotel property’s nightclubs, restaurants or bars will maintain their current level of popularity or perception in the market. Any such change could have a material adverse effect on the net cash flow of the property.
Some of the hotel properties have liquor licenses associated with the mortgaged property. The liquor licenses for these mortgaged properties are generally held by affiliates of the related borrowers, unaffiliated managers or operating lessees. The laws and regulations relating to liquor licenses generally prohibit the transfer of such licenses to any person, or condition such transfer on the prior approval of the governmental authority that issued the license. In the event of a foreclosure of a hotel property that holds a liquor license, the special servicer on behalf of the issuing entity or a purchaser in a foreclosure sale would likely have to apply for a new license, which might not be granted or might be granted only after a delay that could be significant. We cannot assure you that a new license could be obtained promptly or at all. The lack of a liquor license in a hotel property could have an adverse impact on the revenue from the related mortgaged property or on the hotel property’s occupancy rate.
In addition, hospitality properties may be structured with a master lease (or operating lease) in order to minimize potential liabilities of the borrower. Under the master lease structure, an operating lessee (typically affiliated with the borrower) is also an obligor under the related mortgage loan and the operating lessee borrower pays rent to the fee owner
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borrower. See “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks” and “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases”.
In addition, there may be risks associated with hotel properties that have not entered into or become a party to any franchise agreement, license agreement or other “flag”. Hotel properties often enter into these types of agreements in order to align the hotel property with a certain public perception or to benefit from a centralized reservation system. We cannot assure you that hotel properties that lack such benefits will be able to operate successfully on an independent basis.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Hospitality Properties”.
Risks Relating to Affiliation with a Franchise or Hotel Management Company
The performance of a hotel property affiliated with a franchise or hotel management company depends in part on:
| ● | the continued existence and financial strength of the franchisor or hotel management company; |
| ● | the public perception of the franchise or hotel chain service mark; and |
| ● | the duration of the franchise licensing or management agreements. |
The continuation of a franchise agreement, license agreement or management agreement is subject to specified operating standards and other terms and conditions set forth in such agreements. The failure of a borrower to maintain such standards or adhere to other applicable terms and conditions, such as property improvement plans, could result in the loss or cancellation of their rights under the franchise, license or hotel management agreement. We cannot assure you that a replacement franchise could be obtained in the event of termination or that such replacement franchise affiliation would be of equal quality to the terminated franchise affiliation. In addition, a replacement franchise, license and/or hotel property manager may require significantly higher fees as well as the investment of capital to bring the hotel property into compliance with the requirements of the replacement franchisor, licensor and/or hotel property manager. Any provision in a franchise agreement, license agreement or management agreement providing for termination because of a bankruptcy of a franchisor, licensor or manager generally will not be enforceable.
The transferability of franchise agreements, license agreements and property management agreements may be restricted. In the event of a foreclosure, the lender may not have the right to use the franchise license without the franchisor’s consent or the manager might be able to terminate the management agreement. Conversely, in the case of certain mortgage loans, the lender may be unable to remove a franchisor/licensor or a hotel management company that it desires to replace following a foreclosure and, further, may be limited as regards the pool of potential transferees for a foreclosure or real estate owned property.
In some cases where a hotel property is subject to a license, franchise or management agreement, the licensor, franchisor or manager has required or may in the future require the completion of various repairs and/or renovations pursuant to a property improvement plan issued by the licensor, franchisor or manager. Failure to complete those repairs and/or renovations in accordance with the plan could result in the hotel property losing its license
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or franchise or in the termination of the management agreement. Annex A-1 and the related footnotes set forth the amount of reserves, if any, established under the related mortgage loans in connection with any of those repairs and/or renovations. We cannot assure you that any amounts reserved will be sufficient to complete the repairs and/or renovations required with respect to any affected hotel property. In addition, in some cases, those reserves will be maintained by the franchisor, licensor or property manager. Furthermore, the lender may not require a reserve for repairs and/or renovations in all instances.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Hospitality Properties”.
Manufactured Housing Community Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, other factors may adversely affect the financial performance and value of manufactured housing community properties, including:
| ● | the number of competing residential developments in the local market, such as other manufactured housing community properties apartment buildings and site-built single family homes; |
| ● | the physical attributes of the community, including its age and appearance; |
| ● | the location of the manufactured housing community property; |
| ● | the presence and/or continued presence of sufficient manufactured homes at the manufactured housing community property (manufactured homes are not generally part of the collateral for a mortgage loan secured by a manufactured housing community property; rather, the pads upon which manufactured homes are located are leased to the owners of such manufactured homes; accordingly, manufactured homes may be moved from a manufactured housing community property); |
| ● | the type of services or amenities it provides; |
| ● | any age restrictions; |
| ● | the property’s reputation; and |
| ● | state and local regulations, including rent control and rent stabilization, and tenant association rights. |
The manufactured housing community properties have few improvements (which are highly specialized) and are “single-purpose” properties that could not be readily converted to general residential, retail or office use. Thus, if the operation of any of the manufactured housing community properties becomes unprofitable due to competition, age of the improvements or other factors such that the borrower becomes unable to meet its obligations on the related mortgage loan, the liquidation value of that manufactured housing community property may be substantially less, relative to the amount owing on the related mortgage loan, than would be the case if the manufactured housing community property were readily adaptable to other uses.
Some manufactured housing community properties are either recreational vehicle resorts or have a significant portion of the properties that are intended for short-term
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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.
Some of the manufactured housing community mortgaged properties securing the mortgage loans in the trust may have a material number of leased homes that are currently owned by the related borrower or an affiliate thereof and rented by the respective tenants like apartments. In circumstances where the leased homes are owned by an affiliate of the borrower, the related pads may, in some cases, be subject to a master lease with that affiliate. In such cases, the tenants will tend to be more transient and less tied to the property than if they owned their own home. Such leased homes do not, in all (or, possibly, in any) such cases, constitute collateral for the related mortgage loan. Some of the leased homes that are not collateral for the related mortgage loan are rented on a lease-to-own basis. In some cases, the borrower itself owns, leases, sells and/or finances the sale of homes, although generally the related income therefrom will be excluded for loan underwriting purposes. See also representation and warranty no. 33 on Annex D-1 to this prospectus and the exceptions thereto on Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus). Some of the leased homes owned by a borrower or its affiliate may be financed and a default on that financing may materially adversely affect the performance of the manufactured housing community mortgaged property.
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.
Furthermore, certain of the manufactured housing communities are, in whole or in part, in a flood zone. Even if no material borrower-owned improvements are located in the flood zone, the related borrower’s business could be adversely affected by flooding or the potential of flooding.
In addition, certain of the manufactured housing community properties may be subject to government rent control regulations, which can limit the borrower’s ability to institute, and/or the amount of, periodic tenant rent increases.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Manufactured Housing Community Properties”.
Industrial Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, other factors may adversely affect the financial performance and value of industrial properties, including:
| ● | reduced demand for industrial space because of a decline in a particular industry segment; |
| ● | the property becoming functionally obsolete; |
| ● | building design and adaptability; |
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| ● | unavailability of labor sources; |
| ● | changes in access, energy prices, strikes, relocation of highways, the construction of additional highways or other factors; |
| ● | changes in proximity of supply sources; |
| ● | the expenses of converting a previously adapted space to general use; and |
| ● | the location of the property. |
Industrial properties may be adversely affected by reduced demand for industrial space occasioned by a decline in a particular industry segment in which the related tenants conduct their businesses (for example, a decline in consumer demand for products sold by a tenant using the property as a distribution center). In addition, a particular industrial or warehouse property that suited the needs of its original tenant may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties. Furthermore, lease terms with respect to industrial properties are generally for shorter periods of time and may result in a substantial percentage of leases expiring in the same year at any particular industrial property. In addition, mortgaged properties used for many industrial purposes are more prone to environmental concerns than other property types.
Aspects of building site design and adaptability affect the value of an industrial property. Site characteristics that are generally desirable to a warehouse/industrial property include high clear ceiling heights, wide column spacing, a large number of bays (loading docks) and large bay depths, divisibility, a layout that can accommodate large truck minimum turning radii and overall functionality and accessibility.
In addition, because of unique construction requirements of many industrial properties, any vacant industrial property space may not be easily converted to other uses. Thus, if the operation of any of the industrial properties becomes unprofitable due to competition, age of the improvements or other factors such that the borrower becomes unable to meet its obligations on the related mortgage loan, the liquidation value of that industrial property may be substantially less, relative to the amount owing on the related mortgage loan, than would be the case if the industrial property were readily adaptable to other uses.
Location is also important because an industrial property requires the availability of labor sources, proximity to supply sources and customers and accessibility to rail lines, major roadways and other distribution channels.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Industrial Properties”.
Mixed Use Properties Have Special Risks
Certain properties are mixed use properties. Such mortgaged properties are subject to the risks relating to the property types described in “—Retail Properties Have Special Risks”, “—Office Properties Have Special Risks”, “—Self Storage Properties Have Special Risks”, “—Multifamily Properties Have Special Risks” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”, as applicable. See Annex A-1 for the five largest tenants (by net rentable area 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.
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See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Mixed Use Properties”.
Condominium Ownership May Limit Use and Improvements
The management and operation of a condominium is generally controlled by a condominium board representing the owners of the individual condominium units, subject to the terms of the related condominium rules or by-laws. Generally, the consent of a majority of the board members is required for any actions of the condominium board and a unit owner’s ability to control decisions of the board are generally related to the number of units owned by such owner as a percentage of the total number of units in the condominium. In certain cases, the related borrower does not have a majority of votes on the condominium board, which result in the related borrower not having control of the related condominium or owners association.
The board of managers or directors of the related condominium generally has discretion to make decisions affecting the condominium, and we cannot assure you that the related borrower under a mortgage loan secured by one or more interests in that condominium will have any control over decisions made by the related board of managers or directors. Even if a borrower or its designated board members, either through control of the appointment and voting of sufficient members of the related condominium board or by virtue of other provisions in the related condominium documents, has consent rights over actions by the related condominium associations or owners, we cannot assure you that the related condominium board will not take actions that would materially adversely affect the related borrower’s unit. Thus, decisions made by that board of managers or directors, including regarding assessments to be paid by the unit owners, insurance to be maintained on the condominium and many other decisions affecting the maintenance of that condominium, may have a significant adverse impact on the related mortgage loans in the issuing entity that are secured by mortgaged properties consisting of such condominium interests. We cannot assure you that the related board of managers or directors will always act in the best interests of the related borrower under the related mortgage loans.
The condominium board is generally responsible for administration of the affairs of the condominium, including providing for maintenance and repair of common areas, adopting rules and regulations regarding common areas, and obtaining insurance and repairing and restoring the common areas of the property after a casualty. Notwithstanding the insurance and casualty provisions of the related mortgage loan documents, the condominium board may have the right to control the use of casualty proceeds.
In addition, the condominium board generally has the right to assess individual unit owners for their share of expenses related to the operation and maintenance of the common elements. In the event that an owner of another unit fails to pay its allocated assessments, the related borrower may be required to pay such assessments in order to properly maintain and operate the common elements of the property. Although the condominium board generally may obtain a lien against any unit owner for common expenses that are not paid, such lien generally is extinguished if a lender takes possession pursuant to a foreclosure. Each unit owner is responsible for maintenance of its respective unit and retains essential operational control over its unit.
In addition, due to the nature of condominiums, a default on the part of the borrower with respect to such mortgaged properties will not allow the special servicer the same flexibility in realizing on the collateral as is generally available with respect to commercial properties that are not condominium units. The rights of other unit or property owners, the documents governing the management of the condominium units and the state and local
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laws applicable to condominium units must be considered. In addition, in the event of a casualty with respect to a condominium, due to the possible existence of multiple loss payees on any insurance policy covering such property, there could be a delay in the allocation of related insurance proceeds, if any. Consequently, servicing and realizing upon the collateral described above could subject the certificateholders to a greater delay, expense and risk than with respect to a mortgage loan secured by a commercial property that is not a condominium unit.
Certain condominium declarations and/or local laws provide for the withdrawal of a property from a condominium structure under certain circumstances. For example, the New York Condominium Act provides for a withdrawal of the property from a condominium structure by vote of 80% of unit owners. If the condominium is terminated, the building will be subject to an action for partition by any unit owner or lienor as if owned in common. This could cause an early and unanticipated prepayment of the mortgage loan. We cannot assure you that the proceeds from partition would be sufficient to satisfy borrower’s obligations under the mortgage loan. See also “—Risks Related to Zoning Non-Compliance and Use Restrictions” for certain risks relating to use restrictions imposed pursuant to condominium declarations or other condominium especially in a situation where the mortgaged property does not represent the entire condominium building.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Condominium Interests”.
Operation of a Mortgaged Property Depends on the Property Manager’s Performance
The successful operation of a real estate project depends upon the property manager’s performance and viability. The property manager is responsible for:
| ● | responding to changes in the local market; |
| ● | planning and implementing the rental structure; |
| ● | operating the property and providing building services; |
| ● | managing operating expenses; and |
| ● | assuring that maintenance and capital improvements are carried out in a timely fashion. |
Properties deriving revenues primarily from short term sources, such as hotel guests or short term or month-to-month leases, are generally more management intensive than properties leased to creditworthy tenants under long term leases.
Certain of the mortgaged properties will be managed by affiliates of the related borrower. If a mortgage loan is in default or undergoing special servicing, such relationship could disrupt the management of the related mortgaged property, which may adversely affect cash flow. However, the related mortgage loans will generally permit, in the case of mortgaged properties managed by borrower affiliates, the lender to remove the related property manager upon the occurrence of an event of default under the related mortgage loan beyond applicable cure periods (or, in some cases, in the event of a foreclosure following such default), and in some cases a decline in cash flow below a specified level or the failure to satisfy some other specified performance trigger.
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Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses
The effect of mortgage pool loan losses will be more severe if the losses relate to mortgage loans that account for a disproportionately large percentage of the pool’s aggregate principal balance. As mortgage loans pay down or properties are released, the remaining certificateholders may 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 entitled “Range of Remaining Terms to Maturity or ARD as of the Cut-off Date” in Annex A-2 for a stratification of the remaining terms to maturity or anticipated repayment date of the mortgage loans. Because principal on the certificates is payable in sequential order of payment priority, and a class receives principal only after the preceding class(es) have been paid in full, classes that have a lower sequential priority are more likely to face these types of risks of concentration than classes with a higher sequential priority.
Several of the mortgage loans have cut-off date balances that are substantially higher than the average cut-off date balance. In general, concentrations in mortgage loans with larger-than-average balances can result in losses that are more severe, relative to the size of the mortgage loan pool, than would be the case if the aggregate balance of the mortgage loan pool were more evenly distributed.
A concentration of mortgage loans secured by the same mortgaged property types can increase the risk that a decline in a particular industry or business would have a disproportionately large impact on the pool of mortgage loans. Mortgaged property types representing 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 retail, office, self storage, multifamily, hospitality and manufactured housing community properties. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types” for information on the types of mortgaged properties securing the mortgage loans in the mortgage pool.
Repayments by borrowers and the market value of the related mortgaged properties could be affected by economic conditions generally or specific to particular geographic areas or regions of the United States, and concentrations of mortgaged properties in particular geographic areas may increase the risk that conditions in the real estate market where the mortgaged property is located, or other adverse economic or other developments or natural disasters (e.g., earthquakes, floods, forest fires, tornadoes or hurricanes or changes in governmental rules or fiscal policies) affecting a particular region of the country, could increase the frequency and severity of losses on mortgage loans secured by those mortgaged properties. As a result, areas affected by such events may experience disruptions in travel, transportation and tourism, loss of jobs, an overall decrease in consumer activity, or a decline in real estate-related investments. We cannot assure you that the economies in such impacted areas will recover sufficiently to support income-producing real estate at pre-event levels or that the costs of the related clean-up will not have a material adverse effect on the local or national economy. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Geographic Concentrations” in this prospectus. We cannot assure you that any hurricane damage would be covered by insurance.
Mortgaged properties securing 5.0% or more of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (based on allocated loan amount) are located in California, Texas, Virginia, Ohio, Pennsylvania and North Carolina. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Geographic Concentrations”.
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Some of the mortgaged properties are located in areas that, based on low population density, poor economic demographics (such as higher than average unemployment rates, lower than average annual household income and/or overall loss of jobs) and/or negative trends in such regards, would be considered secondary or tertiary markets.
A concentration of mortgage loans with the same borrower or related borrowers also can pose increased risks, such as:
| ● | if a borrower that owns or controls several properties (whether or not all of them secure mortgage loans in the mortgage pool) experiences financial difficulty at one such property, it could defer maintenance at a mortgaged property or debt service payments on the related mortgage loan in order to satisfy current expenses with respect to the first property or, alternatively, it could direct leasing activity in ways that are adverse to the 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, thereby increasing the risk that financial or other difficulties experienced by such related parties could have a greater impact on the pool of mortgage loans. See “—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans” below. |
See “Description of the Mortgage Pool—Mortgage Pool Characteristics” for information on the composition of the mortgage pool by property type and geographic distribution and loan concentration.
Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses
The issuing entity could become liable for a material adverse environmental condition at an underlying mortgaged property. Any such potential liability could reduce or delay payments on the offered certificates.
Each of the mortgaged properties was either (i) subject to environmental site assessments prior to the time of origination of the related mortgage loan (or, in certain limited cases, after origination) including Phase I environmental site assessments or updates of previously performed Phase I environmental site assessments, or (ii) subject to a secured creditor environmental insurance policy or other environmental insurance policy. See “Description of the Mortgage Pool—Environmental Considerations”.
We cannot assure you that the environmental assessments revealed all existing or potential environmental risks or that all adverse environmental conditions have been or will be completely abated or remediated or that any reserves, insurance or operations and maintenance plans will be sufficient to remediate the environmental conditions. Moreover, we cannot assure you that:
| ● | future laws, ordinances or regulations will not impose any material environmental liability; or |
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| ● | the current environmental condition of the mortgaged properties will not be adversely affected by tenants or by the condition of land or operations in the vicinity of the mortgaged properties (such as underground storage tanks). |
We cannot assure you that with respect to any mortgaged property any remediation plan or any projected remedial costs or time is accurate or sufficient to complete the remediation objectives, or that no additional contamination requiring environmental investigation or remediation will be discovered on any mortgaged property. Likewise, all environmental policies naming the lender as named insured cover certain risks or events specifically identified in the policy, but the coverage is limited by its terms, conditions, limitations and exclusions, and does not purport to cover all environmental conditions whatsoever affecting the applicable mortgaged property, and we cannot assure you that any environmental conditions currently known, suspected, or unknown and discovered in the future will be covered by the terms of the policy.
Before the trustee or the special servicer, as applicable, acquires title to a mortgaged property on behalf of the issuing entity or assumes operation of the property, it will be required to obtain an environmental assessment of such mortgaged property, or rely on a recent environmental assessment. This requirement is intended to mitigate the risk that the issuing entity will become liable under any environmental law. There is accordingly some risk that the mortgaged property will decline in value while this assessment is being obtained or remedial action is being taken. Moreover, we cannot assure you that this requirement will effectively insulate the issuing entity from potential liability under environmental laws. Any such potential liability could reduce or delay distributions to certificateholders.
See “Description of the Mortgage Pool—Environmental Considerations” for additional information on environmental conditions at mortgaged properties securing certain mortgage loans in the issuing entity. See also representation and warranty no. 43 on Annex D-1 to this prospectus and the exceptions thereto on Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
See “Transaction Parties—The Sponsors and Mortgage Loan Sellers—Wells Fargo Bank, National Association—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting”; “—Barclays Bank PLC—Barclays’ Underwriting Guidelines and Processes”; “—Rialto Mortgage Finance, LLC—Rialto Mortgage’s Underwriting Standards and Loan Analysis”; “—C-III Commercial Mortgage LLC—C-III CM’s Underwriting Guidelines and Processes”; “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”; and “Certain Legal Aspects of Mortgage Loans”.
See “Certain Legal Aspects of Mortgage Loans—Environmental Considerations”.
Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties
Certain of the mortgaged properties are currently undergoing or, in the future, are expected to undergo redevelopment, expansion or renovation. In addition, the related borrower may be permitted under the related mortgage loan documents, at its option and cost but subject to certain conditions, to undergo future construction, renovation or alterations of the mortgaged property. To the extent applicable, we cannot assure you that any escrow or reserve collected, if any, will be sufficient to complete the current renovation or be otherwise sufficient to satisfy any tenant improvement expenses at a mortgaged property. Failure to complete those planned improvements may have a material adverse
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effect on the cash flow at the mortgaged property and the related borrower’s ability to meet its payment obligations under the mortgage loan documents.
Certain of the hotel properties securing the mortgage loans are currently undergoing or are scheduled to undergo renovations or property improvement plans. In some circumstances, these renovations or property improvement plans 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 property. In other cases, these renovations may involve renovations of common spaces or external features of the related hotel property, which may cause disruptions or otherwise decrease the attractiveness of the related hotel property to potential guests. These property improvement plans may be required under the related franchise or management agreement and a failure to timely complete them may result in a termination or expiration of a franchise or management agreement and may be an event of default under the related mortgage loan.
Certain of the properties securing the mortgage loans may currently be undergoing or are scheduled to undergo renovations or property expansions. Such renovations or expansions may be required under tenant leases and a failure to timely complete such renovations or expansions may result in a termination of such lease and may have a material adverse effect on the cash flow at the mortgaged property and the related borrower’s ability to meet its payment obligations under the mortgage loan documents.
We cannot assure you that current or planned redevelopment, expansion or renovation will be completed at all, that such redevelopment, expansion or renovation will be completed in the time frame contemplated, or that, when and if such redevelopment, expansion or renovation is completed, such redevelopment, expansion or renovation will improve the operations at, or increase the value of, the related mortgaged property. Failure of any of the foregoing to occur could have a material negative impact on the related mortgaged property, which could affect the ability of the related borrower to repay the related mortgage loan.
In the event the related borrower fails to pay the costs for work completed or material delivered in connection with such ongoing redevelopment, expansion or renovation, the portion of the mortgaged property on which there are renovations may be subject to mechanic’s or materialmen’s liens that may be senior to the lien of the related mortgage loan.
The existence of construction or renovation at a mortgaged property may take rental units or rooms or leasable space “off-line” or otherwise make space unavailable for rental, impair access or traffic at or near the mortgaged property, or, in general, make that mortgaged property less attractive to tenants or their customers, and accordingly could have a negative effect on net operating income. In addition, any such construction or renovation at a mortgaged property may temporarily interfere with the use and operation of any portion of such mortgaged property. See “Description of the Mortgage Pool—Redevelopment, Renovation and Expansion” for information regarding mortgaged properties which are currently undergoing or, in the future, are expected to undergo redevelopment, expansion or renovation. See also Annex A-3 to this prospectus for additional information on redevelopment, renovation and expansion at the mortgaged properties securing the 15 largest mortgage loans.
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Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
Certain mortgaged properties securing the mortgage loans may have specialty use tenants and may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable for any reason.
For example, retail, mixed-use or office properties may have theater tenants. Properties with theater tenants are exposed to certain unique risks. Aspects of building site design and adaptability affect the value of a theater. In addition, decreasing attendance at a theater could adversely affect revenue of the theater, which may, in turn, cause the tenant to experience financial difficulties, resulting in downgrades in their credit ratings and, in certain cases, bankruptcy filings. In addition, because of unique construction requirements of theaters, any vacant theater space would not easily be converted to other uses.
Retail, mixed-use or office properties may also have health clubs as tenants. Several factors may adversely affect the value and successful operation of a health club, including:
| ● | the physical attributes of the health club (e.g., its age, appearance and layout); |
| ● | the reputation, safety, convenience and attractiveness of the property to users; |
| ● | management’s ability to control membership growth and attrition; |
| ● | competition in the tenant’s marketplace from other health clubs and alternatives to health clubs; and |
| ● | adverse changes in economic and social conditions and demographic changes (e.g., population decreases or changes in average age or income), which may result in decreased demand. |
In addition, there may be significant costs associated with changing consumer preferences (e.g., multipurpose clubs from single-purpose clubs or varieties of equipment, classes, services and amenities). In addition, health clubs may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason. The liquidation value of any such health club consequently may be less than would be the case if the property were readily adaptable to changing consumer preferences for other uses.
Certain retail, mixed use or office properties may be partially comprised of a parking garage, or certain properties may be entirely comprised of a parking garage. Parking garages and parking lots present risks not associated with other properties. The primary source of income for parking lots and garages is the rental fees charged for parking spaces.
Factors affecting the success of a parking lot or garage include:
| ● | the number of rentable parking spaces and rates charged; |
| ● | the location of the lot or garage and, in particular, its proximity to places where large numbers of people work, shop or live; |
| ● | the amount of alternative parking spaces in the area; |
| ● | the availability of mass transit; and |
| ● | the perceptions of the safety, convenience and services of the lot or garage. |
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In instances where a parking garage does not have a long-term leasing arrangement with a parking lessee, but rather relies on individual short-term (i.e., daily or weekly) parking tenants for parking revenues, variations in any or all of the foregoing factors can result in increased volatility in the net operating income for such parking garage.
Aspects of building site design and adaptability affect the value of a parking garage facility. Site characteristics that are valuable to a parking garage facility include location, clear ceiling heights, column spacing, zoning restrictions, number of spaces and overall functionality and accessibility.
In addition, because of the unique construction requirements of many parking garages and because a parking lot is often vacant paved land without any structure, a vacant parking garage facility or parking lot may not be easily converted to other uses.
Mortgaged properties may have other specialty use tenants, such as medical and dental offices, gas stations, data centers, urgent care facilities, daycare centers and/or restaurants, as part of the mortgaged property.
In the case of specialty use tenants such as restaurants and theaters, aspects of building site design and adaptability affect the value of such properties and other retailers at the mortgaged property. Decreasing patronage at such properties could adversely affect revenue of the property, which may, in turn, cause the tenants to experience financial difficulties, resulting in downgrades in their credit ratings, lease defaults and, in certain cases, bankruptcy filings. See “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” above. Additionally, receipts at such properties are also affected not only by objective factors but by subjective factors. For instance, restaurant receipts are affected by such varied influences as the current personal income levels in the community, an individual consumer’s preference for type of food, style of dining and restaurant atmosphere, the perceived popularity of the restaurant, food safety concerns related to personal health with the handling of food items at the restaurant or by food suppliers and the actions and/or behaviors of staff and management and level of service to the customers. In addition, because of unique construction requirements of such properties, any vacant space would not easily be converted to other uses.
Mortgaged properties with specialty use tenants may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason due to their unique construction requirements. In addition, converting commercial properties to alternate uses generally requires substantial capital expenditures and could result in a significant adverse effect on, or interruption of, the revenues generated by such properties.
In addition, a mortgaged property may not be readily convertible due to restrictive covenants related to such mortgaged property, including in the case of mortgaged properties that are subject to a condominium regime or subject to a ground lease, the use and other restrictions imposed by the condominium declaration and other related documents, especially in a situation where a mortgaged property does not represent the entire condominium regime. See “—Condominium Ownership May Limit Use and Improvements” above.
Some of the mortgaged properties may be part of tax-reduction programs that apply only if the mortgaged properties are used for certain purposes. Such properties may be restricted from being converted to alternative uses because of such restrictions.
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Some of the mortgaged properties have government tenants or other tenants which may have space that was “built to suit” that particular tenant’s uses and needs. For example, a government tenant may require enhanced security features that required additional construction or renovation costs and for which the related tenant may pay above market rent. However, such enhanced features may not be necessary for a new tenant (and such new tenant may not be willing to pay the higher rent associated with such features). While a government office building or government leased space may be usable as a regular office building or tenant space, the rents that may be collected in the event the government tenant does not renew its lease may be significantly lower than the rent currently collected.
Additionally, zoning, historical preservation or other restrictions also may prevent alternative uses. See “—Risks Related to Zoning Non-Compliance and Use Restrictions” below.
Risks Related to Zoning Non-Compliance and Use Restrictions
Certain of the mortgaged properties may not comply with current zoning laws, including use, density, 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 some cases, the related borrower has obtained law and ordinance insurance to cover additional costs that result from rebuilding the mortgaged property in accordance with current zoning requirements, including, within the policy’s limitations, demolition costs, increased costs of construction due to code compliance and loss of value to undamaged improvements resulting from the application of zoning laws. However, if as a result of the applicable zoning laws the rebuilt improvements are smaller or less attractive to tenants than the original improvements, you should not assume that the resulting loss in income will be covered by law and ordinance insurance. Zoning protection insurance, if obtained, will generally reimburse the lender for the difference between (i) the mortgage loan balance on the date of damage loss to the mortgaged property from an insured peril and (ii) the total insurance proceeds at the time of the damage to the mortgaged property if such mortgaged property cannot be rebuilt to its former use due to new zoning ordinances.
In addition, certain of the mortgaged properties that do not conform to current zoning laws may not be “legal non-conforming uses” or “legal non-conforming structures”, thus constituting a zoning violation. 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. See representation and warranty no. 26 on Annex D-1 to this prospectus and the exceptions thereto on Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
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The limited availability of zoning information and/or extent of zoning diligence may also present risks. Zoning information contained in appraisals may be based on limited investigation, and zoning comfort letters obtained from jurisdictions, while based on available records, do not customarily involve any contemporaneous site inspection. The extent of zoning diligence will also be determined based on perceived risk and the cost and benefit of obtaining additional information. Even if law and ordinance insurance is required to mitigate rebuilding-related risks, we cannot assure you that other risks related to material zoning violations will have been identified under such circumstances, and that appropriate borrower covenants or other structural mitigants will have been required as a result.
In addition, certain of the mortgaged properties may be subject to certain use restrictions and/or operational requirements imposed pursuant to development agreements, regulatory agreements, ground leases, restrictive covenants, environmental restrictions, 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. In addition, any alteration, reconstruction, demolition, or new construction affecting a mortgaged property designated a historical landmark may require prior approval. Any such approval process, even if successful, could delay any redevelopment or alteration of a related property. The liquidation value of such property, to the extent subject to limitations of the kind described above or other limitations on convertibility of use, may be substantially less than would be the case if such property was readily adaptable to other uses or redevelopment. See “Description of the Mortgage Pool—Use Restrictions” for examples of mortgaged properties that are subject to restrictions relating to the use of the mortgaged properties.
Risks Relating to Inspections of Properties
Licensed engineers or consultants inspected the mortgaged properties at or about the time of the origination of the mortgage loans to assess items such as structural integrity of the buildings and other improvements on the mortgaged property, including exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements. However, we cannot assure you that all conditions requiring repair or replacement were identified. No additional property inspections were conducted in connection with the issuance of the offered certificates.
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
A borrower may be required to incur costs to comply with various existing and future federal, state or local laws and regulations applicable to the related mortgaged property, for example, zoning laws and the Americans with Disabilities Act of 1990, as amended, which requires all public accommodations to meet certain federal requirements related to access and use by persons with disabilities. See “Certain Legal Aspects of Mortgage Loans—Americans with Disabilities Act”. The expenditure of these costs or the imposition of injunctive relief, penalties or fines in connection with the borrower’s noncompliance could
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negatively impact the borrower’s cash flow and, consequently, its ability to pay its mortgage loan.
Insurance May Not Be Available or Adequate
Although the mortgaged properties are required to be insured, or self-insured by a sole 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.
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.
Certain of the mortgaged properties may be located in areas that are considered a high earthquake risk (seismic zones 3 or 4). See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Geographic Concentrations”.
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.
The mortgage loans do not all require flood insurance on the related mortgaged properties unless they are in a flood zone and flood insurance is available and, in certain instances, even where the related mortgaged property was in a flood zone and flood insurance was available, flood insurance was not required.
The National Flood Insurance Program is scheduled to expire on July 31, 2018. We cannot assure you if or when the program will be reauthorized by Congress. If the program is not reauthorized, it could have an adverse effect on the value of properties in flood zones or their ability to be repaired after flood damage.
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
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all real estate, if reconstruction (for example, following fire or other casualty) or any major repair or improvement is required to the damaged property, changes in laws and governmental regulations may be applicable and may materially affect the cost to, or ability of, the borrowers to effect such reconstruction, major repair or improvement. As a result, the amount realized with respect to the mortgaged properties, and the amount available to make payments on the related mortgage loan, and consequently, the offered certificates, could be reduced. In addition, we cannot assure you that the amount of insurance required or provided would be sufficient to cover damages caused by any casualty, or that such insurance will be available in the future at commercially reasonable rates. See representation and warranty no. 18 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
Inadequacy of Title Insurers May Adversely Affect Distributions 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, 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 with respect to any mortgage loan:
| ● | a title insurer will have the ability to pay title insurance claims made upon it; |
| ● | the title insurer will maintain its present financial strength; or |
| ● | a title insurer will not contest claims made upon it. |
Certain of the mortgaged properties are either completing initial construction or undergoing renovation or redevelopment. Under such circumstances, there may be limitations to the amount of coverage or other exceptions to coverage that could adversely affect the issuing entity if losses are suffered.
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 (as amended, “TRIPRA”), 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.
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
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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 82% in 2018 (subject to annual 1% decreases thereafter 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 $160 million in 2018 (subject to annual $20 million increases thereafter 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), 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. To the extent that uninsured or underinsured casualty losses occur with respect to the related mortgaged properties, losses on the mortgage loans may result. In addition, the failure to maintain such terrorism insurance may constitute a default under the related mortgage loan.
Some of the mortgage loans do not require the related borrower to maintain terrorism insurance. In addition, most of the mortgage loans contain limitations on the related borrower’s obligation to obtain terrorism insurance, such as (i) waiving the requirement that such borrower maintain terrorism insurance if such insurance is not available at commercially reasonable rates, (ii) providing that the related borrower is not required to spend in excess of a specified dollar amount (or in some cases, a specified multiple of what is spent on other insurance) in order to obtain such terrorism insurance, (iii) requiring coverage only for as long as the TRIPRA is in effect, or (iv) requiring coverage only for losses arising from domestic acts of terrorism or from terrorist acts certified by the federal government as “acts of terrorism” under the TRIPRA. See Annex A-3 to this prospectus for a summary of the terrorism insurance requirements under each of the 15 largest mortgage loans. See representation and warranty no. 31 on Annex D-1 to this prospectus and the exceptions thereto on Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
We cannot assure you that all of the mortgaged properties will be insured against the risks of terrorism and similar acts. As a result of any of the foregoing, the amount available to make distributions on your certificates could be reduced.
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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.
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.
Additionally, the risks related to blanket insurance may be aggravated if the mortgage loans that allow such coverage are part of a group of mortgage loans with related borrowers, and some or all of the related mortgaged properties are covered under the same blanket insurance 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—Tenant Issues—Insurance Considerations”. We cannot assure you that any insurance obtained by a sole or significant tenant will be adequate or that such sole or significant tenant will comply with any requirements to maintain adequate insurance. Additionally, to the extent that insurance coverage relies on self-insurance, there is a risk that the “insurer” will not be willing or have the financial ability to satisfy a claim if a loss occurs. See representation and warranty nos. 18 and 31 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
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. See “Description of the Mortgage Pool—Litigation and Other Considerations” in this prospectus.
Limited Information Causes Uncertainty
Historical Information
Some of the mortgage loans that we intend to include in the issuing entity are secured in whole or in part by mortgaged properties for which limited or no historical operating information is available. As a result, you may find it difficult to analyze the historical performance of those mortgaged properties.
A mortgaged property may lack prior operating history or historical financial information because it is newly constructed or renovated, it is a recent acquisition by the related borrower or it is a single-tenant property that is subject to a triple-net lease. In addition, a tenant’s lease may contain confidentiality provisions that restrict the sponsors’ access to or
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disclosure of such tenant’s financial information. The underwritten net cash flows and underwritten net operating income for such mortgaged properties are derived principally from current rent rolls or tenant leases and historical expenses, adjusted to account for inflation, significant occupancy increases and a market rate management fee. In some cases, underwritten net cash flows and underwritten net operating income for mortgaged properties are based all or in part on leases (or letters of intent) that are not yet in place (and may still be under negotiation) or on tenants that may have signed a lease (or letter of intent), or lease amendment expanding the leased space, but are not yet in occupancy and/or paying rent), which present certain risks described in “—Underwritten Net Cash Flow Could Be Based On Incorrect or Flawed Assumptions” below and “Description of the Mortgage Pool—Certain Calculations and Definitions” and “—Mortgage Pool Characteristics—Mortgaged Properties with Limited Prior Operating History” in this prospectus.
See Annex A-1 for certain historical financial information relating to the mortgaged properties, including net operating income for the most recent reporting period and prior three calendar years, to the extent available.
Ongoing Information
The primary source of ongoing information regarding the offered certificates, including information regarding the status of the related mortgage loans and any credit support for the offered certificates, will be the periodic reports delivered to you. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. We cannot assure you that any additional ongoing information regarding the offered certificates will be available through any other source. The limited nature of the available information in respect of the offered certificates may adversely affect their liquidity, even if a secondary market for the offered certificates does develop.
We are not aware of any source through which pricing information regarding the offered certificates will be generally available on an ongoing basis or on any particular date.
Underwritten Net Cash Flow Could Be Based On Incorrect or Flawed Assumptions
As described under “Description of the Mortgage Pool—Certain Calculations and Definitions”, underwritten net cash flow generally includes cash flow (including any cash flow from master leases) adjusted based on a number of assumptions used by the sponsors. We make no representation that the underwritten net cash flow set forth in this prospectus as of the cut-off date or any other date represents actual future net cash flows. For example, with respect to certain mortgage loans included in the issuing entity, the occupancy of the related mortgaged property reflects tenants that (i) may not have yet actually executed leases (but have in some instances signed letters of intent), (ii) have signed leases but have not yet taken occupancy and/or are not paying full contractual rent, (iii) are seeking or may in the future seek to sublet all or a portion of their respective spaces, (iv) are “dark” tenants but paying rent, or (v) are affiliates of the related borrower and are leasing space pursuant to a master lease or a space lease. Similarly, with respect to certain mortgage loans included in the issuing entity, the underwritten net cash flow may be based on certain tenants that have not yet executed leases or that have signed leases but are not yet in place and/or are not yet paying rent, or have a signed lease or lease amendment expanding the leased space, but are not yet in occupancy of all or a portion of their space and/or paying rent, or may assume that future contractual rent steps (during some or all of the remaining term of a lease) have occurred. In many cases, co-tenancy provisions were assumed to be satisfied and vacant space was assumed to be occupied and space that was due to expire was assumed to have been re-let, in each case at market rates
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that may have exceeded current rent. You should review these and other similar assumptions and make your own determination of the appropriate assumptions to be used in determining underwritten net cash flow.
In addition, underwritten or adjusted cash flows, by their nature, are speculative and are based upon certain assumptions and projections. The failure of these assumptions or projections in whole or in part could cause the underwritten net operating income (calculated as described in “Description of the Mortgage Pool—Certain Calculations and Definitions”) to vary substantially from the actual net operating income of a mortgaged property.
In the event of the inaccuracy of any assumptions or projections used in connection with the calculation of underwritten net cash flow, the actual net cash flow could be significantly different (and, in some cases, may be materially less) than the underwritten net cash flow presented in this prospectus, and this would change other numerical information presented in this prospectus based on or derived from the underwritten net cash flow, such as the debt service coverage ratios or debt yield presented in this prospectus. We cannot assure you that any such assumptions or projections made with respect to any mortgaged property will, in fact, be consistent with that mortgaged property’s actual performance.
Frequent and Early Occurrence of Borrower Delinquencies and Defaults May Adversely Affect Your Investment
If you calculate the anticipated yield of your offered certificates based on a rate of default or amount of losses lower than that actually experienced on the mortgage loans and those additional losses result in a reduction of the total distributions on, or the certificate balance of, your offered certificates, your actual yield to maturity will be lower than expected and could be negative under certain extreme scenarios. The timing of any loss on a liquidated mortgage loan that results in a reduction of the total distributions on or the certificate balance of your offered certificates will also affect the actual yield to maturity of your offered certificates, even if the rate of defaults and severity of losses are consistent with your expectations. In general, the earlier a loss is borne by you, the greater the effect on your yield to maturity.
Delinquencies on the mortgage loans, if the delinquent amounts are not advanced, may result in shortfalls in distributions of interest and/or principal to the holders of the offered certificates for the current month. Furthermore, no interest will accrue on this shortfall during the period of time that the payment is delinquent. Additionally, in instances where the principal portion of any balloon payment scheduled with respect to a mortgage loan is collected by the master servicer following the end of the related collection period, no portion of the principal received on such payment will be passed through for distribution to the certificateholders until the subsequent distribution date, which may result in shortfalls in distributions of interest to the holders of the offered certificates in the following month. Furthermore, in such instances no provision is made for the master servicer or any other party to cover any such interest shortfalls that may occur as a result. In addition, if interest and/or principal advances and/or servicing advances are made with respect to a mortgage loan after a default and the related mortgage loan is thereafter worked out under terms that do not provide for the repayment of those advances in full at the time of the workout, then any reimbursements of those advances prior to the actual collection of the amount for which the advance was made may also result in shortfalls in distributions of principal to the holders of the offered certificates with certificate balances for the current month. Even if losses on the mortgage loans are not allocated to a particular class of offered certificates with certificate balances, the losses may affect the weighted average life and yield to maturity of that class of offered certificates. In the case of any material monetary or
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material non-monetary default, the special servicer may accelerate the maturity of the related mortgage loan, which could result in an acceleration of principal distributions to the certificateholders. The special servicer may also extend or modify a mortgage loan, which could result in a substantial delay in principal distributions to the certificateholders. In addition, losses on the mortgage loans, even if not allocated to a class of offered certificates with certificate balances, may result in a higher percentage ownership interest evidenced by those offered certificates in the remaining mortgage loans than would otherwise have resulted absent the loss. The consequent effect on the weighted average life and yield to maturity of the offered certificates will depend upon the characteristics of those remaining mortgage loans in the trust fund.
The Mortgage Loans Have Not Been Reviewed or Re-Underwritten by Us; Some Mortgage Loans May Not Have Complied With Another Originator’s Underwriting Criteria
Although the sponsors have conducted a review of the mortgage loans to be sold to us for this securitization transaction, we, as the depositor for this securitization transaction, have neither originated the mortgage loans nor conducted a review or re-underwriting of the mortgage loans. Instead, we have relied on the representations and warranties made by the applicable sponsors and the remedies for breach of a representation and warranty as described under “Description of the Mortgage Loan Purchase Agreements” and the sponsor’s description of its underwriting criteria described under “Transaction Parties—The Sponsors and Mortgage Loan Sellers—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting”; “—Barclays Bank PLC—Barclays’ Underwriting Guidelines and Processes”; “—Rialto Mortgage Finance, LLC—Rialto Mortgage’s Underwriting Standards and Loan Analysis”; and “—C-III Commercial Mortgage LLC—C-III CM’s Underwriting Guidelines and Processes”. A description of the review conducted by each sponsor for this securitization transaction is set forth under each of the foregoing headings.
The representations and warranties made by the sponsors may not cover all of the matters that one would review in underwriting a mortgage loan and you should not view them as a substitute for re-underwriting the mortgage loans. Furthermore, these representations and warranties in some respects represent an allocation of risk rather than a confirmed description of the mortgage loans. If we had re-underwritten the mortgage loans, it is possible that the re-underwriting process may have revealed problems with a mortgage loan not covered by a representation or warranty or may have revealed inaccuracies in the representations and warranties. See “—Other Risks Relating to the Certificates—Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan” below, and “Description of the Mortgage Loan Purchase Agreements”.
In addition, we cannot assure you that all of the mortgage loans would have complied with the underwriting criteria of the other originators or, accordingly, that each originator would have made the same decision to originate every mortgage loan included in the issuing entity or, if they did decide to originate an unrelated mortgage loan, that they would have been underwritten on the same terms and conditions.
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.
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Static Pool Data Would Not Be Indicative of the Performance of this Pool
As a result of the distinct nature of each pool of commercial mortgage loans, and the separate mortgage loans within the pool, this prospectus does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations by any sponsor of assets of the type to be securitized (known as “static pool data”). In particular, static pool data showing a low level of delinquencies and defaults would not be indicative of the performance of this pool or any other pools of mortgage loans originated by the same sponsor or sponsors.
While there may be certain common factors affecting the performance and value of income-producing real properties in general, those factors do not apply equally to all income-producing real properties and, in many cases, there are unique factors that will affect the performance and/or value of a particular income-producing real property. Moreover, the effect of a given factor on a particular real property will depend on a number of variables, including but not limited to property type, geographic location, competition, sponsorship and other characteristics of the property and the related commercial mortgage loan. Each income-producing real property represents a separate and distinct business venture and, as a result, each of the mortgage loans requires a unique underwriting analysis. Furthermore, economic and other conditions affecting real properties, whether worldwide, national, regional or local, vary over time. The performance of a pool of mortgage loans originated and outstanding under a given set of economic conditions may vary significantly from the performance of an otherwise comparable mortgage pool originated and outstanding under a different set of economic conditions.
Therefore, you should evaluate this offering on the basis of the information set forth in this prospectus with respect to the mortgage loans, and not on the basis of the performance of other pools of securitized commercial mortgage loans.
Appraisals May Not Reflect Current or Future Market Value of Each Property
Appraisals were obtained with respect to each of the mortgaged properties at or about the time of origination of the related mortgage loan (or whole loan, if applicable) or at or around the time of the acquisition of the mortgage loan (or whole loan, if applicable) by the related sponsor. See Annex A-1 for the dates of the latest appraisals for the mortgaged properties. We have not obtained new appraisals of the mortgaged properties or assigned new valuations to the mortgage loans in connection with the offering of the offered certificates. The market values of the mortgaged properties could have declined since the origination of the related mortgage loans.
In general, appraisals represent the analysis and opinion of qualified appraisers and are not guarantees of present or future value. One appraiser may reach a different conclusion than that of a different appraiser with respect to the same property. The appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller and, in certain cases, may have taken into consideration the purchase price paid by the borrower. The amount could be significantly higher than the amount obtained from the sale of a mortgaged property in a distress or liquidation sale.
Information regarding the appraised values of the mortgaged properties (including loan-to-value ratios) presented in this prospectus is not intended to be a representation as to the past, present or future market values of the mortgaged properties. For example, in some cases, a borrower or its affiliate may have acquired the related mortgaged property for a price or otherwise for consideration in an amount that is less than the related appraised value specified on Annex A-1, including at a foreclosure sale or through acceptance of a
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deed-in-lieu of foreclosure. Historical operating results of the mortgaged properties used in these appraisals, as adjusted by various assumptions, estimates and subjective judgments on the part of the appraiser, may not be comparable to future operating results. In addition, certain appraisals may be based on extraordinary assumptions, including without limitation, that certain tenants are in-place and paying rent when such tenants have not yet taken occupancy or that certain renovations or property improvement plans have been completed. Additionally, certain appraisals with respect to mortgage loans secured by multiple mortgaged properties may have been conducted on a portfolio basis rather than on an individual property basis, and the sum of the values of the individual properties may be different from (and in some cases may be less than) the appraised value of the aggregate of such properties on a portfolio basis. In addition, other factors may impair the mortgaged properties’ value without affecting their current net operating income, including:
| ● | changes in governmental regulations, zoning or tax laws; |
| ● | potential environmental or other legal liabilities; |
| ● | the availability of refinancing; and |
| ● | changes in interest rate levels. |
In certain cases, appraisals may reflect “as-is” values or values other than “as-is”. 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 certain values other than “as-is” values as a result of the satisfaction of the related conditions or assumptions or the establishment of reserves estimated to complete the renovations) unless otherwise specified. Any such values other than “as-is” may contain certain assumptions, such as future construction completion, projected re-tenanting or increased tenant occupancies. See “Description of the Mortgage Pool—Appraised Value”.
Additionally, with respect to the appraisals setting forth assumptions, particularly those setting forth extraordinary assumptions, as to the “as-is” values and values other than “as-is” value, we cannot assure you that those assumptions are or will be accurate or that any such values will be the value of the related mortgaged property at maturity or the anticipated repayment date (if any) or at the indicated stabilization date or upon completion of the renovations, as applicable. 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 Mortgage Loan Sellers—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting”; “—Barclays Bank PLC—Barclays’ Underwriting Guidelines and Processes”, “—Rialto Mortgage Finance, LLC—Rialto Mortgage’s Underwriting Standards and Loan Analysis”; and “—C-III Commercial Mortgage LLC—C-III CM’s Underwriting Guidelines and Processes” for additional information regarding the appraisals. We cannot assure you that the information set forth in this prospectus regarding the appraised values or loan-to-value ratios accurately reflects past, present or future market values of the mortgaged properties or the amount that would be realized upon a sale of the related mortgaged property.
The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property
The operation and performance of a mortgage loan will depend in part on the identity of the persons or entities who control the borrower and the mortgaged property. The
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performance of a mortgage loan may be adversely affected if control of a borrower changes, which may occur, for example, by means of transfers of direct or indirect ownership interests in the borrower, or if the mortgage loan is assigned to and assumed by another person or entity along with a transfer of the property to that person or entity.
Many of the mortgage loans generally place certain restrictions on the transfer and/or pledging of general partnership and managing member equity interests in a borrower, such as specific percentage or control limitations, although some have current or permit future mezzanine or subordinate debt. We cannot assure you the ownership of any of the borrowers would not change during the term of the related mortgage loan and result in a material adverse effect on your certificates. See “Description of the Mortgage Pool—Additional Indebtedness” and “—Certain Terms of the Mortgage Loans—’Due-On-Sale’ and ‘Due-On-Encumbrance’ Provisions”.
The Borrower’s Form of Entity May Cause Special Risks
The borrowers are legal entities rather than individuals. Mortgage loans made to legal entities may entail greater risks of loss than those associated with mortgage loans made to individuals. For example, a legal entity, as opposed to an individual, may be more inclined to seek legal protection from its creditors under the bankruptcy laws. Unlike individuals involved in bankruptcies, most entities generally, but not in all cases, do not have personal assets and creditworthiness at stake.
The terms of certain of the mortgage loans require that the borrowers be single-purpose entities and, in most cases, such borrowers’ organizational documents or the terms of the mortgage loans limit their activities to the ownership of only the related mortgaged property or mortgaged properties and limit the borrowers’ ability to incur additional indebtedness. Such provisions are designed to mitigate the possibility that the borrower’s financial condition would be adversely impacted by factors unrelated to the related mortgaged property and mortgage loan. Such borrower may also have previously owned property other than the related mortgaged property or may be a so-called “recycled” single-purpose entity that previously had other business activities and liabilities. However, we cannot assure you that such borrowers have in the past complied, or in the future will comply, with such requirements. Additionally, in some cases unsecured debt exists and/or is allowed in the future. Furthermore, in many cases such borrowers are not required to observe all covenants and conditions which typically are required in order for such borrowers to be viewed under standard rating agency criteria as “single-purpose entities”.
Although a borrower may currently be a single-purpose entity, in certain cases the borrowers were not originally formed as single-purpose entities, but at origination of the related mortgage loan their organizational documents were amended. Such borrower may have previously owned property other than the related mortgaged property and may not have observed all covenants that typically are required to consider a borrower a “single-purpose entity” and thus may have liabilities arising from events prior to becoming a single-purpose entity.
The organizational documents of a borrower or the direct or indirect managing partner or member of a borrower may also contain requirements that there be one or two independent directors, managers or trustees (depending on the entity form of such borrower) whose vote is required before the borrower files a voluntary bankruptcy or insolvency petition or otherwise institutes insolvency proceedings. Generally, but not always, the independent directors, managers or trustees may only be replaced with certain other independent successors. Although the requirement of having independent directors, managers or trustees is designed to mitigate the risk of a voluntary bankruptcy filing by a
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solvent borrower, a borrower could file for bankruptcy without obtaining the consent of its independent director(s) (and we cannot assure you that such bankruptcy would be dismissed as an unauthorized filing), and in any case the independent directors, managers or trustees may determine that a bankruptcy filing is an appropriate course of action to be taken by such borrower. Although the independent directors, managers or trustees generally owe no fiduciary duties to entities other than the borrower itself, such determination might take into account the interests and financial condition of such borrower’s parent entities and such parent entities’ other subsidiaries in addition to those of the borrower. Consequently, the financial distress of an affiliate of a borrower might increase the likelihood of a bankruptcy filing by a borrower.
The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage loan. Certain of the mortgage loans have been made to single-purpose limited partnerships that have a general partner or general partners that are not themselves single-purpose entities. Such loans are subject to additional bankruptcy risk. The organizational documents of the general partner in such cases do not limit it to acting as the general partner of the partnership. Accordingly there is a greater risk that the general partner may become insolvent for reasons unrelated to the mortgaged property. The bankruptcy of a general partner may dissolve the partnership under applicable state law. In addition, even if the partnership itself is not insolvent, actions by the partnership and/or a bankrupt general partner that are outside the ordinary course of their business, such as refinancing the related mortgage loan, may require prior approval of the bankruptcy court in the general partner’s bankruptcy case. The proceedings required to resolve these issues may be costly and time-consuming.
Any borrower, even an entity structured as a single-purpose entity, as an owner of real estate, will be subject to certain potential liabilities and risks as an owner of real estate. We cannot assure you that any borrower will not file for bankruptcy protection or that creditors of a borrower or a corporate or individual general partner or managing member of a borrower will not initiate a bankruptcy or similar proceeding against such borrower or corporate or individual general partner or managing member.
Certain borrowers’ organizational documents or the terms of certain mortgage loans permit an affiliated property manager to maintain a custodial account on behalf of such borrower and certain affiliates of such borrower into which funds available to such borrower under the terms of the related mortgage loans and funds of such affiliates are held, but which funds are and will continue to be separately accounted for as to each item of income and expense for each related mortgaged property and each related borrower. A custodial account structure for affiliated entities, while common among certain REITs, institutions or independent owners of multiple properties, presents a risk for consolidation of the assets of such affiliates as commingling of funds is a factor a court may consider in considering a request by other creditors for substantive consolidation. Substantive consolidation is an equitable remedy that could result in an otherwise solvent company becoming subject to the bankruptcy proceedings of an insolvent affiliate, making its assets available to repay the debts of affiliated companies. A court has the discretion to order substantive consolidation in whole or in part and may include non-debtor affiliates of the bankrupt entity in the proceedings. In particular, consolidation may be ordered when corporate funds are commingled and used for a principal’s personal purposes, inadequate records of transfers are made and corporate entities are deemed an alter ego of a principal. Strict adherence to maintaining separate books and records, avoiding commingling of assets and otherwise maintaining corporate policies designed to preserve the separateness of corporate assets and liabilities make it less likely that a court would order substantive consolidation, but we
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cannot assure you that the related borrowers, property managers or affiliates will comply with these requirements as set forth in the related mortgage loans.
Furthermore, with respect to any affiliated borrowers, creditors of a common parent in bankruptcy may seek to consolidate the assets of such borrowers with those of the parent. Consolidation of the assets of such borrowers would likely have an adverse effect on the funds available to make distributions on your certificates, and may lead to a downgrade, withdrawal or qualification of the ratings of your certificates.
See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Single-Purpose Entity Covenants” and “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”. See also representation and warranty no. 33 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
In addition, borrowers may own a mortgaged property as a Delaware statutory trust or as tenants-in-common. Delaware statutory trusts may be restricted in their ability to actively operate a property, and in the case of a mortgaged property that is owned by a Delaware statutory trust or by tenants-in-common, there is a risk that obtaining the consent of the holders of the beneficial interests in the Delaware statutory trust or the consent of the tenants-in-common will be time consuming and cause delays with respect to the taking of certain actions by or on behalf of the borrower, including with respect to the related mortgaged property. See “—Tenancies-in-Common May Hinder Recovery” below. See also “Description of the Mortgage Pool—Mortgage Pool Characteristics—Tenancies-in-Common or Diversified Ownership” and “—Delaware Statutory Trusts” in this prospectus.
In addition, certain of the mortgage loans may have borrowers that are wholly or partially (directly or indirectly) owned by one or more crowd funding investor groups or other diversified ownership structures. Investments in the commercial real estate market through crowd funding investor groups are a relatively recent development and there may be certain unanticipated risks to this new ownership structure which may adversely affect the related mortgage loan. Typically, the crowd funding investor group is made up of a large number of individual investors who invest relatively small amounts in the group pursuant to a securities offering. With respect to an equity investment in the borrower, the crowd funding investor group in turn purchases a stake in the borrower. Accordingly, equity in the borrower is indirectly held by the individual investors in the crowd funding group. We cannot assure you that either the crowd funding investor group or the individual investors in the crowd funding investor group or other diversified ownership structure have relevant expertise in the commercial real estate market. Additionally, crowd funding investor groups are required to comply with various securities regulations related to offerings of securities and we cannot assure you that any enforcement action or legal proceeding regarding failure to comply with such securities regulations would not delay enforcement of the related mortgage loan or otherwise impair the borrower’s ability to operate the related mortgaged property. Furthermore, we cannot assure you that a bankruptcy proceeding by the crowd funding investor group or other diversified ownership structure will not delay enforcement of the related mortgage loan. See “—Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions”, “—Frequent and Early Occurrence of Borrower Delinquencies and Defaults May Adversely Affect Your Investment” and “—The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property” and “Description of the Mortgage Pool—Mortgage Pool Characteristics—Tenancies-in-Common or Diversified Ownership” in this prospectus.
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A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans
Numerous statutory provisions, including the federal bankruptcy code and state laws affording relief to debtors, may interfere with and delay the ability of a secured mortgage lender to obtain payment of a loan, to realize upon collateral and/or to enforce a deficiency judgment. For example, under the federal bankruptcy code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of a bankruptcy petition, and, often, no interest or principal payments are made during the course of the bankruptcy proceeding. Also, under federal bankruptcy law, the filing of a petition in bankruptcy by or on behalf of a junior lien holder may stay the senior lender from taking action to foreclose out such junior lien. Certain of the mortgage loans have sponsors that have previously filed bankruptcy and we cannot assure you that such sponsors will not be more likely than other sponsors to utilize their rights in bankruptcy in the event of any threatened action by the mortgagee to enforce its rights under the related mortgage loan documents. As a result, the issuing entity’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed. See “—Other Financings or Ability To Incur Other Indebtedness Entails Risk” below, “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” and “Certain Legal Aspects of Mortgage Loans—Foreclosure—Bankruptcy Laws”.
Additionally, the courts of any state may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the action unconscionable. See “Certain Legal Aspects of Mortgage Loans—Foreclosure”.
See also “—Performance of the Mortgage Loan Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” above.
Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions
There may be (and there may exist from time to time) pending or threatened legal proceedings against, or disputes with, the borrowers, the borrower sponsors, the managers of the mortgaged properties and their respective affiliates arising out of their ordinary business. We have not undertaken a search for all legal proceedings that relate to the borrowers, borrower sponsors, managers for the mortgaged properties or their respective affiliates. Potential investors are advised and encouraged to perform their own searches related to such matters to the extent relevant to their investment decision. Any such litigation or dispute may materially impair distributions to certificateholders if borrowers must use property income to pay judgments, legal fees or litigation costs. We cannot assure you that any litigation or dispute or any settlement of any litigation or dispute will not have a material adverse effect on your investment. See representation and warranty no. 15 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
Additionally, a borrower or a principal of a borrower or affiliate may have been a party to a bankruptcy, foreclosure, litigation or other proceeding, particularly against a lender, or may have been convicted of a crime in the past. In addition, certain of the borrower sponsors, property managers, affiliates of any of the foregoing and/or entities controlled thereby have been a party to bankruptcy proceedings, mortgage loan defaults and restructures, discounted payoffs, foreclosure proceedings or deed-in-lieu of foreclosure
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transactions, or other material proceedings (including criminal proceedings) in the past, whether or not related to the mortgaged property securing a mortgage loan in this securitization transaction. In some cases, mortgaged properties securing certain of the mortgage loans previously secured other loans that had been in default, restructured or the subject of a discounted payoff, foreclosure or deed-in-lieu of foreclosure.
Certain of the borrower sponsors may have a history of litigation or other proceedings against their lender, in some cases involving various parties to a securitization transaction. We cannot assure you that the borrower sponsors that have engaged in litigation or other proceedings in the past will not commence action against the issuing entity in the future upon any attempt by the special servicer to enforce the mortgage loan documents. Any such actions by the borrower or borrower sponsor may result in significant expense and potential loss to the issuing entity and a shortfall in funds available to make payments on the offered certificates. In addition, certain principals or borrower sponsors may have in the past been convicted of, or pled guilty to, a felony. We cannot assure you that such borrower or principal will not be more likely than other borrowers or principals to avail itself or cause a borrower to avail itself of its legal rights, under the federal bankruptcy code or otherwise, in the event of an action or threatened action by the lender or its servicer to enforce the related mortgage loan documents, or otherwise conduct its operations in a manner that is in the best interests of the lender and/or the mortgaged property. We cannot assure you that any such proceedings or actions will not have a material adverse effect upon distributions on your certificates. Further, borrowers, principals of borrowers, property managers and affiliates of such parties may, in the future, be involved in bankruptcy proceedings, foreclosure proceedings or other material proceedings (including criminal proceedings), whether or not related to the mortgage loans. We cannot assure you that any such proceedings will not negatively impact a borrower’s or borrower sponsor’s ability to meet its obligations under the related mortgage loan and, as a result could have a material adverse effect upon your certificates.
Often it is difficult to confirm the identity of owners of all of the equity in a borrower, which means that past issues may not be discovered as to such owners. See “Description of the Mortgage Pool—Litigation and Other Considerations” and “—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” for additional information on certain mortgage loans in the issuing entity. Accordingly, we cannot assure you that there are no undisclosed bankruptcy proceedings, foreclosure proceedings, deed-in-lieu-of-foreclosure transaction and/or mortgage loan workout matters that involved one or more mortgage loans or mortgaged properties, and/or a guarantor, borrower sponsor or other party to a mortgage loan.
In addition, in the event the owner of a borrower experiences financial problems, we cannot assure you that such owner would not attempt to take actions with respect to the mortgaged property that may adversely affect the borrower’s ability to fulfill its obligations under the related mortgage loan. See “Description of the Mortgage Pool—Litigation and Other Considerations” for information regarding litigation matters with respect to certain mortgage loans.
Other Financings or Ability to Incur Other Indebtedness Entails Risk
When a borrower (or its constituent members) also has one or more other outstanding loans (even if they are pari passu, subordinated, mezzanine, preferred equity or unsecured loans or another type of equity pledge), the issuing entity is subjected to additional risk such as:
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| ● | the borrower (or its constituent members) may have difficulty servicing and repaying multiple financings; |
| ● | the existence of other financings will generally also make it more difficult for the borrower to obtain refinancing of the related mortgage loan (or whole loan, if applicable) or sell the related mortgaged property and may thereby jeopardize repayment of the mortgage loan (or whole loan, if applicable); |
| ● | the need to service additional financings may reduce the cash flow available to the borrower to operate and maintain the mortgaged property and the value of the mortgaged property may decline as a result; |
| ● | if a borrower (or its constituent members) defaults on its mortgage loan and/or any other financing, actions taken by other lenders such as a suit for collection, foreclosure or an involuntary petition for bankruptcy against the borrower could impair the security available to the issuing entity, including the mortgaged property, or stay the issuing entity’s ability to foreclose during the course of the bankruptcy case; |
| ● | the bankruptcy of another lender also may operate to stay foreclosure by the issuing entity; and |
| ● | the issuing entity may also be subject to the costs and administrative burdens of involvement in foreclosure or bankruptcy proceedings or related litigation. |
Although no companion loan related to a whole loan will be an asset of the issuing entity, the related borrower is still obligated to make interest and principal payments on such 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 or on the related anticipated repayment date. |
With respect to mezzanine financing (if any), while a mezzanine lender has no security interest in the related mortgaged properties, a default under a mezzanine loan could cause a change in control of the related borrower. With respect to mortgage loans that permit mezzanine financing, the relative rights of the mortgagee and the related mezzanine lender will generally be set forth in an intercreditor agreement, which agreements typically provide that the rights of the mezzanine lender (including the right to payment) against the borrower and mortgaged property are subordinate to the rights of the mortgage lender and that the mezzanine lender may not take any enforcement action against the mortgage borrower and mortgaged property. See “Description of the Mortgage Pool—Additional Indebtedness—Mezzanine Indebtedness” and representation and warranty number 9 on Annex D-1 and the matters scheduled on Annex D-2-1.
In addition, the mortgage loan documents related to certain mortgage loans may have or permit future “preferred equity” structures, where one or more special limited partners or members receive a preferred return in exchange for an infusion of capital or other type of equity pledge that may require payments of a specified return or of excess cash flow. Such arrangements can present risks that resemble mezzanine debt, including dilution of the
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borrower’s equity in the mortgaged property, stress on the cash flow in the form of a preferred return or excess cash payments, and/or potential changes in the management of the related mortgaged property in the event the preferred return is not satisfied.
Additionally, the terms of certain mortgage loans permit or require the borrowers to post letters of credit and/or surety bonds for the benefit of the related mortgage loan, which may constitute a contingent reimbursement obligation of the related borrower or an affiliate. The issuing bank or surety will not typically agree to subordination and standstill protection benefiting the mortgagee.
In addition, borrowers under most of the mortgage loans are generally permitted to incur trade payables and equipment financing, which may not be limited or may be significant, in order to operate the related mortgaged properties. Also, with respect to certain mortgage loans the related borrower either has incurred or is permitted to incur unsecured debt from an affiliate of either the borrower or the sponsor of the borrower. See “Description of the Mortgage Pool—Additional Indebtedness—Other Unsecured Indebtedness”.
For additional information, see “Description of the Mortgage Pool—Additional Indebtedness” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Tenancies-in-Common May Hinder Recovery
Certain of the mortgage loans included in the issuing entity have borrowers that own the related mortgaged properties as tenants-in-common. In general, with respect to a tenant-in-common ownership structure, each tenant-in-common owns an undivided share in the property and if such tenant-in-common desires to sell its interest in the property (and is unable to find a buyer or otherwise needs to force a partition) the tenant-in-common has the ability to request that a court order a sale of the property and distribute the proceeds to each tenant in common proportionally. As a result, if a tenant-in-common that has not waived its right of partition or similar right exercises a right of partition, the related mortgage loan may be subject to prepayment. The bankruptcy, dissolution or action for partition by one or more of the tenants-in-common could result in an early repayment of the related mortgage loan, significant delay in recovery against the tenant-in-common borrowers, particularly if the tenant-in-common borrowers file for bankruptcy separately or in series (because each time a tenant-in-common borrower files for bankruptcy, the bankruptcy court stay will be reinstated), a material impairment in property management and a substantial decrease in the amount recoverable upon the related mortgage loan. Not all tenants-in-common under the mortgage loans will be single-purpose entities. Each tenant-in-common borrower has waived its right to partition, reducing the risk of partition. However, we cannot assure you that, if challenged, this waiver would be enforceable. In addition, in some cases, the related mortgage loan documents may provide for full recourse (or in an amount equal to 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. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Tenancies-in-Common or Diversified Ownership” in this prospectus.
Risks Relating to Delaware Statutory Trusts
Certain of the Mortgage Loans included in the issuing entity have borrowers that are Delaware statutory trusts. In general, a Delaware statutory trust is restricted in its ability to actively operate a property. Accordingly, the related borrower has master leased the property to a newly formed, single-purpose entity that is wholly owned by the same entity
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that owns the signatory trustee for the related borrower. The master lease has been collaterally assigned to the lender and has been subordinated to the related Mortgage Loan documents. 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.
Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions
Provisions requiring yield maintenance charges, prepayment premiums or lockout periods may not be enforceable in some states and under federal bankruptcy law. Provisions requiring prepayment premiums or yield maintenance charges also may be interpreted as constituting the collection of interest for usury purposes. Accordingly, we cannot assure you that the obligation to pay a yield maintenance charge or prepayment premium will be enforceable. Also, we cannot assure you that foreclosure proceeds will be sufficient to pay an enforceable yield maintenance charge or prepayment premium.
Additionally, although the collateral substitution provisions related to defeasance do not have the same effect on the certificateholders as prepayment, we cannot assure you that a court would not interpret those provisions as the equivalent of a yield maintenance charge or prepayment premium. In certain jurisdictions those collateral substitution provisions might therefore be deemed unenforceable or usurious under applicable law or public policy.
Risks Associated with One Action Rules
Several states (such as California) have laws that prohibit more than one “judicial action” to enforce a mortgage obligation, and some courts have construed the term “judicial action” broadly. Accordingly, the special servicer will be required to obtain advice of counsel prior to enforcing any of the issuing entity’s rights under any of the mortgage loans that include mortgaged properties where a “one action” rule could be applicable. In the case of a multi-property mortgage loan which is secured by mortgaged properties located in multiple states, the special servicer may be required to foreclose first on properties located in states where “one action” rules apply (and where non-judicial foreclosure is permitted) before foreclosing on properties located in states where judicial foreclosure is the only permitted method of foreclosure. See “Certain Legal Aspects of Mortgage Loans—Foreclosure”.
State Law Limitations on Assignments of Leases and Rents May Entail Risks
Generally mortgage loans included in an issuing entity secured by mortgaged properties that are subject to leases typically will be secured by an assignment of leases and rents pursuant to which the related borrower (or with respect to any indemnity deed of trust structure, the related property owner) assigns to the lender its right, title and interest as landlord under the leases of the related mortgaged properties, and the income derived from those leases, as further security for the related mortgage loan, while retaining a license to collect rents for so long as there is no default. If the borrower defaults, the license terminates and the lender is entitled to collect rents. Some state laws may require that the lender take possession of the related property and obtain a judicial appointment of a receiver before becoming entitled to collect the rents. In addition, if bankruptcy or similar proceedings are commenced by or in respect of the borrower, the lender’s ability to collect the rents may be adversely affected. See “Certain Legal Aspects of Mortgage Loans—Leases and Rents” and “—Foreclosure—Bankruptcy Laws”.
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Various Other Laws Could Affect the Exercise of Lender’s Rights
The laws of the jurisdictions in which the mortgaged properties are located (which laws may vary substantially) govern many of the legal aspects of the mortgage loans. These laws may affect the ability to foreclose on, and, in turn the ability to realize value from, the mortgaged properties securing the mortgage loans. For example, state law determines:
| ● | what proceedings are required for foreclosure; |
| ● | whether the borrower and any foreclosed junior lienors may redeem the property and the conditions under which these rights of redemption may be exercised; |
| ● | whether and to what extent recourse to the borrower is permitted; and |
| ● | what rights junior mortgagees have and whether the amount of fees and interest that lenders may charge is limited. |
In addition, the laws of some jurisdictions may render certain provisions of the mortgage loans unenforceable or subject to limitations which may affect lender’s rights under the mortgage loans. Delays in liquidations of defaulted mortgage loans and shortfalls in amounts realized upon liquidation as a result of the application of these laws may create delays and shortfalls in payments to certificateholders. See “Certain Legal Aspects of Mortgage Loans”.
In a recent decision, Game Place, L.L.C. v. Fredericksburg 35, LLC, 813 S.E.2d 312 (Va. 2018), the Supreme Court of Virginia held a commercial lease unenforceable on the grounds that the lease was not validly conveyed as a deed under state law because the deed did not comply with the state’s requirement that all valid deeds include a seal or scroll or an approved acceptable substitute for a seal. Parties to an unsealed lease otherwise subject to the related state law have an implied tenancy from the manner in which rent is received, such that monthly rent payments would imply a month-to-month tenancy. Three of the Mortgaged Properties, collectively representing approximately 11.0% of the Initial Pool Balance, are located in the state of Virginia. We cannot assure you that leases at such Mortgaged Properties are in compliance with Virginia law as interpreted by this decision, nor can we assure you that any such lease will qualify as a valid lease enforceable against the related tenant.
Risks of Anticipated Repayment Date Loans
Certain of the mortgage loans provide that, if after a certain date (referred to as the anticipated repayment date) the related borrower has not prepaid the mortgage loan in full, any principal outstanding after that anticipated repayment date will accrue interest at an increased interest rate rather than the stated mortgage loan rate. Generally, from and after the anticipated repayment date, cash flow in excess of that required for debt service, the funding of reserves and certain approved operating expenses with respect to the related mortgaged property will be applied toward the payment of principal (without payment of a yield maintenance charge) of the related mortgage loan until its principal balance has been reduced to zero. Although these provisions may create an incentive for the borrower to repay the mortgage loan in full on its anticipated repayment date, a substantial payment would be required and the borrower has no obligation to do so. While interest at the initial mortgage rate continues to accrue and be payable on a current basis on the mortgage loan after its anticipated repayment date, the payment of excess interest will be deferred and will be required to be paid only after the outstanding principal balance of the related mortgage loan has been paid in full, at which time the excess interest that has been deferred, to the
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extent actually collected, will be paid to the holders of the Class V certificates, which is not offered by this prospectus. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—ARD Loans”.
The Absence of Lockboxes Entails Risks That Could Adversely Affect Distributions on Your Certificates
Certain of the mortgage loans may not require the related borrower to cause rent and other payments to be made into a lockbox account maintained on behalf of the mortgagee, although some of those mortgage loans do provide for a springing lockbox. If rental payments are not required to be made directly into a lockbox account, there is a risk that the borrower will divert such funds for other purposes.
Borrower May Be Unable to Repay Remaining Principal Balance on Maturity Date or Anticipated Repayment Date; Longer Amortization Schedules and Interest-Only Provisions Increase Risk
Mortgage loans with substantial remaining principal balances at their stated maturity date or anticipated repayment date, as applicable, involve greater risk than fully-amortizing mortgage loans 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 or on the related anticipated repayment date.
Most of the mortgage loans have amortization schedules that are significantly longer than their respective terms to maturity or anticipated repayment date, as applicable, and many of the mortgage loans require only payments of interest for part or all of their respective terms. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Due Dates; Mortgage Rates; Calculations of Interest”. A longer amortization schedule or an interest-only provision in a mortgage loan will result in a higher amount of principal outstanding under the mortgage loan at any particular time, including at the maturity date or anticipated repayment date of the mortgage loan, than would have otherwise been the case had a shorter amortization schedule been used or had the mortgage loan had a shorter interest-only period or not included an interest-only provision at all. That higher principal amount outstanding could both (i) make it more difficult for the related borrower to make the required balloon payment at maturity or to repay the outstanding principal amount at the anticipated repayment date and (ii) lead to increased losses for the issuing entity either during the loan term or at maturity or at the anticipated repayment date if the mortgage loan becomes a defaulted mortgage loan.
A borrower’s ability to repay a mortgage loan on its stated maturity date or anticipated repayment date, as applicable, typically will depend upon its ability either to refinance the mortgage loan or to sell the mortgaged property at a price sufficient to permit repayment. A borrower’s ability to achieve either of these goals will be affected by a number of factors, including:
| ● | the availability of, and competition for, credit for commercial, multifamily or manufactured housing community real estate projects, which fluctuate over time; |
| ● | the prevailing interest rates; |
| ● | the net operating income generated by the mortgaged property; |
| ● | the fair market value of the related mortgaged property; |
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| ● | the borrower’s equity in the related mortgaged property; |
| ● | significant tenant rollover at the related mortgaged properties (see “—Retail Properties Have Special Risks” and “—Office Properties Have Special Risks” above); |
| ● | the borrower’s financial condition; |
| ● | the operating history and occupancy level of the mortgaged property; |
| ● | reductions in applicable government assistance/rent subsidy programs; |
| ● | the tax laws; and |
| ● | prevailing general and regional economic conditions. |
With respect to any mortgage loan that is part of a whole loan, the risks relating to balloon payment obligations are enhanced by the existence and amount of any related companion loan.
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 the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan may permit the related special servicer) to extend and modify mortgage loans in a manner consistent with the servicing standard, subject to the limitations described under “Pooling and Servicing Agreement—Realization Upon Mortgage Loans” and “—Modifications, Waivers and Amendments”.
Neither the master servicer nor the special servicer will have the ability to extend or modify a non-serviced mortgage loan because such mortgage loan is being serviced by the master servicer or special servicer pursuant to the trust and servicing agreement or pooling and servicing agreement governing the servicing of the applicable non-serviced whole loan. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
We cannot assure you that any extension or modification will increase the present value of recoveries in a given case. Whether or not losses are ultimately sustained, any delay in collection of a balloon payment that would otherwise be distributable on your certificates, whether such delay is due to borrower default or to modification of the related mortgage loan, will likely extend the weighted average life of your certificates.
In any event, we cannot assure you that each borrower under a balloon loan will have the ability to repay the principal balance of such mortgage loan on the related maturity date or anticipated repayment date, as applicable.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics”.
Risks Related to Ground Leases and Other Leasehold Interests
With respect to certain mortgaged properties, the encumbered interest will be characterized as a “fee interest” if (i) the borrower has a fee interest in all or substantially all of the mortgaged property (provided that if the borrower has a leasehold interest in any portion of the mortgaged property, such portion is not material to the use or operation of the mortgaged property), or (ii) the mortgage loan is secured by the borrower’s leasehold
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interest in the mortgaged property as well as the borrower’s (or other fee owner’s) overlapping fee interest in the related mortgaged property.
Leasehold mortgage loans are subject to certain risks not associated with mortgage loans secured by a lien on the fee estate of the borrower. The most significant of these risks is that if the related borrower’s leasehold were to be terminated upon a lease default, the lender would lose its security in the leasehold interest. Generally, each related ground lease or a lessor estoppel requires the lessor to give the lender notice of the borrower’s defaults under the ground lease and an opportunity to cure them, permits the leasehold interest to be assigned to the lender or the purchaser at a foreclosure sale, in some cases only upon the consent of the lessor, and contains certain other protective provisions typically included in a “mortgageable” ground lease, although not all these protective provisions are included in each case.
Upon the bankruptcy of a lessor or a lessee under a ground lease, the debtor has the right to assume or reject the lease. If a debtor lessor rejects the lease, the lessee has the right pursuant to the federal bankruptcy code to treat such lease as terminated by rejection or remain in possession of its leased premises for the rent otherwise payable under the lease for the remaining term of the ground lease (including renewals) and to offset against such rent any damages incurred due to the landlord’s failure to perform its obligations under the lease. If a debtor lessee/borrower rejects any or all of the lease, the leasehold lender could succeed to the lessee/borrower’s position under the lease only if the lease specifically grants the lender such right. If both the lessor and the lessee/borrower are involved in bankruptcy proceedings, the issuing entity may be unable to enforce the 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 notwithstanding lender protection provisions contained in the ground lease or in the mortgage.
Some of the ground leases securing the mortgage loans may provide that the ground rent payable under the related ground lease increases during the term of the mortgage loan. These increases may adversely affect the cash flow and net income of the related borrower.
A leasehold lender could lose its security unless (i) the leasehold lender holds a fee mortgage, (ii) the ground lease requires the lessor to enter into a new lease with the leasehold lender upon termination or rejection of the ground lease, or (iii) the bankruptcy court, as a court of equity, allows the leasehold lender to assume the ground lessee’s obligations under the ground lease and succeed to the ground lessee’s position. Although not directly covered by the 1994 amendments to the federal bankruptcy code, such a result would be consistent with the purpose of the 1994 amendments to the federal bankruptcy code granting the holders of leasehold mortgages permitted under the terms of the lease the right to succeed to the position of a leasehold mortgagor. Although consistent with the federal bankruptcy code, such position may not be adopted by the applicable bankruptcy court.
Further, in a decision by the United States Court of Appeals for the Seventh Circuit (Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir. 2003)) the court ruled with respect to an unrecorded lease of real property that where a statutory sale of the fee interest in leased property occurs under the federal bankruptcy code upon the bankruptcy of a landlord, such sale terminates a lessee’s possessory interest in the property, and the purchaser assumes title free and clear of any interest, including any leasehold estates. Pursuant to the federal bankruptcy code, a lessee may request the bankruptcy court to prohibit or condition the statutory sale of the property so as to provide adequate protection
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of the leasehold interest; however, the court ruled that this provision does not ensure continued possession of the property, but rather entitles the lessee to compensation for the value of its leasehold interest, typically from the sale proceeds. While there are certain circumstances under which a “free and clear” sale under the federal bankruptcy code would not be authorized (including that the lessee could not be compelled in a legal or equitable proceeding to accept a monetary satisfaction of his possessory interest, and that none of the other conditions of the federal bankruptcy code otherwise permits the sale), we cannot assure you that those circumstances would be present in any proposed sale of a leased premises. As a result, we cannot assure you that, in the event of a statutory sale of leased property pursuant to the federal bankruptcy code, the lessee will be able to maintain possession of the property under the ground lease. In addition, we cannot assure you that the lessee and/or the lender will be able to recoup the full value of the leasehold interest in bankruptcy court. Most of the ground leases contain standard protections typically obtained by securitization lenders. Certain of the ground leases with respect to a mortgage loan included in the issuing entity may not. See also representation and warranty no. 36 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
Except as noted in “Description of the Mortgage Pool—Mortgage Pool Characteristics—Fee & Leasehold Estates; Ground Leases” in this prospectus and/or the exceptions to representation and warranty no. 36 on Annex D-1 (as indicated on Annex D-2), each of the ground leases has a term that extends at least 20 years beyond the maturity date of the mortgage loan (taking into account all freely exercisable extension options) and contains customary mortgagee protection provisions, including notice and cure rights and the right to enter into a new lease with the applicable ground lessor in the event a ground lease is rejected or terminated.
With respect to certain of the mortgage loans, the related borrower may have given to certain lessors under the related ground lease a right of first refusal 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 “Description of the Mortgage Pool—Mortgage Pool Characteristics—Fee & Leasehold Estates; Ground Leases” and “Certain Legal Aspects of Mortgage Loans—Foreclosure—Bankruptcy Laws”.
Increases in Real Estate Taxes May Reduce Available Funds
Certain of the mortgaged properties securing the mortgage loans have or may in the future have the benefit of reduced real estate taxes in connection with a local government “payment in lieu of taxes” program or other tax abatement arrangements. Upon expiration of such program or if such programs were otherwise terminated, the related borrower would be required to pay higher, and in some cases substantially higher, real estate taxes. Prior to expiration of such program, the tax benefit to the mortgaged property may decrease throughout the term of the expiration date until the expiration of such program. An increase in real estate taxes may impact the ability of the borrower to pay debt service on the mortgage loan.
See “Description of the Mortgage Pool—Real Estate and Other Tax Considerations” for descriptions of real estate tax matters relating to certain mortgaged properties.
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State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed-in-Lieu of Foreclosure and Reduce Net Proceeds
Many jurisdictions impose recording taxes on mortgages which, if not paid at the time of the recording of the mortgage, may impair the ability of the lender to foreclose the mortgage. Such taxes, interest, and penalties could be significant in amount and would, if imposed, reduce the net proceeds realized by the issuing entity in liquidating the real property securing the related mortgage loan.
Risks Related to Conflicts of Interest
Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned With Your Interests
The originators, the sponsors and their affiliates (including certain of the underwriters) expect to derive ancillary benefits from this offering and their respective incentives may not be aligned with those of purchasers of the offered certificates. The sponsors originated or purchased the mortgage loans in order to securitize the mortgage loans by means of a transaction such as the offering of the offered certificates. The sponsors will sell the mortgage loans to the depositor (an affiliate of Wells Fargo Bank, National Association, one of the sponsors and originators, the master servicer, the certificate administrator and the custodian, and of Wells Fargo Securities, LLC, one of the underwriters) on the closing date in exchange for cash, derived from the sale of the offered certificates to investors and/or in exchange for offered certificates. A completed offering would reduce the originators’ exposure to the mortgage loans. The originators made the mortgage loans with a view toward securitizing them and distributing the exposure by means of a transaction such as this offering of offered certificates. In addition, certain mortgaged properties may have tenants that are affiliated with the related originator. See “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases”. This offering of offered certificates will effectively transfer the originators’ exposure to the mortgage loans to purchasers of the offered certificates.
The originators, the sponsors and their affiliates expect to receive various benefits, including compensation, commissions, payments, rebates, remuneration and business opportunities, in connection with or as a result of this offering of offered certificates and their interests in the mortgage loans. The sponsors and their affiliates will effectively receive compensation, and may record a profit, in an amount based on, among other things, the amount of proceeds (net of transaction expenses) received from the sale of the offered certificates to investors relative to their investment in the mortgage loans. The benefits to the originators, the sponsors and their affiliates arising from the decision to securitize the mortgage loans may be greater than they would have been had other assets been selected.
Furthermore, the sponsors and/or their affiliates may benefit from a completed offering of the offered certificates because the offering would establish a market precedent and a valuation data point for securities similar to the offered certificates, thus enhancing the ability of the sponsors and their affiliates to conduct similar offerings in the future and permitting them to adjust the fair value of the mortgage loans or other similar assets or securities held on their balance sheet, including increasing the carrying value or avoiding decreasing the carrying value of some or all of such similar positions.
In some cases, the originators, the sponsors or their affiliates are the holders of the mezzanine loans, subordinate loans, unsecured loans and/or companion loans related to their mortgage loans. The originators, the sponsors and/or their respective affiliates may
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retain existing mezzanine loans, subordinate loans, unsecured loans and/or companion loans or originate future permitted mezzanine indebtedness, subordinate indebtedness or unsecured indebtedness with respect to the mortgage loans. These transactions may cause the originators, the sponsors and their affiliates or their clients or counterparties who purchase the mezzanine loans, subordinate loans, unsecured 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 such companion loans or any existing or future mezzanine loans, subordinate loans and/or unsecured loans, based on the potential effect on an investor in the offered certificates, and may receive substantial returns from these transactions. In addition, the originators, the sponsors or any of their respective affiliates may benefit from certain relationships, including financial dealings, with any borrower, any non-recourse carveout guarantor or any of their respective affiliates, aside from the origination of mortgage loans or contribution of mortgage loans into this securitization. Conflicts may also arise because the sponsors and their respective affiliates intend to continue to actively acquire, develop, operate, finance and dispose of real estate-related assets in the ordinary course of their businesses. During the course of their business activities, the sponsors and their respective affiliates may acquire, sell or lease properties, or finance loans secured by properties, which may include the properties securing the mortgage loans or properties that are in the same markets as the mortgaged properties. Such other properties, similar to other third-party owned real estate, may compete with the mortgaged properties for existing and potential tenants. The sponsors may also, from time to time, be among the tenants at the mortgaged properties, and they should be expected to make occupancy-related decisions based on their self-interest and not that of the issuing entity. We cannot assure you that the activities of these parties with respect to such other properties will not adversely impact the performance of the mortgaged properties.
In addition, certain of the mortgage loans included in the issuing entity may have been refinancings of debt previously held by a sponsor, an originator or one of their respective affiliates, or a sponsor, an originator or one of their respective affiliates may have or have had equity investments in the borrowers or mortgaged properties under certain of the mortgage loans included in the issuing entity. Each of the sponsors, the originators and their respective affiliates have made and/or may make loans to, or equity investments in, affiliates of the borrowers under the related mortgage loans. In the circumstances described above, the interests of the sponsors, the originators and their respective affiliates may differ from, and compete with, the interests of the issuing entity.
Further, various originators, sponsors and their respective affiliates are acting in multiple capacities in or with respect to this transaction, which may include, without limitation, acting as one or more transaction parties or a subcontractor or vendor of such party, participating in or contracting for interim servicing and/or custodial services with certain transaction parties, providing warehouse financing to, or receiving warehouse financing from, certain other originators or sponsors prior to transfer of the related mortgage loans to the issuing entity, and/or conducting due diligence on behalf of an investor with respect to the mortgage loans prior to their transfer to the issuing entity.
In addition, Rialto Mortgage Finance, LLC, a sponsor, a mortgage loan seller and an originator, is an affiliate of Rialto Capital Advisors, LLC, which is the special servicer under
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the WFCM 2018-C44 pooling and servicing agreement, which governs the servicing of the Village at Leesburg whole loan and the 181 Fremont Street whole loan (prior to the securitization of the related controlling companion loan). Rialto Capital Advisors, LLC and Rialto Mortgage Finance, LLC are also affiliates of the entity appointed as the initial directing certificateholder under the WFCM 2018-C44 pooling and servicing agreement.
Each of these relationships may create a conflict of interest. For a description of certain of the foregoing relationships and arrangements that exist among the parties to this securitization, see “Certain Affiliations, Relationships And Related Transactions Involving Transaction Parties” and “Transaction Parties”.
These roles and other potential relationships may give rise to conflicts of interest as described in “—Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests”, “—Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans” and “—Other Potential Conflicts of Interest May Affect Your Investment” below. Each of the foregoing relationships and related interests should be considered carefully by you before you invest in any offered certificates.
The Servicing of the 181 Fremont Street Whole Loan Will Shift to Other Servicers
The servicing of the 181 Fremont Street whole loan will be governed by the WFCM 2018-C44 pooling and servicing agreement only temporarily, until the securitization of the related controlling companion loan. At that time, the servicing and administration of the 181 Fremont Street whole loan will shift to the applicable master servicer and the applicable special servicer under the pooling and servicing agreement that governs the securitization of the related controlling companion loan and will be governed exclusively by such pooling and servicing agreement and the related intercreditor agreement. Neither the closing date of such securitization nor the identity of such master servicer or special servicer has been determined. In addition, the provisions of the pooling and servicing investment agreement that governs the securitization of such controlling companion loan have not yet been determined. Prospective investors should be aware that they will not have any control over the identity of the master servicer or special servicer under the pooling and servicing agreement that governs the securitization of the 181 Fremont Street controlling companion loan, nor will they have any assurance as to the particular terms of such pooling and servicing agreement except to the extent of compliance with any requirements set forth in the related intercreditor agreement. Moreover, the directing certificateholder for this securitization will not have any consent or consultation rights with respect to the servicing of the 181 Fremont Street whole loan other than those limited consent and consultation rights as are provided in the related intercreditor agreement, and the holder of the related controlling pari passu companion loan or the controlling party in the related securitization of such controlling pari passu companion loan or such other party specified in the related intercreditor agreement is expected to have rights substantially similar to, but not necessarily identical to, those granted to the directing certificateholder in this transaction. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans—Control Rights”.
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
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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 parties to the pooling and servicing agreement and will have no authority to advise any party to the pooling and servicing agreement or to direct their actions.
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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.
Further, certain Underwriter Entities and their respective affiliates are acting in multiple capacities in or with respect to this transaction, which may include, without limitation, acting as one or more transaction parties or a subcontractor or vendor of such party, participating in or contracting for interim servicing and/or custodial services with certain transaction parties, providing warehouse financing to, or receiving warehouse financing from, certain other originators or sponsors prior to transfer of the related mortgage loans to the issuing entity, and/or conducting due diligence on behalf of an investor with respect to the mortgage loans prior to their transfer to the issuing entity.
For a description of certain of the foregoing and additional relationships and arrangements that exist among the parties to this securitization, see “Transaction Parties—The Sponsors and Mortgage Loan Sellers” and “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
Potential Conflicts of Interest of the Master Servicer and the Special Servicer
The pooling and servicing agreement provides that the mortgage loans serviced thereunder are required to be administered in accordance with the servicing standard without regard to ownership of any certificate by the master servicer, the special servicer or any of their respective affiliates. See “Pooling and Servicing Agreement—Servicing Standard”. The trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan provides that such non-serviced whole loan is required to be administered in accordance with a servicing standard that is substantially similar in all material respects but not necessarily identical to the servicing standard set forth in the pooling and servicing agreement. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Notwithstanding the foregoing, the master servicer, each sub-servicer and the special servicer or any of their respective affiliates and, as it relates to servicing and administration of a non-serviced mortgage loan, the master servicer, sub-servicer, special servicer or any of their respective affiliates under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan, may have interests when dealing with the mortgage loans that are in conflict with those of holders of the certificates, especially if the master servicer, sub-servicer, special servicer or any of their respective affiliates holds certificates or securities relating to any applicable companion loan, or has financial interests in or financial dealings with a borrower or a borrower sponsor.
Furthermore, nothing in the pooling and servicing agreement or otherwise will prohibit the master servicer or special servicer or an affiliate thereof from soliciting the refinancing of any of the mortgage loans. In the event that the master servicer or special servicer or an affiliate thereof refinances any of the mortgage loans included in the mortgage pool, an
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earlier than expected payoff of any such mortgage loan could occur, which would result in a prepayment, which such prepayment could have an adverse effect on the yield of the certificates. See “—Other Risks Relating to the Certificates—Your Yield May Be Affected by Defaults, Prepayments and Other Factors” in this prospectus.
In order to minimize the effect of certain of these conflicts of interest as they relate to the special servicer, for so long as the special servicer obtains knowledge that it has become a borrower party with respect to a mortgage loan (each such mortgage loan referred to herein as an “excluded special servicer loan”), the special servicer will be required to resign as special servicer with respect to that mortgage loan and, prior to the occurrence of a control termination event under the pooling and servicing agreement, the directing certificateholder will be required to select a separate special servicer that is not a borrower party (referred to herein as an “excluded special servicer”) with respect to any excluded special servicer loan, unless such excluded special servicer loan is also an excluded loan. After the occurrence and during the continuance of a control termination event or at any time the applicable excluded special servicer loan is also an excluded loan, the resigning special servicer will be required to use commercially reasonable efforts to appoint the excluded special servicer. See “Pooling and Servicing Agreement—Replacement of the Special Servicer Without Cause”. Any excluded special servicer will be required to perform all of the obligations of the special servicer with respect to such excluded special servicer loan and will be entitled to all special servicing compensation with respect to such excluded special servicer loan earned during such time as the related mortgage loan is an excluded special servicer loan. While the special servicer will have the same access to information related to the excluded special servicer loan as it does with respect to the other mortgage loans, the special servicer will covenant in the pooling and servicing agreement that it will not directly or indirectly provide any information related to any excluded special servicer loan to the related borrower party, any of the special servicer’s employees or personnel or any of its affiliates involved in the management of any investment in the related borrower party or the related mortgaged property or, to its actual knowledge, any non-affiliate that holds a direct or indirect ownership interest in the related borrower party, and will maintain sufficient internal controls and appropriate policies and procedures in place in order to comply with those obligations. Notwithstanding those restrictions, there can be no assurance that the related borrower party will not obtain sensitive information related to the strategy of any contemplated workout or liquidation related to an excluded special servicer loan.
Each of these relationships may create a conflict of interest. For instance, if the special servicer or its affiliate holds a subordinate class of certificates, the special servicer might seek to reduce the potential for losses allocable to those certificates from the mortgage loans by deferring acceleration in hope of maximizing future proceeds. However, that action could result in less proceeds to the issuing entity than would be realized if earlier action had been taken. In addition, no servicer is required to act in a manner more favorable to the offered certificates or any particular class of certificates than to the WFCM 2018-C45 non-offered certificates.
The master servicer and the special servicer service and are expected to continue to service, in the ordinary course of their respective businesses, existing and new mortgage loans for third parties, including portfolios of mortgage loans similar to the mortgage loans. The real properties securing these other mortgage loans may be in the same markets as, and compete with, certain of the mortgaged properties securing the mortgage loans. Consequently, personnel of the master servicer or the special servicer, as applicable, may perform services, on behalf of the issuing entity, with respect to the mortgage loans at the same time as they are performing services, on behalf of other persons, with respect to other
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mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans. In addition, the mortgage loan sellers will determine who will service mortgage loans that the mortgage loan sellers originate in the future, and that determination may be influenced by the mortgage loan seller’s opinion of servicing decisions made by the master servicer or the special servicer under the pooling and servicing agreement including, among other things, the manner in which the master servicer or special servicer enforces breaches of representations and warranties against the related mortgage loan seller. This may pose inherent conflicts for the master servicer or special servicer.
The special servicer may enter into one or more arrangements with the directing certificateholder, a controlling class certificateholder or other certificateholders (or an affiliate or a third party representative of one or more of the preceding parties) to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, the special servicer’s appointment (or continuance) as special servicer under the pooling and servicing agreement and/or the related intercreditor agreement and limitations on the right of such person to replace the special servicer. See “—Other Potential Conflicts of Interest May Affect Your Investment” below.
Although the master servicer and 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.
LNR Partners assisted Prime Finance Long Duration (B-Piece) II Holdco I, L.P. (or its affiliate), which is expected to purchase the Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR and Class V certificates and is expected to be appointed as the initial directing certificateholder, with due diligence relating to the mortgage loans to be included in the mortgage pool.
In addition, Rialto Mortgage Finance, LLC, a sponsor, a mortgage loan seller and an originator, is an affiliate of Rialto Capital Advisors, LLC, which is the special servicer under the WFCM 2018-C44 pooling and servicing agreement, which governs the servicing of the Village at Leesburg whole loan and the 181 Fremont Street whole loan (prior to the securitization of the related controlling companion loan). Rialto Capital Advisors, LLC and Rialto Mortgage Finance, LLC are also affiliates of the entity appointed as the initial directing certificateholder under the WFCM 2018-C44 pooling and servicing agreement.
It is expected that Wells Fargo Bank, National Association, a sponsor, an originator, a mortgage loan seller and the holder of one of the CoolSprings Galleria companion loans and one of the 181 Fremont Street companion loans, will act as master servicer. In addition, Wells Fargo Bank, National Association is the certificate administrator and the custodian under this securitization and is an affiliate of Wells Fargo Commercial Mortgage Securities, Inc., the depositor, and of Wells Fargo Securities, LLC, one of the underwriters. In addition, Wells Fargo Bank is (i) the master servicer, the certificate administrator and the custodian under the WFCM 2018-C44 PSA, which governs the servicing and administration of the
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Village at Leesburg whole loan and the 181 Fremont Street whole loan (prior to the securitization of the related controlling companion loan) and (ii) the master servicer, the certificate administrator and the custodian under the BANK 2018-BNK12 PSA, which governs the servicing and administration of the CoolSprings Galleria whole loan.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
Potential Conflicts of Interest of the Operating Advisor
Park Bridge Lender Services LLC has been appointed as the initial operating advisor with respect to all of the mortgage loans other than any non-serviced mortgage loan. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer”. In the normal course of conducting its business, the initial operating advisor and its affiliates have rendered services to, performed surveillance of, 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, the directing certificateholder, mortgaged property owners and their vendors or affiliates of any of those parties. Each of these relationships, to the extent they exist, may continue in the future and may involve a conflict of interest with respect to the initial operating advisor’s duties as operating advisor. We cannot assure you that the existence of these relationships and other relationships in the future will not impact the manner in which the initial operating advisor performs its duties under the pooling and servicing agreement.
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. Although the operating advisor is required to consider the servicing standard in connection with its activities under the pooling and servicing agreement, the operating advisor will not itself be bound by the servicing standard.
In addition, the operating advisor and its affiliates may acquire or have interests that are in conflict with those of certificateholders if the operating advisor or any of its affiliates has financial interests in or financial dealings with a borrower, a parent or a sponsor of a borrower, a servicer or any of their affiliates. Each of these relationships may also create a conflict of interest.
Potential Conflicts of Interest of the Asset Representations Reviewer
Park Bridge Lender Services LLC has been appointed as the initial asset representations reviewer with respect to all of the mortgage loans. See “Transaction Parties—The Operating Advisor and the Asset Representations Reviewer”. In the normal course of conducting its
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business, the initial asset representations reviewer and its affiliates 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 or the directing certificateholder, collateral property owners and their vendors or affiliates of any of those parties. Each of these relationships, to the extent they exist, may continue in the future and may involve a conflict of interest with respect to the initial asset representations reviewer’s duties as asset representations reviewer. We cannot assure you that the existence of these relationships and other relationships in the future will not impact the manner in which the initial asset representations reviewer performs its duties under the pooling and servicing agreement.
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.
In addition, the asset representations reviewer and its affiliates may acquire or have interests that are in conflict with those of certificateholders if the asset representations reviewer or any of its affiliates has financial interests in or financial dealings with a borrower, a parent or a sponsor of a borrower, a servicer or any of their affiliates. Each of these relationships may also create a conflict of interest.
Potential Conflicts of Interest of the Directing Certificateholder and the Companion Holders
It is expected that Prime Finance Long Duration (B-Piece) II Holdco I, L.P. or an affiliate thereof will be appointed as the initial directing certificateholder. The special servicer may, at the direction of the directing certificateholder (for so long as a control termination event does not exist and, at all times, other than with respect to any excluded loan), take actions with respect to the specially serviced loans that could adversely affect the holders of some or all of the classes of certificates. The directing certificateholder will be controlled by the controlling class certificateholders.
The controlling class certificateholders and the holder of any companion loan or securities backed by such companion loan may have interests in conflict with those of the other certificateholders. As a result, it is possible that (i) the directing certificateholder on behalf of the controlling class certificateholders (for so long as a control termination event does not exist and, at all times, other than with respect to any excluded loan or non-serviced whole loan), (ii) the controlling noteholder of the 181 Fremont Street whole loan, prior to the securitization of the related controlling companion loan, or (iv) the directing certificateholder (or equivalent entity) under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan, may direct
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the special servicer under the pooling and servicing agreement or the special servicer under such trust and servicing agreement or pooling and servicing agreement relating to the securitization transaction governing the servicing of such non-serviced whole loan, as the case may be, to take actions that conflict with the interests of holders of certain classes of the certificates. Set forth below is the identity of the initial directing certificateholder (or equivalent entity) for each non-serviced whole loan, the securitization trust or other entity holding the controlling note in such non-serviced whole loan and the trust and servicing agreement or pooling and servicing agreement under which it is being serviced.
Whole Loan | Non-Serviced PSA | Controlling Noteholder | Initial Directing Party(1) |
| Village at Leesburg | WFCM 2018-C44 | WFCM 2018-C44 | RREF III-D AIV RR H, LLC |
| 181 Fremont Street | WFCM 2018-C44(2) | Deutsche Bank AG, New York Branch(2) | RREF III-D AIV RR H, LLC(2) |
| CoolSprings Galleria | BANK 2018-BNK12 | BANK 2018-BNK12 | Ellington Management Group, LLC |
| Flats at East Bank | CGCMT 2018-C5(3) | CGCMT 2018-C5(3) | ACREFI Mortgage Lending LLC(4) |
| (1) | As of the closing date of the related securitization. The entity with the heading “Initial Directing Party” above reflects the party entitled to exercise control and consultation rights with respect to the related mortgage loan similar to those of the Directing Certificateholder under the PSA until such party’s rights are terminated pursuant to the related pooling and servicing agreement or intercreditor agreement, as applicable. |
| (2) | The 181 Fremont Street Whole Loan is currently being serviced under the WFCM 2018-C44 PSA. From and after the securitization of the related controlling companion loan, the related whole loan will be serviced under the pooling and servicing agreement governing such securitization, such securitization will be the related controlling noteholder and the related initial directing certificateholder will be the party specified in such pooling and servicing agreement. |
| (3) | The CGCMT 2018-C5 securitization is expected to close on or about June 21, 2018. |
| (4) | The initial Directing Party is the holder of the controlling subordinate companion loan, who will have certain control and consultation rights with respect to the related mortgage loan until the occurrence of a control appraisal period pursuant to the related intercreditor agreement. During the control appraisal period, the directing certificateholder (or equivalent entity) under the identified servicing agreement is expected to exercise such control and consultation rights until such rights are terminated pursuant to such servicing agreement. |
The controlling noteholder or directing certificateholder for each non-serviced whole loan has certain consent and/or consultation rights with respect to the related non-serviced whole loan under the trust and servicing agreement or pooling and servicing agreement governing the servicing of that non-serviced whole loan. Such controlling noteholder or directing certificateholder does not have any duties to the holders of any class of certificates and may have similar conflicts of interest with the holders of other certificates backed by the companion loans. As a result, it is possible that a controlling noteholder of a non-serviced whole loan (solely with respect to the related non-serviced whole loan) may advise a non-serviced special servicer to take actions that conflict with the interests of holders of certain classes of the certificates. However, such non-serviced special servicer is not permitted to take actions that are prohibited by law or that violate its servicing standard or the terms of the related mortgage loan documents. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. In addition, except as limited by certain conditions described under “Description of the Mortgage Pool—The Whole Loans”, a non-serviced special servicer may be replaced by the related directing certificateholder or controlling noteholder for cause at any time and without cause for so long as a control termination event (or its equivalent) does not exist. See “—Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans” and “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
In addition, except as limited by certain conditions described under “Pooling and Servicing Agreement—Termination of the Master Servicer or Special Servicer for Cause—Servicer Termination Events”, the special servicer may be replaced by the directing certificateholder at any time for cause or without cause (for so long as a control termination event does not exist and other than in respect of any excluded loan). See “Pooling and Servicing Agreement—The Directing Certificateholder” and “—Termination of the Master Servicer or Special Servicer for Cause—Servicer Termination Events”.
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The directing certificateholder, any controlling noteholder or their respective affiliates (and the directing certificateholder (or equivalent entity) under a trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan and their respective affiliates) may have interests that are in conflict with those of certain certificateholders, especially if the applicable directing certificateholder, controlling noteholder or any of their respective affiliates holds certificates or companion loan securities, or has financial interests in or other financial dealings (as lender or otherwise) with a borrower or an affiliate of a borrower. In order to minimize the effect of certain of these conflicts of interest, for so long as any borrower party is the directing certificateholder or the holder of the majority of the controlling class (any such mortgage loan referred to herein as an “excluded loan” with respect to the directing certificateholder or the holder of the majority of the controlling class), the directing certificateholder will not have consent or consultation rights solely with respect to the related excluded loan (however, the directing certificateholder will be provided certain notices and certain information relating to such excluded loan as described in the pooling and servicing agreement). In addition, for so long as any borrower party is the directing certificateholder or a controlling class certificateholder, as applicable, the directing certificateholder or such controlling class certificateholder, as applicable, will not be given access to any “excluded information” solely relating to the related excluded loan and/or the related mortgaged properties pursuant to the terms of the pooling and servicing agreement. Notwithstanding those restrictions, there can be no assurance that the directing certificateholder or any controlling class certificateholder will not obtain sensitive information related to the strategy of any contemplated workout or liquidation related to an excluded loan or otherwise seek to exert its influence over the special servicer in the event an excluded loan becomes subject to a workout or liquidation. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information” in this prospectus. Each of these relationships may create a conflict of interest.
Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans
The anticipated initial investor in the Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR and Class V certificates, which is referred to in this prospectus as the “b-piece buyer” (see “Pooling and Servicing Agreement—The Directing Certificateholder—General”), was given the opportunity by the sponsors to perform due diligence on the mortgage loans originally identified by the sponsors for inclusion in the issuing entity, and to request the removal, re-sizing or change in the expected repayment dates or other features of some or all of the mortgage loans. The mortgage pool as originally proposed by the sponsors was adjusted based on certain of these requests. In addition, the b-piece buyer received or may have received 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 (except as may be restricted pursuant to the credit risk retention rules) 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
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its own benefit and has no liability to any person or entity for conducting its due diligence. The b-piece buyer is not required to take into account the interests of any other investor in the certificates in exercising remedies or voting or other rights in its capacity as owner of its certificates or in making requests or recommendations to the sponsors as to the selection of the mortgage loans and the establishment of other transaction terms. Investors are not entitled to rely on in any way the b-piece buyer’s acceptance of a mortgage loan. The b-piece buyer’s acceptance of a mortgage loan does not constitute, and may not be construed as, an endorsement of such mortgage loan, the underwriting for such mortgage loan or the originator of such mortgage loan.
The b-piece buyer will have no liability to any certificateholder for any actions taken by it as described in the preceding two paragraphs and the pooling and servicing agreement will provide that each certificateholder, by its acceptance of a certificate, waives any claims against such buyers in respect of such actions.
Prime Finance Long Duration (B-Piece) II Holdco I, L.P., or an affiliate thereof, will constitute the initial directing certificateholder. The directing certificateholder will have certain rights to direct and consult with the special servicer. In addition, the directing certificateholder will generally have certain consultation rights with regard to the non-serviced mortgage loans under the trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of such non-serviced whole loan and the related intercreditor agreement. See “Pooling and Servicing Agreement—The Directing Certificateholder” and “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
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 Applicable Directing Certificateholder To Terminate the Special Servicer of the Applicable Whole Loan
With respect to each whole loan, the directing certificateholder exercising control rights over that whole loan will be entitled, under certain circumstances, to remove the special servicer under the applicable pooling and servicing agreement or trust and servicing agreement governing the servicing of such whole loan and, in such circumstances, appoint a successor special servicer for such whole loan (or have certain consent rights with respect to such removal or replacement). The party with this appointment power may have special relationships or interests that conflict with those of the holders of one or more classes of certificates. In addition, that party does not have any duties to the holders of any class of certificates, may act solely in its own interests, and will have no liability to any certificateholders for having done so. No certificateholder may take any action against the directing certificateholder, under the pooling and servicing agreement for this securitization or under the pooling and servicing agreement or trust and servicing agreement governing the servicing of a non-serviced whole loan, or against any other parties for having acted solely in their respective interests. See “Description of the Mortgage Pool—The Whole Loans” for a description of these rights to terminate the special servicer.
Other Potential Conflicts of Interest May Affect Your Investment
The managers of the mortgaged properties and the borrowers may experience conflicts in the management and/or ownership of the mortgaged properties because:
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| ● | 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.
Other Risks Relating to the Certificates
The Certificates Are Limited Obligations
The certificates, when issued, will only represent ownership interests in the issuing entity. The certificates will not represent an interest in or obligation of, and will not be guaranteed by, the sponsors, the depositor, or any other person. The primary assets of the issuing entity will be the mortgage loans, and distributions on any class of certificates will depend solely on the amount and timing of payments and other collections in respect of the mortgage loans. We cannot assure you that the cash flow from the mortgaged properties and the proceeds of any sale or refinancing of the mortgaged properties will be sufficient to pay the principal of, and interest on, the mortgage loans or to distribute in full the amounts of interest and principal to which the certificateholders will be entitled. See “Description of the Certificates—General”.
The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline
Your certificates will not be listed on any national securities exchange or traded on any automated quotation systems of any registered securities association, and there is currently no secondary market for your certificates. The underwriters have no obligation to make a market in the offered certificates. We cannot assure you that an active secondary market for the certificates will develop. Additionally, one or more investors may purchase substantial portions of one or more classes of certificates. Accordingly, you may not have an active or liquid secondary market for your certificates.
The market value of the certificates will also be influenced by the supply of and demand for CMBS generally. A number of factors will affect investors’ demand for CMBS, including:
| ● | the availability of alternative investments that offer higher yields or are perceived as being a better credit risk than CMBS, or as having a less volatile market value or being more liquid than CMBS; |
| ● | legal and other restrictions that prohibit a particular entity from investing in CMBS or limit the amount or types of CMBS that it may acquire or require it to maintain increased capital or reserves as a result of its investment in CMBS; |
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| ● | increased regulatory compliance burdens imposed on CMBS or securitizations generally, or on classes of securitizers, that may make securitization a less attractive financing option for commercial mortgage loans; and |
| ● | investors’ perceptions of commercial real estate lending or CMBS, which may be adversely affected by, among other things, a decline in real estate values or an increase in defaults and foreclosures on commercial mortgage loans. |
We cannot assure you that your certificates will not decline in value.
Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity of the Offered Certificates
We make no representation 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. Changes in federal banking and securities laws and other laws and regulations may have an adverse effect on issuers, investors or other participants in the asset-backed securities markets including the CMBS market and may have adverse effects on the liquidity, market value and regulatory characteristics of the certificates. While the general effects of such changes are uncertain, regulatory or legislative provisions applicable to certain investors may have the effect of limiting or restricting their ability to hold or acquire CMBS, which in turn may adversely affect the ability of investors in the offered certificates who are not subject to those provisions to resell their certificates in the secondary market. For example:
| ● | Investors should be aware of the risk retention and due diligence requirements in Europe (the “EU Risk Retention and Due Diligence Requirements“) which apply in respect of various types of EU regulated investors including credit institutions and investment firms and their consolidated affiliates, authorized alternative investment fund managers, insurance and reinsurance undertakings (each, an “Affected Investor“). Among other things, such requirements restrict an Affected Investor from investing in securitizations unless: (i) the originator, sponsor or original lender in respect of the relevant securitization has explicitly disclosed that it will retain, on an on-going basis, a net economic interest of not less than five percent in respect of certain specified credit risk tranches or securitized exposures; and (ii) such investor is able to demonstrate that they have undertaken certain due diligence in respect of various matters including but not limited to its note position, the underlying assets and (in the case of certain types of investors) the relevant sponsor or originator. |
Prospective investors should also be aware that a new EU risk retention regime will apply, in place of the EU Risk Retention and Due Diligence Requirements, to securitizations in respect of which the relevant securities are issued on or after January 1, 2019; and that there will be material differences between that new regime and the EU Risk Retention and Due Diligence Requirements. The relevant changes will be implemented primarily by Regulation (EU) 2017/2402 (the “Securitization Regulation“). The Securitization Regulation will (amongst other things) impose restrictions on investment in securitizations and requirements as to due diligence, which will apply to Affected Investors in place of the relevant provisions of the EU Risk Retention and Due Diligence Requirements and which will apply also to (i)
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certain investment companies authorized in accordance with Directive 2009/65/EC, and managing companies as defined in that Directive (together, “UCITS“); and (ii) institutions for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 (subject to certain exceptions), and certain investment managers and authorized entities appointed by such institutions (together, “IORPS“). With regard to securitizations in respect of which the relevant securities are issued before January 1, 2019 (“Pre-2019 Securitizations“), as is the case with the offered certificates, Affected Investors will continue to be subject to the investment restrictions and due diligence requirements of the EU Risk Retention and Due Diligence Requirements (and will not be subject to the provisions of the Securitization Regulation in that respect), including on and after that date. However, the Securitization Regulation makes no express provision as to the application of any investment restrictions or due diligence requirements, whether under the EU Risk Retention and Due Diligence Requirements or under the Securitization Regulation, to UCITS or IORPs that hold or acquire any interest in respect of a Pre-2019 Securitization; and, accordingly, it is not known what requirements (if any) may be applicable thereto. Certain aspects of the Securitization Regulation will be supplemented by regulatory technical standards that are required to be submitted in draft by the European Banking Authority to the European Commission by July 18, 2018. The European Banking Authority has consulted publicly on such regulatory technical standards, but it is not certain as to what form the final regulatory technical standards may take or when they will be adopted. EU Risk Retention and Due Diligence Requirements and the Securitization Regulation are collectively referred to as the “EU Risk Retention Rules“.
None of the sponsors, the depositor or any other party to the transaction is obligated or intends to retain a material net economic interest in the securitization constituted by the issue of the offered certificates in accordance with the EU Risk Retention Rules or to take any other action which may be required by Affected Investors, UCITS or IORPS for the purposes of their compliance with the EU Risk Retention Rules. Consequently, the offered certificates may not be a suitable investment for Affected Investors, UCITS or IORPS. Failure by an Affected Investor, UCITS or IORPS to comply with any applicable EU Risk Retention Rules with respect to an investment in the offered certificates may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions. As a result, the price and liquidity of the offered certificates in the secondary market may be adversely affected. Prospective investors are responsible themselves to analyze their own regulatory position and are encouraged to consult with their own investment and legal advisors regarding application of and compliance with any applicable EU Risk Retention Rules or other applicable regulations and the suitability of the offered certificates for investment. None of the sponsors, the issuing entity, the depositor, the underwriters and any other party to the transaction makes any representation to any prospective investor or purchaser of the offered certificates regarding the regulatory treatment of their investment in the offered certificates on the closing date or at any time in the future.
| ● | Barclays Bank PLC, a sponsor, may be subject to the “bail-in” powers of national authorities in EU member states (each a “Resolution Authority“) and such sponsor’s liabilities, including the obligation to repurchase certain |
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defective mortgage loans could, among other things, be reduced, converted or extinguished in full. Alternatively the EU Bank Recovery and Resolution Directive (2014/59/EU), collectively with secondary and implementing EU rules, and national implementing legislation (the “BRRD“) gives the power to a Resolution Authority to transfer the assets of certain relevant institutions to a third party entity.
| ● | 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 were issued by the U.S. banking regulators in July 2013; these regulations implement the increased capital requirements established under the Basel Accord and are being phased in over time. These new capital regulations eliminate reliance on credit ratings and otherwise alter, and in most cases increase, the capital requirements imposed on depository institutions and their holding companies, including with respect to ownership of asset-backed securities such as CMBS. Further changes in capital requirements have been announced by the Basel Committee on Banking Supervision and it is uncertain when such changes will be implemented in the United States. When fully implemented in the United States, these changes may have an adverse effect with respect to investments in asset-backed securities, including CMBS. As a result of these regulations, investments in CMBS such as the certificates by financial institutions subject to bank capital regulations may result in greater capital charges to these financial institutions and these new regulations may otherwise adversely affect the treatment of CMBS for their regulatory capital purposes. |
| ● | Regulations were adopted on December 10, 2013 to implement Section 619 of the Dodd-Frank Act (such statutory provision together with such implementing regulations, the “Volcker Rule“). The Volcker Rule generally prohibits “banking entities” (which is broadly defined to include U.S. banks and bank holding companies and many non-U.S. banking entities, together with their respective subsidiaries and other affiliates) from (i) engaging in proprietary trading, (ii) acquiring or retaining an ownership interest in or sponsoring a “covered fund” and (iii) entering into certain relationships with such funds. Subject to certain exceptions, banking entities were required to be in conformance with the Volcker Rule by July 21, 2015. Under the Volcker Rule, unless otherwise jointly determined otherwise by specified federal regulators, a “covered fund” does not include an issuer that may rely on an exclusion or exemption from the definition of “investment company” under the Investment Company Act other than the exclusions contained in Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act. |
The issuing entity will be relying on an exclusion or exemption under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule. The general effects of the Volcker Rule remain uncertain. Any prospective investor in the certificates, including a U.S. or foreign bank or a subsidiary or other affiliate thereof,
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should consult its own legal advisors regarding such matters and other effects of the Volcker Rule.
| ● | The Financial Accounting Standards Board has adopted changes to the accounting standards for structured products. These changes, or any future changes, may affect the accounting for entities such as the issuing entity, could under certain circumstances require an investor or its owner generally to consolidate the assets of the issuing entity in its financial statements and record third parties’ investments in the issuing entity as liabilities of that investor or owner or could otherwise adversely affect the manner in which the investor or its owner must report an investment in CMBS for financial reporting purposes. |
| ● | For purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended, no class of offered certificates will constitute “mortgage related securities”. |
| ● | In addition, compliance with legal requirements, such as the credit risk retention regulations under the Dodd-Frank Act, could cause commercial real estate lenders to tighten their lending standards and reduce the availability of debt financing for commercial real estate borrowers. This, in turn, may adversely affect a borrower’s ability to refinance the mortgage loan or sell the related mortgaged property on the related maturity date. We cannot assure you that any borrower will be able to generate sufficient cash from the sale or refinancing of the related mortgaged property to make the balloon payment on the related mortgage loan. |
Further changes in federal banking and securities laws and other laws and regulations may have an adverse effect on issuers, investors, or other participants in the asset-backed securities markets (including the CMBS market) and may have adverse effects on the liquidity, market value and regulatory characteristics of the certificates.
Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities should consult with their own legal, accounting and other advisors in determining whether, and to what extent, the 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”.
In addition, this transaction is structured to comply with the Credit Risk Retention Rules as and to the extent set forth under “Credit Risk Retention”. We cannot assure you that the retaining sponsor or the third-party purchaser will at all times satisfy such credit risk retention requirements. At this time, it is unclear what effect a failure of the retaining sponsor or the third-party purchaser to be in compliance with the Credit Risk Retention Rules at any time will have on the certificateholders or the market value or liquidity of the certificates.
Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded
Ratings assigned to the offered certificates by the nationally recognized statistical rating organizations engaged by the depositor:
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| ● | 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. |
The nationally recognized statistical rating organizations that assign ratings to any class of offered certificates will establish the amount of credit support, if any, for such class of offered certificates based on, among other things, an assumed level of defaults, delinquencies and losses with respect to the mortgage loans. Actual losses may, however, exceed the assumed levels. If actual losses on the mortgage loans exceed the assumed levels, you may be required to bear the additional losses.
In addition, the rating of any class of offered certificates below an investment grade rating by any nationally recognized statistical rating organization, whether upon initial issuance of such class of certificates or as a result of a ratings downgrade, could adversely affect the ability of an employee benefit plan or other investor to purchase or retain those offered certificates. See “Certain ERISA Considerations” and “Legal Investment”.
Nationally recognized statistical rating organizations that were not engaged by the depositor to rate the offered certificates may nevertheless issue unsolicited credit ratings on one or more classes of offered certificates, relying on information they receive pursuant to Rule 17g-5 under the Securities Exchange Act of 1934, as amended, or otherwise. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from any ratings assigned by a rating agency engaged by the depositor. The issuance of unsolicited ratings by any nationally recognized statistical rating organization on a class of the offered certificates that are lower than ratings assigned by a rating agency engaged by the depositor may adversely impact the liquidity, market value and regulatory characteristics of that class.
As part of the process of obtaining ratings for the offered certificates, the depositor had initial discussions with and submitted certain materials to six 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 certain classes of the certificates
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and not the other nationally recognized statistical rating organizations, due in part to their initial subordination levels for the various classes of the certificates. If the depositor had selected the other nationally recognized statistical rating organizations to rate the certificates, we cannot assure you that the ratings such other nationally recognized statistical rating organizations would have assigned to the certificates would not have been lower than the ratings assigned by the nationally recognized statistical rating organizations engaged by the depositor. Further, in the case of one nationally recognized statistical rating organization engaged by the depositor, the depositor only requested ratings for certain classes of offered certificates, due in part to the final subordination levels provided by that nationally recognized statistical rating organization for the classes of certificates. If the depositor had selected that nationally recognized statistical rating organization to rate those classes of offered certificates not rated by it, its ratings of those other certificates may have been different, and potentially lower, than those ratings ultimately assigned to those certificates by the other nationally recognized statistical rating organizations hired by the depositor. In addition, the decision not to engage one or more other rating agencies in the rating of certain classes of certificates to be issued in connection with this transaction may negatively impact the liquidity, market value and regulatory characteristics of those classes of certificates. Although unsolicited ratings may be issued by any nationally recognized statistical rating organization, a nationally recognized statistical rating organization might be more likely to issue an unsolicited rating if it was not selected after having provided preliminary feedback to the depositor. Neither the depositor nor any other person or entity will have any duty to notify you if any other nationally recognized statistical rating organization issues, or delivers notice of its intention to issue, consolidated ratings on one or more classes of certificates after the date of this prospectus.
Furthermore, the Securities and Exchange Commission may determine that any or all of the rating agencies engaged by the depositor to rate the certificates no longer qualifies as a nationally recognized statistical rating organization, or is no longer qualified to rate the certificates or may no longer rate similar securities for a limited period as a result of an enforcement action, and that determination may also have an adverse effect on the liquidity, market value and regulatory characteristics of the offered certificates. To the extent that the provisions of any mortgage loan or the pooling and servicing agreement condition any action, event or circumstance on the delivery of a rating agency confirmation, the pooling and servicing agreement will require delivery or deemed delivery of a rating agency confirmation only from the rating agencies engaged by the depositor to rate the certificates.
We are not obligated to maintain any particular rating with respect to the certificates, and the ratings initially assigned to the certificates by any or all of the rating agencies engaged by the depositor to rate the certificates could change adversely as a result of changes affecting, among other things, the mortgage loans, the mortgaged properties, the parties to the pooling and servicing agreement, or as a result of changes to ratings criteria employed by any or all of the rating agencies engaged by the depositor to rate the certificates. Although these changes would not necessarily be or result from an event of default on any mortgage loan, any adverse change to the ratings of the offered certificates would likely have an adverse effect on the market value, liquidity and/or regulatory characteristics of those certificates.
Further, certain actions provided for in loan agreements may require a rating agency confirmation be obtained from the rating agencies engaged by the depositor to rate the certificates 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
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being obtained, we cannot assure you that the applicable rating agency will not downgrade, qualify or withdraw its ratings as a result of the taking of such action. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—’Due-On-Sale’ and ‘Due-On-Encumbrance’ Provisions”, “Pooling and Servicing Agreement—Rating Agency Confirmations” and “Ratings” for additional considerations regarding the ratings, including a description of the process of obtaining confirmations of ratings for the offered certificates.
Your Yield May Be Affected by Defaults, Prepayments and Other Factors
General
The yield to maturity on each class of offered certificates will depend in part on the following:
| ● | the purchase price for the certificates; |
| ● | the rate and timing of principal payments on the mortgage loans (both voluntary and involuntary), and the allocation of principal prepayments to the respective classes of offered certificates with certificate balances; and |
| ● | the allocation of shortfalls and losses on the mortgage loans to the respective classes of offered certificates. |
For this purpose, principal payments include voluntary and involuntary prepayments, such as prepayments resulting from the application of loan reserves, property releases, casualty or condemnation, defaults and liquidations as well as principal payments resulting from repurchases due to material breaches of representations and warranties or material document defects or purchases by a companion loan holder or mezzanine lender (if any) pursuant to a purchase option or sales of defaulted mortgage loans.
Any changes in the weighted average lives of your certificates may adversely affect your yield. In general, if you buy a certificate at a premium, and principal distributions occur faster than expected, your actual yield to maturity will be lower than expected. If principal distributions are very high, holders of certificates purchased at a premium might not fully recover their initial investment. Conversely, if you buy a certificate at a discount and principal distributions occur more slowly than expected, your actual yield to maturity will be lower than expected.
Prepayments resulting in a shortening of weighted average lives of your certificates may be made at a time of low interest rates when you may be unable to reinvest the resulting payment of principal on your certificates at a rate comparable to the effective yield anticipated by you in making your investment in the certificates, while delays and extensions resulting in a lengthening of those weighted average lives may occur at a time of high interest rates when you may have been able to reinvest principal payments that would otherwise have been received by you at higher rates.
In addition, the extent to which prepayments on the mortgage loans in the issuing entity ultimately affect the weighted average life of the certificates will depend on the terms of the certificates, more particularly:
| ● | a class of certificates that entitles the holders of those certificates to a disproportionately larger share of the prepayments on the mortgage loans increases the “call risk” or the likelihood of early retirement of that class if the rate of prepayment is relatively fast; and |
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| ● | a class of certificates that entitles the holders of the certificates to a disproportionately smaller share of the prepayments on the mortgage loans increases the likelihood of “extension risk” or an extended average life of that class if the rate of prepayment is relatively slow. |
The Timing of Prepayments and Repurchases May Change Your Anticipated Yield
The rate at which voluntary prepayments occur on the mortgage loans will be affected by a variety of factors, including:
| ● | the terms of the mortgage loans, including, the length of any prepayment lockout period and the applicable yield maintenance charges and prepayment premiums and the extent to which the related mortgage loan terms may be practically enforced; |
| ● | the level of prevailing interest rates; |
| ● | the availability of credit for commercial real estate; |
| ● | the master servicer’s or special servicer’s ability to enforce yield maintenance charges and prepayment premiums; |
| ● | the failure to meet certain requirements for the release of escrows; |
| ● | the occurrence of casualties or natural disasters; and |
| ● | economic, demographic, tax, legal or other factors. |
Although a yield maintenance charge or other prepayment premium provision of a mortgage loan is intended to create an economic disincentive for a borrower to prepay voluntarily a mortgage loan, we cannot assure you that mortgage loans that have such provisions will not prepay.
The extent to which the special servicer forecloses upon, takes title to and disposes of any mortgaged property related to a mortgage loan or sells defaulted mortgage loans will affect the weighted average lives of your certificates. If the special servicer forecloses upon a significant number of the related mortgage loans, and depending upon the amount and timing of recoveries from the related mortgaged properties or sells defaulted mortgage loans, your certificates may have a shorter weighted average life.
Delays in liquidations of defaulted mortgage loans and modifications extending the maturity of mortgage loans will tend to delay the payment of principal on the mortgage loans. The ability of the related borrower to make any required balloon payment at maturity or to repay any ARD loan at the related anticipated repayment date typically will depend upon its ability either to refinance the mortgage loan or to sell the related mortgaged property. A significant number of the mortgage loans require balloon payments at maturity and there is a risk that a number of those mortgage loans may default at maturity, or that the special servicer may extend the maturity of a number of those mortgage loans in connection with workouts. We cannot assure you as to the borrowers’ abilities to make mortgage loan payments on a full and timely basis, including any balloon payments at maturity or on the related anticipated repayment date. Bankruptcy of the borrower or adverse conditions in the market where the mortgaged property is located may, among other things, delay the recovery of proceeds in the case of defaults. Losses on the mortgage loans due to uninsured risks or insufficient hazard insurance proceeds may create shortfalls in distributions to certificateholders. Any required indemnification of a party to
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the pooling and servicing agreement in connection with legal actions relating to the issuing entity, the related agreements or the certificates may also result in shortfalls.
See “—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions” above and “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Prepayment Protections and Certain Involuntary Prepayments and Voluntary Prepayments” and “Description of the Mortgage Pool—Redevelopment, Renovation and Expansion”.
In addition, if a sponsor repurchases a mortgage loan from the issuing entity due to a material breach of one or more of its representations or warranties or a material document defect, the repurchase price paid will be passed through to the holders of the certificates with the same effect as if the mortgage loan had been prepaid in part or in full, and no yield maintenance charge or other prepayment premium would be payable. Additionally, any mezzanine lender (if any) may have the option to purchase the related mortgage loan after certain defaults, and the purchase price may not include any yield maintenance charges or prepayment premiums. As a result of such a repurchase or purchase, investors in the Class X-A and Class X-B certificates and any other certificates purchased at a premium might not fully recoup their initial investment. A repurchase, a prepayment or the exercise of a purchase option may adversely affect the yield to maturity on your certificates. In this respect, see “Description of the Mortgage Loan Purchase Agreements” and “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”.
The certificates with notional amounts will not be entitled to distributions of principal but instead will accrue interest on their respective notional amounts. Because the notional amount of the certificates indicated in the table below is based upon the outstanding certificate balances of the related class of certificates, the yield to maturity on the indicated certificates will be extremely sensitive to the rate and timing of prepayments of principal, liquidations and principal losses on the mortgage loans to the extent allocated to the related certificates.
Interest-Only Class of Certificates | Underlying Classes |
| Class X-A | Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates |
| Class X-B | Class A-S, Class B and Class C certificates |
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 Class X-A or 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 certificates with notional amounts may be adversely affected by the prepayment of mortgage loans with higher net mortgage loan rates. See “Yield and Maturity Considerations—Yield on the Certificates with Notional Amounts”.
In addition, with respect to the Class A-SB certificates, the extent to which the planned balances are achieved and the sensitivity of the Class A-SB certificates to principal prepayments on the mortgage loans will depend in part on the period of time during which the Class A-1, Class A-2, Class A-3 and Class A-4 certificates remain outstanding. As such, the Class A-SB certificates will become more sensitive to the rate of prepayments on the mortgage loans than they were when the Class A-1, Class A-2, Class A-3 and Class A-4 certificates were outstanding.
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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 mortgage loan are not satisfied, the amounts reserved in such escrows may be, or may be required to 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-1. 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, the special servicer or the trustee reimburses itself (or the master servicer, special servicer, trustee or other party to a trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan) out of general collections on the mortgage loans included in the issuing entity for any advance that it (or any such other party) has determined is not recoverable out of collections on the related mortgage loan, then to the extent that this reimbursement is made from collections of principal on the mortgage loans in the issuing entity, that reimbursement will reduce the amount of principal ultimately available to be distributed on the certificates and will result in a reduction of the certificate balance (or notional amount) of one or more classes of certificates as described in this prospectus. See “Description of the Certificates—Distributions”. Likewise, if the master servicer or the trustee reimburses itself out of principal collections on the mortgage loans for any workout-delayed reimbursement amounts, that reimbursement will reduce the amount of principal available to be distributed on the certificates on that distribution date. This reimbursement would have the effect of reducing current payments of principal on the offered certificates (other than the certificates with notional amounts and the Class R certificates) and extending the weighted average lives of the offered certificates with certificate balances. See “Description of the Certificates—Distributions”.
In addition, to the extent losses are realized on the mortgage loans, first the Class J-RR certificates, then the Class H-RR certificates, then the Class G-RR certificates, then the Class F-RR certificates, then the Class E-RR certificates, then the Class D certificates, then the Class C certificates, then the Class B certificates, then the Class A-S certificates and, then, pro rata, the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, based on their respective certificate balances, will bear such losses up to an amount equal to the respective outstanding certificate balance of that class. A reduction in the certificate balance of the Class A-1, Class A-2, Class A-SB, Class A-3 or Class A-4 certificates will result in a corresponding reduction in the notional amount of the Class X-A certificates and a reduction of the certificate balance of the Class A-S, Class B or Class C certificates will result in a corresponding reduction of the notional amount of the Class X-B certificates. We make no representation as to the anticipated rate or timing of prepayments (voluntary or
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involuntary) or rate, timing or amount of liquidations or losses on the mortgage loans or as to the anticipated yield to maturity of any such offered certificate. See “Yield and Maturity Considerations”.
Risk of Early Termination
The issuing entity is subject to optional termination under certain circumstances. See “Pooling and Servicing Agreement—Termination; Retirement of Certificates”. In the event of this termination, you might receive some principal payments earlier than otherwise expected, which could adversely affect your anticipated yield to maturity.
Subordination of the Subordinated Certificates Will Affect the Timing of Distributions and the Application of Losses on the Subordinated Certificates
As described in this prospectus, the rights of the holders of Class A-S, Class B and Class C certificates to receive payments of principal and interest otherwise payable on the certificates they hold will be subordinated to such rights of the holders of the more senior certificates having an earlier alphabetical or alphanumeric class designation. If you acquire any Class A-S, Class B or Class C certificates, then your rights to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will generally be subordinated to those of the holders of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B and Class X-D certificates and, if your certificates are Class B or Class C certificates, to those of the holders of the Class A-S certificates and, if your certificates are Class C certificates, to those of the holders of the Class B certificates. See “Description of the Certificates”. As a result, investors in those classes of certificates that are subordinated in whole or part to other classes of certificates will generally bear the effects of losses on the mortgage loans and unreimbursed expenses of the issuing entity before the holders of those other classes of certificates. See “Description of the Certificates—Distributions” and “—Subordination; Allocation of Realized Losses”.
Your Lack of Control Over the Issuing Entity and the Mortgage Loans Can Impact Your Investment
You Have Limited Voting Rights
Except as described in this prospectus, you and other certificateholders generally do not have a right to vote and do not have the right to make decisions with respect to the administration of the issuing entity and the mortgage loans. With respect to mortgage loans (other than the mortgage loans that will be serviced under a separate trust and servicing agreement or pooling and servicing agreement), those decisions are generally made, subject to the express terms of the pooling and servicing agreement for this transaction, by the master servicer, the special servicer, the trustee or the certificate administrator, as applicable, subject to any rights of the directing certificateholder under the pooling and servicing agreement for this transaction and the rights of the holders of any related companion loan and mezzanine debt under the related intercreditor agreement. With respect to a non-serviced mortgage loan, you will generally not have any right to vote or make decisions, and those decisions will generally be made by the master servicer or the special servicer under the trust and servicing agreement or pooling and servicing agreement governing the servicing of such non-serviced mortgage loan and the related companion loan, subject to the rights of the directing certificateholder appointed under such trust and servicing agreement or pooling and servicing agreement. See “Pooling and Servicing Agreement” and “Description of the Mortgage Pool—The Whole Loans”. In particular, with respect to the risks relating to a modification of a mortgage loan, see “—Risks Relating to Modifications of the Mortgage Loans” below.
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In certain limited circumstances where certificateholders have the right to vote on matters affecting the issuing entity, in some cases, these votes are by certificateholders taken as a whole and in others the vote is by class. Your interests as an owner of certificates of a particular class may not be aligned with the interests of owners of one or more other classes of certificates in connection with any such vote. In addition, in all cases voting is based on the outstanding certificate balance, which is reduced by realized losses. In certain cases with respect to the termination of the special servicer and the operating advisor, certain voting rights will also be reduced by cumulative appraisal reduction amounts, as described below. These limitations on voting could adversely affect your ability to protect your interests with respect to matters voted on by certificateholders. See “Description of the Certificates—Voting Rights”. You will have no rights to vote on any servicing matters related to the mortgage loan that will be serviced under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced whole loan.
In general, a certificate beneficially owned by any borrower affiliate, any property manager, the master servicer, the special servicer, the trustee, the certificate administrator, the depositor, any mortgage loan seller or respective affiliates or agents will be deemed not to be outstanding and a holder of such certificate will not have the right to vote, subject to certain exceptions, as further described in the definition of “Certificateholder” under “Description of the Certificates—Reports to Certificateholders; Certain Available Information—Certificate Administrator Reports”.
The Class V and Class R certificates will not have any voting rights.
The Rights of the Directing Certificateholder and the Operating Advisor Could Adversely Affect Your Investment
The directing certificateholder will have certain consent and consultation rights with respect to certain matters relating to the mortgage loans (other than any excluded loan and, with respect to any non-serviced mortgage loan, will have limited consultation rights) and the right to replace the special servicer (other than with respect to a non-serviced mortgage loan) with or without cause, except that if a control termination event (i.e., an event in which the certificate balance of the most senior class of certificates that is eligible to be a controlling class, as reduced by the application of cumulative appraisal reduction amounts and realized losses, is less than 25% of its initial certificate balance) occurs and is continuing, the directing certificateholder will lose the consent rights and the right to replace the special servicer, but will retain consultation rights, and if a consultation termination event (i.e., an event in which the certificate balance of the most senior class of certificates that is eligible to be a controlling class (as reduced by the application of realized losses) is less than 25% of its initial certificate balance) occurs and is continuing, then the directing certificateholder will no longer have any consultation rights with respect to any mortgage loans. See “Pooling and Servicing Agreement—The Directing Certificateholder”.
These actions and decisions with respect to which the directing certificateholder has consent or consultation rights include, among others, certain modifications to the mortgage loans, including modifications of monetary terms, foreclosure or comparable conversion of the related mortgaged properties, and certain sales of mortgage loans or REO properties for less than the outstanding principal amount plus accrued interest, fees and expenses. As a result of the exercise of these rights by the directing certificateholder, the special servicer may take actions with respect to a mortgage loan that could adversely affect the interests of investors in one or more classes of offered certificates.
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Similarly, with respect to the non-serviced mortgage loans, the special servicer under the trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of a non-serviced mortgage loan may, at the direction or upon the advice of the directing certificateholder (or the equivalent), of the related securitization trust holding the controlling note for a non-serviced whole loan, take actions with respect to such non-serviced mortgage loan and related companion loan that could adversely affect such non-serviced mortgage loan, and therefore, the holders of some or all of the classes of certificates. The issuing entity (as the holder of a non-controlling note) will have limited consultation rights with respect to major decisions and the implementation of any recommended actions outlined in an asset status report relating to a non-serviced whole loan and in connection with a sale of a defaulted loan, and such rights will be exercised by the directing certificateholder for this transaction so long as no consultation termination event has occurred and is continuing and by the special servicer if a consultation termination event has occurred and is continuing. Additionally, with respect to each non-serviced whole loan, in circumstances similar to those described above, the directing certificateholder (or the equivalent) of the related securitization trust will have the right to replace the special servicer of such securitization with or without cause, and without the consent of the issuing entity. See “Description of the Mortgage Pool—The Whole Loans” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Although the special servicer under the pooling and servicing agreement and the special servicer for a non-serviced mortgage loan are not permitted to take actions which are prohibited by law or violate the servicing standard under the applicable pooling and servicing agreement or trust and servicing agreement or the terms of the related mortgage loan documents, it is possible that the directing certificateholder (or the equivalent) under such pooling and servicing agreement or trust and servicing agreement may direct or advise, as applicable, the related special servicer to take actions with respect to such mortgage loan that conflict with the interests of the holders of certain classes of the certificates.
You will be acknowledging and agreeing, by your purchase of offered certificates, that the directing certificateholder, the controlling companion loan holder with respect to any non-serviced whole loan, and the directing certificateholder (or the equivalent) under the trust and servicing agreement or pooling and servicing agreement, as applicable, governing the servicing of a non-serviced mortgage loan:
(i) may have special relationships and interests that conflict with those of holders of one or more classes of certificates;
(ii) may act solely in the interests of the holders of the controlling class (or, in the case of a non-serviced mortgage loan, the controlling class of the securitization trust formed under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced mortgage loan or the related controlling companion loan holder may act solely in its own best interest);
(iii) does not have any duties to the holders of any class of certificates other than the controlling class (or, in the case of a non-serviced mortgage loan, the controlling class of the securitization trust formed under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced mortgage loan or the related controlling companion noteholder does not have any duties to any other person);
(iv) may take actions that favor the interests of the holders of the controlling class (or, in the case of a non-serviced mortgage loan, the controlling class of the
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securitization trust formed under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced mortgage loan or the related controlling companion noteholder) over the interests of the holders of one or more other classes of certificates; and
(v) will have no liability whatsoever (other than to a controlling class certificateholder) for having so acted as set forth in clauses (i) – (iv) above, and that no certificateholder may take any action whatsoever against the directing certificateholder or the directing certificateholder (or the equivalent) under the trust and servicing agreement or pooling and servicing agreement governing the servicing of a non-serviced mortgage loan, or the controlling companion loan holder of any non-serviced whole loan, or any of their respective affiliates, directors, officers, employees, shareholders, members, partners, agents or principals for having so acted.
In addition, if the certificate balances of the classes of horizontal risk retention certificates in the aggregate (taking into account the application of any cumulative appraisal reduction amounts to notionally reduce the certificate balances of such classes) is 25% or less of the initial certificate balances of such classes in the aggregate (such event being referred to in this prospectus as an “operating advisor consultation event”), then so long as an operating advisor consultation event has occurred and is continuing, the operating advisor will have certain consultation rights with respect to certain matters relating to the mortgage loans (other than any non-serviced mortgage loan). Further, the operating advisor will have the right to recommend a replacement of the special servicer at any time, as described under “Pooling and Servicing Agreement—The Operating Advisor” and “—Replacement of the Special Servicer After Operating Advisor Recommendation and Certificateholder Vote”. The operating advisor is generally required to act on behalf of the issuing entity and in the best interest of, and for the benefit of, the certificateholders. We cannot assure you that any actions taken by the special servicer or the master servicer as a result of a recommendation or consultation by the operating advisor will not adversely affect the interests of investors in one or more classes of certificates. With respect to any non-serviced mortgage loan, any operating advisor appointed under the related trust and servicing agreement or pooling and servicing agreement governing the servicing of such non-serviced mortgage loan may have rights and duties under such trust and servicing agreement or pooling and servicing agreement that vary in certain respects from those under the pooling and servicing agreement relating to this transaction, including, for example, variations in the duties of the operating advisor that may result if the related securitization is not satisfying its risk retention requirements through retention by a “third-party purchaser”. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans—General”. Further, the operating advisor will generally have no obligations or consultation rights under the pooling and servicing agreement for this transaction with respect to any non-serviced mortgage loan or any related REO Property. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
You Have Limited Rights to Replace the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator, the Operating Advisor or the Asset Representations Reviewer
In general, the directing certificateholder will have the right to terminate and replace the special servicer with or without cause so long as no control termination event has occurred and is continuing and other than in respect of any excluded loan as described in this prospectus. After the occurrence and during the continuance of a control termination event under the pooling and servicing agreement, the special servicer may also be removed in
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certain circumstances (x) if a request is made by certificateholders evidencing not less than 25% of the voting rights (taking into account the application of appraisal reductions to notionally reduce the respective certificate balances) and (y) upon receipt of approval by certificateholders holding at least 66-2/3% of a quorum of the certificateholders (which quorum consists of the holders of certificates evidencing at least 50% of the aggregate voting rights (taking into account the application of realized losses and the application of appraisal reductions to notionally reduce the respective certificate balances). See “Pooling and Servicing Agreement—Replacement of the Special Servicer Without Cause”.
In addition, if at any time the operating advisor determines, in its sole discretion exercised in good faith, that (1) 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, and (2) the replacement of the special servicer would be in the best interest of the certificateholders as a collective whole, then the operating advisor will have the right to recommend the replacement of the special servicer and deliver a report supporting such recommendation in the manner described in “Pooling and Servicing Agreement—Replacement of the Special Servicer After Operating Advisor Recommendation and Certificateholder Vote”. The operating advisor’s recommendation to replace the special servicer must be confirmed by an affirmative vote of holders of voting rights of principal balance certificates evidencing at least a majority of a quorum (which, for this purpose, is holders that (i) evidence at least 20% of the voting rights (taking into account the application of appraisal reduction amounts to notionally reduce the respective certificate balances) of all principal balance certificates on an aggregate basis, and (ii) consist of at least three certificateholders, certificate owners that are not “risk retention affiliated” with each other).
The certificateholders will generally have no right to replace and terminate any of the master servicer, the trustee or the certificate administrator without cause. The vote of the requisite percentage of certificateholders may terminate the operating advisor or the asset representations reviewer without cause. The vote of the requisite percentage of the certificateholders will be required to replace the master servicer, the special servicer, the operating advisor and the asset representations reviewer even for cause, and certain termination events may be waived by the vote of the requisite percentage of the certificateholders. With respect to each non-serviced whole loan, in circumstances similar to those described above, the directing certificateholder (or the equivalent) and the certificateholders of the securitization trust related to such other trust and servicing agreement or pooling and servicing agreement will have the right to replace the special servicer of such securitization with or without cause, and without the consent of the issuing entity. The certificateholders generally will have no right to replace the master servicer or the special servicer of a trust and servicing agreement or pooling and servicing agreement relating to any non-serviced mortgage loan, though under certain circumstances the certificateholders may have a limited right to replace the master servicer or special servicer for cause solely with respect to such non-serviced whole loan under such trust and servicing agreement or pooling and servicing agreement, as applicable. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan” in this prospectus. We cannot assure that your lack of control over the replacement of these parties will not have an adverse impact on your investment.
The Rights of Companion Holders and Mezzanine Debt May Adversely Affect Your Investment
With respect to mortgage loans that have mezzanine debt, the related mezzanine lender will have the right under certain limited circumstances to (i) cure certain defaults with
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respect to, and under certain default scenarios, purchase (without payment of any yield maintenance charge or prepayment premium) the related mortgage loan and (ii) so long as no event of default with respect to the related mortgage loan continues after the mezzanine lender’s cure right has expired, approve certain modifications and consent to certain actions to be taken with respect to the related mortgage loan. See “Description of the Mortgage Pool—Mortgage Pool Characteristics” and “—Additional Indebtedness”.
The purchase option that the holder of mezzanine debt holds pursuant to the related intercreditor agreement generally permits such holder to purchase its related defaulted mortgage loan for a purchase price generally equal to the outstanding principal balance of the related defaulted mortgage loan, together with accrued and unpaid interest (exclusive of default interest) on, and unpaid servicing expenses, protective advances and interest on advances related to, such defaulted mortgage loan. However, in the event such holder is not obligated to pay some or all of those fees and additional expenses, including any liquidation fee payable to the special servicer under the terms of the pooling and servicing agreement, then the exercise of such holder’s rights under the intercreditor agreement to purchase the related mortgage loan from the issuing entity may result in a loss to the issuing entity in the amount of those fees and additional expenses. In addition, such holder’s right to cure defaults under the related defaulted mortgage loan could delay the issuing entity’s ability to realize on or otherwise take action with respect to such defaulted mortgage loan.
In addition, with respect to a non-serviced mortgage loan, you will generally not have any right to vote or consent with respect to any matters relating to the servicing and administration of such non-serviced mortgage loan, however, the directing certificateholder (or equivalent) of the related securitization trust holding (or any other party) the controlling note for the related non-serviced whole loan, will have the right to vote or consent with respect to certain specified matters relating to the servicing and administration of such non-serviced mortgage loan. The interests of the securitization trust holding the controlling note (or the holder of the related controlling companion note) may conflict with those of the holders of some or all of the classes of certificates, and accordingly the directing certificateholder (or the equivalent) of such securitization trust (or the holder of the related controlling note) may direct or advise the special servicer for the related securitization trust to take actions that conflict with the interests of the holders of certain classes of the certificates. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans”, “—The Non-Serviced AB Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
You will be acknowledging and agreeing, by your purchase of offered certificates, that any 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; |
| ● | do not have any duties to any other person, including the holders of any class of certificates; |
| ● | may take actions that favor its interests over the interests of the holders of one or more classes of certificates; and |
| ● | will have no liability whatsoever for having so acted and that no certificateholder may take any action whatsoever against the companion loan holder or its |
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representative or any director, officer, employee, agent or principal of the companion loan holder or its representative for having so acted.
Risks Relating to Modifications of the Mortgage Loans
As delinquencies or defaults occur, the related special servicer will be required to utilize an increasing amount of resources to work with borrowers to maximize collections on the mortgage loans serviced by it. This may include modifying the terms of such mortgage loans that are in default or whose default is reasonably foreseeable. At each step in the process of trying to bring a defaulted mortgage loan current or in maximizing proceeds to the issuing entity, the special servicer 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 in order to maximize ultimate proceeds of such mortgage loans to the issuing entity may have the effect of, among other things, reducing or otherwise changing the mortgage rate, forgiving or forbearing payments of principal, interest or other amounts owed under the mortgage loan, extending the final maturity date of the mortgage loan, capitalizing or deferring delinquent interest and other amounts owed under the mortgage loan, forbearing payment of a portion of the principal balance of the mortgage loan or any combination of these or other modifications.
Any modified mortgage loan may remain in the issuing entity, and the modification may result in a reduction in (or may eliminate) the funds received in respect of such mortgage loan. In particular, any modification to reduce or forgive the amount of interest payable on the mortgage loan will reduce the amount of cash flow available to make distributions of interest on the certificates, which will likely impact the most subordinated classes of certificates that suffer the shortfall. To the extent the modification defers principal payments on the mortgage loan (including as a result of an extension of its stated maturity date), certificates entitled to principal distributions will likely be repaid more slowly than anticipated, and if principal payments on the mortgage loan are forgiven, the reduction will cause a write-down of the certificate balances of the certificates in reverse order of seniority. See “Description of the Certificates—Subordination; Allocation of Realized Losses”.
The ability to modify mortgage loans by the special servicer may be limited by several factors. First, if the special servicer has to consider a large number of modifications, operational constraints may affect the ability of the special servicer to adequately address all of the needs of the borrowers. Furthermore, the terms of the related servicing agreement may prohibit the special servicer from taking certain actions in connection with a loan modification, such as an extension of the loan term beyond a specified date such as a specified number of years prior to the rated final distribution date. You should consider the importance of the role of the special servicer in maximizing collections for the transaction and the impediments the special servicer may encounter when servicing delinquent or defaulted mortgage loans. In some cases, failure by the special servicer to timely modify the terms of a defaulted mortgage loan may reduce amounts available for distribution on the certificates in respect of such mortgage loan, and consequently may reduce amounts available for distribution to the related certificates. In addition, even if a loan modification is successfully completed, we cannot assure you that the related borrower will continue to perform under the terms of the modified mortgage loan.
Modifications that are designed to maximize collections in the aggregate may adversely affect a particular class of certificates. The pooling and servicing agreement obligates the special servicer not to consider the interests of individual classes of certificates. You should note that in connection with considering a modification or other type of loss mitigation, the special servicer may incur or bear related out-of-pocket expenses, such as appraisal fees,
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which would be reimbursed to the special servicer from the transaction as servicing advances and paid from amounts received on the modified loan or from other mortgage loans in the mortgage pool but in each case, prior to distributions being made on the certificates.
Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan
Each sponsor is the sole warranting party in respect of the mortgage loans sold by such sponsor to us. Neither we nor any of our affiliates (except Wells Fargo Bank, National Association in its capacity as a sponsor, with respect to the mortgage loans it will contribute to this securitization) is obligated to repurchase or substitute any mortgage loan or make any payment to compensate the issuing entity in connection with a breach of any representation or warranty of a sponsor or any document defect, if the sponsor defaults on its obligation to do so. We cannot assure you that the sponsors, notwithstanding the existence of any payment guarantee, will effect such repurchases or substitutions or make such payment to compensate the issuing entity. Although a loss of value payment may only be made by the related mortgage loan seller to the extent that the special servicer deems such amount to be sufficient to compensate the issuing entity for such material defect or material breach, we cannot assure you that such loss of value payment will fully compensate the issuing entity for such material defect or material breach in all respects. In particular, in the case of a non-serviced whole loan that is serviced under the related non-serviced trust and servicing agreement or pooling and servicing agreement entered into in connection with the securitization of the related pari passu companion loan, the asset representations reviewer under that pooling and servicing agreement or trust and servicing agreement (if any) may review the diligence file relating to such pari 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. In addition, the sponsors may have various legal defenses available to them in connection with a repurchase or substitution obligation or an obligation to pay the loss of value payment. 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 a REMIC or cause the issuing entity to incur a tax.
Each sponsor has only limited assets with which to fulfill any obligations on its part that may arise as a result of a material document defect or a material breach of any of the sponsor’s representations or warranties. We cannot assure you that a sponsor has or will have sufficient assets with which to fulfill any obligations on its part that may arise, or that any such entity will maintain its existence.
Additionally, one of the sponsors, Barclays Bank PLC, may be subject to the “bail-in” powers of a Resolution Authority and such sponsor’s liabilities, including the obligation to repurchase certain defective mortgage loans could, among other things, be reduced, converted or extinguished in full. Alternatively the BRRD gives the power to a Resolution Authority to transfer the assets of certain relevant institutions to a third party entity. See “—The Sponsors, the Depositor and the Issuing Entity Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans”.
See “Description of the Mortgage Loan Purchase Agreements”.
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Risks Relating to Interest on Advances and Special Servicing Compensation
To the extent described in this prospectus, the master servicer, the special servicer and the trustee will each be entitled to receive interest on unreimbursed advances made by it at the “Prime Rate” as published in The Wall Street Journal. This interest will generally accrue from the date on which the related advance is made or the related expense is incurred to the date of reimbursement. In addition, under certain circumstances, including delinquencies in the payment of principal and/or interest, a mortgage loan will be specially serviced and the special servicer will be entitled to compensation for special servicing activities. The right to receive interest on advances or special servicing compensation is senior to the rights of certificateholders to receive distributions on the offered certificates. The payment of interest on advances and the payment of compensation to the special servicer may lead to shortfalls in amounts otherwise distributable on your certificates.
Bankruptcy of a Servicer May Adversely Affect Collections on the Mortgage Loans and the Ability to Replace the Servicer
The master servicer or the special servicer may be eligible to become a debtor under the federal bankruptcy code or enter into receivership under the Federal Deposit Insurance Act (“FDIA“). If the master servicer or special servicer, as applicable, were to become a debtor under the federal bankruptcy code or enter into receivership under the FDIA, although the pooling and servicing agreement provides that such an event would entitle the issuing entity to terminate the master servicer or special servicer, as applicable, the provision would most likely not be enforceable. However, a rejection of the pooling and servicing agreement by the master servicer or special servicer, as applicable, in a bankruptcy proceeding or repudiation of the pooling and servicing agreement in a receivership under the FDIA would be treated as a breach of the pooling and servicing agreement and give the issuing entity a claim for damages and the ability to appoint a successor master servicer or special servicer, as applicable. An assumption under the federal bankruptcy code would require the master servicer or special servicer, as applicable, to cure its pre-bankruptcy defaults, if any, and demonstrate that it is able to perform following assumption. The bankruptcy court may permit the master servicer or special servicer, as applicable, to assume the servicing agreement and assign it to a third party. An insolvency by an entity governed by state insolvency law would vary depending on the laws of the particular state. We cannot assure you that a bankruptcy or receivership of the master servicer or special servicer, as applicable, would not adversely impact the servicing of the related mortgage loans or the issuing entity would be entitled to terminate the master servicer or special servicer, as applicable, in a timely manner or at all.
If the master servicer or special servicer, as applicable, becomes the subject of bankruptcy or similar proceedings, the issuing entity claim to collections in that master servicer or special servicer’s, as applicable, possession at the time of the bankruptcy filing or other similar filing may not be perfected. In this event, funds available to pay principal and interest on your certificates may be delayed or reduced.
The Sponsors, the Depositor and the Issuing Entity Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans
In the event of the bankruptcy or insolvency of a sponsor or the depositor, it is possible the issuing entity’s right to payment from or ownership of the mortgage loans could be challenged, and if such challenge were successful, delays, reductions in payments and/or losses on the certificates could occur.
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The transfer of the mortgage loans by the sponsors in connection with this offering is not expected to qualify for the securitization safe harbor adopted by the Federal Deposit Insurance Corporation (the “FDIC“) for securitizations sponsored by insured depository institutions. However, the safe harbor is non-exclusive.
In the case of each sponsor, an opinion of counsel will be rendered on the closing date, based on certain facts and assumptions and subject to certain qualifications, to the effect that the transfer of the related mortgage loans by such sponsor to the depositor would generally be respected in the event of a bankruptcy or insolvency of such sponsor. A legal opinion is not a guaranty as to what any particular court would actually decide, but rather an opinion as to the decision a court would reach if the issues are competently presented and the court followed existing precedent as to legal and equitable principles applicable in bankruptcy cases. In any event, we cannot assure you that the Federal Deposit Insurance Corporation, a bankruptcy trustee or another interested party, as applicable, would not attempt to assert that such transfer was not a sale. Even if a challenge were not successful, it is possible that payments on the certificates would be delayed while a court resolves the claim.
In addition, since the issuing entity is a common law trust, it may not be eligible for relief under the federal bankruptcy laws, unless it can be characterized as a “business trust” for purposes of the federal bankruptcy laws. Bankruptcy courts look at various considerations in making this determination, so it is not possible to predict with any certainty whether or not the issuing entity would be characterized as a “business trust”. Regardless of whether a bankruptcy court ultimately determines that the issuing entity is a “business trust”, it is possible that payments on the offered certificates would be delayed while the court resolved the issue.
Title II of the Dodd-Frank Act provides for an orderly liquidation authority (“OLA“) under which the FDIC can be appointed as receiver of certain systemically important non-bank financial companies and their direct or indirect subsidiaries in certain cases. We make no representation as to whether this would apply to any of the sponsors. In January 2011, the then-acting general counsel of the FDIC issued a letter (the “Acting General Counsel’s Letter“) in which he expressed his view that, under then-existing regulations, the FDIC, as receiver under the OLA, would not, in the exercise of its OLA repudiation powers, recover as property of a financial company assets transferred by the financial company, provided that the transfer satisfies the conditions for the exclusion of assets from the financial company’s estate under the federal bankruptcy code. The letter further noted that, while the FDIC staff may be considering recommending further regulations under OLA, the acting general counsel would recommend that such regulations incorporate a 90-day transition period for any provisions affecting the FDIC’s statutory power to disaffirm or repudiate contracts. If, however, the FDIC were to adopt a different approach than that described in the Acting General Counsel’s Letter, delays or reductions in payments on the offered certificates would occur.
Barclays Bank PLC, a mortgage loan seller, a sponsor and an originator, is subject to the provisions of the Insolvency Act 1986, as amended (United Kingdom Act of Parliament, 1986 ch. 45) (the “Insolvency Act“) and the Banking Act 2009, as amended (United Kingdom Act of Parliament, 2009 ch. 1) (the “Banking Act“). Under the terms of the Insolvency Act, certain transactions by an English-registered company, such as Barclays, may be challenged by an insolvency officer appointed to that company on its insolvency. Under the Banking Act, the Secretary of State, Prudential Regulation Authority, or Bank of England can apply to the court for implementation of an insolvency regime specifically for certain deposit-taking institutions. One aspect of this regime is that an insolvency officer will conduct the relevant insolvency process in such a manner as to promote protection of
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retail deposits held by such an institution (in combination with the United Kingdom Financial Services Compensation Scheme).
Further, under the Banking Act, specified UK authorities have extended tools to deal with the failure (or likely failure) of certain UK incorporated entities, including authorized and established entities including deposit-taking institutions and investment firms and powers to recognize and give effect to certain resolution actions in respect of the European Economic Area and third country institutions. The tools available under the Banking Act may be used in respect of relevant institutions and, in certain circumstances, their UK established banking group companies and such tools include (a) the power to issue share transfer instruments and/or orders pursuant to which there may be transferred to a commercial purchaser or a nominee of or a company wholly owned by the UK Treasury, all or some of the securities issued by a UK institution with permission to accept deposits under the FSMA (“UK Bank“) (or any UK holding company of the UK Bank). The share transfers can extend to a wide range of “securities” including shares and bonds issued by the UK Bank (or any UK holding company of the UK Bank) and warrants for such and also deferred shares or private membership rights in a building society and (b) the power to transfer all or some of the property, rights and liabilities of a UK Bank or a building society to a commercial purchaser or Bank of England entity. In certain circumstances encumbrances and trusts can be over-reached or varied. Power also exists to override any default provisions in transactions otherwise affected by these powers. Compensation may be payable in the context of share transfer instruments and/or orders and property transfer instruments. In the case of share transfers any compensation will be paid to the person who held the security immediately before the transfer, who may not be the encumbrancer. The Banking Act also includes provisions relating to two new insolvency procedures which may be commenced by specified UK authorities (bank insolvency and bank administration).
The Banking Act also vests power in the Bank of England (among other things) to override, vary or impose contractual obligations between the UK Bank (or any UK holding company of the UK Bank) and its former group undertakings (as defined in the Banking Act), for reasonable consideration, in order to enable any transferee or successor bank of the UK Bank (or any UK holding company of the UK Bank) to operate effectively. There is also power for the UK Treasury to amend the law (save for a provision made by or under the Act) by order for the purpose of enabling it to use the special resolution regime powers effectively, potentially with retrospective effect.
If an instrument or order were to be made under the Banking Act in respect of Barclays Bank PLC, such instrument or order may (among other things) affect the ability of Barclays Bank PLC to satisfy its obligations under the related mortgage loan purchase agreement and/or result in modifications to the related mortgage loan purchase agreement. As a result, the making of an instrument or order in respect of Barclays Bank PLC may affect the ability of the issuing entity to meet its obligations in respect of the certificates. While there is provision for compensation in certain circumstances under the Banking Act, there can be no assurance that certificateholders would recover compensation promptly and equal to any loss actually incurred.
As at the date of this prospectus, no order or action has been taken by the UK Treasury or the Bank of England under the Banking Act in respect of Barclays Bank PLC and there has been no indication that any such instrument or order will be made, but there can be no assurance that this will not change and/or that certificateholders will not be adversely affected by any such instrument or order if made.
An opinion of counsel will be rendered on the closing date, based on certain facts and assumptions and subject to certain qualifications, to the effect that the transfer of Barclays’
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interest in the mortgage loan by Barclays Bank PLC will constitute a true sale of such assets. Nevertheless, we cannot assure you that an interested party would not attempt to assert that such transfer was not a sale nor challenge the transaction under United Kingdom insolvency rules, nor that the transfer could not be affected by an order under the Banking Act. Even if a challenge were not successful, or if an order under the Banking Act itself was successfully challenged, resolution of such a matter could cause significant delay which may impact on payments under the certificates.
The EU Bank Recovery and Resolution Directive (2014/59/EU) (collectively with secondary and implementing EU rules, and national implementing legislation, the “BRRD“) equips national authorities in EU member states (the “Resolution Authorities“) with tools and powers for preparatory and preventive measures, early supervisory intervention and resolution of credit institutions and investment firms (collectively, “Relevant Institutions“). If a Relevant Institution enters into a mortgage loan purchase agreement with the depositor and is deemed likely to fail within the circumstances identified in the BRRD, the relevant Resolution Authority may employ such tools and powers in order to intervene in the Relevant Institution’s failure. In particular, liabilities of Relevant Institutions arising out of the mortgage loan purchase agreement (for example, liabilities requiring lenders to repurchase mortgage loans or to cure certain breaches or defects with respect to mortgage loans) and not otherwise subject to an exception, could be subject to the exercise of “bail-in” powers of the relevant Resolution Authorities (which power is just one of a number of wide powers given to Resolution Authorities for the recovery and resolution of banks and other financial institutions). If the relevant Resolution Authority decides to apply the “bail-in” tool to the liabilities of a Relevant Institution, then subject to certain exceptions set out in the BRRD, the liabilities of such Relevant Institution could, among other things, be reduced, converted to shares or other ownership interests in the Relevant Institution, its parent company or a bridge institution or extinguished in full. In addition, under the BRRD the Resolution Authority will have the power (among other tools) to transfer to a third party, rights, assets or liabilities of an institution under resolution. As a result, the depositor or the issuing entity and ultimately, the certificateholders may not be able to recover any liabilities owed by such an entity to the depositor or the issuing entity, as applicable. Further, a relevant Resolution Authority may exercise its discretions in a manner that produces different outcomes amongst institutions resolved in different EU member states. The resolution mechanisms under the BRRD correspond closely to those available to the Single Resolution Board (the “SRB“) and the European Commission under the SR Regulation (Regulation 806/2014) which applies to EU member states in the Eurozone and other member states participating in the single supervisory mechanism (the “SSM“) with the SRB taking on many of the functions assigned to national resolution authorities by the BRRD. If a member state (such as the UK) has chosen not to participate in the SSM, Relevant Institutions established in that member state are not subject to the SR Regulation, but to the BRRD as implemented in that member state. For a discussion of certain risks relating to repurchases of a mortgage loan, see “—Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan” above.
If Barclays Bank PLC were acting through its New York branch, and were to become the subject of an insolvency proceeding under the laws of the United Kingdom and a proceeding were initiated under Chapter 15 of the federal bankruptcy code or the New York Superintendent of Financial Services were to take possession of the New York branch, it is possible that the New York Superintendent of Financial Services, a creditor or trustee in bankruptcy of Barclays Bank PLC may argue that the sale of its interest in the mortgage loan by Barclays Bank PLC was a pledge of the receivables rather than a sale. The New York Superintendent of Financial Services, a creditor, a bankruptcy trustee or another
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interested party could still attempt to assert that the transfer of Barclays’ interest in the mortgage loan was not a sale. If such party’s challenge is successful, payments on the certificates would be reduced or delayed. Even if the challenge is not successful, payments on the certificates could be delayed while a court resolves the claim.
The Requirement of the Special Servicer to Obtain FIRREA-Compliant Appraisals May Result in an Increased Cost to the Issuing Entity
Each appraisal obtained pursuant to the pooling and servicing agreement is required to contain a statement, or is accompanied by a letter from the appraiser, to the effect that the appraisal was performed in accordance with the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA“), as in effect on the date such appraisal was obtained. Any such appraisal is likely to be more expensive than an appraisal that is not FIRREA compliant. Such increased cost could result in losses to the issuing entity. Additionally, FIRREA compliant appraisals are required to assume a value determined by a typically motivated buyer and seller, and could result in a higher appraised value than one not prepared assuming a forced liquidation or other distress situation. In addition, because a FIRREA compliant appraisal may result in a higher valuation than a non-FIRREA compliant appraisal, there may be a delay in calculating and applying appraisal reductions, which could result in the holders of a given class of certificates continuing to hold the full non-notionally reduced amount of such certificates for a longer period of time than would be the case if a non-FIRREA compliant appraisal were obtained.
Tax Matters and Changes in Tax Law May Adversely Impact the Mortgage Loans or Your Investment
Tax Considerations Relating to Foreclosure
If the issuing entity acquires a mortgaged property (or, in the case of a non-serviced mortgage loan, a beneficial interest in a mortgaged property) subsequent to a default on the related mortgage loan pursuant to a foreclosure or deed-in-lieu of foreclosure, the special servicer (or, in the case of a non-serviced mortgage loan, the related non-serviced special servicer) would be required to retain an independent contractor to operate and manage such mortgaged property. Among other items, the independent contractor generally will not be able to perform construction work other than repair, maintenance or certain types of tenant build-outs, unless the construction was more than 10% completed when the mortgage loan defaulted or when the default of the mortgage loan became imminent. Generally, 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 corporate tax rate. No determination has been made whether any portion of the income from the mortgaged properties constitutes “rent from real property”. Any such imposition of tax will reduce the net proceeds available for distribution to certificateholders. The special servicer (or, in the case of a non-serviced mortgage loan, the related non-serviced special servicer) may permit the Lower-Tier REMIC to earn “net income from foreclosure property” that is subject to tax if it determines that the net after-tax benefit to holders of certificates and any related companion loan holder(s), as a collective whole, could reasonably be expected to be greater than under another method of operating or leasing the mortgaged property. See “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”. In addition, if the issuing entity were to acquire one or more mortgaged properties (or, in the case of a non-serviced mortgage loan,
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a beneficial interest in a mortgaged property) pursuant to a foreclosure or deed-in-lieu of foreclosure, upon acquisition of those mortgaged properties (or, in the case of a non-serviced mortgage loan, a beneficial interest in a mortgaged property), the issuing entity may in certain jurisdictions, particularly in New York, be required to pay state or local transfer or excise taxes upon liquidation of such properties. Such state or local taxes may reduce net proceeds available for distribution to the certificateholders. In most circumstances, the special servicer (or in the case of a non-serviced mortgage loan, the related non-serviced special servicer) will be required to sell such mortgaged property prior to the close of the third calendar year beginning after the year of acquisition.
When foreclosing on a real estate mortgage, a REMIC is generally limited to taking only the collateral that will qualify as “foreclosure property” within the meaning of the REMIC provisions. Foreclosure property includes only the real property (ordinarily the land and structures) securing the real estate mortgage and personal property incident to such real property.
REMIC Status
If an entity intended to qualify as a REMIC fails to satisfy one or more of the REMIC provisions of the United States Internal Revenue Code of 1986, as amended, during any taxable year, the United States Internal Revenue Code of 1986, as amended, provides that such entity will not be treated as a REMIC for such year and any year thereafter. In such event, the relevant entity would likely be treated as an association taxable as a corporation under the United States Internal Revenue Code of 1986, as amended. If designated portions of the issuing entity are so treated, the offered certificates may be treated as stock interests in an association and not as debt instruments.
Material Federal Tax Considerations Regarding Original Issue Discount
One or more classes of offered certificates may be issued with “original issue discount” for federal income tax purposes, which generally would result in the holder recognizing taxable income in advance of the receipt of cash attributable to that income. Investors must have sufficient sources of cash to pay any federal, state or local income taxes with respect to the original issue discount. In addition, such original issue discount will be required to be accrued and included in income based on the assumption that no defaults will occur and no losses will be incurred with respect to the mortgage loans. This could lead to the inclusion of amounts in ordinary income early in the term of the certificate that later prove uncollectible, giving rise to a bad debt deduction. In the alternative, an investor may be required to treat such uncollectible amount as a capital loss under Section 166 of the United States Internal Revenue Code of 1986, as amended.
Description of the Mortgage Pool
General
The assets of the issuing entity will consist of a pool of forty-nine (49) fixed-rate mortgage loans (the “Mortgage Loans“ or, collectively, the “Mortgage Pool“) with an aggregate principal balance as of the Cut-off Date of $658,765,419 (the “Initial Pool Balance“). The “Cut-off Date“ means the respective due dates for such Mortgage Loans in July 2018 (or, in the case of any Mortgage Loan that has its first due date in August 2018, the date that would have been its due date in July 2018 under the terms of such Mortgage Loan if a monthly debt service payment were scheduled to be due in that month).
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Four (4) of the Mortgage Loans, representing approximately 17.9% of the Initial Pool Balance, are each part of a larger whole loan, each of which is comprised of the related Mortgage Loan and one or more loans that are pari passu in right of payment to the related Mortgage Loan (collectively referred to in this prospectus as “Pari Passu Companion Loans“) and/or are subordinate in right of payment to the related Mortgage Loan (referred to in this prospectus as “Subordinate Companion Loans“). The Pari Passu Companion Loans and the Subordinate Companion Loans are collectively referred to as the “Companion Loans“ in this prospectus, and each Mortgage Loan and the related Companion Loan(s) are collectively referred to as a “Whole Loan“. Each Companion Loan is secured by the same mortgage and the same single assignment of leases and rents securing the related Mortgage Loan. See “—The Whole Loans” below for more information regarding the rights of the holders of the related Mortgage Loans and Companion Loans.
The Mortgage Loans were selected for this transaction from mortgage loans specifically originated for securitizations of this type by the mortgage loan sellers and their respective affiliates, or originated by others and acquired by the mortgage loan sellers specifically for a securitization of this type, in either case, taking into account, among other factors, rating agency criteria and anticipated feedback from investors in the most subordinate certificates, property type and geographic location.
The mortgage loan sellers will transfer to the depositor the Mortgage Loans set forth in the following chart, and the depositor will in turn sell the Mortgage Loans to the issuing entity:
Sellers of the Mortgage Loans
| Mortgage Loan Seller | Number of Mortgage Loans | Number of Mortgaged Properties | Aggregate Cut-Off Date Balance of Mortgage Loans | Approx. % of Initial Pool Balance | ||||||||||||
| Wells Fargo Bank, National Association | 14 | 27 | $ | 271,350,036 | 41.2 | % | ||||||||||
| Barclays Bank PLC | 11 | 31 | 172,882,585 | 26.2 | ||||||||||||
| Rialto Mortgage Finance, LLC | 7 | 13 | 113,800,000 | 17.3 | ||||||||||||
| C-III Commercial Mortgage LLC(1) | 17 | 18 | 100,732,798 | 15.3 | ||||||||||||
| Total | 49 | 89 | $ | 658,765,419 | 100.0 | % | ||||||||||
(1) Two (2) of the Mortgage Loans sold by C-III Commercial Mortgage LLC, secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Securitas Office and 5800 North Course Office, collectively representing approximately 2.4% of the Initial Pool Balance, were originated by an affiliate thereof, C-III Mortgage Funding LLC.
All of the Mortgage Loans were originated by their respective sellers or affiliates thereof, except as described in “—Co-Originated or Third-Party Originated Mortgage Loans” below.
Each Mortgage Loan is evidenced by one or more promissory notes or similar evidence of indebtedness (each a “Mortgage Note“) and, in each case, is secured by (or, in the case of an indemnity deed of trust, backed by a guaranty that is secured by) one or more mortgages, deeds of trust or other similar security instruments (each, a “Mortgage“) creating a first lien on a fee simple and/or leasehold interest in one or more commercial, multifamily or manufactured housing community (each, a “Mortgaged Property“).
The Mortgage Loans are generally non-recourse loans. In the event of a borrower default on a non-recourse Mortgage Loan, recourse may be had only against the specific Mortgaged Property or Mortgaged Properties and the other limited assets securing such Mortgage Loan, and not against the related borrower’s other assets. The Mortgage Loans are not insured or guaranteed by the sponsors, the mortgage loan sellers or any other
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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.
Co-Originated or Third-Party Originated Mortgage Loans
The following Mortgage Loans are component promissory notes of whole loans co-originated by the related mortgage loan seller and another entity or were originated by an unaffiliated third party and transferred to the mortgage loan seller:
| ● | The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 181 Fremont Street, representing approximately 3.0% of the Initial Pool Balance, for which Barclays Bank PLC is the mortgage loan seller, is part of a whole loan that was co-originated by Barclays Bank PLC and Deutsche Bank AG, New York Branch. Such mortgage loan was underwritten pursuant to Barclays Bank PLC’s underwriting guidelines. |
Certain Calculations and Definitions
This prospectus sets forth certain information with respect to the Mortgage Loans and the Mortgaged Properties. The sum in any column of the tables presented in Annex A-2 or Annex A-3 may not equal the indicated total due to rounding. The information in Annex A-1 with respect to the Mortgage Loans (or Whole Loans, if applicable) and the Mortgaged Properties is based upon the pool of the Mortgage Loans as it is expected to be constituted as of the close of business on July 17, 2018 (the “Closing Date“), assuming that (i) all scheduled principal and interest payments due on or before the Cut-off Date will be made and (ii) there will be no principal prepayments on or before the Closing Date. The statistics in Annex A-1, Annex A-2 and Annex A-3 were primarily derived from information provided to the depositor by each sponsor, which information may have been obtained from the borrowers.
From time to time, a particular Mortgage Loan or Whole Loan may be identified in this prospectus by name (for example, the Village at Leesburg Mortgage Loan or the Village at Leesburg Whole Loan); when that occurs, we are referring to the Mortgage Loan or Whole Loan, as the case may be, secured by the Mortgaged Property or portfolio of Mortgaged Properties identified by that name on Annex A-1 to this prospectus. From time to time, a particular Companion Loan may be identified by name (for example, the Village at Leesburg Companion Loan); when that occurs, we are referring to the (or, if applicable, an individual) Companion Loan secured by the Mortgaged Property or portfolio of Mortgaged Properties identified by that name on Annex A-1 to this prospectus. From time to time, a particular Mortgaged Property may be identified in this prospectus by name (for example, the Village at Leesburg Mortgaged Property); when that occurs, we are referring to the Mortgaged Property identified by that name on Annex A-1 to this prospectus.
All percentages of the Mortgage Loans and Mortgaged Properties, or of any specified group of Mortgage Loans and Mortgaged Properties, referred to in this prospectus without further description are approximate percentages of the Initial Pool Balance by Cut-off Date Balances and/or the allocated loan amount allocated to such Mortgaged Properties as of the Cut-off Date.
All information presented in this prospectus with respect to each Mortgage Loan with one or more Pari Passu Companion Loans is calculated in a manner that reflects the aggregate indebtedness evidenced by that Mortgage Loan and the related Pari Passu Companion
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Loan(s), unless otherwise indicated. All information presented in this prospectus with respect to each Mortgage Loan with a related Subordinate Companion Loan is calculated without regards to any such Subordinate Companion Loan, unless otherwise indicated.
Definitions
For purposes of this prospectus, including the information presented in the Annexes, the indicated terms have the following meanings:
“ADR“ means, for any hotel property, average daily rate.
“Annual Debt Service“ generally means, for any Mortgage Loan, 12 times the average of the principal and interest payments for the first 12 payment periods of the Mortgage Loan following the Cut-off Date, provided that:
| ● | in the case of a Mortgage Loan that provides for interest-only payments through maturity, Annual Debt Service means the aggregate interest payments scheduled to be due on the Due Date following the Cut-off Date and the 11 Due Dates thereafter for such Mortgage Loan; and |
| ● | in the case of a Mortgage Loan that provides for an initial interest-only period and provides for scheduled amortization payments after the expiration of such interest-only period prior to the maturity date or the Anticipated Repayment Date, as applicable, Annual Debt Service means 12 times the monthly payment of principal and interest payable during the amortization period. |
Monthly debt service and the debt service coverage ratios are also calculated using the average of the principal and interest payments for the first 12 payment periods of the Mortgage Loan following the Cut-off Date, subject to the proviso to the prior sentence. In the case of any Whole Loan, Annual Debt Service is calculated with respect to the Mortgage Loan including any related Companion Loan(s) (other than any related Subordinate Companion Loan). Annual Debt Service is calculated with regard to the related Mortgage Loan included in the issuing entity only, unless otherwise indicated.
“Appraised Value“ means, for any Mortgaged Property, the appraiser’s adjusted value of such Mortgaged Property as determined by the most recent third party appraisal of the Mortgaged Property available to the related mortgage loan seller as set forth under “Appraised Value” on Annex A-1. The Appraised Value set forth on Annex A-1 is the “as-is” value unless otherwise specified in this prospectus, on Annex A-1 and/or the related footnotes. In certain cases, the appraisals state values other than “as-is” as well as the “as-is” value for the related Mortgaged Property that assume that certain events will occur with respect to the re-tenanting, construction, renovation or repairs at such Mortgaged Property. In most such cases, the related appraisals take into account the reserves that the mortgage loan seller has taken to complete such re-tenanting, construction, renovation or repairs. We make no representation that sufficient amounts have been reserved or that the appraised value would approximate either the value that would be determined in a current appraisal of the related Mortgaged Property or the amount that would be realized upon a sale. In addition, with respect to certain of the Mortgage Loans secured by a portfolio of Mortgaged Properties, the Appraised Value represents the “as-is” value, or values other than “as-is” for the portfolio of Mortgaged Properties as a collective whole, which is generally higher than the aggregate of the “as-is” or appraised values other than “as-is” of the individual Mortgaged Properties or values based on a portfolio of Mortgaged Properties rather than the value of each individual Mortgaged Property. For more information see the definition of “LTV Ratio” and the table and related discussion below. In the case of certain of the
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Mortgage Loans, the LTV Ratio for such Mortgage Loans has been calculated based on values other than the “as-is” Appraised Value of the related Mortgaged Property, and in certain other cases, based on an Appraised Value that includes certain property that does not qualify as real property. For additional information, see the table in the definition of LTV Ratio below. With respect to any Mortgage Loan that is a part of a Whole Loan, the Appraised Value is based on the appraised value of the related Mortgaged Property that secures the entire Whole Loan.
“Cash Flow Analysis“ is, with respect to one or more of the Mortgaged Properties securing a Mortgage Loan among the 15 largest Mortgage Loans, a summary presentation of certain adjusted historical financial information provided by the related borrower, and a calculation of the Underwritten Net Cash Flow expressed as (a) “Effective Gross Income” minus (b) “Total Operating Expenses” and underwritten replacement reserves and (if applicable) tenant improvements and leasing commissions. For this purpose:
| ● | “Effective Gross Income“ means, with respect to any Mortgaged Property, the revenue derived from the use and operation of that property, less allowances for vacancies, concessions and credit losses. The “revenue” component of such calculation was generally determined on the basis of the information described with respect to the “revenue” component described under “Underwritten Net Cash Flow” below. In general, any non-recurring revenue items and non-property related revenue are eliminated from the calculation of Effective Gross Income. |
| ● | “Total Operating Expenses“ means, with respect to any Mortgaged Property, all operating expenses associated with that property, including, but not limited to, utilities, administrative expenses, repairs and maintenance, management fees, advertising costs, insurance premiums, real estate taxes and (if applicable) ground rent. Such expenses were generally determined on the basis of the same information as the “expense” component described under “Underwritten Net Cash Flow” below. |
To the extent available, selected historical income, expenses and net income associated with the operation of the related Mortgaged Property securing each Mortgage Loan appear in each cash flow summary contained in Annex A-3 to this prospectus. Such information is one of the sources (but not the only source) of information on which calculations of Underwritten Net Cash Flow are based. The historical information presented is derived from audited and/or unaudited financial statements provided by the borrowers. The historical information in the cash flow summaries reflects adjustments made by the mortgage loan seller to exclude certain items contained in the related financial statements that were not considered in calculating Underwritten Net Cash Flow and is presented in a different format from the financial statements to show a comparison to the Underwritten Net Cash Flow. In general, solely for purposes of the presentation of historical financial information, the amount set forth under the caption “gross income” consists of the “total revenues” set forth in the applicable financial statements (including (as and to the extent stated) rental revenues, tenant reimbursements and recovery income (and, in the case of hospitality properties and certain other property types, parking income, telephone income, food and beverage income, laundry income and other income), with adjustments to exclude amounts recognized on the financial statements under a straight-line method of recognizing rental income (including increases in minimum rents and rent abatements) from operating leases over their lives and items indicated as extraordinary or one-time revenue collections or considered nonrecurring in property operations. The amount set forth under the caption “expenses” in the historical financial information consists of the total expenses set forth in the applicable financial statements, with adjustments to exclude allocated parent company expenses, restructuring charges and charges associated with employee severance and
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termination benefits, interest expenses paid to company affiliates or unrelated third parties, charges for depreciation and amortization and items indicated as extraordinary or one-time losses or considered nonrecurring in property operations.
The selected historical information presented in the cash flow summaries is derived from audited and/or unaudited financial statements furnished by the respective borrowers which have not been verified by the depositor, any underwriters, the mortgage loan sellers or any other person. Audits or other verification of such financial statements could result in changes thereto, which could in turn result in the historical net income presented herein being overstated or understated.
The “Cut-off Date Balance“ of any Mortgage Loan, will be the unpaid principal balance of that Mortgage Loan, as of the Cut-off Date for such Mortgage Loan, after application of all payments due on or before that date, whether or not received.
An “LTV Ratio“ for any Mortgage Loan, as of any date of determination, is a fraction, expressed as a percentage, the numerator of which is the scheduled principal balance of the Mortgage Loan as of that date (assuming no defaults or prepayments on the Mortgage Loan prior to that date), and the denominator of which is the “as-is” Appraised Value (including “as-is” Appraised Values that reflect a portfolio premium) as determined by an appraisal of the Mortgaged Property obtained at or about the time of the origination of the related Mortgage Loan (or, in the case of each of the Mortgage Loans as shown in the table below, a value other than the “as-is” Appraised Value).
Mortgage Loan Name | % of Initial Pool Balance | Cut-off Date LTV Ratio (Other Than “As-Is”) | Maturity Date LTV Ratio (Other Than “As-Is”) | Appraised Value (Other Than “As-Is”) | Cut-off Date LTV Ratio (“As-Is”) | Maturity Date LTV Ratio (“As-Is”) | “As-Is” Appraised Value |
| Village at Leesburg(1) | 9.9% | 58.1% | 53.4% | $226,000,000 | 64.0% | 58.8% | $205,000,000 |
| 181 Fremont Street(2) | 3.0% | 39.6% | 39.6% | $632,000,000 | 54.2% | 54.2% | $461,000,000 |
| Holiday Inn Express & Suites – Sumner, WA(3) | 1.7% | 58.8% | 48.9% | $19,000,000 | 66.9% | 55.6% | $16,700,000 |
| Bond Street Fund 16(4) | 1.6% | 67.5% | 60.4% | $15,450,000 | 68.4% | 61.2% | $15,250,000 |
| (1) | The Appraised Value assumes that the second largest tenant (63,564 SF), representing 11.6% of net rentable square feet, has completed its renovation. All outstanding tenant improvement and leasing commission costs have been reserved. |
| (2) | The Appraised Value assumes all outstanding rent abatements and leasing commissions have been paid and the tenant improvements have been completed. All outstanding rent abatements, tenant improvements and leasing commissions have been reserved. |
| (3) | The Appraised Value assumes all capital expenditure funds will be fully escrowed or guaranteed at closing and will be available as needed to fund the planned capital expenditures. All funds were escrowed at closing in the amount of $2,357,672. |
| (4) | The Appraised Value assumes that the Bond Street Fund 16 - Smyrna and Bond Street Fund 16 – Shops At Eastchase Mortgaged Properties achieve stabilized occupancy by April 2019. |
The LTV Ratio as of the related maturity date or, if applicable, the Anticipated Repayment Date, set forth in Annex A-2 was calculated based on the principal balance of the related Mortgage Loan on the related maturity date or Anticipated Repayment Date, as the case may be, assuming all principal payments required to be made on or prior to the related maturity date or, if applicable, the Anticipated Repayment Date (in either case, not including the Maturity Date Balloon or ARD Payment) are made. In addition, because it is based on the value of a Mortgaged Property determined as of loan origination, the information set forth in this prospectus in Annex A-1 and in Annex A-2 is not necessarily a
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reliable measure of the related borrower’s current equity in each Mortgaged Property. In a declining real estate market, the appraised value of a Mortgaged Property could have decreased from the appraised value determined at origination and the current actual LTV Ratio of a Mortgage Loan and the LTV Ratio at maturity or anticipated repayment date may be higher than its LTV Ratio at origination even after taking into account amortization since origination. See “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property”.
In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, LTV Ratios with respect to such Mortgage Loan were calculated including any related Companion Loan(s) (except that, in the case of a Mortgage Loan with a Subordinate Companion Loan, LTV Ratios were calculated without regard to any related Subordinate Companion Loan).
The characteristics described above and in Annex A-2, along with certain additional characteristics of the Mortgage Loans presented on a loan-by-loan basis, are set forth in Annex A-1.
“Cut-off Date Loan-to-Value Ratio“ or “Cut-off Date LTV Ratio“ generally means the ratio, expressed as a percentage, of the Cut-off Date Balance of a Mortgage Loan to the Appraised Value of the related Mortgaged Property or Mortgaged Properties determined as described under “—Appraised Value” in this prospectus. See also the footnotes to Annex A-1 in this prospectus. Because the Appraised Values of the Mortgaged Properties were determined prior to origination, the information set forth in this prospectus, including the Annexes hereto, is not necessarily a reliable measure of property value or the related borrower’s current equity in each Mortgaged Property. In a declining real estate market, the appraised value of a Mortgaged Property may have decreased from the appraised value determined at origination and the current actual Cut-off Date loan-to-value ratio of a Mortgage Loan may be higher than the Cut-off Date LTV Ratio that we present in this prospectus, even after taking into account any amortization since origination. 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 related Mortgaged Property or the amount that would be realized upon a sale of that property. See “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property” in this prospectus. In the case of a Mortgage Loan that is part of a Whole Loan, the related Cut-off Date LTV Ratio was calculated based on the aggregate principal balance of the Mortgage Loan and the related Pari Passu Companion Loan(s) (but excluding any related Subordinate Companion Loan) as of the Cut-off Date.
“Debt Service Coverage Ratio“, “DSCR“, “Underwritten Net Cash Flow Debt Service Coverage Ratio“, “Underwritten Debt Service Coverage Ratio“, “U/W NCF DSCR“ or “U/W DSCR“ generally means the ratio of the Underwritten Net Cash Flow for the related Mortgaged Property or Mortgaged Properties to the Annual Debt Service as shown on Annex A-1 to this prospectus.
Underwritten Net Cash Flow Debt Service Coverage Ratios for all partial interest-only loans, if any, were calculated based on the first principal and interest payment required to be made to the issuing entity during the term of the Mortgage Loan, and the Underwritten Net Cash Flow Debt Service Coverage Ratio for all interest-only loans were calculated based on the sum of the first 12 interest payments following the Cut-off Date.
In the case of a Mortgage Loan that is part of a Whole Loan, such debt service coverage ratio was calculated based on the aggregate Annual Debt Service of the Pari Passu Mortgage
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Loan and the related Pari Passu Companion Loan(s) (but excluding any related Subordinate Companion Loan).
In general, debt service coverage ratios are used by income property lenders to measure the ratio of (a) cash currently generated by a property or expected to be generated by a property based upon executed leases that is available for debt service to (b) required debt service payments. However, debt service coverage ratios only measure the current, or recent, ability of a property to service mortgage debt. If a property does not possess a stable operating expectancy (for instance, if it is subject to material leases that are scheduled to expire during the loan term and that provide for above-market rents and/or that may be difficult to replace), a debt service coverage ratio may not be a reliable indicator of a property’s ability to service the mortgage debt over the entire remaining loan term. See the definition of “Underwritten Net Cash Flow” below.
The Underwritten Debt Service Coverage Ratios presented in this prospectus appear for illustrative purposes only and, as discussed above, are limited in their usefulness in assessing the current, or predicting the future, ability of a Mortgaged Property or Mortgaged Properties to generate sufficient cash flow to repay the related Mortgage Loan. No representation is made that the Underwritten Debt Service Coverage Ratios presented in this prospectus accurately reflect that ability.
“GLA“ means gross leasable area.
“In-Place Cash Management“ means, for funds directed into a lockbox, such funds are generally not made immediately available to the related borrower, but instead are forwarded to a cash management account controlled by the lender and the funds are disbursed according to the related Mortgage Loan documents with any excess remitted to the related borrower (unless an event of default under the Mortgage Loan documents or one or more specified trigger events have occurred and are outstanding) generally on a daily basis.
“Loan Per Unit“ means the principal balance per unit of measure (as applicable) as of the Cut-off Date. With respect to any Mortgage Loan that is part of a Whole Loan, the Loan Per Unit is calculated with regard to both the related Pari Passu Companion Loan(s) and the related Mortgage Loan, but without regard to any related Subordinate Companion Loan, unless otherwise indicated.
“LTV Ratio at Maturity or ARD“, “LTV Ratio at Maturity or Anticipated Repayment Date“ and “Balloon or ARD LTV Ratio“ generally means the ratio, expressed as a percentage, of (a) the principal balance of a Mortgage Loan scheduled to be outstanding on the stated maturity date (or, in the case of an ARD Loan, scheduled to be outstanding on the Anticipated Repayment Date), assuming (among other things) no prepayments or defaults, to (b) the Appraised Value of the related Mortgaged Property or Mortgaged Properties determined as described under “—Appraised Value”. Each Mortgage Loan requires that a regular monthly debt service payment be made on the stated maturity date or Anticipated Repayment Date, as applicable, and accordingly the principal balance referenced in clause (a) of the immediately preceding sentence will be net of the principal portion, if any, of the monthly debt service payment due on such date. Because the Appraised Values of the Mortgaged Properties were determined prior to origination, the information set forth in this prospectus, including the Annexes hereto, is not necessarily a reliable measure of the related borrower’s current equity in each Mortgaged Property. In a declining real estate market, the appraised value of a Mortgaged Property may have decreased from the appraised value determined at origination and the actual loan-to-value ratio at maturity of a Mortgage Loan may be higher than the LTV Ratio at Maturity or ARD that we present in this
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prospectus. See “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property” in this prospectus. In the case of each Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, such loan-to-value ratio was calculated based on the aggregate principal balance that will be due at maturity (or, in the case of an ARD Loan, scheduled to be outstanding on the Anticipated Repayment Date)with respect to such Pari Passu Mortgage Loan and the related Pari Passu Companion Loan(s), but without regard to any related Subordinate Companion Loan.
“Maturity Date Balloon or ARD Payment“ or “Balloon or ARD Payment“ means, for any balloon Mortgage Loan or ARD Loan, the payment of principal due upon its stated maturity date or Anticipated Repayment Date. Each Mortgage Loan requires that a regular monthly debt service payment be made on the stated maturity date or Anticipated Repayment Date, as applicable, and accordingly the payment of principal referenced in the immediately preceding sentence will be net of the principal portion, if any, of the monthly debt service payment due on such date.
“Net Operating Income“ generally means, for any given period (ending on the “NOI Date“), the total operating revenues derived from a Mortgaged Property during that period, minus the total operating expenses incurred in respect of that Mortgaged Property during that period other than:
| ● | non-cash items such as depreciation and amortization, |
| ● | capital expenditures, and |
| ● | debt service on the related Mortgage Loan or on any other loans that are secured by that Mortgaged Property. |
“NRA“ means net rentable area.
“Occupancy Rate“ means (i) in the case of multifamily rental properties and manufactured housing community properties, the percentage of rental units, pads or beds, as applicable, that are rented (generally without regard to the length of the lease or rental period) as of the date of determination; (ii) in the case of office, retail and industrial/warehouse properties, the percentage of the net rentable square footage rented as of the date of determination (subject to, in the case of certain Mortgage Loans, one or more of the additional lease-up assumptions); (iii) in the case of hospitality properties, the percentage of available rooms occupied for the trailing 12-month period ending on the date of determination; and (iv) in the case of self storage facilities, either the percentage of the net rentable square footage rented or the percentage of units rented as of the date of determination, depending on borrower reporting. In the case of some of the Mortgage Loans, the calculation of Occupancy Rate for one or more related properties was based on assumptions regarding occupancy, such as: the assumption that a particular tenant at the subject Mortgaged Property that has executed a lease (or, in some cases, a letter of intent to execute 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 12 months of the Cut-off Date; assumptions regarding the renewal of particular leases and/or the re-leasing of certain space at the subject Mortgaged Property; and certain additional lease-up assumptions as may be described in the footnotes to Annex A-1 to this prospectus. For information regarding the determination of the occupancy rates with respect to the 15 largest Mortgage Loans, see the individual Mortgage Loan and portfolio descriptions in Annex A-3.
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“Occupancy As Of Date“ means the date of determination of the Occupancy Rate of a Mortgaged Property.
“Prepayment Provisions“ denotes a general summary of the provisions of a Mortgage Loan that restrict the ability of the related borrower to voluntarily prepay the Mortgage Loan. In each case, some exceptions may apply that are not described in the general summary, such as provisions that permit a voluntary partial prepayment in connection with the release of a portion of a Mortgaged Property, or require the application of tenant holdback reserves or performance escrows following failure to satisfy release conditions to a partial prepayment, in each case notwithstanding any lockout period or yield maintenance charge that may otherwise apply. In describing Prepayment Provisions, we use the following symbols with the indicated meanings:
| ● | “D(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which voluntary prepayments of principal are prohibited, but the related borrower is permitted to defease that Mortgage Loan in order to obtain a release of the related Mortgaged Property. |
| ● | “L(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which voluntary prepayments of principal are prohibited and defeasance is not permitted. |
| ● | “O(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which prepayments of principal are permitted without the payment of any Prepayment Premium or Yield Maintenance Charge and the lender is not entitled to require a defeasance in lieu of prepayment. |
| ● | “YM(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which prepayments of principal are permitted with the payment of a Yield Maintenance Charge and the lender is not entitled to require a defeasance in lieu of prepayment. |
| ● | “D or @%(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which the related borrower is permitted to defease that Mortgage Loan in order to obtain a release of the related Mortgaged Property and during which prepayments of principal are permitted with the payment of a Prepayment Premium (equal to @% of the prepaid amount). |
| ● | “D or YM(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which the related borrower is permitted to defease that Mortgage Loan in order to obtain a release of the related Mortgaged Property and during which prepayments of principal are permitted with the payment of a Yield Maintenance Charge. |
| ● | “D or GRTR of @% or YM(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which the related borrower is permitted to defease that Mortgage Loan in order to obtain a release of the related Mortgaged Property and during which prepayments of principal are permitted with the payment of the greater of a Yield Maintenance Charge and a Prepayment Premium (equal to @% of the prepaid amount). |
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| ● | “GRTR of @% or YM(#)“ means, with respect to any Mortgage Loan, a specified number of monthly payment periods (which number is denoted by a numeric value #) during which prepayments of principal are permitted with the payment of the greater of a Yield Maintenance Charge and a Prepayment Premium (equal to @% of the prepaid amount) and the lender is not entitled to require a defeasance in lieu of prepayment. |
“Remaining Term to Maturity or ARD“ means, with respect to any Mortgage Loan, the number of months from the Cut-off Date to the related stated maturity date or Anticipated Repayment Date.
“RevPAR“ means, with respect to any hotel property, revenue per available room.
“Square Feet“, “SF“ or “Sq. Ft.“ means, in the case of a Mortgaged Property operated as a retail center, office, self storage or industrial/warehouse facility, any other single-purpose property or any combination of the foregoing, the square footage of the net rentable or leasable area.
“T-12“ and “TTM“ each means trailing 12 months.
“Term to Maturity“ means, with respect to any Mortgage Loan, the remaining term, in months, from the Cut-off Date for such Mortgage Loan to the related maturity date or, in the case of an ARD Loan, the related Anticipated Repayment Date, as applicable. Annex A-1 indicates which Mortgage Loans are ARD Loans.
“Underwritten Expenses“ or “U/W Expenses“ means, with respect to any Mortgage Loan or Mortgaged Property, an estimate of (a) operating expenses (such as utilities, administrative expenses, repairs and maintenance, management and franchise fees and advertising); and (b) estimated fixed expenses (such as insurance, real estate taxes and, if applicable, ground, space or air rights lease payments), as determined by the related mortgage loan seller and generally derived from historical expenses at the Mortgaged Property, the borrower’s budget or appraiser’s estimate, in some cases adjusted for significant occupancy increases and a market rate management fee and subject to certain assumptions and subjective judgments of each mortgage loan seller as described under the definition of “Underwritten Net Operating Income” below.
“Underwritten Net Cash Flow“, “Underwritten NCF“, “U/W Net Cash Flow“ or “U/W NCF“ means an amount based on assumptions relating to cash flow available for debt service. In general, it is the Underwritten Net Operating Income less all reserves for capital expenditures, including tenant improvement costs and leasing commissions. Underwritten Net Cash Flow generally does not reflect interest expenses, non-cash items such as depreciation and amortization and other non-reoccurring expenses.
In determining the “revenue” component of Underwritten Net Cash Flow for each Mortgaged Property, the related mortgage loan seller generally relied on a rent roll and/or other known, signed tenant leases, executed extension options, property financial statements, estimates in the related appraisal, or other indications of anticipated income (generally supported by market considerations, cash reserves or letters of credit) supplied by the related borrower and, where the actual vacancy shown thereon and, if available, the market vacancy was less than 5%, assumed a minimum 5% vacancy in determining revenue from rents (in certain cases, inclusive of rents under master leases with an affiliate of the borrower that relate to space not used or occupied by the master lease tenant, or, in the case of a hotel property, room rent, food and beverage revenues and other hotel property income), except that in the case of certain non-multifamily and non-manufactured
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housing community properties, space occupied by such anchor or single tenants or other large creditworthy tenants may have been disregarded (or a rate of less than 5% has been assumed) in performing the vacancy adjustment due to the length of the related leases or creditworthiness of such tenants. Where the actual or market vacancy was greater than 5%, the mortgage loan seller determined revenue from rents (in certain cases, inclusive of rents under master leases with an affiliate of the borrower that relate to space not used or occupied by the master lease tenant, or, in the case of a hotel property, room rent, food and beverage revenues and other hotel property income) by generally relying on a rent roll and/or other known, signed leases, executed lease extension options, property financial statements, estimates in the related appraisal, or other indications of anticipated income (generally supported by market considerations, cash reserves or letters of credit) supplied and generally (but not in all cases) the greatest of (a) actual current vacancy at the related Mortgaged Property or a vacancy otherwise based on performance of the related Mortgaged Property (e.g., an economic vacancy based on actual collections for a specified trailing period), (b) if available, current vacancy according to third-party-provided market information or at comparable properties in the same or similar market as the related Mortgaged Property, subject to adjustment to address special considerations (such as where market vacancy may have been ignored with respect to space covered by long-term leases or because it was deemed inapplicable by reason of, among other things, below market rents at or unique characteristics of the subject Mortgaged Property) and/or to reflect the appraiser’s conclusion of a supportable or stabilized occupancy rate, and (c) subject to the discussion above, 5%. In some cases involving a multi-property Mortgage Loan, the foregoing vacancy assumptions may be applied to the portfolio of the related Mortgaged Properties in the entirety, but may not apply to each related Mortgaged Property. In addition, for some Mortgaged Properties, the actual vacancy may reflect the average vacancy over the course of a year (or trailing 12-month period). In determining revenue for multifamily, manufactured housing community and self storage properties, the mortgage loan sellers generally reviewed rental revenue shown on the rolling one-to-twelve month (or some combination thereof) operating statements or annualized the rental revenue and reimbursement of expenses shown on rent rolls or operating statements with respect to the prior one-to-twelve-month periods. In the case of hospitality properties, gross receipts were generally determined based upon the average occupancy not to exceed 80% and daily rates based on third-party-provided market information or average daily rates achieved during the prior one-to-three year annual reporting period.
In determining the “expense” component of Underwritten Net Cash Flow for each Mortgaged Property, the related mortgage loan seller generally relied on, to the extent available, historical operating statements, full-year or year-to-date financial statements, rolling 12-month operating statements, year-to-date financial statements and/or budgets supplied by the related borrower, as well as estimates in the related appraisal, except that: (i) if tax or insurance expense information more current than that reflected in the financial statements was available and verified, the newer information was generally used; (ii) property management fees were generally assumed to be 1% to 6% (depending on the property type) of effective gross revenue (or, in the case of a hospitality property, gross receipts); (iii) in general, depending on the property type, assumptions were made with respect to the average amount of reserves for leasing commissions, tenant improvement expenses and capital expenditures; (iv) expenses were assumed to include annual replacement reserves; and (v) recent changes in circumstances at the Mortgaged Properties were taken into account (for example, physical changes that would be expected to reduce utilities costs). Annual replacement reserves were generally underwritten to the suggested replacement reserve amount from an independent, third-party property condition or engineering report, or minimum requirements by property type designated by the mortgage loan seller, and are: (a) in the case of retail, office, self storage and industrial/warehouse
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properties, generally not more than $0.40 per square foot of net rentable commercial area (and may be zero); (b) in the case of multifamily rental apartments, generally not more than approximately $400 per residential unit per year, depending on the condition of the property (and may be zero); (c) in the case of manufactured housing community properties, generally not more than approximately $80 per pad per year, depending on the condition of the property (and may be zero); and (d) in the case of hospitality properties, generally 4% to 5%, inclusive, of gross revenues (and may be zero). In addition, in some cases, the mortgage loan seller recharacterized as capital expenditures items that are reported by borrowers as operating expenses (thus increasing the “net cash flow”).
Historical operating results may not be available for Mortgaged Properties with newly constructed improvements, Mortgaged Properties with triple-net leases, Mortgaged Properties that have recently undergone substantial renovations and newly acquired Mortgaged Properties. In such cases, items of revenue and expense used in calculating Underwritten Net Cash Flow were generally derived from rent rolls, estimates set forth in the related appraisal, leases with tenants, other third-party-provided market information or from other borrower-supplied information. We cannot assure you with respect to the accuracy of the information provided by any borrowers, or the adequacy of the procedures used by the related mortgage loan seller in determining the presented operating information.
For purposes of calculating Underwritten Net Cash Flow for Mortgage Loans where leases have been executed by one or more affiliates of the borrower, the rents under some of such leases, if applicable, have been adjusted downward to reflect market rents for similar properties if the rent actually paid under the lease was significantly higher than the market rent for similar properties.
The amounts described as revenue and expense above are often highly subjective values. In the case of some of the Mortgage Loans, the calculation of Underwritten Net Cash Flow for the related Mortgaged Properties was based on assumptions regarding projected rental income, expenses and/or occupancy, including, without limitation, one or more of the following: (i) the assumption that a particular tenant at a Mortgaged Property that has executed a lease or letter of intent, but has not yet taken occupancy and/or has not yet commenced paying rent, will take occupancy and commence paying rent on a future date generally expected to occur within 12 months of the Cut-off Date; (ii) the assumption that certain rental income that is to be payable commencing on a future date under a signed lease, but where the subject tenant is in an initial rent abatement or free rent period, will be paid commencing on such future date; (iii) assumptions regarding the probability of renewal or extension of particular leases and/or the re-leasing of certain space at a Mortgaged Property and the anticipated effect on capital and re-leasing expenditures; (iv) assumptions regarding the costs and expenses, including leasing commissions and tenant improvements, associated with leasing vacant space or releasing occupied space at a future date; and (v) assumptions regarding future increases or decreases in expenses, or whether certain expenses are capital expenses or should be treated as expenses which are not recurring. In addition, in the case of some commercial properties, the underwritten revenues were adjusted upward to account for a portion or average of the additional rents provided for under any rent step-ups scheduled to occur over the terms of the executed leases. We cannot assure you that the assumptions made with respect to any Mortgage Loan will, in fact, be consistent with actual property performance. Actual annual net cash flow for a Mortgaged Property may be less than the Underwritten Net Cash Flow presented with respect to that property in this prospectus. In addition, the underwriting analysis of any particular Mortgage Loan as described herein by a particular mortgage loan seller may not conform to an analysis of the same property by other persons or entities.
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See “Risk Factors—Risks Relating to the Mortgage Loans—Underwritten Net Cash Flow Could Be Based On Incorrect or Flawed Assumptions” in this prospectus. See also Annex A-1 and the footnotes thereto.
“Underwritten NCF Debt Yield“ or “U/W NCF Debt Yield“ generally means, with respect to any Mortgage Loan, the related Underwritten NCF divided by the Cut-off Date Balance of that Mortgage Loan. However, in the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, such debt yield was calculated based on the aggregate principal balance of such Mortgage Loan and the related Pari Passu Companion Loan(s) as of the Cut-off Date (and, for the avoidance of doubt, without regard to any related Subordinate Companion Loan).
No Mortgage Loan included in the Trust has an Underwritten NCF Debt Yield calculated based on the related Cut-off Date Balance less a related earnout or holdback reserve.
“Underwritten Net Operating Income“, “Underwritten NOI“, “U/W Net Operating Income“ or “U/W NOI“ means an amount based on assumptions of the cash flow available for debt service before deductions for capital expenditures, including replacement reserves, tenant improvement costs and leasing commissions. In general, Underwritten Net Operating Income is the assumed revenue derived from the use and operation of a Mortgaged Property, consisting primarily of rental income, less the sum of (a) assumed operating expenses (such as utilities, administrative expenses, repairs and maintenance, management fees and advertising) and (b) fixed expenses, such as insurance, real estate taxes and, if applicable, ground lease payments. Underwritten Net Operating Income is generally estimated in the same manner as Underwritten Net Cash Flow, except that no deduction is made for capital expenditures, including replacement reserves, tenant improvement costs and leasing commissions. See “Risk Factors—Risks Relating to the Mortgage Loans—Underwritten Net Cash Flow Could Be Based On Incorrect or Flawed Assumptions” in this prospectus.
“Underwritten Net Operating Income Debt Service Coverage Ratio“ or “U/W NOI DSCR“ for any Mortgage Loan for any period, as presented in this prospectus, including the tables presented on Annex A-1 and Annex A-2, is the ratio of Underwritten NOI calculated for the related Mortgaged Property to the amount of total Annual Debt Service on such Mortgage Loan except that the Underwritten Net Operating Income Debt Service Coverage Ratio for all partial interest-only loans, if any, was calculated based on the first principal and interest payment required to be made to the issuing entity during the term of the Mortgage Loan. However, in the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, such debt service coverage ratio was calculated based on the aggregate Annual Debt Service of the related Mortgage Loan and the related Pari Passu Companion Loan(s) as of the Cut-off Date (and, for the avoidance of doubt, without regard to any related Subordinate Companion Loan). The Underwritten Net Operating Income Debt Service Coverage Ratios for all interest-only Mortgage Loans were calculated based on the sum of the first 12 interest payments following the Cut-off Date.
“Underwritten NOI Debt Yield“ or “U/W NOI Debt Yield“ means, with respect to any Mortgage Loan, the related Underwritten NOI divided by the Cut-off Date Balance of that Mortgage Loan. In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, such debt yield was calculated based on the aggregate principal balance of such Mortgage Loan and the related Pari Passu Companion Loan(s) as of the Cut-off Date (and, for the avoidance of doubt, without regard to any related Subordinate Companion Loan).
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“Underwritten Revenues“ or “U/W Revenues“ with respect to any Mortgage Loan means the gross potential rent (in certain cases, inclusive of rents under master leases with an affiliate of the borrower that relate to space not used or occupied by the master lease tenant, or, in the case of a hotel property, room rent, food and beverage revenues and other hotel property income), subject to the assumptions and subjective judgments of each mortgage loan seller as described under the definition of “Underwritten Net Operating Income” above.
“Units“, “Rooms“ or “Pads“ means (a) in the case of certain Mortgaged Properties operated as multifamily housing, the number of apartments, regardless of the size of or number of rooms in such apartment, (b) in the case of a Mortgaged Property operated as a hotel property, the number of guest rooms, (c) in the case of a Mortgaged Property operated as a manufactured housing community property, the number of pads for manufactured homes, or (d) in the case of certain Mortgaged Properties operated as self storage properties, the number of self storage units.
“Weighted Average Mortgage Rate“ means the weighted average of the Mortgage Rates as of the Cut-off Date.
You should review the footnotes to Annex A-1 in this prospectus for information regarding certain other loan-specific adjustments regarding the calculation of debt service coverage ratio information, loan-to-value ratio information, debt yield information and/or loan per net rentable square foot or unit with respect to certain of the Mortgage Loans.
Except as otherwise specifically stated, the Cut-off Date LTV Ratio, Underwritten Debt Service Coverage Ratio, LTV Ratio at Maturity or ARD, Underwritten NCF Debt Yield, Underwritten NOI Debt Yield and loan per net rentable square foot or unit statistics with respect to each Mortgage Loan are calculated and presented without regard to any indebtedness other than the Mortgage Loan, 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.
References to “weighted averages“ of the Mortgage Loans or any particular sub-group of the mortgage loans are references to averages weighted on the basis of the Cut-off Date Balances of the subject Mortgage Loans.
If we present a debt rating for some tenants and not others in the tables, you should assume that the other tenants are not rated and/or have below-investment grade ratings. If a tenant has a rated parent or affiliate, we present the rating of that parent or affiliate, notwithstanding that the parent or affiliate may itself have no obligations under the lease. Presentation of a rating opposite a tenant should not be construed as a statement that the relevant tenant will perform or be able to perform its obligations.
The sum in any column of any of the tables in Annex A-2 to this prospectus may not equal the indicated total due to rounding.
Historical information presented in this prospectus, including information in Annexes A-1 and A-3 to this prospectus, is derived from audited and/or unaudited financial statements provided by the borrowers. In each case, the historical information is taken from the same source with respect to a Mortgage Loan and subject to the same adjustments and considerations as described above with respect to the 15 largest Mortgage Loans under the definition of “Cash Flow Analysis”.
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Mortgage Pool Characteristics
Overview
Cut-off Date Mortgage Loan Characteristics
All Mortgage Loans | |
| Initial Pool Balance(1) | $658,765,419 |
| Number of mortgage loans | 49 |
| Number of mortgaged properties | 89 |
| Range of Cut-off Date Balances | $797,183 to $65,250,000 |
| Average Cut-off Date Balance | $13,444,192 |
| Range of Mortgage Rates | 3.709% to 6.110% |
| Weighted average Mortgage Rate | 4.899% |
| Range of original terms to maturity(2) | 60 months to 120 months |
| Weighted average original term to maturity(2) | 120 months |
| Range of remaining terms to maturity(2) | 56 months to 120 months |
| Weighted average remaining term to maturity(2) | 118 months |
| Range of original amortization terms(3) | 300 months to 360 months |
| Weighted average original amortization term(3) | 358 months |
| Range of remaining amortization terms(3) | 299 months to 360 months |
| Weighted average remaining amortization term(3) | 358 months |
| Range of Cut-off Date LTV Ratios(4)(5)(7) | 39.6% to 74.5% |
| Weighted average Cut-off Date LTV Ratio(4)(5)(7) | 61.2% |
| Range of LTV Ratios as of the maturity date(2)(4)(5)(7) | 39.0% to 66.4% |
| Weighted average LTV Ratio as of the maturity date(2)(4)(5)(7) | 55.8% |
| Range of U/W NCF DSCRs(5)(6)(7) | 1.25x to 3.14x |
| Weighted average U/W NCF DSCR(5)(6)(7) | 1.66x |
| Range of U/W NOI Debt Yields(5) | 8.1% to 16.2% |
| Weighted average U/W NOI Debt Yield(5) | 10.3% |
| Percentage of Initial Pool Balance consisting of: | |
| Interest-only, Amortizing Balloon | 54.7% |
| Interest-only, Balloon | 22.4% |
| Amortizing Balloon | 17.7% |
| Interest-only, ARD | 3.0% |
| Interest-only, Amortizing ARD | 2.1% |
| (1) | Subject to a permitted variance of plus or minus 5%. |
| (2) | With respect to two (2) Mortgage Loans with an Anticipated Repayment Date, secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as 181 Fremont Street and Amcor Industrial Center, representing approximately 5.1% of the Initial Pool Balance, calculated as of the related Anticipated Repayment Date. |
| (3) | Excludes ten (10) Mortgage Loans secured by the Mortgaged Properties or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as 1801 L Street, ExchangeRight Net Leased Portfolio #21, 181 Fremont Street, Roseville Corporate Center, Montclair East, Flats at East Bank, Tarheel MHC Portfolio, 63-37/27 108th Street, RC Plaza and 189 Court Street, representing approximately 25.5% of the Initial Pool Balance, that are interest only for the entire term or until the Anticipated Repayment Date, as applicable. |
| (4) | Loan-to-value ratios (such as, for example, the Cut-Off Date LTV Ratio and the LTV Ratio at Maturity or ARD) with respect to the Mortgage Loans were generally calculated using “as-is” values as described under “Description of the Mortgage Pool—Certain Calculations and Definitions” in this prospectus; provided, that with respect to certain Mortgage Loans, the related loan-to-value ratios have been calculated using “as-complete”, “as-stabilized” or similar hypothetical values. In addition, with respect to certain Mortgage Loans secured by multiple Mortgaged Properties, the appraised value may be an “as-portfolio” value that assigns a premium to the value of the Mortgaged Properties as a whole, which value exceeds the sum of their individual appraised values. Such Mortgage Loans are identified under the definition of “LTV Ratio” set forth under “Description of the Mortgage Pool—Certain Calculations and Definitions” in this prospectus. For further information, see Annex A-1 to this prospectus. See also “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property” and “Description of the Mortgage Pool—Appraised Value” in this prospectus. |
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| (5) | In the case of four (4) Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, 181 Fremont Street, CoolSprings Galleria and Flats at East Bank, representing approximately 17.9% of the Initial Pool Balance, each of which has one or more pari passu companion loans and/or subordinate companion loans that are not included in the issuing entity, the debt service coverage ratio, loan-to-value ratio and debt yield have been calculated including the related pari passu companion loan(s) but excluding any related subordinate companion loan. |
| (6) | Debt service coverage ratios are calculated using the average of the principal and interest payments for the first twelve payment periods of the Mortgage Loan following the cut-off date; provided that (i) in the case of a Mortgage Loan that provides for interest-only payments through maturity or its Anticipated Repayment Date, as applicable, such items are calculated based on the interest payments scheduled to be due on the first due date following the cut-off date and the 11 due dates thereafter for such Mortgage Loan and (ii) in the case of a Mortgage Loan that provides for an initial interest-only period that ends prior to maturity or its Anticipated Repayment Date, as applicable, and provides for scheduled amortization payments thereafter, such items are calculated based on the monthly payment of principal and interest payable for the 12 payment periods immediately following the expiration of the interest-only period. |
| (7) | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Mission Center, representing approximately 4.5% of the Initial Pool Balance, the LTV Ratio at Maturity or ARD is calculated assuming that the loan is interest-only for first 5 years of the 10 year loan term, provided, that, if as of June 11, 2023, the NCF Debt Yield equals or exceeds 10.5%, then the interest-only period will be extended for 1 additional year. The LTV Ratio at Maturity or ARD, assuming the borrower has one additional year of interest-only debt service payments, is 63.7%. See Annex A-1 to this prospectus and the footnotes thereto. |
The issuing entity will include four (4) Mortgage Loans, representing approximately 13.5% of the Initial Pool Balance, that represent the obligations of multiple borrowers that are liable (other than by reason of cross-collateralization provisions and/or tenancies-in-common borrower structures) on a joint and several basis for the repayment of the entire indebtedness evidenced by the related Mortgage Loan.
See also “—Certain Calculations and Definitions” above for important general and specific information regarding the manner of calculation of the underwritten debt service coverage ratios and loan-to-value ratios. See also “—Certain Terms of the Mortgage Loans” below for important information relating to certain payment and other terms of the Mortgage Loans.
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Property Types
The table below shows the property type concentrations of the Mortgaged Properties:
Property Type Distribution(1)
| Property Type | Number of Mortgaged Properties | Aggregate Cut-off Date Balance(1) | Approx. % of Initial Pool Balance | |||||||||
| Retail | 34 | $ | 223,732,106 | 34.0 | % | |||||||
| Anchored | 7 | 131,605,357 | 20.0 | |||||||||
| Single Tenant(2) | 18 | 35,515,000 | 5.4 | |||||||||
| Shadow Anchored | 5 | 19,974,600 | 3.0 | |||||||||
| Super Regional Mall | 1 | 19,950,390 | 3.0 | |||||||||
| Unanchored | 3 | 16,686,759 | 2.5 | |||||||||
| Office | 10 | $ | 140,937,221 | 21.4 | % | |||||||
| Suburban | 5 | 104,187,221 | 15.8 | |||||||||
| CBD | 1 | 20,000,000 | 3.0 | |||||||||
| Medical | 4 | 16,750,000 | 2.5 | |||||||||
| Self Storage | 19 | $ | 101,447,884 | 15.4 | % | |||||||
| Self Storage | 19 | 101,447,884 | 15.4 | |||||||||
| Multifamily | 3 | $ | 67,091,470 | 10.2 | % | |||||||
| Low Rise | 1 | 38,000,000 | 5.8 | |||||||||
| Garden | 2 | 29,091,470 | 4.4 | |||||||||
| Hospitality | 5 | $ | 44,430,416 | 6.7 | % | |||||||
| Limited Service | 4 | 30,447,281 | 4.6 | |||||||||
| Select Service | 1 | 13,983,135 | 2.1 | |||||||||
| Manufactured Housing Community | 13 | $ | 39,992,909 | 6.1 | % | |||||||
| Manufactured Housing Community | 13 | 39,992,909 | 6.1 | |||||||||
| Industrial | 2 | $ | 24,137,006 | 3.7 | % | |||||||
| Warehouse | 2 | 24,137,006 | 3.7 | |||||||||
| Mixed Use | 3 | $ | 16,996,408 | 2.6 | % | |||||||
| Multifamily/Retail | 1 | 13,000,000 | 2.0 | |||||||||
| Retail/Multifamily | 1 | 2,100,000 | 0.3 | |||||||||
| Self Storage/Office | 1 | 1,896,408 | 0.3 | |||||||||
| Total | 89 | $ | 658,765,419 | 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 in Annex A-1. |
| (2) | The Mortgaged Properties or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Walgreens - Yorktown, ExchangeRight Net Leased Portfolio #21 – Hobby Lobby – Birmingham, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Hollywood, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Chesapeake, ExchangeRight Net Leased Portfolio #21 – Walgreens – Valrico, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Scott, ExchangeRight Net Leased Portfolio #21 – Dollar General – Harvey, ExchangeRight Net Leased Portfolio #21 – Walgreens – Huber Heights, ExchangeRight Net Leased Portfolio #21 – Dollar General – Reynoldsburg, ExchangeRight Net Leased Portfolio #21 – Dollar General – Amherst, ExchangeRight Net Leased Portfolio #21 – Dollar General – Louisville, ExchangeRight Net Leased Portfolio #21 – Dollar General – Mandeville, ExchangeRight Net Leased Portfolio #21 – Advance Auto Parts – Gillette, ExchangeRight Net Leased Portfolio #21 – Napa Auto Parts – McHenry, ExchangeRight Net Leased Portfolio #21 – O’Reilly Auto Parts – Knoxville, ExchangeRight Net Leased Portfolio #21 – Dollar General – Warren, ExchangeRight Net Leased Portfolio #21 – Napa Auto Parts – Crystal Lake and Citi Bank – Chicago, representing approximately 5.4% of the Initial Pool Balance, are operated as stand-alone, single-tenant retail properties. |
Retail Properties
In the case of the retail properties set forth in the above chart, we note the following:
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as CoolSprings Galleria, representing approximately 3.0% of the Initial Pool Balance, the loan documents provide for certain borrower rights to |
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demolish all structures related to one Dark Anchor and to restore that area to green space (“Dark Anchor Razing“). Of the five anchors, Belk (5.0% of underwritten base rent) and Belk Men’s & Kid’s (2.1% of underwritten base rent) serve as collateral for the Mortgage Loan, while Dillard’s, Macy’s and JC Penney are shadow anchors. Provided that the related Dark Anchor caused a Single Dark Anchor Trigger Event Period or Multiple Dark Anchor Trigger Event Period, as the case may be, such Dark Anchor Razing does not effect a Single Dark Anchor Trigger Event Period Cure or a Multiple Dark Anchor Trigger Event Period Cure, as applicable; although, with respect to a Single Dark Anchor Trigger Event Period only, the resulting cash flow sweep is subject to the Single Dark Anchor Cash Flow Cap. See Annex A-3. For one such demolition, the lender’s consent is not to be unreasonably withheld. Conditions to the demolition include (i) no event of default, (ii) the borrower’s providing financial security if related costs exceed 5% of the outstanding loan amount, (iii) such demolition and any replacement will be completed at least 6 months prior to the May 11, 2028 maturity date or such earlier time required by zoning, any reciprocal easement agreement or related material contracts; (iv) such demolition and any replacement will be permitted under each REA and Lease and not permit any party under any REA or Lease to reduce rent, reduce its obligations or materially increase the borrower’s obligations, in each case, due to the operation of a co-tenancy provision or otherwise, and (v) such demolition and replacement will be permitted pursuant to REMIC requirements.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Flats at East Bank, representing approximately 2.0% of the Initial Pool Balance, the Mortgaged Property does not have direct legal access to any public roads for ingress and egress. A wholly-owned subsidiary of the borrower (the “Access Lease Tenant“) leases the necessary access roadways from the City of Cleveland (the “City“) pursuant to a 99-year lease expiring on October 1, 2114 (the “Access Lease“). The Access Lease requires that the roadways remain at all times free and open to the general public as public roadways and sidewalks. Because the Access Lease is not assignable without the City’s consent, the borrower pledged its equity in the Access Lease Tenant as additional collateral for the Mortgage Loan. In addition, the Access Lease Tenant has entered into a recorded estoppel and agreement with respect to the Access Lease for the benefit of the borrower and the lender, wherein the Access Lease Tenant agrees to maintain and use the access area as an open public roadway and ensure continuous access, as well as use commercially reasonable efforts to obtain an access easement from the City for the benefit of the Mortgaged Property as provided for in the Access Lease. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Retail Properties Have Special Risks”, and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses” in this prospectus, and “—Specialty Use Concentrations” below.
Office Properties
In the case of the office properties set forth above, see “Risk Factors—Office Properties Have Special Risks” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Self Storage Properties
In the case of the self storage properties set forth above, see “Risk Factors—Self Storage Properties Have Special Risks” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
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| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Evans Self Storage Portfolio, representing 2.0% of the Initial Pool Balance, the Blanchard; Evans I Mortgaged Property has identified 19.4% of its income derived from covered parking, open parking or industrial units. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Security Storage, representing approximately 0.3% of the Initial Pool Balance, the related Mortgaged Property generates approximately 34.1% of its effective gross income from its office/warehouse rental. |
Multifamily Properties
In the case of the multifamily properties set forth in the above chart, we note the following:
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 1801 L Street, representing approximately 5.8% of the Initial Pool Balance, the related Mortgaged Property is subject to an Amended and Restated Regulatory Agreement, dated December 19, 2002, as well as a Regulatory Agreement dated September 18, 2006 (collectively, the “Regulatory Agreement“) that impose affordable housing restrictions. The subject property is a 4-story multifamily building that contains 176 apartment units and 10,840 square feet of ground floor retail space. The Regulatory Agreement requires that 45 units be allocated to below-market renters, as follows: 36 “Very Low-Income Units” (for renters whose annual income is less than 50% of the Sacramento metropolitan statistical area median income) and 9 “Moderate-Income Units” (for renters whose annual income is less than 110% of the Sacramento metropolitan statistical area median income). If there is an owner default on the affordable housing obligations that is not cured within a reasonable time period, the owner would be subject to remedies including, among other things, the disgorgement of excess rents collected over what the Regulatory Agreement would otherwise provide and replacement of the property manager. The related parties have entered into a subordination agreement which provides lender notice and the right to cure for any defaults under the Regulatory Agreement. The current rent roll satisfies the affordable housing allocation requirements. The Regulatory Agreement’s restrictions expire in 2032 and 2057. The loan underwriting assumed the continuation of tax exemption. The loan documents provide for full recourse liability for amendment or modification of the Regulatory Agreement without lender’s prior written consent. See also “Description of the Mortgage Pool—Real Estate and Other Tax Considerations” |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Addison Ridge Apartments – Phase II, representing approximately 3.8% of the Initial Pool Balance, approximately 53.7% of the tenants at the Mortgaged Property are either active or retired members of the military. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Addison Ridge Apartments – Phase II, representing approximately 3.8% of the Initial Pool Balance, several community amenities, including the existing leasing office and clubhouse, are located on an adjacent, affiliate-owned property. Access to and use of these amenities is granted pursuant to a recorded easement agreement. Additionally, the Mortgage Loan documents require the borrower, the borrower sponsor, the property manager and their respective affiliates (including, but not limited to, the owners and property managers of the adjacent affiliate-owned properties) to refrain from any poaching activities with respect to tenants at the |
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Mortgaged Property and at the adjacent properties, including, but not limited to, soliciting or incentivizing tenants with active leases to lease space at any other property owned, managed or operated by any such person (or any affiliate), and the Mortgage Loan documents also restrict the property manager in the performance of its duties with respect to the leasing of the Mortgaged Property and the adjacent, affiliate-owned properties from treating any of such properties more favorably than the others.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Keyway Apartments, representing approximately 0.6% of the Initial Pool Balance, approximately 25 of 63 units are leased to tenants currently using Section 8 housing vouchers, which represents approximately 39.7% of the underwritten revenue. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Multifamily Properties Have Special Risks”. See also representation and warranty no. 8 in Annex D-1 and the exceptions thereto in Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
Hospitality Properties
In the case of the hospitality properties set forth in the above chart, we note the following:
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Holiday Inn Express & Suites – Sumner, WA, representing approximately 1.7% of the Initial Pool Balance, another Holiday Inn Express Hotel & Suites is located approximately six miles from the Mortgaged Property, which is expected to open on May 1, 2019 and is expected to be directly competitive with the Mortgaged Property. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Springhill Suites – Lancaster, CA, representing approximately 1.4% of the Initial Pool Balance, a Residence Inn by Marriott Lancaster is located within approximately three miles of the Mortgaged Property, which is expected to open July 1, 2019, and is expected to be directly competitive with the Mortgaged Property. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Hampton Inn Omaha West Dodge Road Old Mill, representing approximately 1.1% of the Initial Pool Balance, the mortgaged property is a limited service hospitality property, and a franchise agreement, dated November 3, 2011, with Hampton Inns Franchise LLC, as franchisor, is in-place that expires on November 30, 2033 (the mortgage loan matures June 11, 2028). The borrower’s operating agreement provided that the project developer, Keith Sybrowsky (shown as manager of the borrower on the franchise documents) would manage the borrower during the development of the project, and that a new manager would be appointed when the project was fully operational as a hotel. As so contemplated, the manager of the borrower has since changed to another member of the ownership group, Keith Wilson, the loan sponsor and representative of largest voting shareholder, but prior consent for the change was not obtained as required under the franchise agreement. The lender has contacted the borrower’s representatives about pursuing the appropriate consents. Mr. Wilson has been involved in the hospitality industry since the 1990’s and has invested in more than 15 hospitality properties. Based on information available to the lender at loan origination, subject property RevPAR has been increasing from 2016 |
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to the present, and the property ranks #3 of 9 in RevPAR in its competitive subset. The loan documents provide springing recourse to the borrower and the guarantor for any franchise agreement cancellation, termination or expiration unless agreement executed with replacement franchisor satisfactory to the lender.
For more information regarding the 15 largest Mortgage Loans secured by hospitality properties, see the individual Mortgage Loan and portfolio descriptions in Annex A-3 to this prospectus.
The following table shows the breakdown of each Mortgaged Property associated with a hotel brand through a license agreement, franchise agreement, operating agreement or management agreement.
Mortgaged Property Name | Cut-off Date Balance by Allocated Loan Amount | Approx. % of Initial Pool Balance by Allocated Loan Amount | Expiration/Termination of Related License/ Franchise Agreement, Operating Agreement or Management Agreement | Maturity Date of the Related Mortgage Loan | |
| Embassy Suites Tucson, AZ | $ | 13,983,135 | 2.1% | 7/31/2030 | 6/6/2028 |
| Holiday Inn Express & Suites – Sumner, WA | $ | 11,175,865 | 1.7% | 4/25/2033 | 5/6/2028 |
| Springhill Suites – Lancaster, CA | $ | 9,488,585 | 1.4% | 1/8/2028 | 6/6/2028 |
| Hampton Inn Omaha West Dodge Road Old Mill | $ | 6,991,281 | 1.1% | 11/30/2033 | 6/11/2028 |
| La Quinta Batavia | $ | 2,791,549 | 0.4% | 4/23/2035(1) | 4/11/2028 |
| (1) | The franchise agreement is subject to termination by the franchisor or franchisee every fifth anniversary of 4/23/2015. |
See “Risk Factors—Risks Relating to the Mortgage Loans— Hotel Properties Have Special Risks”, “—Risks Relating to Affiliation with a Franchise or Hotel Management Company” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses” in this prospectus, and “—Specialty Use Concentrations” below.
Manufactured Housing Community Properties
In the case of the manufactured housing community properties set forth in the above chart, we note the following:
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Pueblo MHC Portfolio, representing approximately 2.8% of the Initial Pool Balance, the portfolio includes 226 park-owned, approximately 32.4% of the total pads, which are collateral for the Mortgage Loan. Additionally, pursuant to the Mortgage Loan documents, to the extent the borrower purchases additional park-owned homes, such homes are required to become collateral for the Mortgage Loan. Such tenants sign a lease for the respective pad site, and a separate lease for the park-owned home. Income for such park-owned homes has been excluded from underwriting and valuation. In the event the borrower intends to sell or convey any borrower owned home, the borrower may obtain the release of such home from the lien of the Mortgage Loan, provided that, among other requirements, the loan-to-value ratio is not more than 125% (or the release is otherwise in compliance with the REMIC requirements). |
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Pueblo MHC Portfolio, representing |
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approximately 2.8% of the Initial Pool Balance, the Oakwood Estates MHC Mortgaged Property has had historically low occupancy, with occupancy rates of 58.1% in 2015, 57.2% in 2016, 56.9% in 2017 and, as of April 6, 2018, the occupancy is 57.2%. Additionally, the Mortgaged Property maintains a private on-site wastewater treatment plant (“WWTP“), which is managed by a third party contractor. The WWTP’s discharge permit, set to expire on May 31, 2018, has been administratively extended pending review and acceptance of the formal renewal documents, which were submitted prior to Mortgage Loan origination. According to the borrower, it is anticipated that the permit will be renewed through mid-2028.
| ● | With respect to the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Pueblo MHC Portfolio – Oasis MHC, Whispering Pines and Cape Canaveral MHP, representing approximately 0.9%, 0.4% and 0.1%, respectively, of the Initial Pool Balance, each of the related Mortgaged Properties is age-restricted to tenants at least 55 years of age. |
| ● | With respect to the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Whispering Pines and Juniper Hilltop MHP, representing approximately 0.4% and 0.3%, respectively, of the Initial Pool Balance, the related Mortgaged Properties are not connected in their entirety to public water and/or a public sewer system and may have private wells, septic systems and/or wastewater treatment plants onsite. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Whispering Pines, representing approximately 0.4% of the Initial Pool Balance, the related Mortgaged Property includes, in addition to mobile home sites, 165 recreational vehicle sites (most of which are leased to transient tenants) and 3 apartments/cottages, that collectively generate approximately 43.1% of the related underwritten revenues. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Winding Creek MHC, representing approximately 0.2% of the Initial Pool Balance, the related Mortgaged Property includes 11 apartment units and one single-family home that collectively generate approximately 21.3% of the underwritten revenues. A portion of the related Mortgaged Property is located in a flood zone. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Manufactured Housing Community Properties Have Special Risks” and “—Some Mortgaged Properties May Not be Readily Convertible to Alternative Uses” in this prospectus, and “—Specialty Use Concentrations” below.
Industrial Properties
In the case of the industrial properties set forth above, see “Risk Factors—Industrial Properties Have Special Risks” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Mixed Use Properties
In the case of the mixed use properties set forth above, see “Risk Factors—Mixed Use Properties Have Special Risks” and “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”. See Annex A-1 to this prospectus and the footnotes thereto.
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Specialty Use Concentrations
Certain Mortgaged Properties have one of the 5 largest tenants by net rentable area that operates its space as a specialty use that 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 Pool Balance (by allocated loan amount) |
| Restaurant/Bakery(1) | 14 | 17.0% |
| Grocery store(2) | 4 | 12.9% |
| Gym, fitness center or a health club(3) | 3 | 11.5% |
| Medical i.e., medical, dental, physical therapy or veterinary offices or clinics, outpatient facilities, research or diagnostic laboratories or health management services and/or health professional schools(4) | 10 | 11.3% |
| Movie Theater(5) | 1 | 9.9% |
| Bank branch(6) | 5 | 5.9% |
| Bowling Alley(7) | 2 | 5.0% |
| (1) | Includes the Mortgaged Properties identified on Annex A-1 to this prospectus as Center Pointe Plaza II, CoolSprings Galleria, Flats at East Bank, Bond Street Fund 16 – Smyrna, Bond Street Fund 16 – Shops At Eastchase, Bond Street Fund 16 – 271 Indian Lake Boulevard, 63-37/27 108th Street, Shops at Cross Creek II, RC Plaza, Nut Tree Shopping Center, The Shops at Vacaville Crossings, Steelbrook Plaza, Plaza at Mableton and Shops at Waycross. |
| (2) | Includes the Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, Manito Shopping Center, 63-37/27 108th Street and Plaza at Mableton. |
| (3) | Includes the Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, Shops at Cross Creek II and Steelbrook Plaza. |
| (4) | Includes the Mortgaged Properties identified on Annex A-1 to this prospectus as Parkway Center, ExchangeRight Net Leased Portfolio # 21 – Fresenius Medical Care – Belpre, ExchangeRight Net Leased Portfolio # 21 – Fresenius Medical Care – Chicago, ExchangeRight Net Leased Portfolio # 21 – Fresenius Medical Care – Hammond, Bond Street Fund 16 – Shops At Eastchase, Medical Towers at Sawyer Ranch, The Shops at Vacaville Crossings, Plaza at Mableton, Shops at Waycross and Security Storage. |
| (5) | Includes the Mortgaged Property identified on Annex A-1 to this prospectus as Village at Leesburg. |
| (6) | Includes the Mortgaged Properties identified on Annex A-1 to this prospectus as Roseville Corporate Center, Bond Street Fund 16 – Smyrna, Manito Shopping Center, Citi Bank – Chicago and The Shops at Vacaville Crossings. |
| (7) | Includes the Mortgaged Properties identified on Annex A-1 to this prospectus as CoolSprings Galleria and Flats at East Bank. |
In addition:
| ● | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Shops at Cross Creek II, securing approximately 1.1% of the Initial Pool Balance, such Mortgaged Property includes a tenant that operates as a dry cleaner with on-site processing. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses” and “—Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses”.
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Mortgage Loan Concentrations
Top Fifteen Mortgage Loans
The following table shows certain information regarding the 15 largest Mortgage Loans by Cut-off Date Balance:
Loan Name | Mortgage Loan Cut-off Date Balance | Approx. % of Initial Pool Balance | Loan per Unit(1) | U/W NCF DSCR(1) | Cut-off Date LTV Ratio(1) | Property Type | ||||
| Village at Leesburg | $65,250,000 | 9.9% | $240 | 1.28x | 58.1% | Retail | ||||
| Westport Self Storage Portfolio | $48,300,000 | 7.3% | $57 | 1.51x | 58.7% | Self Storage | ||||
| Parkway Center | $42,560,000 | 6.5% | $72 | 1.38x | 63.9% | Office | ||||
| 1801 L Street | $38,000,000 | 5.8% | $215,909 | 1.61x | 63.1% | Multifamily | ||||
| ExchangeRight Net Leased Portfolio #21 | $37,795,000 | 5.7% | $143 | 2.19x | 61.7% | Various | ||||
| Mission Center | $29,750,000 | 4.5% | $162 | 1.68x | 68.4% | Office | ||||
| Center Pointe Plaza II | $28,270,000 | 4.3% | $150 | 2.00x | 57.9% | Retail | ||||
| Addison Ridge Apartments - Phase II | $25,000,000 | 3.8% | $116,822 | 1.36x | 69.8% | Multifamily | ||||
| Citadel Self Storage | $25,000,000 | 3.8% | $174 | 1.25x | 59.9% | Self Storage | ||||
| 181 Fremont Street | $20,000,000 | 3.0% | $573 | 3.14x | 39.6% | Office | ||||
| CoolSprings Galleria | $19,950,390 | 3.0% | $242 | 1.91x | 48.0% | Retail | ||||
| Pueblo MHC Portfolio | $18,400,000 | 2.8% | $26,399 | 1.43x | 57.6% | Manufactured Housing Community | ||||
| Roseville Corporate Center | $16,000,000 | 2.4% | $146 | 2.15x | 66.4% | Office | ||||
| Montclair East | $14,700,000 | 2.2% | $108 | 1.68x | 58.3% | Retail | ||||
| Embassy Suites Tucson, AZ | $13,983,135 | 2.1% | $117,505 | 2.05x | 63.6% | Hospitality | ||||
| Top 3 Total/Weighted Average | $156,110,000 | 23.7% | 1.38x | 59.9% | ||||||
| Top 5 Total/Weighted Average | $231,905,000 | 35.2% | 1.55x | 60.7% | ||||||
| Top 15 Total/Weighted Average | $442,958,525 | 67.2% | 1.68x | 60.1% | ||||||
| (1) | In the case of each of the Mortgage Loans that is part of a Whole Loan, the calculation of the Loan per Unit, U/W NCF DSCR and Cut-off Date LTV Ratio for each such Mortgage Loan is calculated based on the principal balance, debt service payment and Underwritten Net Cash Flow for the Mortgage Loan included in the issuing entity and the related Pari Passu Companion Loan(s) in the aggregate. |
See “—Assessment of Property Value and Condition” below for additional information.
For more information regarding the 15 largest Mortgage Loans and/or loan concentrations and related Mortgaged Properties, see the individual Mortgage Loan and portfolio descriptions in Annex A-3. Other than with respect to the top 15 Mortgage Loans identified in the table above, each of the other Mortgage Loans represents no more than 2.1% of the Initial Pool Balance.
See “Risk Factors—Risks Relating to the Mortgage Loans—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses”.
Multi-Property Mortgage Loans and Related Borrower Mortgage Loans
Certain Mortgage Loans set forth in the table below entitled “Multi-Property Mortgage Loans”, representing approximately 21.7% of the Initial Pool Balance are secured by two or more properties. In some cases, however, the amount of the mortgage lien encumbering a particular property or group of those properties may be less than the full amount of indebtedness under the Mortgage Loan, generally to minimize recording tax. In such
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instances, the mortgage amount may equal a specified percentage (generally ranging from 100% to 150%, inclusive) of the appraised value or allocated loan amount for the particular Mortgaged Property. This would limit the extent to which proceeds from that property would be available to offset declines in value of the other Mortgaged Properties securing the same Mortgage Loan.
The table below shows each individual Mortgage Loan that is secured by two or more Mortgaged Properties.
Multi-Property Mortgage Loans (1)
| Mortgage Loan/Property Portfolio Names | Aggregate Cut-off Date Balance | Approx. % of Initial Pool Balance | ||||||
| Westport Self Storage Portfolio | $ | 48,300,000 | 7.3 | % | ||||
| ExchangeRight Net Leased Portfolio #21 | $ | 37,795,000 | 5.7 | % | ||||
| Pueblo MHC Portfolio | $ | 18,400,000 | 2.8 | % | ||||
| Evans Self Storage Portfolio | $ | 13,300,000 | 2.0 | % | ||||
| Tarheel MHC Portfolio | $ | 12,500,000 | 1.9 | % | ||||
| Bond Street Fund 16 | $ | 10,434,600 | 1.6 | % | ||||
| Economy SS Portfolio | $ | 1,997,884 | 0.3 | % | ||||
| Total | $ | 142,727,484 | 21.7 | % | ||||
| (1) | Total may not equal the sum of such amounts listed due to rounding. |
In some cases, an individual Mortgaged Property may be comprised of two or more parcels that may not be contiguous or may be owned by separate borrowers or a portfolio of Mortgaged Properties may be comprised of Mortgaged Properties owned by separate borrowers.
| ● | With respect to the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Westport Self Storage Portfolio, representing approximately 7.3% of the Initial Pool Balance, each of the related twelve Mortgaged Properties is owned by a separate borrower. |
One (1) group of Mortgage Loans, set forth in the table below entitled “Related Borrower Loans”, representing approximately 0.5% of the Initial Pool Balance, are not cross-collateralized but have borrowers that are related to each other. See “Risk Factors—Risks Relating to the Mortgage Loans—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses” in addition to Annex A-1 and the related footnotes.
The following table shows each group of Mortgage Loans that are not cross-collateralized but have borrowers that are related to each other.
Related Borrower Loans(1)
| Mortgage Loan | Number of Mortgaged Properties | Aggregate Cut-off Date Balance | Approx. % of Initial Pool Balance | |||||||||
| Group 1: | ||||||||||||
| Whispering Pines | 1 | $ | 2,500,000 | 0.4 | % | |||||||
| Cape Canaveral MHP | 1 | 797,183 | 0.1 | |||||||||
| Total for Group 1: | 2 | $ | 3,297,183 | 0.5 | % | |||||||
| (1) | Totals may not equal the sum of such amounts listed due to rounding. |
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Mortgage Loans with related borrowers are identified under “Affiliated Sponsor” on Annex A-1. See “Risk Factors—Risks Relating to the Mortgage Loans—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses” in addition to Annex A-1 and the related footnotes.
See also representation and warranty no. 42 on Annex D-1 to this prospectus and the exceptions thereto on Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
Geographic Concentrations
The table below shows the states that have concentrations of Mortgaged Properties that secure 5.0% or more of the Initial Pool Balance:
Geographic Distribution(1)
| State | Number of Mortgaged Properties | Aggregate Cut-off Date Balance | % of Initial Pool Balance | |||||||||
| California | 11 | $ | 176,625,344 | 26.8 | % | |||||||
| Texas | 14 | $ | 73,028,847 | 11.1 | % | |||||||
| Virginia | 3 | $ | 72,275,000 | 11.0 | % | |||||||
| Ohio | 9 | $ | 43,528,746 | 6.6 | % | |||||||
| Pennsylvania | 1 | $ | 42,560,000 | 6.5 | % | |||||||
| North Carolina | 8 | $ | 39,497,884 | 6.0 | % | |||||||
| (1) | Because this table presents information relating to Mortgaged Properties and not the Mortgage Loans, the information for any Mortgaged Property that is one of multiple Mortgaged Properties securing a particular Mortgage Loan is based on an allocated loan amount as stated in Annex A-2. |
The remaining Mortgaged Properties are located throughout 19 other states, with no more than 4.3% of the Initial Pool Balance by allocated loan amount secured by Mortgaged Properties located in any such jurisdiction.
In addition, with respect to the Mortgaged Properties in the Mortgage Pool, we note the following in respect of their geographic concentration:
| ● | Fifteen (15) Mortgaged Properties or portfolios of Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Walgreens – Yorktown, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Hollywood, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Chesapeake, ExchangeRight Net Leased Portfolio #21 – Walgreens – Valrico, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Scott, ExchangeRight Net Leased Portfolio #21 – Dollar General – Harvey, ExchangeRight Net Leased Portfolio #21 – Dollar General – Mandeville, Center Pointe Plaza II, Tarheel MHC Portfolio – Colonial, 5800 North Course Office, Shops at Cross Creek II, Affordable Storage Woodlands, Whispering Pines, Winding Creek MHC and Cape Canaveral MHP, securing approximately 11.1% of the Initial Pool Balance by allocated loan amount, are each located within the state of Florida or within approximately 25 miles of the coast of the Gulf of Mexico or the Atlantic Ocean, and, therefore, are more susceptible to hurricanes. See representation and warranty nos. 18 and 26 in Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble in Annex D-1). |
| ● | Twelve (12) Mortgaged Properties securing approximately 28.5% 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 |
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respect to these Mortgaged Properties, and based on those reports, no Mortgaged Property has a seismic expected loss greater than 12% (in the aggregate, with respect to Mortgaged Properties comprised of multiple structures).
Mortgaged Properties with Limited Prior Operating History
Twenty-nine (29) of the Mortgaged Properties, securing approximately 22.8% of the Initial Pool Balance by allocated loan amount (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 or limited prior operating history, (ii) have a borrower or an affiliate under the related Mortgage Loan that acquired the related Mortgaged Property 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 Annex A-3 for more information on the Mortgaged Properties with limited prior operating history relating to the largest 15 Mortgage Loans.
See “Risk Factors—Risks Relating to the Mortgage Loans—Limited Information Causes Uncertainty”.
Tenancies-in-Common or Diversified Ownership
Four (4) Mortgage Loans secured by the Mortgaged Properties or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Mission Center, Center Pointe Plaza II, Evans Self Storage Portfolio and Steelbrook Plaza, representing approximately 11.4% of the Initial Pool Balance, each have two or more borrowers that own all or a portion of the related Mortgaged Property as tenants-in-common, and the respective tenants-in-common have agreed to a waiver of their rights of partition. See “Risk Factors—Risks Relating to the Mortgage Loans—The Borrower’s Form of Entity May Cause Special Risks” and ”—Tenancies-in-Common May Hinder Recovery”.
Described below is certain information regarding Mortgage Loans having borrowers with diversified ownership (generally more than twenty (20) individuals having a direct ownership interest in the borrower):
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Parkway Center, representing approximately 6.5% of the Initial Pool Balance, the related borrower is a Delaware limited liability company, which is owned, directly or indirectly, by more than 20 investors. |
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21, representing approximately 5.7% of the Initial Pool Balance, the Mortgage Loan is structured as a Delaware statutory trust, which permits up to 200 members. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Embassy Suites Tucson, AZ, representing approximately 2.1% of the Initial Pool Balance, the related borrower is a Utah limited liability company, which is owned, directly and indirectly by more than 20 investors. |
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| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Amcor Industrial Center, representing approximately 2.1% of the Initial Pool Balance, the Mortgage Loan is structured as a Delaware statutory trust, which permits up to 100 beneficial owners. |
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Tarheel MHC Portfolio, representing approximately 1.9% of the Initial Pool Balance, the co-borrowers are five North Carolina limited liability companies that are each owned by more than 20 investors (none of which own more than 10% of any borrower). |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Medical Towers at Sawyer Ranch, representing approximately 1.4% of the Initial Pool Balance, the related borrower is an Ohio limited partnership, which is owned, directly and indirectly by more than 20 investors (none of which own more than 10.0% of the borrower). |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Affordable Storage Woodlands, representing approximately 0.9% of the Initial Pool Balance, the related borrower is a Texas limited partnership, which is owned, directly or indirectly, by more than 20 investors. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Steelbrook Plaza, representing approximately 0.5% of the Initial Pool Balance, the borrowers are two tenants-in-common that are collectively, directly and indirectly, owned by 20 or more investors. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Juniper Hilltop MHP, representing approximately 0.3% of the Initial Pool Balance, the related borrower, an Oregon limited liability company, is 70% owned by class A shareholders, which consist of a total of 28 investor entities and individuals (inclusive of the three related non-recourse carveout guarantors) and is 30% owned by class B shareholders, which consist of the three related non-recourse carveout guarantors. |
Delaware Statutory Trusts
With respect to two (2) Mortgage Loans secured by the Mortgaged Property or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 and Amcor Industrial Center, representing approximately 7.8% of the Initial Pool Balance, the related borrower is a Delaware statutory trust. See “Risk Factors—Risks Relating to the Mortgage Loans—The Borrower’s Form of Entity May Cause Special Risks” and “—Risks Relating to Delaware Statutory Trusts”.
Condominium Interests
Two (2) of the Mortgage Loans secured by Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg and 181 Fremont Street, representing approximately 12.9% of the Initial Pool Balance, are secured, in whole or in part, by the related borrower’s interest in one or more units in a condominium. With respect to all such Mortgage Loans (other than as described below), the borrower generally controls the appointment of a majority of the members 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(s) without the borrower’s consent.
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| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Village at Leesburg, representing approximately 9.9% of the Initial Pool Balance, the Mortgaged Property is comprised of two retail units having a 58.06% voting rights interest in each of (i) a condominium regime governing the common elements of the related mixed use buildings, and (ii) a master owners’ association regime governing the common areas within the related project, including parking garages and structures and private streets. The two retail units consist of the Wegmans leased fee parcel (excluding the improvements), and the remaining retail space within the related project, including the Cobb Theatres and LA Fitness buildings, four retail-only buildings and the first floor retail space of ten mixed use buildings. In addition to its majority voting rights interest in both associations, the borrower has all of the Class A Member interests in the condominium and the power to appoint three of the five members of the related board of directors. The association board’s decisions are subject to a majority vote, with the exception of amendments to the condominium documents and approval of restoration plans following casualty, both of which require consent of unit owners having at least 2/3 of the total voting rights, among other things. The loan documents provide for springing full recourse to the borrower and guarantors resulting from the condominium regime’s being withdrawn or terminated, or the master owners’ association regime being terminated. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Condominium Ownership May Limit Use and Improvements”. See also representation and warranty no. 8 in Annex D-1 to this prospectus and the exceptions thereto in Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
Fee & Leasehold Estates; Ground Leases
The table below shows the distribution of underlying interests encumbered by the mortgages related to the Mortgaged Properties:
Underlying Estate Distribution(1)
Underlying Estate | Number of Mortgaged Properties | Aggregate Cut-off Date Balance | Approx. % of Initial Pool Balance | |||||||||
| Fee(2) | 88 | $ | 645,765,419 | 98.0 | % | |||||||
| Fee and Leasehold | 1 | 13,000,000 | 2.0 | |||||||||
| Total | 89 | $ | 658,765,419 | 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 in Annex A-1 to this prospectus. |
| (2) | 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, 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. |
In general except as noted in the exceptions to representation and warranty no. 36 in Annex D-1 indicated on Annex D-2 or otherwise discussed below, and unless the related fee interest is also encumbered by the related Mortgage, each of the ground leases: (i) 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 (ii) contains customary mortgagee protection provisions, including notice and cure rights and the right to enter into
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a new lease with the applicable ground lessor in the event a ground lease is rejected or terminated.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Flats at East Bank, representing approximately 2.0% of the Initial Pool Balance, the Mortgaged Property is subject to an overlapping fee and leasehold security interest. The leasehold estate was created when the borrower transferred the fee interest in the Mortgaged Property to the local Port Authority in connection with the granting of a sales tax savings plan related to the development of the Mortgaged Property. The borrower has an option to purchase the fee interest on or after April 1, 2019 for $100, plus all of the fee owner’s costs associated with the exercise of such option.
Mortgage loans secured by ground leases present certain bankruptcy and foreclosure risks not present with Mortgage Loans secured by fee simple estates. See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Related to Ground Leases and Other Leasehold Interests”, “Certain Legal Aspects of Mortgage Loans—Foreclosure” and “Certain Legal Aspects of Mortgage Loans—Foreclosure—Bankruptcy Laws”.
Environmental Considerations
An environmental report was prepared for each Mortgaged Property securing a Mortgage Loan (except for the Mortgaged Property identified on Annex A-1 to this prospectus as The Shops at Vacaville Crossings) no more than 11 months prior to the Cut-off Date. See Annex A-1 for the date of the environmental report for each Mortgaged Property. The environmental reports were generally prepared pursuant to the American Society for Testing and Materials standard for a “Phase I” environmental site assessment (the “ESA”). In addition to the Phase I standards, some of the environmental reports will include additional research, such as limited sampling for asbestos-containing material, lead-based paint, radon or water damage with limited areas of potential or identified mold, depending on the property use and/or age. Additionally, as needed pursuant to American Society for Testing and Materials standards, supplemental “Phase II” site investigations have been completed for some Mortgaged Properties to further evaluate certain environmental issues, including certain recognized environmental conditions (each, a “REC”). A Phase II investigation generally consists of sampling and/or testing.
See “Risk Factors—Risks Relating to the Mortgage Loans—Adverse Environmental Conditions at or Near Mortgaged Properties May Result In Losses” in this prospectus. See also representation and warranty no. 43 in Annex D-1 to this prospectus and the exceptions thereto in Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
Described below is certain additional information regarding environmental issues at the Mortgaged Properties securing the Mortgage Loans:
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Flats at East Bank, representing approximately 2.0% of the Initial Pool Balance, the related Phase I ESA dated April 2, 2018, identified a controlled REC at the related Mortgaged Property related to historical manufactured gas plants. According to the ESA, the Mortgaged Property has undergone remedial efforts to the satisfaction of the Ohio EPA Voluntary Cleanup Program. A no further action letter was issued in 2010, which requires institutional controls and covenants, as well as a covenant restricting the property to restricted residential (which prohibits single-family homes, duplexes and other “stand-alone” residential dwellings), commercial or industrial use. |
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| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 as Tarheel MHC Portfolio, representing approximately 1.9%, of the Initial Pool Balance, the related ESA conducted for the Lambeth property identified a former gas station as a REC. The borrower obtained an environmental impairment liability (“EIL”) insurance policy covering the Mortgaged Properties, from Beazley (Lloyd’s of London Syndicates 623/2623) (rated “A” by A.M. Best), which lists the borrower as the first named insured and the lender, with its successors, assigns, and/or affiliates as additional named insured. The EIL policy has an initial term of 121 months, with an optional extended reporting period of 36 months, policy limits of $1,000,000 per incident and $6,000,000 in the aggregate, with a $50,000 deductible per incident. The premium for the initial term of the policy was paid in full at loan origination as well as an escrow to purchase an additional three years of coverage. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Manito Shopping Center, representing approximately 1.4% of the Initial Pool Balance, the related Phase I ESA obtained at loan origination identified a controlled recognized environmental condition (“CREC”) at the Mortgaged Property with respect to the former presence of certain dry cleaner and machine shop tenants at the Mortgaged Property. The State of Washington Department of Ecology (the “Department”) issued no further action status for the Mortgaged Property on June 18, 2009 with property use restrictions, activity and use limitations, institutional controls and engineering controls, as provided in that certain Environmental Covenant, between the Department and the former owner of the Mortgaged Property (the “Covenant”). Specifically, the Covenant provides that the asphalt parking lot at the Mortgaged Property must be maintained in good condition in order to maintain a cap over the contaminated soil. Additionally, the owner of the Mortgaged Property may not alter, modify or remove the asphalt parking lot structure. Examples of prohibited activities listed in the Covenant include drilling and digging in the parking lot covering the contaminated area at the Mortgaged Property. The owner of the Mortgaged Property must restrict leases to uses and activities consistent with these covenants with respect to the contaminated area, and must notify all tenants of the restrictions on the use of the Mortgaged Property. Finally, the Department must receive 30 days’ prior written notice prior to any transfer of ownership of the Mortgaged Property. The ESA recommended continued compliance with the property use restrictions, activity and use limitations, institutional controls and engineering controls. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as The Shops at Vacaville Crossings, representing approximately 0.6% of the Initial Pool Balance, in lieu of obtaining a Phase I ESA, the lender obtained a $4,337,500 group lender environmental collateral protection and liability-type environmental insurance policy with a $4,337,500 sublimit per claim from Steadfast Insurance Company, a member company of Zurich North America with a 10 year term (equal to the loan term) and a 3 year policy tail and having no deductible. The policy premium was pre-paid at closing. Zurich North America has an S & P rating of “AA-”. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Steelbrook Plaza, representing approximately 0.5% of the Initial Pool Balance, a former tenant of the related Mortgaged Property performed on-site dry cleaning from approximately 1962 to 2001 both in a prior building that has been demolished and in a still existing building, located on the |
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southeastern part of the site. The former dry cleaning operations are considered a REC. The related Mortgaged Property was entered into the Connecticut Property Transfer Program due to the former dry cleaner. Regulatory closure has not been achieved. Prior subsurface investigations identified soil and groundwater contamination. However, an environmental management and consulting firm engaged by the related borrower or its affiliate in connection with the acquisition of the related Mortgaged Property in 2007: (i) over time determined that the groundwater contamination had naturally attenuated to below applicable criteria, and therefore, no groundwater remediation appears necessary; (ii) recommended the excavation and off-site disposal of the contaminated soils, which was completed in December 2010; and (iii) ultimately concluded that no further investigation or remediation was warranted. In December 2017, the related borrower’s environmental consultant submitted its Final Verification Report to the Connecticut Department of Energy & Environmental Protection. Discussions with the borrower’s environmental consultant indicate this is the last piece of information that needs to be filed with the State, and the process of obtaining a closure letter on this site can take years. A lender’s policy for environmental insurance was obtained from Great American E&S Insurance Company. The policy has a policy period that runs through May 3, 2031, a $50,000 self-insured retention and a limit of $1 million per incident and in the aggregate.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 189 Court Street, representing approximately 0.3% of the Initial Pool Balance, the Phase I environmental site assessment obtained at loan origination identified a recognized environmental condition related to a prior on-site dry cleaner which occupied the property from at least 1969 to 1988. In lieu of a Phase II ESA, the lender obtained a $2.1 million lender environmental insurance policy from Zurich North America with a 13 year term (three years past the loan term) and having a $25,000 deductible. The policy premium was pre-paid at closing. Zurich North America has an S&P rating of “AA-”. |
Redevelopment, Renovation and Expansion
Certain of the Mortgaged Properties are properties which are currently undergoing or are expected to undergo material redevelopment, renovation or expansion, including with respect to hotel properties, executing property improvement plans (“PIPs”) required by the franchisors. Below are descriptions of certain of such Mortgaged Properties.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Village at Leesburg, representing approximately 9.9% of the Initial Pool Balance, the second largest tenant, Cobb Theatres, is currently in the process of renovating its existing theaters and completing a 12,297 expansion of its leased space (which expansion will add 2 screens to the theatre). Such expansion is anticipated to be complete in November 2018. A rent concession reserve in the amount of $520,190 and an outstanding TI/LC reserve in the amount of $6,455,836 were each taken at closing in connection with Cobb Theatres’ expansion. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 181 Fremont Street, representing 3.0% of the Initial Pool Balance, the Mortgaged Property is newly constructed. Facebook, Inc., the sole tenant at the Mortgaged Property, has taken possession of its space and commenced the buildout of its improvements. At origination, approximately $42,717,266 was escrowed for outstanding tenant improvements and leasing commissions. The sole |
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tenant is expected to occupy the Mortgaged Property in three phases with floors 5 through 13 being occupied in February 2019, floors 14 through 25 being occupied in March 2020 and floors 26 through 38 being occupied in March 2021. Additionally, at origination approximately $68,379,092 was escrowed for outstanding rent concessions due under the sole tenant’s lease.
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Pueblo MHC Portfolio, representing approximately 2.8% of the Initial Pool Balance, at origination the borrower deposited $600,000 into a home purchase/capex reserve to be used by the borrower for the purchase of additional homes or performance of general capital expenditures as set forth in the Mortgage Loan Documents. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Montclair East, representing approximately 2.2% of the Initial Pool Balance, the largest tenant (Ross Stores), representing approximately 30.7% of the net rentable square feet, executed a new lease and is relocating from its current 24,000-square feet space to a 41,623-square feet space at the Mortgaged Property (the “Ross Expansion Space”). The second largest tenant (dd’s Discounts), representing approximately 17.7% of the net rentable square feet, is moving into the former Ross Stores space upon the completion of the Ross Expansion Space which is expected to be completed by July 2018. Upon the delivery of the Ross Expansion Space to Ross Stores and the former Ross Stores space to dd’s Discounts, the tenant leases each provide for a free rent period of 120 days. At Mortgage Loan origination, the borrower deposited $245,976 into a free rent reserve. Additionally, the fourth largest tenant (Five Below, Inc.), representing approximately 9.3% of net rentable square feet, is currently building out its space and, according to the borrower, is expected to take occupancy and start paying rent by July 2018. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Holiday Inn Express & Suites – Sumner, WA, representing 1.7% of the Initial Pool Balance, the Mortgaged Property is subject to a license renewal property improvement plan PIP, which requires renovations to the exterior of the building, public, recreational and guest room areas, among other improvements. Pursuant to the PIP, the approximate cost of the renovation is $2,357,672, which must be completed by November 30, 2019 (all renovations other than the guest room areas must be completed by May 30, 2019). At origination, the borrower deposited an amount equal to $2,357,672 into a PIP Reserve Account. |
We cannot assure you that any of these redevelopments, renovations or expansions will be completed, that any amounts reserved in connection therewith will be sufficient to complete any such redevelopment, renovation or expansion or that the failure to do so will not have a material adverse impact on the related Mortgaged Properties. Additionally, other Mortgaged Properties may, and likely do, have property improvement or renovation plans in various stages of completion or planning.
Certain risks related to redevelopment, renovation and expansion at a Mortgaged Property are described in “Risk Factors—Risks Relating to the Mortgage Loans—Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties”.
Assessment of Property Value and Condition
In connection with the origination or acquisition of each Mortgage Loan or otherwise in connection with this offering, an appraisal was conducted in respect of the related
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Mortgaged Property by an independent appraiser that was state certified and/or a member of the Appraisal Institute or an update of an existing appraisal was obtained. In each case, the appraisal complied, or the appraiser certified that it complied, with the real estate appraisal regulations issued jointly by the federal bank regulatory agencies under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended. In general, those appraisals represent the analysis and opinion of the person performing the appraisal and are not guarantees of, and may not be indicative of, present or future value. We cannot assure you that another person would not have arrived at a different valuation, even if such person used the same general approach to and same method of valuing the property or that different valuations would not have been reached separately by the mortgage loan sellers based on their internal review of such appraisals. The appraisals obtained as described above sought to establish the amount a typically motivated buyer would pay a typically motivated seller. Such amount could be significantly higher than the amount obtained from the sale of a Mortgaged Property under a distress or liquidation sale.
In addition, in general, a licensed engineer, architect or consultant inspected the related Mortgaged Property, in connection with the origination or acquisition of each of the Mortgage Loans or otherwise in connection with this offering, to assess the condition of the structure, exterior walls, roofing, interior structure and mechanical and electrical systems. Engineering reports by licensed engineers, architects or consultants generally were prepared, except for newly constructed properties, certain manufactured housing community properties and properties for which the borrower’s interest consists of a fee interest solely on the land and not any improvements, for the Mortgaged Properties in connection with the origination of the related Mortgage Loan or in connection with this offering. None of these engineering reports are more than eight (8) months old as of the Cut-off Date. In certain cases where material deficiencies were noted in such reports, the related borrower was required to establish reserves for replacement or repair or remediate the deficiency.
Litigation and Other Considerations
There may be material pending or threatened legal proceedings against, or other past or present material criminal or material adverse regulatory circumstances experienced by, the borrowers, their sponsors and managers of the Mortgaged Properties and their respective affiliates. In addition, the Mortgaged Properties may be subject to ongoing litigation. For example:
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Westport Self Storage Portfolio, representing approximately 7.3% of the Initial Pool Balance, the sponsor and the non-member manager of each co-borrower (Westport Properties Inc.) is named defendant, among others, in a lawsuit by the ex-wife of the founder of Westport Properties Inc., alleging rights to certain tenant protection income from properties named in the lawsuit (none of the subject properties nor the guarantor is named in the lawsuit), as well as a percentage of Westport Properties Inc.’s gross revenue under an alleged “succession plan.” The lawsuit does not name any co-borrowers or guarantor, but the non-member manager can be removed in the event of an adverse judgment. Based on certain factors, including the borrower’s ability to replace the current manager with another qualified professional self-storage operator/manager, the loan was approved notwithstanding such litigation. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Mission Center, representing approximately 4.5% of the Initial Pool Balance, the borrower sponsor/guarantor (Neil Kadisha) had a |
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judgment issued against him in 2011 with respect to a civil case relating to his serving as trustee of a trust benefiting a friend’s widow and children. The judgment was for approximately $100 million and included an award of $5 million in punitive damages based on evidence of Mr. Kadisha’s misappropriating trust assets and concealing his actions. The judgment has been satisfied.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Center Pointe Plaza II, representing approximately 4.3% of the Initial Pool Balance, one borrower sponsor received a misdemeanor in 1999 for witness tampering. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Securitas Office, representing approximately 1.3% of the Initial Pool Balance, the borrower sponsor was charged with four misdemeanors for failure to obtain certificates of occupancy between 2007 and 2010. Three of these cases were dismissed, while the fourth, filed in February of 2010, resulted in a 180 day jail sentence which was suspended on the condition of good behavior for a period of two years. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Shops at Cross Creek II, representing approximately 1.1% of the Initial Pool Balance, one of the borrower sponsors is a defendant in a civil lawsuit, with respect to a conduit loan for which the borrower owes approximately $300,000 to the lender for rents collected after the loan went into default. According to the sponsor, the funds are available, however, the lender has not yet agreed as to the final amount due. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Keyway Apartments, representing approximately 0.6% of the Initial Pool Balance, the related borrower sponsor, who worked as a financial advisor at an investment bank, was given a $50,000 fine and a 90-day suspension, which was completed in January 2008, after making alleged unauthorized trades in certain client accounts. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 189 Court Street, representing approximately 0.3% of the Initial Pool Balance, the borrower sponsor/guarantor (Gerard Longo) is one of several named defendants in a lawsuit filed by an individual plaintiff in connection with certain real estate transactions involving the plaintiff and a developer (Jason Halpern). Besides claims against the developer, the plaintiff has asserted claims of tortious interference and aiding and abetting breaches of developer’s fiduciary duty against Mr. Longo and a Longo affiliate arising out of a sale of a Florida property. The plaintiff alleges that the developer accepted an offer from a Longo affiliate for $7.75 million that was approximately $1.25 million less than market value and less than the plaintiff’s unsuccessful bid. In addition to damages claims against the developer, the plaintiff is seeking rescission of the sale to the Longo affiliate and unspecified damages from Mr. Longo in connection with the related claims. A hearing on defendants’ motion to dismiss all claims was held on May 30, 2018, but no decision has as yet been rendered. The most recent stated net worth of Mr. Longo is in excess of the original principal amount of the Mortgage Loan. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions”. See also “—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” below and
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representation and warranty no. 15 in Annex D-1 and the exceptions thereto in Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings
| ● | Thirty-one (31) of the Mortgage Loans, representing approximately 61.1% of the Initial Pool Balance, were originated in connection with the borrower’s refinancing of a previous mortgage loan. |
| ● | Seventeen (17) of the Mortgage Loans, representing approximately 29.0% of the Initial Pool Balance, were originated in connection with the borrower’s acquisition of the related Mortgaged Property. |
| ● | One (1) of the Mortgage Loans, representing approximately 9.9% of the Initial Pool Balance, were originated in connection with the borrower’s recapitalization of the related Mortgaged Property. |
Certain of the borrowers, principals of the borrowers and other entities under the control of such principals or single tenants at the related Mortgaged Properties or in certain cases a Mortgaged Property that secures a Mortgage Loan are, or previously have been, parties to bankruptcy proceedings, foreclosure proceedings, deed-in-lieu of foreclosure transactions and/or mortgage loan workouts resulting from mortgage loan defaults, which in some cases involved a Mortgaged Property that secures a Mortgage Loan to be included in the Trust. For example:
| ● | With respect to nineteen (19) Mortgage Loans secured by the Mortgaged Properties or portfolios of Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, Parkway Center, 1801 L Street, ExchangeRight Net Leased Portfolio #21, Center Pointe Plaza II, CoolSprings Galleria, Roseville Corporate Center, Montclair East, Evans Self Storage Portfolio, Holiday Inn Express & Suites – Sumner, WA, 2900 McLane Road, Bond Street Fund 16, Medical Towers at Sawyer Ranch, Securitas Office, Shops at Cross Creek II, RC Plaza, Keyway Apartments, Plaza at Mableton and Rio Grande MHP, representing approximately 53.0% of the Initial Pool Balance, (a) within approximately the last 10 years, related borrowers, sponsors and/or key principals (or affiliates thereof) have previously (i) sponsored, been a key principal with respect to, or been a payment or non-recourse carveout guarantor on mortgage loans secured by, real estate projects (including in some such cases, the particular Mortgaged Property or Mortgaged Properties referenced above in this sentence) that became the subject of foreclosure proceedings or a deed-in-lieu of foreclosure or bankruptcy proceedings or directly or indirectly secured a real estate loan or a real estate related mezzanine loan that was the subject of a discounted payoff, sale at a loss or modification, or (ii) been the subject of personal bankruptcy proceedings, (b) the related Mortgage Loan refinanced a prior loan secured by, or a mezzanine loan secured by interests in the owner of, the Mortgaged Property which prior loan was the subject of a maturity default, a maturity extension or a discounted payoff, short sale or other restructuring, (c) within approximately the last 10 years, the Mortgaged Property was acquired by the related borrower or an affiliate thereof or a seller thereto from a foreclosing lender or through foreclosure or a deed-in-lieu of foreclosure, as part of an REO transaction, at a foreclosure sale or out of receivership, or (d) the Mortgaged Property has been or currently is involved in a borrower, principal or tenant bankruptcy. |
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In particular, with respect to the 15 largest Mortgage Loans we note the following:
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Village at Leesburg, representing approximately 9.9% of the Initial Pool Balance, an entity in which the guarantor and borrower sponsor (Gary D. Rappaport) and affiliates owned an indirect, non-controlling 10% interest defaulted in 2008. The related property was ultimately the subject of a foreclosure in 2009. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Parkway Center, representing approximately 6.5% of the Initial Pool Balance, the related mortgage loan seller is aware of at least three instances where a company as to which one of the borrower sponsors is the chairman of the board, or an affiliate of that company, directly or indirectly owned (or was part of a partnership that directly or indirectly owned) a commercial property that was the subject of a deed-in-lieu of foreclosure transaction since the beginning of September 2010. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 1801 L Street, representing approximately 5.8% of the Initial Pool Balance, the sponsor/ guarantor (Sotiris K. Kolokotronis) filed personal bankruptcy in connection with workout negotiations associated with an Elk Grove, California residential project. The lender declared the project in default in 2008 following deteriorating market conditions, and sold the related note to a hedge fund that sought to enforce the sponsor’s guaranty. After negotiations failed, Mr. Koloktronis filed personal bankruptcy in 2012. The parties subsequently entered into a settlement agreement. The related residential project was later the subject of a non-contested foreclosure. In addition, affiliates of the sponsor defaulted on a Sacramento condominium development across the street from the Mortgaged Property following market deterioration in 2009-2010 that inhibited purchaser financing for the related condominium units. The project was ultimately the subject of a non-contested foreclosure |
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21, representing approximately 5.7% of the Initial Pool Balance, one of three guarantors and borrower sponsors reported that he guaranteed a prior loan secured by a property unrelated to the Mortgaged Properties that in November 2009 became the subject of foreclosure proceedings, which were settled in May 2013. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Center Pointe Plaza II, representing 4.3% of the Initial Pool Balance, one sponsor had a loan modification for an unrelated property on August 30, 2013 with Bank Atlantic. The loan was ultimately extended, and the servicer received a complete satisfaction of the unrelated loan on January 11, 2016. Another sponsor was one of several partners involved in a land development project, where an unrelated loan was subject to a discounted payoff. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as CoolSprings Galleria, representing approximately 3.0% of the Initial Pool Balance, affiliates of one loan sponsor, CBL & Associates Limited Partnership, have sponsored eleven regional mall or other retail projects over the last 10 years that have been the subject of mortgage loan defaults, including six that resulted in foreclosure proceedings and two that resulted in deeds-in-lieu of |
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foreclosure. In addition, affiliates of another loan sponsor, Teachers Insurance and Annuity Association of America, have sponsored eight office and retail projects over the last 10 years that have been the subject of mortgage loan defaults, including two that resulted in foreclosure proceedings and one that resulted in a deed-in-lieu of foreclosure.
Certain risks relating to bankruptcy proceedings are described in “Risk Factors—Risks Relating to the Mortgage Loans—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans” and “—Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions” and “Certain Legal Aspects of Mortgage Loans—Foreclosure—Bankruptcy Laws”. See also representation and warranty no. 41 and no. 42 in Annex D-1 to this prospectus and the exceptions thereto in Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus).
Tenant Issues
Tenant Concentrations
The Mortgaged Properties have tenant concentrations as set forth below:
| ● | Twenty-six (26) of the Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21, 181 Fremont Street, Amcor Industrial Center, 2900 McLane Road, Securitas Office, 5800 North Course Office and Citi Bank – Chicago, securing approximately 15.6% of the Initial Pool Balance by allocated loan amount, are leased to a single tenant. |
| ● | Two (2) of the Mortgaged Properties identified on Annex A-1 to this prospectus as 63-37/27 108th Street and Plaza at Mableton, securing approximately 1.7% of the Initial Pool Balance by allocated loan amount, have a tenant that leases over 50% (by net rentable area) of the Mortgaged Property (other than the single tenant Mortgaged Properties identified above). |
See “—Lease Expirations and Terminations” below, and “Risk Factors—Risks Relating to the Mortgage Loans—Risks of Commercial and Multifamily Lending Generally”, “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—A Tenant Concentration May Result in Increased Losses” and “—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses” in this prospectus.
Lease Expirations and Terminations
Expirations
Certain of the Mortgaged Properties are subject to tenant leases that expire before the maturity date of the related Mortgage Loan. For tenant lease expiration information in the form of a lease rollover chart relating to each of the top 15 Mortgage Loans, see the related summaries attached as Annex A-3 to this prospectus. In addition, see Annex A-1 to this prospectus for tenant lease expiration dates for the 5 largest tenants (based on net rentable area leased) at each retail, office and industrial Mortgaged Property. Whether or not any of the 5 largest tenants 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
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significant concentration of leases that expire before, or shortly following, the maturity of the related Mortgage Loan. In addition, certain other Mortgaged Properties may have a significant portion of the leases that expire in a particular year, or portion thereof, at the related Mortgaged Property. Prospective investors are encouraged to review the charts entitled “Major Tenants” and “Lease Expiration Schedules” for the 15 largest Mortgage Loans presented on Annex A-3 to this prospectus, in particular those related to the Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, Parkway Center, ExchangeRight Net Leased Portfolio #21, Mission Center, Center Pointe Plaza II, 181 Fremont Street and CoolSprings Galleria.
With respect to the Mortgage Loan secured, in whole or in part, by the Mortgaged Properties identified in the table below, the Mortgaged Properties are occupied by a single tenant under a lease which expires prior to, or within 12 months after, the maturity date or Anticipated Repayment Date, as applicable, of the related Mortgage Loan.
Mortgaged Property | % of the Initial Pool Balance by Allocated Loan Amount | Owner Occupied | Lease Expiration Date | Maturity Date or Anticipated Repayment Date |
| ExchangeRight Net Leased Portfolio #21 – Tractor Supply - Hollywood | 0.4% | No | 3/1/2028 | 4/6/2028 |
| ExchangeRight Net Leased Portfolio #21 – Tractor Supply - Chesapeake | 0.4% | No | 4/30/2028 | 4/6/2028 |
| ExchangeRight Net Leased Portfolio #21 – Dollar General - Harvey | 0.2% | No | 4/30/2028 | 4/6/2028 |
| ExchangeRight Net Leased Portfolio #21 – Fresenius Medical Care - Hammond | 0.2% | No | 9/30/2027 | 4/6/2028 |
| ExchangeRight Net Leased Portfolio #21 – Walgreens - Huber Heights | 0.2% | No | 6/30/2028 | 4/6/2028 |
| ExchangeRight Net Leased Portfolio #21 – Dollar General - Mandeville | 0.1% | No | 9/30/2027 | 4/6/2028 |
| ExchangeRight Net Leased Portfolio #21 – O’Reilly Auto Parts - Knoxville | 0.1% | No | 4/14/2028 | 4/6/2028 |
| Securitas Office | 1.3% | No | 6/30/2028 | 6/11/2028 |
| 5800 North Course Office | 1.1% | No | 12/31/2025 | 6/11/2028 |
If a Mortgaged Property loses its sole tenant, whether upon expiration of the related lease or otherwise, the “dark value” of such property may be materially below the “as-is” value of such property or even the unpaid principal balance of the related Mortgage Loan because of the difficulties of finding a new tenant that will lease the space on comparable terms as the old tenant. Such difficulties may arise from an oversupply of comparable space, high vacancy rates, low rental rates or the Mortgaged Property’s lack of suitability for most potential replacement tenants.
Certain other Mortgaged Properties are occupied by multiple tenants under leases that all expire during a given twelve month period ending prior to the applicable maturity date or Anticipated Repayment Date.
In addition, with respect to certain other Mortgaged Properties, there are leases that represent in the aggregate a material (greater than 25%) portion (but less than 100%) of the net rentable square footage of the related Mortgaged Property that expire in a single calendar year prior to, or shortly after, the maturity of the related Mortgage Loan.
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See Annex A-1 for tenant lease expiration dates for the 5 largest tenants (based on net rentable area leased) at each retail, office and industrial Mortgaged Property.
Terminations
In addition to termination options tied to certain triggers as described in “Risk Factors—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Early Lease Termination Options May Reduce Cash Flow” that are common with respect to retail properties, certain tenant leases permit the related tenant to unilaterally terminate its lease at any time. For more information on lease terminations see the footnotes to Annex A-1 to this prospectus.
Set forth below are certain government leases that individually are among the top 5 tenants at the related Mortgaged Property and have termination options associated with appropriation rights or are otherwise unilaterally terminable by the tenant.
Mortgaged Property | Percent of Initial Pool Balance | Tenant | Percent of Net Rentable Area | Percent of U/W Base Rent |
| Mission Center | 4.5% | County of San Diego | 28.9% | 28.7% |
For more information related to tenant termination options held by the 5 largest tenants (by net rentable area leased) see Annex A-1 to this prospectus and the accompanying footnotes for additional information, as well as the charts entitled “Major Tenants” and “Lease Expiration Schedules” for the 15 largest Mortgage Loans presented on Annex A-3 to this prospectus, in particular those related to the Mortgaged Properties identified on Annex A-1 to this prospectus as Parkway Center, ExchangeRight Net Leased Portfolio #21 and CoolSprings Galleria.
Other
Tenants under certain leases included in the Underwritten Net Cash Flow, Underwritten NOI and/or Occupancy Rate may not be in physical occupancy, may not have begun paying rent or may be in negotiation. For more information see footnote 1 to Annex A-1 to this prospectus. For example:
| ● | Ten (10) of the Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, Parkway Center, ExchangeRight Net Leased Portfolio #21 – Fresenius Medical Care – Belpre, Mission Center, Center Pointe Plaza II, 181 Fremont Street, Amcor Industrial Center, Medical Towers at Sawyer Ranch, Securitas Office and The Shops at Vacaville Crossings, securing approximately 34.1% of the Initial Pool Balance by allocated loan amount, have, among the 5 largest tenants at such Mortgaged Property (by net rentable area leased), tenants that have renewed leases or have taken possession of the space demised under the related lease with the related borrower, but have not yet commenced payments of rent or are in a rent abatement period under the related lease, have tenants that have “gone dark”, have tenants that have executed leases, but have not taken possession or commenced payment of rent, have tenants that are in a build out phase and have not taken occupancy, have tenants that are expanding their space but have not commenced payment of the additional rent, have tenants that renewed leases that provide free rent and have not commenced payment of rent, have tenants that are entitled to free rent periods or rent abatement in the future, or have subleases in place that can increase vacancy risks. In certain circumstances, an escrow reserve related to free rent periods and tenant improvement costs and leasing commissions due in |
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connection with such leases was funded at closing. See Annex A-1 to this prospectus and the accompanying footnotes for additional information with respect to these Mortgage Loans.
In particular, with respect to single tenant properties or tenants that are one of the top 5 tenants (by net rentable area leased) for the 15 largest Mortgage Loans, certain of such tenants have not taken possession or commenced paying rent. For more information see Annex A-3 to this prospectus and the accompanying footnotes, in particular those related to the Mortgaged Properties or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, Parkway Center, ExchangeRight Net Leased Portfolio #21 – Fresenius Medical Care – Belpre, Mission Center, Center Pointe Plaza II and 181 Fremont Street.
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 more information see Annex A-3 to this prospectus and the accompanying footnotes for additional information.
See “Risk Factors—Risks Relating to the Mortgage Loans—Underwritten Net Cash Flow Could Be Based On Incorrect or Flawed Assumptions”.
Purchase Options and Rights of First Refusal
Below are certain purchase options and rights of first refusal to purchase all or a portion of the Mortgaged Property with respect to certain of the Mortgaged Properties.
| ● | Nine (9) of the Mortgaged Properties or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Westport Self Storage Portfolio – San Antonio/Boerne USSC, ExchangeRight Net Leased Portfolio #21 – Walgreens – Yorktown, ExchangeRight Net Leased Portfolio #21 – Fresenius Medical Care – Chicago, ExchangeRight Net Leased Portfolio #21 – Walgreens - Valrico, ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Scott, ExchangeRight Net Leased Portfolio #21 – Walgreens – Huber Heights, 181 Fremont Street, Amcor Industrial Center and Whispering Pines, and securing approximately 9.0% of the Initial Pool Balance by allocated loan amount, are each subject to a purchase option, right of first refusal or right of first offer (“ROFO”) to purchase such Mortgaged Property, a portion thereof or a related pad site; such rights are held by either a tenant at the related Mortgaged Property, a tenant at a neighboring property, a hotel franchisor, a licensee, a homeowner’s association, another unit owner of the related condominium, a neighboring property owner, a master tenant, a lender or another third party. See “Yield and Maturity Considerations” in this prospectus. See representation and warranty no. 7 in Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1). |
In addition, with respect to the 15 largest Mortgage Loans presented on Annex A-3 to this prospectus, we note the following:
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 as Westport Self Storage Portfolio, representing approximately 7.3% of the Initial Pool Balance, with respect to the San Antonio/Boerne USSC Mortgaged Property, having an allocated loan amount of $9,437,217 or 19.5% of the original principal balance of the related Mortgage Loan, Alamo Fireworks has a Right of First Refusal (”ROFR”) to purchase an undeveloped |
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parcel (Tract 2) tract if borrower is otherwise willing to accept an offer as to that parcel only. The ROFR is not extinguished by foreclosure; however, the ROFR does not apply to foreclosure or deed in lieu thereof.
| ● | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Walgreens – Yorktown, representing approximately 0.6% of the Initial Pool Balance, the sole tenant has a right of first refusal to purchase the Mortgaged Property. The tenant has agreed that such right of first refusal will not apply to a foreclosure or 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 Mortgaged Property. |
| ● | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Fresenius Medical Care – Chicago, representing approximately 0.4% of the Initial Pool Balance, Crown Castle Towers (“Crown”) has a right of first refusal to purchase that certain portion of approximately 600 square feet of the Mortgaged Property (the “Easement Area”) pursuant to that certain Grant of Easement and Assignment of Lease, dated February 11, 2013 (the “Grant of Easement”). If Crown fails or declines to exercise its right of first refusal, such right of first refusal will survive any sale and conveyance, and will remain effective with respect to any subsequent offer to purchase the Easement Area, whether separate or as part of a larger parcel of the Mortgaged Property. The title insurance received at origination specifically insures against the Grant of Easement. |
| ● | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Walgreens – Valrico, representing approximately 0.4% of the Initial Pool Balance, the sole tenant has a right of first refusal to purchase the Mortgaged Property. The tenant has agreed that such right of first refusal will not apply to a foreclosure or 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 Mortgaged Property. |
| ● | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Tractor Supply – Scott, representing approximately 0.3% of the Initial Pool Balance, the sole tenant has a right of first refusal to purchase the Mortgaged Property. The tenant has agreed that such right of first refusal will be subordinate to the mortgage, and any amendment, supplement, modification, renewal, refinance or replacement thereof. |
| ● | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21 – Walgreens – Huber Heights, representing approximately 0.2% of the Initial Pool Balance, the sole tenant has a right of first offer to purchase the Mortgaged Property. The tenant has agreed that such right of first offer will not apply to a foreclosure or deed-in-lieu of foreclosure or any other enforcement action under the Mortgage Loan; provided, however, such right of first offer will apply to subsequent purchasers of the Mortgaged Property. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 181 Fremont Street, representing approximately 3.0% of the Initial Pool Balance, Facebook, Inc., the sole tenant at the mortgaged property, has a right of first refusal to purchase the Mortgaged Property if the landlord receives an offer to purchase the Mortgaged Property from a “Facebook Competitor”. Pursuant to the tenant’s lease, a Facebook Competitor is currently |
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defined as (i) Alphabet Inc., (ii) Apple Inc. and (iii) Microsoft Inc. This list of Facebook Competitors may be updated once each calendar year; provided that (a) the list of Facebook Competitors may only provide up to three (3) entities at any time and (b) those entities must be in a similar industry which offers a similar product or service as the sole tenant. The sole tenant will not have any right of first refusal with respect to (a) a sale of the Mortgaged Property through a foreclosure by a trustee’s power of sale, judicially or by accepting a deed-in-lieu of foreclosure, or as a purchaser at a foreclosure sale or (b) a sale to any party other than a “Facebook Competitor”.
See “Risk Factors—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Leases That Are Not Subordinated to the Lien of the Mortgage or Do Not Contain Attornment Provisions May Have an Adverse Impact at Foreclosure”.
Affiliated Leases
Certain of the Mortgaged Properties may be leased in whole or in part by borrowers or borrower affiliates.
See “Risk Factors—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks”.
Insurance Considerations
The Mortgage Loans generally require that each Mortgaged Property be insured by a hazard insurance policy in an amount (subject to an approved deductible) at least equal to the lesser of the outstanding principal balance of the related Mortgage Loan and 100% of the replacement cost of the improvements located on the related Mortgaged Property, and if applicable, that the related hazard insurance policy contain appropriate endorsements or have been issued in an amount sufficient to avoid the application of co-insurance and not permit reduction in insurance proceeds for depreciation; provided that, in the case of certain of the Mortgage Loans, the hazard insurance may be in such other amounts as was required by the related originators.
In general, the standard form of hazard insurance policy covers physical damage to, or destruction of, the improvements on the Mortgaged Property by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion, subject to the conditions and exclusions set forth in each policy. Each Mortgage Loan generally also requires the related borrower to maintain comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Mortgaged Property in an amount generally equal to at least $1,000,000. Each Mortgage Loan generally further requires the related borrower to maintain business interruption insurance in an amount not less than approximately 100% of the gross rental income from the related Mortgaged Property for not less than 12 months. In general, the Mortgage Loans (including those secured by Mortgaged Properties located in California) do not require earthquake insurance. Twelve (12) of the Mortgaged Properties, securing approximately 28.5% of the Initial Pool Balance by allocated loan amount, are located in areas that are considered a high earthquake risk (seismic zones 3 and 4). Seismic reports were prepared with respect to these Mortgaged Properties, and based on those reports, no Mortgaged Property has a probable maximum loss greater than 12% (in the aggregate, with respect to Mortgaged Properties comprised of multiple structures).
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| ● | With respect to fifty-six (56) Mortgaged Properties, securing approximately 57.2% of the Initial Pool Balance by allocated loan amount, the related borrowers (or, in some cases, tenants which are permitted to maintain insurance in lieu of the related borrowers) maintain insurance under blanket policies. See representation and warranty nos. 18 and 31 on Annex D-1 to this prospectus and the exceptions thereto on Annex D-2 to this prospectus (subject to the limitations and qualifications set forth in the preamble to Annex D-1 to this prospectus). |
Certain of the Mortgaged Properties may permit the borrower’s obligations to provide required insurance (including property, rent loss, liability and terrorism coverage) to be suspended if a sole or significant tenant or the property manager elects to provide third party insurance or self-insurance in accordance with its lease or management agreement. Described below are Mortgage Loans having such third party insurance or self-insurance conditions:
| ● | With respect to three (3) Mortgage Loans secured by the Mortgaged Properties or portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as ExchangeRight Net Leased Portfolio #21, 181 Fremont Street and 5800 North Course Office, securing approximately 9.9% of the Initial Pool Balance, the related borrower may rely on the single tenant’s, ground lease tenant’s or owner’s association’s insurance or, in some cases, self-insurance, so long as the single tenant’s or ground lease tenant’s lease is in effect and no default has occurred under the lease and the tenant’s insurance or, if applicable, self-insurance meets the requirements under the related loan documents or (in certain cases) of the related lease. Under certain circumstances generally relating to a material casualty, a sole tenant entitled to self-insure may have the right to terminate its lease at the related Mortgaged Property under the terms of that lease. If the tenant fails to provide acceptable insurance coverage or, if applicable, self-insurance, the borrower generally (but not in all cases) must obtain or provide supplemental coverage to meet the requirements under the Mortgage Loan documents. See representation and warranty nos. 18 and 31 on Annex D-1 and the exceptions to representation and warranty nos. 18 and 31 on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1). |
In situations involving leased fee properties, where the tenant or other non-borrower party constructed improvements and either maintains its own insurance or self-insures, the borrower will typically have no right to available casualty proceeds. Subject to applicable restoration obligations, casualty proceeds are payable to the tenant or other non-borrower party and/or its leasehold mortgagee. Further, with respect to Mortgaged Properties that are part of condominium regimes, the insurance may be maintained by the condominium association rather than the related borrower. Many Mortgage Loans contain limitations on the obligation to obtain terrorism insurance. See “Risk Factors—Risks Relating to the Mortgage Loans—Terrorism Insurance May Not Be Available for All Mortgaged Properties”. See also representation and warranty nos. 18 and 31 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Associated with Blanket Insurance Policies or Self-Insurance”.
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Use Restrictions
Certain of the Mortgaged Properties are subject to restrictions that restrict the use of such Mortgaged Properties to its current use, place other use restrictions on such Mortgaged Property or limit the related borrower’s ability to make changes to such Mortgaged Property. In certain cases, use of a Mortgaged Property may be restricted due to environmental conditions at the Mortgaged Property. See “—Environmental Considerations”.
In the case of certain such Mortgage Loans subject to such restrictions the related borrower is generally required pursuant to the related Mortgage Loan documents to maintain law or ordinance insurance coverage if any of the improvements or the use of a Mortgaged Property constitutes a legal non-conforming structure or use, which provides coverage for loss to the undamaged portion of such property, demolition costs and the increased cost of construction. However, the related property may not be able to be restored or repaired to the full extent necessary to maintain the pre-casualty/pre-destruction use of the subject structure/property, and such law and ordinance insurance coverage does not provide any coverage for lost future rents or other damages from the inability to restore the property to its prior use or structure or for any loss of value to the related property. For example:
With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Westport Self Storage Portfolio, representing approximately 7.3% of the Initial Pool Balance, with respect to the Fort Worth USSC Mortgaged Property, having an allocated loan amount of $5,407,616, or 11.2% of the original principal balance of the related Mortgage Loan, the use is legally non-conforming. The zoning ordinance requires that rebuilding conform to current zoning if there is a threshold casualty of 75% or greater of building’s reasonable value. Law and ordinance coverage is required and in-place, but, following a threshold casualty, it is not expected that available insurance and land sale proceeds would be sufficient to pay-down the Mortgage Loan by the allocated loan amount for such Mortgaged Property. The Mortgage Loan documents provide that the borrower is required to pay-down the Mortgage Loan in an amount equal to 130% of such Mortgaged Property’s allocated loan amount if such Mortgaged Property cannot be fully restored following threshold casualty, and that the borrower and guarantor have personal liability for the borrower’s failure to do so.
With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Evans Self Storage Portfolio, representing approximately 2.0% of the Initial Pool Balance, all of the Mortgaged Properties are legal nonconforming as to use. Pursuant to Section 90-132 of the applicable local county ordinance, a nonconforming use may not be reestablished, repaired, replaced or rebuilt after damage to the extent of 75% or more of its value. The Mortgage Loan is fully recourse to the borrower following a casualty whereby any individual Mortgaged Property is damaged to an extent in excess of 75% of the replacement cost of such individual Mortgaged Property and the borrower is not permitted by the applicable government authority to restore the affected Mortgaged Property to the use and condition existing immediately prior to such casualty, with the amount of recourse liability being equal to the allocated loan amount for each such affected individual Mortgaged Property (minus any insurance proceeds actually received by the lender for such affected individual Mortgaged Property and used to pay down the outstanding principal balance of the Mortgage Loan), provided that such recourse liability will not commence until the date which is six months after the date of such casualty. Additionally, (x) the appraisal concluded the combined land value ($1,500,000) and combined insurable value ($12,510,000) of the Mortgaged Properties exceeds the principal balance of the Mortgage Loan, and (y) the Mortgaged Properties are comprised of fifteen separate buildings, reducing the probability of damage
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concentration at the Mortgaged Properties in the event of certain casualty events, should such events arise.
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Related to Zoning Non-Compliance and Use Restrictions” and representation and warranty nos. 8 and 26 on Annex D-1 and the exceptions thereto on Annex D-2.
In addition, certain of the Mortgaged Properties are subject to “historic” or “landmark” designations, which results in restrictions and in some cases prohibitions on modification of certain aspects of the related Mortgaged Property.
Appraised Value
In certain cases, appraisals may reflect “as-is” values and values other than an “as-is” value. However, the Appraised Value reflected in this prospectus with respect to each Mortgaged Property reflects only the “as-is” value, except as set forth in the table below. The values other than the “as-is” value may be based on certain assumptions, such as future construction completion, projected re-tenanting or increased tenant occupancies. We cannot assure you that those assumptions are or will be accurate or that any such non-“as-is” value will be the value of the related mortgaged property at maturity or other specified date. In addition, with respect to certain mortgage loans secured by multiple mortgaged properties, the appraised value may be an “as-portfolio” value that assigns a premium to the value of the mortgaged properties as a whole, which value exceeds the sum of their individual appraised values. Such appraised values, the related “as-is” appraised values, and the Cut-off Date LTV Ratio and LTV Ratio at Maturity based on both such hypothetical value and the “as-is” appraised value, are set forth under the definition of “LTV Ratio” set forth under “Description of the Mortgage Pool—Certain Calculations and Definitions—Definitions”.
See “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property”.
Non-Recourse Carveout Limitations
While the Mortgage Loans generally contain non-recourse carveouts for liabilities such as liabilities as a result of fraud by the borrower, certain voluntary insolvency proceedings or other matters, certain of the Mortgage Loans may not contain such carveouts or contain limitations to such carveouts. In general, the liquidity and net worth of a non-recourse guarantor under a Mortgage Loan will be less, and may be materially less, than the outstanding principal amount of that Mortgage Loan. In addition, certain Mortgage Loans have additional limitations to the non-recourse carveouts. See representation and warranty no. 28 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
In addition, there may be impediments and/or difficulties in enforcing some or all of the non-recourse carveout liability obligations of individual guarantors depending on the domicile or citizenship of the guarantor.
See “Risk Factors—Risks Relating to the Mortgage Loans—Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed”. See also representation and warranty no. 28 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
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Real Estate and Other Tax Considerations
Below are descriptions of real estate tax matters relating to certain Mortgaged Properties.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 1801 L Street, representing approximately 5.8% of the Initial Pool Balance, the related Mortgaged Property is subject to an Amended and Restated Regulatory Agreement, dated December 19, 2002, as well as a Regulatory Agreement dated September 18, 2006 (collectively, the “Regulatory Agreement”) that impose affordable housing restrictions. The subject property is a 4-story multifamily building that contains 176 apartment units and 10,840 square feet of ground floor retail space. The Regulatory Agreement requires that 45 units be allocated to below-market renters, as follows: 36 “Very Low-Income Units” (for renters whose annual income is less than 50% of the Sacramento metropolitan statistical area median income) and 9 “Moderate-Income Units” (for renters whose annual income is less than 110% of the Sacramento metropolitan statistical area median income). The 36 Very Low Income Units qualify the subject property for a tax exemption of 20.45%. The tax exemption rate is fixed unless the Redevelopment Agency of the City of Sacramento further amends the Regulatory Agreement or such units are disqualified due to below market renters to other units). The loan underwriting assumed the continuation of tax exemption. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Flats at East Bank, representing approximately 2.0% of the Initial Pool Balance, the related Mortgaged Property is subject to a 15-year tax abatement on 100% of the assessed value of the residential space at the Mortgaged Property. The tax abatement ends with the January 2030 tax year. The total assessment for the residential portion of the Mortgaged Property is $52,374,900 or $217,323 per unit. The 15-year tax abatement provides the Mortgaged Property with an exemption in the amount of $36,578,000, reducing the annual taxable assessment to $5,528,940 or $22,942 per unit. Total monthly abated taxes for the Flats at East Bank Mortgaged Property are $583,673 or $2,422 per unit. The lender underwrote taxes with respect to the residential portion of the related Mortgaged Property based on the actual abated taxes due. |
Certain risks relating to real estate taxes regarding the Mortgaged Properties or the borrowers are described in “Risk Factors—Risks Relating to the Mortgage Loans—Increases in Real Estate Taxes May Reduce Available Funds”.
Delinquency Information
As of the Cut-off Date, none of the Mortgage Loans will be 30 days or more delinquent and none of the Mortgage Loans have been 30 days or more delinquent since origination. A Mortgage Loan will be treated as 30 days delinquent if the scheduled payment for a due date is not received from the related borrower by the immediately following due date.
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Certain Terms of the Mortgage Loans
Amortization of Principal
The Mortgage Loans provide for one or more of the following:
Twenty (20) of the Mortgage Loans, representing approximately 54.7% of the Initial Pool Balance, provide for an initial interest-only period that expires between twenty-four (24) and eighty-four (84) months following the related origination date and thereafter require monthly payments of principal and interest based on amortization schedules significantly longer than the remaining term to stated maturity.
Nine (9) of the Mortgage Loans, representing approximately 22.4% of the Initial Pool Balance, provide for interest-only payments for the entire term to stated maturity, with no scheduled amortization prior to that date.
Eighteen (18) of the Mortgage Loans, representing approximately 17.7% of the Initial Pool Balance, require monthly payments of principal and interest for the entire term to stated maturity.
One (1) of the Mortgage Loans, representing approximately 3.0% of the Initial Pool Balance, provides for interest-only payments for the entire term to Anticipated Repayment Date, with no scheduled amortization prior to that date; provided that if such Mortgage Loan is outstanding from and after the Anticipated Repayment Date occurring approximately 10 years following the related origination date, interest will accrue at the related Revised Rate.
One (1) of the Mortgage Loans, representing approximately 2.1% of the Initial Pool Balance, provides for interest-only payments then monthly payments of principal and interest based on amortization schedules significantly longer than the remaining term to the Anticipated Repayment Date; provided that if such Mortgage Loan is outstanding from and after the Anticipated Repayment Date occurring approximately 10 years following the related origination date, interest will accrue at the related Revised Rate.
Amortization Type | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Approx. % of Initial Pool Balance (%) | |||||||||
| Interest-only, Amortizing Balloon(1) | 20 | $ | 360,502,100 | 54.7 | % | |||||||
| Interest-only, Balloon | 9 | 147,861,750 | 22.4 | |||||||||
| Amortizing Balloon | 18 | 116,751,569 | 17.7 | |||||||||
| Interest-only, ARD | 1 | 20,000,000 | 3.0 | |||||||||
| Interest-only, Amortizing ARD | 1 | 13,650,000 | 2.1 | |||||||||
| Total: | 49 | $ | 658,765,419 | 100.0 | % | |||||||
| (1) | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Mission Center, representing approximately 4.5% of the Initial Pool Balance, the loan is interest-only for first 5 years of the 10 year loan term, provided, that, if as of June 11, 2023, the NCF Debt Yield equals or exceeds 10.5% (the “Debt Yield Condition”), then the interest-only period will be extended for 1 additional year. See Annex A-1 to this prospectus and the footnotes thereto |
Due Dates; Mortgage Rates; Calculations of Interest
Subject in some cases to a next business day convention, all of the Mortgage Loans have due dates upon which scheduled payments of principal, interest or both are required to be made by the related borrower under the related Mortgage Note (each such date, a “Due Date”) that occur as described in the following table:
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Overview of Due Dates
Due Date | Number of Mortgage Loans | Aggregate Cut-off Date Balance | Approx. % of Initial Pool Balance | |||||||||
| 1 | 1 | $ | 65,250,000 | 9.9 | % | |||||||
| 6 | 18 | 286,682,585 | 43.5 | |||||||||
| 11 | 30 | 306,832,834 | 46.6 | |||||||||
| Total: | 49 | $ | 658,765,419 | 100.0 | % | |||||||
The Mortgage Loans have grace periods as set forth in the following table:
Overview of Grace Periods
| Grace Period (Days) | Number of Mortgage Loans | Aggregate Cut-off Date Balance | Approx. % of Initial Pool Balance | |||||||||
| 0 | 48 | $ | 593,515,419 | 90.1 | % | |||||||
| 5 | 1 | 65,250,000 | 9.9 | |||||||||
| Total: | 49 | $ | 658,765,419 | 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-1 for information on the number of days before late payment charges are due under the Mortgage Loans. The information on Annex A-1 regarding the number of days before a late payment charge is due is based on the express terms of the Mortgage Loans. Some jurisdictions may impose a statutorily longer period.
All of the Mortgage Loans are secured by first liens on, or security interests in fee simple, leasehold or a similar interest 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.
Forty-eight (48) of the Mortgage Loans, representing approximately 97.0% of the Initial Pool Balance, accrue interest on the basis of the actual number of days in a month, assuming a 360-day year (“Actual/360 Basis”).
One (1) of the Mortgage Loans, representing approximately 3.0% of the Initial Pool Balance, accrues interest on the basis of a 360-day year consisting of twelve 30-day months (“30/360 Basis”).
ARD Loans
Two (2) Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as 181 Fremont Street and Amcor Industrial Center (each, an “ARD Loan”), representing approximately 5.1% of the Initial Pool Balance, provide that, after a certain date (the “Anticipated Repayment Date”), if the borrower has not prepaid the ARD Loan in full, any principal outstanding on that date will accrue interest at an increased interest rate (the “Revised Rate”) rather than the stated Mortgage Rate (the “Initial Rate”). See Annex A-1 for the Anticipated Repayment Date for the ARD Loans.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 181 Fremont Street, representing approximately 3.0% of the Initial Pool Balance, the related Revised Rate is equal to the greatest of (i) the related Initial Rate plus 150 basis points, (ii) the related swap rate plus a spread of 0.9146% plus
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150 basis points or (iii) when applicable pursuant to the related Mortgage Loan documents, the default rate.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Amcor Industrial Center, representing approximately 2.1% of the Initial Pool Balance, the related Revised Rate is equal to the greater of (i) the related Initial Rate plus 300 basis points and (ii) the 10-year swap yield as of the related Anticipated Repayment Date plus 465 basis points.
One of the ARD Loans is interest-only for its full term, and the other of the ARD Loans is interest-only for 60 months. Consequently, the repayment of such ARD Loan in full on its Anticipated Repayment Date would require a substantial payment of principal on that date (except to the extent that such ARD Loan is repaid prior thereto). The ARD provisions described above, to the extent applicable, may result in an incentive for the borrower to repay the ARD Loan on or before its Anticipated Repayment Date but the borrower will have no obligation to do so. We make no statement regarding the likelihood that such ARD Loan will be repaid on its Anticipated Repayment Date.
After its Anticipated Repayment Date, an ARD Loan further requires that all cash flow available from the related Mortgaged Properties after payment of the monthly debt service payments required under the terms of the related Mortgage Loan documents and all escrows and property expenses required under the related Mortgage Loan documents be used to accelerate amortization of principal (without payment of any Yield Maintenance Charge or Prepayment Premium) on such ARD Loan. While interest at the Initial Rate continues to accrue and be payable on a current basis on an ARD Loan after its Anticipated Repayment Date, the payment of Excess Interest, to the extent actually collected, will be deferred and will be required to be paid, only after the outstanding principal balance of such ARD Loan has been paid in full, at which time the Excess Interest will be paid to the holders of the Class V certificates. See “Risk Factors—Risks Relating to the Mortgage Loans—Risks of Anticipated Repayment Date Loans”.
Prepayment Protections and Certain Involuntary Prepayments and Voluntary Prepayments
Voluntary prepayments, if permitted, generally require the payment of a Yield Maintenance Charge or a Prepayment Premium unless the Mortgage Loan (or Whole Loan, if applicable) is prepaid within a specified period (ranging from approximately four to seven months) up to and including the stated maturity date. See Annex A-1 and Annex A-2 for more information on the prepayment protections attributable to the Mortgage Loans on a loan-by-loan basis and a pool basis.
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 “—Releases; Partial Releases” below.
Generally, no Yield Maintenance Charge will be required for prepayments in connection with a casualty or condemnation, unless, in the case of most of the Mortgage Loans, an event of default has occurred and is continuing. See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions” in the prospectus. In addition, certain of the Mortgage Loans permit the related borrower, after a total or partial casualty or partial condemnation, to prepay the remaining principal balance of the Mortgage Loan or, if the affected
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Mortgaged Property is part of a portfolio, a property-specific release price (after application of the related insurance proceeds or condemnation award to pay the principal balance of the Mortgage Loan), which may not be accompanied by any prepayment consideration.
Certain of the Mortgage Loans are secured in part by letters of credit and/or cash reserves that in each such case:
| ● | will be released to the related borrower upon satisfaction by the related borrower of certain performance related conditions, which may include, in some cases, meeting debt service coverage ratio levels and/or satisfying leasing conditions; and |
| ● | if not so released, may, at the discretion of the lender, prior to loan maturity (or earlier loan default or loan acceleration), be drawn on and/or applied to prepay the subject Mortgage Loan if such performance related conditions are not satisfied within specified time periods. |
See Annex A-1 and Annex A-3 for more information on reserves relating to the largest 15 Mortgage Loans.
Voluntary Prepayments
As of origination, the following prepayment restrictions and defeasance provisions applied to the Mortgage Loans:
| ● | Forty-two (42) of the Mortgage Loans, representing approximately 88.0% of the Initial Pool Balance, each prohibit voluntary principal prepayments during a specified period of time (each, a “Lock-out Period”) but permit the related borrower (after an initial period of at least two years following the date of initial issuance of the Offered Certificates) for a specified period to defease the related Mortgage Loan by pledging non-callable United States Treasury obligations and other non-callable government securities within the meaning of Section 2(a)(16) of the Investment Company Act, as amended (“Government Securities”) that provide for payment on or prior to each Due Date through and including the maturity date or Anticipated Repayment Date, as applicable (or, in some cases, such earlier Due Date on which the Mortgage Loan becomes freely prepayable), of amounts at least equal to the amounts that would have been payable or outstanding, as applicable, on those dates under the terms of the subject Mortgage Loan and obtaining the release of the related Mortgaged Property from the lien of the related mortgage, and thereafter such Mortgage Loan is freely prepayable. |
| ● | Five (5) of the Mortgage Loans, representing approximately 6.0% of the Initial Pool Balance, each prohibit voluntary principal prepayments during a Lock-out Period, and following such Lock-out Period, for a specified period of time, permit the related borrower to make voluntary principal prepayments upon the payment of the greater of a Yield Maintenance Charge or Prepayment Premium, and thereafter such Mortgage Loan is freely prepayable. |
| ● | One (1) of the Mortgage Loans, representing approximately 3.0% of the Initial Pool Balance, prohibits voluntary principal prepayments during a Lock-out Period, and following such Lock-out Period, for a specified period of time, permits the related borrower to make voluntary principal prepayments upon the payment of the greater of a Yield Maintenance Charge or Prepayment Premium, and thereafter for a specified period of time, permits the related borrower to defease the Mortgage Loan by the pledging of Government Securities that provide for payment on or prior to |
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each Due Date through and including the maturity date or Anticipated Repayment Date or make voluntary principal prepayments upon the payment of the greater of a Yield Maintenance Charge or Prepayment Premium, and thereafter such Mortgage Loan is freely prepayable.
| ● | One (1) of the Mortgage Loans, representing approximately 3.0% of the Initial Pool Balance, prohibits voluntary principal prepayments during a Lock-out Period, and following such Lock-out Period, for a specified period of time, permits the related borrower to defease the Mortgage Loan by the pledging of Government Securities that provide for payment on or prior to each Due Date through and including the maturity date or make voluntary principal prepayments upon the payment of the greater of a Yield Maintenance Charge or Prepayment Premium, and thereafter such Mortgage Loan is freely prepayable. |
Prepayment restrictions for each Mortgage Loan reflect the entire life of the Mortgage Loan. Some Mortgage Loans may be sufficiently seasoned that their Lock-out Periods have expired. See Annex A-1 to this prospectus, including the footnotes thereto, for individual prepayment restrictions and seasoning applicable to each Mortgage Loan.
The Mortgage Loans generally permit voluntary prepayment without payment of a Yield Maintenance Charge or any Prepayment Premium during a limited “open period” immediately prior to and including the stated maturity date, as follows:
Prepayment Open Periods
| Open Periods (Payments) | Number of Mortgage Loans | % of Initial Pool Balance | ||||||
| 3 | 16 | 14.9 | % | |||||
| 4-6 | 31 | 80.1 | ||||||
| 7 | 2 | 5.0 | ||||||
| Total | 49 | 100.0 | % | |||||
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions”.
“Due-On-Sale” and “Due-On-Encumbrance” Provisions
The Mortgage Loans generally contain “due-on-sale” and “due-on-encumbrance” clauses, which in each case permits the holder of the Mortgage Loan to accelerate the maturity of the related Mortgage Loan if the related borrower sells or otherwise transfers or encumbers (subject to certain exceptions set forth in the Mortgage Loan documents) the related Mortgaged Property or a controlling interest in the borrower without the consent of the mortgagee (which, in some cases, may not be unreasonably withheld). Many of the Mortgage Loans place certain restrictions (subject to certain exceptions set forth in the Mortgage Loan documents) on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations. The terms of the mortgages generally permit, subject to certain limitations, affiliate, estate planning and family transfers, transfers at death, transfers of interest in a public company, the transfer or pledge of less than, or other 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 specified in or 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
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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 (i) prohibit transfers of non-controlling interests so long as no change of control results or, (ii) 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 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 of the Rating Agencies; |
| ● | the transferee has executed and delivered an assumption agreement evidencing its agreement to abide by the terms of the Mortgage Loan together with legal opinions and title insurance endorsements; and |
| ● | the assumption fee has been received (which assumption fee will be paid as described under “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, but will in no event be paid to the Certificateholders); however, certain of the Mortgage Loans allow the borrower to sell or otherwise transfer the related Mortgaged Property a limited number of times without paying an assumption fee. |
Transfers resulting from the foreclosure of a pledge of the collateral for a mezzanine loan (if any) will also result in a permitted transfer. See “—Additional Indebtedness” below.
Defeasance
The terms of forty-four (44) of the Mortgage Loans (the “Defeasance Loans”), representing approximately 94.0% of the Initial Pool Balance, permit the applicable borrower at any time (provided that no event of default exists) after a specified period (the “Defeasance Lock-Out Period”) to obtain a release of a Mortgaged Property from the lien of the related Mortgage (a “Defeasance Option”) in connection with a defeasance. With respect to all of the Defeasance Loans, the Defeasance Lock-Out Period ends at least two years after the Closing Date.
Exercise of a Defeasance Option is also generally conditioned on, among other things, (a) the borrower providing the mortgagee with at least 30 days prior written notice of the date on which such defeasance will occur (such date, the “Release Date”), and (b) the borrower (A) paying on any Release Date (i) all accrued and unpaid interest on the principal balance of the Mortgage Loan (or, the related Whole Loan) up to and including the Release Date, (ii) all other sums (excluding scheduled interest or principal payments due following the Release Date), due under the Mortgage Loan (or Whole Loan, if applicable) and under all other 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)
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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 Anticipated Repayment Date (or to the first day of the open period for such Mortgage Loan) (or Whole Loan, if applicable) and (2) in amounts equal to the scheduled payments due on such due dates under the Mortgage Loan (or Whole Loan, if applicable), or under the defeased portion of the Mortgage Loan (or Whole Loan, if applicable) in the case of a partial defeasance, including in the case of a Mortgage Loan with a balloon payment due at maturity or anticipated to be paid on the related Anticipated Repayment Date, the related 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. See “Risk Factors—Other Risks Relating to the Certificates—Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded”. See also representation and warranty no. 34 on Annex D-1 and the exceptions thereto on Annex D-2 (subject to the limitations and qualifications set forth in the preamble to Annex D-1).
For additional information on Mortgage Loans that permit partial defeasance, see “—Releases; 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 Whole Loan, 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.
Releases; Partial Releases
The Mortgage Loans described below permit the release of one or more of the Mortgaged Properties or a portion of a single Mortgaged Property in connection with a partial defeasance, a partial prepayment or a partial substitution, subject to the satisfaction of certain specified conditions, including the REMIC requirements. Additionally, certain Mortgage Loans permit the addition of real property to the Mortgage Loan collateral.
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Westport Self Storage Portfolio, representing approximately 7.3% of the Initial Pool Balance, following the defeasance lockout period, the loan documents permit one or more partial releases of individual property(ies) (A) in connection with a bona fide sale to third parties, (B) to prevent the commencement of, or cause the expiration of, a trigger event, (C) to cure the occurrence of an event of default, subject to certain conditions, including: (i) the release cannot leave the Fort Worth USSC Mortgaged Property with less than 4 other individual properties as the remaining property; (ii) partial defeasance of the loan in an amount equal to (I) if the post-release loan is secured by 3 properties or less, the greater of (A) 130% of the allocated amount for the release property, (B) the post-release DSCR’s being not less than the greater of 1.55x and the pre-release DSCR, (C) the post-release Debt Yield’s being not less than the greater of 10.5% and the pre-release Debt Yield, (D) the post-release LTV’s being not greater than the less |
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of 60% and the pre-release LTV, and (E) an amount such that the REMIC trust will not fail to maintain its REMIC status due to the partial defeasance, (II) if the post-release loan is secured by 4 to 7 properties, the greater of (A) 125% of the allocated amount for the release property, (B) the post-release DSCR’s being not less than the greater of 1.55x and the pre-release DSCR, (C) the post-release Debt Yield’s being not less than the greater of 10.0% and the pre-release Debt Yield, (D) the post-release LTV’s being not greater than the less of 60% and the pre-release LTV, and (E) an amount such that the REMIC trust will not fail to maintain its REMIC status due to the partial defeasance; (III) if the post-release loan is secured by 8 or more properties, the greater of (A) 120% of the allocated amount for the release property, (B) the post-release DSCR’s being not less than the greater of 1.55x and the pre-release DSCR, (C) the post-release Debt Yield’s being not less than the greater of 9.75% and the pre-release Debt Yield, (D) the post-release LTV’s being not greater than the less of 60% and the pre-release LTV, and (E) an amount such that the REMIC trust will not fail to maintain its REMIC status due to the partial defeasance; (iii) an opinion of counsel that the REMIC trust will not fail to maintain its REMIC status due to the partial defeasance; and (iv) a rating agency confirmation.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Parkway Center, representing approximately 6.5% of the Initial Pool Balance, following the related lockout period, the related loan documents permit the partial release of one or more discrete portions of the related Mortgaged Property (each, an “Individual Property”) from the lien of the related security instrument, subject to certain conditions, including: (i) the related borrower’s partially defeasing a portion of the subject Mortgage Loan equal to 125% of the allocated loan amount for the Individual Property or Properties to be released; (ii) after giving effect to such release, (a) the debt service coverage ratio with respect to the undefeased portion of the subject Mortgage Loan based on the remaining Mortgaged Property is greater than the greater of (1) the debt service coverage ratio of the subject Mortgage Loan prior to partial defeasance and the release and (2) 1.35x, (b) the loan-to-value ratio with respect to the undefeased portion of the subject Mortgage Loan based on the remaining Mortgaged Property is no greater than the lesser of (1) the loan-to-value ratio of the subject Mortgage Loan prior to partial defeasance and the release and (2) 70%, and (c) the debt yield with respect to the undefeased portion of the subject Mortgage Loan based on the remaining Mortgaged Property is no less than 9.75%; and (iii) delivery of a REMIC opinion. In addition, all conditions with respect to transfer of the Individual Property or Properties to be released set forth in the related mezzanine loan agreement must be satisfied. Each Individual Property is improved by a separate building. Notwithstanding the foregoing, the Individual Property located at 875 Greentree Road, Parkway Center Building 7, Pittsburgh, Pennsylvania may not be released. |
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Pueblo MHC Portfolio, representing approximately 2.8% of the Initial Pool Balance, following the lockout period, the borrowers may obtain the release of an individual Mortgaged Property, provided that, among other conditions: (i) the borrower makes a defeasance payment in an amount equal to at least 125% of the allocated loan amount with respect to the parcel to be released; (ii) the debt service coverage immediately following the release is not less than the greater of (A) 1.43x or (B) the debt service coverage ratio for all the Mortgaged Properties immediately preceding the release; (iii) following such release. the loan-to-value ratio of all remaining Mortgaged Properties after the release is not greater than the lesser of (A) 57.8% or (B) the loan-to-value ratio for all of the |
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Mortgaged Properties prior to the release; and (iv) the REMIC release requirements are satisfied.
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Tarheel MHC Portfolio, representing approximately 1.9% of the Initial Pool Balance, provided that, among other conditions: (i) the borrower makes a defeasance payment in an amount equal to at least 125% of the allocated loan amount with respect to the parcel to be released; (ii) the debt service coverage immediately following the release is not less than the greater of (A) 1.42x or (B) the debt service coverage ratio for all the Mortgaged Properties immediately preceding the release; (iii) following such release, the loan-to-value ratio of all remaining Mortgaged Properties after the release is not greater than the lesser of (A) 64.5% or (B) the loan-to-value ratio for all of the Mortgaged Properties prior to the release; and (iv) the REMIC release requirements are satisfied. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Nut Tree Shopping Center, representing approximately 0.9% of the Initial Pool Balance, following the defeasance lockout period, the loan documents permit the partial release of either one of the two constituent parcels, subject to certain conditions, including: (i) partial prepayment of the loan in an amount equal to the greater of (x) the net sales proceeds of the release parcel, (y) 125% of the allocated amount for the release parcel or (z) an amount that would satisfy REMIC requirements; (ii) payment of the greater of 1% amount prepaid or applicable yield maintenance; (iii) the post-release DSCR of the remaining property will be no less than the greater of the pre-release DSCR for the entire property and 1.25x, (iii) the post-release LTV for the remaining property will be no more than the lesser of the pre-release LTV of the entire property and 60.3%, (iv) the post-release debt yield of the remaining property will be no less than the greater of the pre-release debt yield for the entire property and 8.5%, and (v) a rating agency confirmation, and (vi) an opinion of counsel that the REMIC trust would not fail to maintain its status as a result of such release, among other things. |
Furthermore, some of the Mortgage Loans permit the release or substitution of specified parcels of real estate or improvements that secure the Mortgage Loans but were not assigned any material value or considered a source of any material cash flow for purposes of determining the related Appraised Value or Underwritten Net Cash Flow or considered material to the use or operation of the property or permit the general right to release as yet unidentified parcels if they are non-income producing so long as such release does not materially adversely affect the use or value of the remaining property, among other things. Such real estate may be permitted to be released, subject to certain REMIC rules, without payment of a release price and consequent reduction of the principal balance of the subject Mortgage Loan or substitution of additional collateral if zoning and other conditions are satisfied. We cannot assure you that the development of a release parcel, even if approved by the special servicer as having no material adverse effect to the remaining property, may not for some period of time either disrupt operations or lessen the value of the remaining property.
Escrows
Twenty-three (23) of the Mortgage Loans, representing approximately 90.0% of the portion of the Initial Pool Balance that is secured in whole or in part by office, retail, industrial, mixed use and other properties, provide for upfront or monthly escrows (or credit) for the full term or a portion of the term of the related Mortgage Loan to cover
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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, industrial, mixed use and other properties only.
Forty-five (45) of the Mortgage Loans, representing approximately 87.9% of the Initial Pool Balance, provide for monthly or upfront escrows to cover property taxes on the Mortgaged Properties.
Forty-four (44) of the Mortgage Loans, representing approximately 91.3% of the Initial Pool Balance, provide for monthly or upfront escrows to cover ongoing replacements and capital repairs.
Thirty-two (32) of the Mortgage Loans, representing approximately 56.1% of the Initial Pool Balance, provide for monthly or upfront escrows to cover insurance premiums on the Mortgaged Properties.
Two (2) of the Mortgage Loans, representing approximately 3.8% of the Initial Pool Balance, provide for monthly or upfront escrows to cover planned capital expenditures or franchise-mandated property improvement plans.
Two (2) of the Mortgage Loans, representing approximately 0.8% of the Initial Pool Balance, require seasonality reserves that were deposited in connection with the origination of such Mortgage Loans and/or that are required to be funded on an ongoing basis or, in certain cases, are required to be funded upon specified trigger events.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 1801 L Street, representing approximately 5.8% of the Initial Pool Balance, a $700,000 economic holdback reserve was established at loan closing, subject to release upon satisfaction of certain conditions, including: (i) no default having occurred and being continuing, (ii) no cash trap event being continuing; (iii) the debt yield being not less than 7.9%; (iv) the amortizing DSCR (based on a 30-year amortization) being not less than 1.20x; and (v) the lender having received satisfactory evidence that the vacant space identified as Unit 6 (3,128 square feet) is leased and that the tenant is fully occupying such space and paying rent. If the release conditions are not satisfied on or before June 1, 2021, the lender will apply the economic holdback funds to the prepayment of the loan, together with the related prepayment premium therefor.
Certain of the Mortgage Loans described above permit the related borrower to post a letter of credit or guaranty in lieu of maintaining cash reserves.
In addition, in certain cases, the related borrower may not be required to maintain the escrows described above until the occurrence of a specified trigger.
Many of the Mortgage Loans provide for other escrows and reserves, including, in certain cases, reserves for debt service, operating expenses, vacancies at the related Mortgaged Property and other shortfalls or reserves to be released under circumstances described in the related Mortgage Loan documents.
See the footnotes to Annex A-1 for more information regarding escrows under the Mortgage Loan documents.
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Mortgaged Property Accounts
Cash Management. 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 account mechanics prescribed for the Mortgage Loans:
Cash Management Types
Type of Lockbox | Mortgage Loans | Aggregate Cut-off Date Balance of Mortgage Loans | Approx. % of Initial Pool Balance (%) | |||||||||
| Springing | 32 | $ | 321,362,581 | 48.8 | % | |||||||
| Hard/Springing Cash Management | 11 | 199,814,257 | 30.3 | |||||||||
| Hard/Upfront Cash Management | 4 | 105,738,582 | 16.1 | |||||||||
| Soft/Springing Cash Management | 1 | 29,750,000 | 4.5 | |||||||||
| None | 1 | 2,100,000 | 0.3 | |||||||||
| Total: | 49 | $ | 658,765,419 | 100 | % | |||||||
The following is a description of the types of cash management provisions to which the borrowers under the Mortgage Loans are subject:
| ● | Hard/Upfront Cash Management. The related borrower is required to instruct the tenants and other payors (including any third party property managers) to pay all rents and other revenue directly to a lockbox account controlled by the applicable servicer on behalf of the issuing entity. Funds are then swept into a cash management account controlled by the applicable servicer on behalf of the issuing entity and then applied by the applicable servicer in accordance with the related Mortgage Loan documents. This typically includes the payment of debt service and, in some cases, expenses at the related Mortgaged Property. Generally, excess funds may then be remitted to the related borrower. |
| ● | Hard/Springing Cash Management. The related borrower is required to instruct the tenants and other payors (including any third party property managers) to pay all rents and other revenue directly to a lockbox account controlled by the applicable servicer on behalf of the issuing entity. Until the occurrence of a “trigger” event, which typically includes an event of default under the Mortgage Loan documents, such funds are forwarded to an account controlled by the related borrower or are otherwise made available to the related borrower. From and after the occurrence of such a “trigger” event, only the portion of such funds remaining after the payment of current debt service, the funding of reserves and, in some cases, expenses at the related Mortgaged Property are to be forwarded or otherwise made available to the related borrower or, in some cases, maintained in an account controlled by the servicer as additional collateral for the loan until the “trigger” event ends or terminates in accordance with the loan documentation. |
| ● | Soft/Upfront Cash Management. Revenue from the related Mortgaged Property is generally paid by the tenants and other payors to the related borrower or the property manager. The related borrower or property manager, as applicable, then forwards such funds to a lockbox account controlled by the applicable servicer on behalf of the issuing entity. Funds are then swept into a cash management account controlled by the applicable servicer on behalf of the issuing entity and applied by the servicer in accordance with the related Mortgage Loan documents. This typically includes the payment of debt service and, in some cases, expenses at the related Mortgaged Property. Generally, excess funds may then be remitted to the related borrower. |
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| ● | Soft/Springing Cash Management. Revenue from the related Mortgaged Property is generally paid by the tenants and other payors (including any third party property managers) to the related borrower or the property manager. The related borrower or property manager, as applicable, then forwards such funds to a lockbox account controlled by the applicable servicer on behalf of the issuing entity. Until the occurrence of a “trigger” event, which typically includes an event of default under the Mortgage Loan documents, such funds are forwarded to an account controlled by the related borrower or are otherwise made available to the related borrower. In some cases, upon the occurrence of such a “trigger” event, the Mortgage Loan documents will require the related borrower to instruct tenants and/or other payors to pay directly into an account controlled by the applicable servicer on behalf of the issuing entity. All funds held in such lockbox account controlled by the applicable servicer following such “trigger” event will be applied by the applicable servicer in accordance with the related Mortgage Loan documents. From and after the occurrence of such a trigger event, only the portion of such funds remaining after the payment of current debt service and, in some cases, expenses at the related Mortgaged Property are to be forwarded or otherwise made available to the related borrower. |
| ● | Springing. A lockbox account is established at origination or upon the occurrence of certain “trigger” events. Revenue from the related Mortgaged Property is generally paid by the tenants and other payors to the related borrower or property manager. The Mortgage Loan documents provide that, upon the occurrence of a “trigger” event, which typically includes an event of default under the Mortgage Loan documents, the related borrower would be required to instruct tenants to pay directly into such lockbox account or, if tenants are directed to pay to the related borrower or the property manager, the related borrower or property manager, as applicable, would then forward such funds to a lockbox account controlled by the applicable servicer on behalf of the issuing entity. Funds are then swept into a cash management account controlled by the servicer on behalf of the issuing entity and applied by the servicer in accordance with the related Mortgage Loan documents. This typically includes the payment of debt service and, in some cases, expenses at the related Mortgaged Property. Excess funds may then be remitted to the related borrower. |
| ● | None. Revenue from the related Mortgaged Property is paid to the related borrower and is not subject to a lockbox account as of the Closing Date, and no lockbox account is required to be established during the term of the related Mortgage Loan. |
In connection with any hard lockbox cash management, income deposited directly into the related lockbox account may not include amounts paid in cash and/or checks that are paid directly to the related property manager, notwithstanding requirements to the contrary. Furthermore, with respect to certain multifamily and hospitality properties considered to have a hard lockbox, cash, checks and “over-the-counter” receipts may be deposited into the lockbox account by the property manager. Mortgage Loans whose terms call for the establishment of a lockbox account require that the amounts paid to the property manager will be deposited into the applicable lockbox account on a regular basis. Lockbox accounts will not be assets of the issuing entity. See the footnotes to Annex A-1 for more information regarding lockbox provisions for the Mortgage Loans.
Exceptions to Underwriting Guidelines
See “Transaction Parties—The Sponsors and Mortgage Loan Sellers—Wells Fargo Bank, National Association—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting”; “—Barclays Bank PLC—Barclays’ Underwriting Guidelines and Processes”; “—Rialto Mortgage
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Finance, LLC—Rialto Mortgage’s Underwriting Standards and Loan Analysis”; and “—C-III Commercial Mortgage LLC—C-III CM’s Underwriting Guidelines and Processes”.
Five (5) Mortgage Loans, representing approximately 15.0% of the Initial Pool Balance, were originated or acquired by Wells Fargo Bank, National Association and Barclays Bank PLC with exceptions to the related mortgage loan seller’s underwriting guidelines as described in the following bullet points:
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 1801 L Street, representing approximately 5.8% of the Initial Pool Balance, a tenant has executed a letter of intent to occupy 3,128 square feet of retail space but has not executed a lease and the tenant was underwritten as in-place, which represents an exception to the underwriting guidelines for Wells Fargo Bank, National Association. Wells Fargo Bank, National Association’s decision to include the Mortgage Loan notwithstanding this exception was supported by the following: (a) the Mortgaged Property is a class A multifamily property with 176 units and ground floor retail comprising only 10,840 square feet and 11.5% of the U/W Effective Gross Income; (b) the Cut-off Date LTV Ratio, U/W NCF DSCR and U/W NCF Debt Yield is 63.1%, 1.61x and 7.9%, respectively and if the Mortgage Loan underwriting considered the 3,128 square foot retail space vacant, the U/W NCF DSCR and U/W NCF Debt Yield would be 1.58x and 7.8%, respectively; (c) the Mortgage Loan is structured with a $700,000 economic holdback, which the lender is required to apply to pay down the principal balance of the Mortgage Loan if the following conditions are not satisfied by June 1, 2021: (i) no Cash Trap Event Period then exists; (ii) the NCF Debt Yield is equal to or greater than 7.9%; (iii) the NCF DSCR (calculated based on a hypothetical 30-year amortization schedule) is equal to or greater than 1.20x; (iv) lender has reasonably determined there have been no material changes that could adversely impact the Mortgaged Property; and (v) the currently vacant retail space, totaling 3,128 square feet, is leased with such tenant being in occupancy, paying full, unabated rent, with all TI/LCs having been paid; and (d) the sponsors are husband and wife and the wife is the Chief Operating Officer of the Sacrament Kings, while the husband has more than 32 years of commercial real estate experience, has been involved in developing more than 7,000 residential home sites, 2,000 single-family homes, 1,500 multi-family units, and 300,000 square feet of commercial buildings in Northern California, Colorado, Nevada, and Oregon that are valued at more than $1.0 billion, and is currently involved in the development of multiple projects in Sacramento’s urban core valued at approximately $225 million. In addition, certain characteristics of the Mortgage Loan can be found in Annex A-1 to this prospectus. Based on the foregoing, Wells Fargo Bank, National Association approved inclusion of the Mortgage Loan into this transaction |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 181 Fremont Street, representing approximately 3.0% of the Initial Pool Balance, the related Mortgage Loan was co-originated by Deutsche Bank AG, New York Branch and Barclays Bank PLC with an exception to Barclays Bank PLC’s underwriting guidelines and/or typical underwriting procedures. The underwritten base rent reflects the average rent over the remaining lease term expiring on February 28, 2031, rather than the average rent through the Anticipated Repayment Date (“ARD”) on April 6, 2028. The amount of underwritten base rent attributable to average rent for the period beyond the ARD is $1,337,679. Barclays Bank PLC’s decision to include the Mortgage Loan notwithstanding this exception was supported by the following: (a) the Mortgaged Property is 100.0% leased to |
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Facebook, Inc. on a long term lease maturing on February 28, 2031 with two, 5-year renewal options; (b) the U/W LTV, U/W NOI Debt Yield and U/W NCF DSCR are 39.6%, 11.8% and 3.14x (on the 181 Fremont Street Whole Loan), respectively; (c) if the Mortgaged Property was underwritten based on the average rent average through the anticipated repayment date, the U/W NOI Debt Yield and U/W NCF DSCR would be 11.3% and 3.00x, respectively; (d) the Mortgaged Property was built in 2018 for Facebook, Inc. which took possession and is currently constructing its interior improvements for which there was an upfront reserve and the tenant is also putting in its own money into completing the interior improvements; and (e) the guarantor, Paul Guarantor LLC, is 100.0% owned by Jay Paul Company, which has significant experience in the market and has developed over 11.0 million square feet of institutional quality space, and has an additional 6.0 million square feet of space in their development pipeline. Certain characteristics of the Mortgage Loan can be found in Annex A-1 to this prospectus. Based on the foregoing, Barclays Bank PLC approved inclusion of the Mortgage Loan into this transaction.
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as CoolSprings Galleria, representing approximately 3.0% of the Initial Pool Balance, the underwritten management fee (2.4%) is less than 3.0%, which represents an exception to the underwriting guidelines for Wells Fargo Bank, National Association. Wells Fargo Bank, National Association’s decision to include the Mortgage Loan notwithstanding this exception was supported by the following: (a) the Mortgaged Property was 96.2% leased to 124 tenants as of April 24, 2018 and has experienced an average occupancy of 98.1% over the past five years (with a trough occupancy of 96.8% in 2017); (b) the U/W NCF DSCR and U/W NCF Debt Yield are 1.91x and 12.1%, respectively; and if the Mortgage Loan underwriting utilized a 3.0% management fee, the U/W NCF DSCR and U/W NCF Debt Yield would be approximately 1.89x and 12.0%, respectively; (c) the Mortgaged Property is located in Franklin, Tennessee, approximately 16 miles south from the Nashville central business district; (d) the Mortgaged Property is located adjacent to Interstate 65, which has an average daily traffic count of approximately 112,000 vehicles; (e) the Mortgaged Property is located in the seventh richest county in America, with a 2017 median household income of $104,367; and (f) the 2017 estimated population and average household income within a five-mile radius of the Mortgaged Property is 97,298 and $158,041, respectively. Certain characteristics of the Mortgage Loan can be found in Annex A-1 to this prospectus. Based on the foregoing, Wells Fargo Bank, National Association approved inclusion of the Mortgage Loan into this transaction. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 2900 McLane Road, representing approximately 1.6% of the Initial Pool Balance, the underwritten management fee (1.9%) is less than 3.0%, which represents an exception to the underwriting guidelines for Wells Fargo Bank, National Association. Wells Fargo Bank, National Association’s decision to include the Mortgage Loan notwithstanding this exception was supported by the following: (a) the Mortgaged Property is 100.0% leased to PaperWorks Industries Holding Corp. on a 17.5-year triple-net lease term through December 2032; (b) the Cut-off Date LTV Ratio, U/W NCF DSCR and U/W NCF Debt Yield is 59.6%, 1.59x and 10.1%, respectively and if the Mortgage Loan underwriting utilized a 3.0% management fee, the U/W NCF DSCR and U/W NCF Debt Yield would be approximately 1.56x and 9.8%, respectively; (d) the Mortgaged Property is located 14.0 miles northwest of downtown Syracuse, and 11.5 miles from interstate 81 and 6.8 miles from interstate 90, which are the area’s major east/west and north/south |
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thoroughfares, respectively; (e) the Mortgaged Property has been 100.0% occupied since 1989 by three different single tenant industrial users with no downtime between leases; and (f) the sponsor has more than 45 years of commercial real estate experience and owns more than 7 million square feet of real estate valued at approximately $389 million as of March 31, 2018. In addition, certain characteristics of the Mortgage Loan can be found in Annex A-1 to this prospectus. Based on the foregoing, Wells Fargo Bank, National Association approved inclusion of the Mortgage Loan into this transaction
| ● | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Bond Street Fund 16, representing approximately 1.1% of the Initial Pool Balance, the 271 Indian Lake Boulevard Mortgaged Property’s underwritten vacancy (0.0%) is less than 5.0%, which represents an exception to the underwriting guidelines for Wells Fargo Bank, National Association. Wells Fargo Bank, National Association’s decision to include the Mortgage Loan notwithstanding this exception was supported by the following: (a) the Mortgage Loan benefits from the diversity of the three properties, which include the fee interests in three shopping centers occupied by 16 tenants; (b) the 271 Indian Lake Boulevard Mortgaged Property was constructed in 2014 and has been 100.0% occupied since construction; (c) the aggregate underwritten vacancy of the Mortgage Loan is 9.4%, and if the 271 Indian Lake Boulevard Mortgaged Property underwriting utilized a 5.0% vacancy, the aggregate underwritten vacancy for the Mortgage Loan would be 10.7%; (d) the Cut-off Date LTV Ratio, U/W NCF DSCR and U/W NCF Debt Yield is 67.5%, 1.50x and 9.6%, respectively, and if the 271 Indian Lake Boulevard Mortgaged Property underwriting utilized a 5.0% vacancy, the Mortgage Loan U/W NCF DSCR and U/W NCF Debt Yield would be approximately 1.47x and 9.5%, respectively; (e) the Mortgage Loan does not allow the partial release of any of the three Mortgaged Properties; and (f) the sponsor has more than 20 years of commercial real estate experience. In addition, certain characteristics of the Mortgage Loan can be found in Annex A-1 to this prospectus. Based on the foregoing, Wells Fargo Bank, National Association approved inclusion of the Mortgage Loan into this transaction. |
Additional Indebtedness
General
The Mortgage Loans generally prohibit borrowers from incurring any additional debt secured by their Mortgaged Property without the consent of the lender. However:
| ● | substantially all of the Mortgage Loans permit the related borrower to incur limited indebtedness in the ordinary course of business that is not secured by the related Mortgaged Property; |
| ● | the borrowers under certain of the Mortgage Loans have incurred and/or may incur in the future unsecured debt other than in the ordinary course of business; |
| ● | any borrower that is not required pursuant to the terms of the related 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 |
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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. |
Whole Loans
Certain Mortgage Loans are subject to the rights of a related Companion Holder, as further described in “—The Whole Loans” below.
Mezzanine Indebtedness
Although the Mortgage Loans generally place certain restrictions on incurring mezzanine debt by the pledging of general partnership and managing member equity interests in a borrower, such as specific percentage or control limitations, the terms of the Mortgage Loan documents generally permit, subject to certain limitations, the pledge of less than a controlling portion of the equity interests in a borrower or the pledge of limited partnership or non-managing membership equity interests in a borrower. Certain Mortgage Loans described below permit the incurrence of mezzanine debt subject to satisfaction of certain conditions including a certain maximum combined loan-to-value ratio and/or a minimum combined debt service coverage ratio. Also, certain of the Mortgage Loans do not restrict the pledging of ownership interests in the related borrower, but do restrict the transfer of ownership interests in a borrower by imposing limitations on transfer of control or a specific percentage of ownership interests. In addition, in general, a borrower (or its direct or indirect owners) that does not meet single-purpose entity criteria may not be restricted in any way from incurring mezzanine debt.
As of the Cut-off Date, each sponsor has informed us that it is aware of the following existing mezzanine indebtedness with respect to the Mortgage Loans it is selling to the depositor:
Mortgage Loan Name | Mortgage Loan Cut-off Date Balance | Percentage of Initial Pool Balance | Mezzanine Debt Cut-off Date Balance | Companion Loan Cut-off Date Balance | Subordinate 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 Ratio(1) | Cut-off Date Mortgage Loan Underwritten NCF DSCR | Cut-off Date Total Debt Underwritten NCF DSCR(1) |
| Parkway Center | $ 42,560,000 | 6.5% | $4,700,000 | N/A | N/A | 5.5873% | 63.9% | 71.0% | 1.38x | 1.18x |
| 181 Fremont Street | $ 20,000,000 | 3.0% | $225,000,000 | $230,000,000 | N/A | 4.4340% | 39.6% | 75.2% | 3.14x | 1.38x |
| (1) | Calculated including the mezzanine debt and any subordinate debt. Cut-off Date Wtd. Avg. Total Debt Interest Rate is based on the interest rate of the related Mortgage Loan, any Companion Loans and the related mezzanine loan as of the Cut-off Date, and the Cut-off Date Total Debt Underwritten NCF DSCR is calculated based on such initial interest rates. |
Each of the mezzanine loans related to the Mortgage Loan secured by the Mortgaged Property identified in the table above is subject to an intercreditor agreement between the holder of the related mezzanine loan and the related lender under the related Mortgage
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Loan that, in each case, 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 (taking into account the cure rights exercised by the mezzanine lender) 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 (taking into account the cure rights exercised by the mezzanine lender), the related mezzanine lender may accept payments on and prepayments of the related mezzanine loan, (c) the related mezzanine lender will have certain rights to receive notice of and cure defaults under the related Mortgage Loan prior to any acceleration or enforcement of the related Mortgage Loan, (d) the related mezzanine lender may amend or modify the related mezzanine loan in certain respects without the consent of the related mortgage lender, and the mortgage lender must obtain the mezzanine lender’s consent to amend or modify the Mortgage Loan in certain respects, (e) upon the occurrence of an event of default under the related mezzanine loan documents, the related mezzanine lender may foreclose upon the 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, and (f) if the related 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 related 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 related Mortgage Loan, in whole but not in part, for a price generally equal to the outstanding principal balance of the related Mortgage Loan, together with all accrued interest and other amounts due thereon, plus any advances made by the related Mortgage Loan lender or its servicer and any interest thereon plus, subject to certain limitations, any Liquidation Fees and Special Servicing Fees payable under the PSA, but generally excluding any late charges, default interest, exit fees, special maintenance charges payable in connection with a prepayment or Yield Maintenance Charges and Prepayment Premiums. The related mezzanine loan agreement provides, among other things, that an event of default under the related Mortgage Loan will be an event of default under the mezzanine loan.
The Mortgage Loans generally place certain restrictions on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations as described under “—Certain Terms of the Mortgage Loans—‘Due-On-Sale’ and ‘Due-On-Encumbrance’ Provisions” above.
Certain of the Mortgage Loans do not prohibit the pledge by direct or indirect owners of the related borrower of equity distributions that may be made from time to time by the borrower to its equity owners.
With respect to the Mortgage Loans listed in the following 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 and determined in accordance with the related Mortgage Loan documents:
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Mortgage Loan Name | Mortgage Loan Cut-off Date Balance | Maximum Principal Amount Permitted (If Specified)(1) | Combined Maximum LTV Ratio(2) | Combined Minimum DSCR(2) | Combined Minimum Debt Yield(2) | Intercreditor Agreement Required | Mortgage Lender Allowed to Require Rating Agency Confirmation(3) |
| Embassy Suites Tucson, AZ | $13,983,135 | N/A | 63.6% | 2.05x | N/A | Yes | Yes |
| (1) | Indicates the maximum aggregate principal amount of the Mortgage Loan and the related mezzanine loan (if any) that is specifically stated in the Mortgage Loan documents and does not take account of any restrictions that may be imposed at any time by operation of any debt yield, debt service coverage ratio or loan-to-value ratio conditions. |
| (2) | Debt service coverage ratios, loan-to-value ratios and debt yields are to be calculated in accordance with definitions set forth in the related Mortgage Loan documents. Except as otherwise noted in connection with a Mortgage Loan, the determination of the loan-to-value ratio must be, or may be required by the lender to be, based on a recent appraisal. |
| (3) | Indicates whether the conditions to the financing include (a) delivery of Rating Agency Confirmation that the proposed financing will not, in and of itself, result in the downgrade, withdrawal or qualification of the then-current rating assigned to any class of certificates and/or (b) acceptability of any related intercreditor or mezzanine loan documents to the Rating Agencies. |
The specific rights of the related mezzanine lender with respect to any such future mezzanine loan will be specified in the related intercreditor agreement and may include cure rights and a default-related repurchase option. The intercreditor agreement required to be entered into in connection with any future mezzanine loan will either be substantially in the form attached to the related loan agreement or be subject to receipt of a Rating Agency Confirmation or to the related lender’s approval. The direct and/or indirect owners of a borrower under a Mortgage Loan are also generally permitted to pledge their interest in such borrower as security for a mezzanine loan in circumstances where the ultimate transfer of such interest to the mezzanine lender would be a permitted transfer under the related Mortgage Loan documents.
Generally, upon a default under a mezzanine loan, subject to the terms of any applicable intercreditor or subordination agreement, the holder of the mezzanine loan would be entitled to foreclose upon the equity in the related borrower, which has been pledged to secure payment of such debt. Although this transfer of equity may not trigger the due-on-sale clause under the related Mortgage Loan, it could cause a change in control of the borrower and/or cause the obligor under the mezzanine loan to file for bankruptcy, which could negatively affect the operation of the related Mortgaged Property and the related borrower’s ability to make payments on the related Mortgage Loan in a timely manner.
The Mortgage Loans generally permit a pledge of the same direct and indirect ownership interests in any borrower that could be transferred without the lender consent. See “—Certain Terms of the Mortgage Loans—‘Due-on-Sale’ and ‘Due-on-Encumbrance’ Provisions” above.
Some of the Mortgage Loans permit certain affiliates of the related borrower to pledge their indirect ownership interests in the borrower including, but not limited to, pledges to an institutional lender providing a corporate line of credit or corporate credit facility as collateral for such corporate line of credit or corporate credit facility. In connection with those pledges, the Mortgage Loan documents for such Mortgage Loans may: (i) contain limitations on the amounts that such collateral may secure and prohibit foreclosure of such pledges unless such foreclosure would represent a transfer otherwise permitted under the Mortgage Loan documents but do not prohibit a change in control in the event of a permitted foreclosure; or (ii) require that such financing be secured by at least a certain number of assets other than such ownership interests in the related borrower. For example, with respect to the 15 largest Mortgage Loans presented on Annex A-3 to this prospectus, we note the following:
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| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Village at Leesburg, representing approximately 9.9% of the Initial Pool Balance, the loan documents permit the pledge of any direct or indirect ownership interest in any member, partner or shareholder of the borrower (but not a direct interest in the borrower) by Carlyle Fund V Carlyle Realty Partners V-A, L.P., Carlyle Realty Partners V-B, L.P., Carlyle Realty Partners V-C, L.P., Carlyle Realty Partners V, L.P., Carlyle Realty Coinvestment V, L.L.C., Carlyle Realty Foreign Investors V, L.P., Carlyle Realty Partners V (Canadian), L.P. and CRP V Manager GP, L.L.C. or any successor of Carlyle Fund V as permitted by the loan documents in favor of one or more commercial banks or a financial institutions with significant real estate experience involving properties similar to the property with a long term unsecured debt rating of no less than “A” by S&P and “A2” by Moody’s to secure a loan or line of credit which is secured by pledge of all or substantially all of the assets of pledgor, repayment of the loan or line of credit is not tied specifically to cash flow from the mortgaged property and such pledge will not be made in connection with a permitted non-controlling pledge or a pledge of the economic distributions actually received by the members in the sole member of the borrower. |
| ● | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as CoolSprings Galleria, representing approximately 3.0% of the Initial Pool Balance, the loan documents permit the pledge of any direct or indirect ownership interest in any member, partner or shareholder of the borrower (but not a direct interest in the borrower) by CBL & Associates Limited Partnership and/or CBL & Associates Properties, Inc. (or any successor of CBL & Associates Limited Partnership and/or CBL & Associates Properties, Inc. as permitted by the loan documents), Teachers Insurance and Annuity Association of America and/or APG Asset Management US Inc. in favor of one or more Permitted Pledge Banks (a commercial bank or a financial institution with significant real estate experience involving properties similar to the property with a long term unsecured debt rating of no less than “A” by S&P and “A2” by Moody’s) to secure a loan or line of credit which is secured by pledge of all or substantially all of the assets of pledgor, repayment of the loan or line of credit is not tied specifically to cash flow from the mortgaged property and such pledge will not be made in connection with a permitted non-controlling pledge. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Other Financings or Ability to Incur Other Indebtedness Entails Risk”.
Other Secured Indebtedness
The borrowers under some of the Mortgage Loans have incurred or are permitted to incur other secured subordinate debt subject to the terms of the related Mortgage Loan document or otherwise expressly permitted by applicable law. For example:
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 1801 L Street, representing approximately 5.8% of the Initial Pool Balance, the borrower has incurred existing secured subordinate debt in the amount of $4,750,000 with a current balance of $6,244,117, payable to the Housing Authority of the City of Sacramento. The subordinate debt matures on January 1, 2036 (the loan matures on July 11, 2028). The subordinate lender has entered into a subordination agreement with the Mortgage Loan Seller, as senior lender, that provides for subordination of the subordinate lender’s lien and payment rights, as well as standstill protections for the senior lender in the event of a subordinate loan default. The senior lender has the right of notice and the right to cure for any defaults under the subordinate loan, and a subordinate
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loan default is also a default under the senior loan. See the summary for the 1801 L Street Mortgage Loan in Annex A-3 to this prospectus
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Flats at East Bank, representing approximately 2.0% of the Initial Pool Balance, the borrower sponsor received a $17,000,000 loan (which was transferred to the borrower) from Cuyahoga County to finance the development of the Mortgaged Property in April 2014 (the “Development Loan”), which was made from the proceeds of Cuyahoga County’s issuance of bonds (the “Cuyahoga County IRB Bonds”). The Cuyahoga County IRB Bonds are allocated into three tranches of approximately $3.78 million (at an interest rate of 4.5%), $6.865 million (at an interest rate of 5.5%) and $6.355 million (at an interest rate of 6.0%), and expire in 2024, 2033 and 2038, respectively. The Development Loan and the Cuyahoga County IRB Bonds are secured by a subordinate mortgage encumbering the Mortgaged Property (subject to a subordination agreement with, and which mortgage is held by, Huntington National Bank as the trustee for the holders of the Cuyahoga County IRB Bonds). The debt service on the Cuyahoga County IRB Bonds is paid from excess cash flow from the Mortgaged Property to the extent transferred to the borrower and from cash available to the guarantors. The guarantors (and other affiliates of the borrower) have guaranteed annual debt service payments with respect to the Cuyahoga County IRB Bonds under the Development Loan. There can be no assurance that the guarantors would be able to, or would, make such payments if necessary. Pursuant to a subordination agreement, no material enforcement action may be taken against the borrower or the Mortgaged Property prior to repayment in full of the Mortgage Loan.
Six (6) of the Mortgaged Properties, representing approximately 1.9% of the Initial Pool Balance, are located in Florida. Florida’s Property Assessed Clean Energy (“PACE”) statute renders loan document provisions prohibiting PACE loans unenforceable.
Other Unsecured Indebtedness
The borrowers under some of the Mortgage Loans have incurred or are permitted to incur unsecured subordinate debt (in addition to trade payables, equipment financing and other debt incurred in the ordinary course) subject to the terms of the related Mortgage Loan documents.
Prospective investors should assume that all or substantially all of the Mortgage Loans permit their borrowers to incur a limited amount (generally in an amount not more than 5% of the original Mortgage Loan balance or an amount otherwise normal and reasonable under the circumstances) of trade payables, equipment financing and/or other unsecured indebtedness in the ordinary course of business or an unsecured credit line to be used for working capital purposes. In addition, certain of the Mortgage Loans allow the related borrower to receive unsecured loans from equity owners, provided that such loans are subject to and subordinate to the applicable Mortgage Loan.
Certain risks relating to additional debt are described in “Risk Factors—Risks Relating to the Mortgage Loans—Other Financings or Ability to Incur Other Indebtedness Entails Risk”.
The Whole Loans
General
Each of the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Village at Leesburg, 181 Fremont Street, CoolSprings Galleria and
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Flats at East Bank, is part of a Whole Loan consisting of such Mortgage Loan and the related Companion Loan(s). In connection with each Whole Loan, the rights between the trustee on behalf of the issuing entity and the holder(s) of the related Companion Loan(s) (the “Companion Holder” or “Companion Holders”) are generally governed by an intercreditor agreement or a co-lender agreement (each, an “Intercreditor Agreement”). With respect to each of the Whole Loans, the related Mortgage Loan and the related Companion Loan(s) are cross-collateralized and cross-defaulted.
The following terms are used in reference to the Whole Loans:
“BANK 2018-BNK12 PSA” means the pooling and servicing agreement governing the servicing of the CoolSprings Galleria Whole Loan.
“CGCMT 2018-C5 PSA” means the pooling and servicing agreement expected to govern the servicing of the Flats at East Bank Whole Loan.
“Control Note” means, with respect to any Whole Loan, the “Controlling Note” or other similar term specified in the related Intercreditor Agreement. As of the Closing Date, the Control Note with respect to each Whole Loan will be the promissory note(s) listed as the “Control Note” in the column “Control Note/Non-Control Note” in the table below entitled “Whole Loan Control Notes and Non-Control Notes”.
“Controlling Holder” means, with respect to any Whole Loan, the holder of the related Control Note. As of the Closing Date, the Controlling Holder with respect to each Whole Loan will be the holder listed next to the related Control Note in the column “Note Holder” in the table below entitled “Whole Loan Control Notes and Non-Control Notes”.
“Non-Control Note” means, with respect to any Whole Loan, any “Non-Controlling Note” or other similar term specified in the related Intercreditor Agreement. As of the Closing Date, the Non-Control Notes with respect to each Whole Loan will be the promissory notes listed as the “Non-Control Notes” in the column “Control Note/Non-Control Note” in the table below entitled “Whole Loan Control Notes and Non-Control Notes”.
“Non-Controlling Holder” means, with respect to any Whole Loan, the holder(s) of a Non-Control Note. As of the Closing Date, the Non-Controlling Holders with respect to each Whole Loan will be the holders listed next to the related Non-Control Notes in the column “Note Holder” in the table below entitled “Whole Loan Control Notes and Non-Control Notes”.
“Non-Serviced Certificate Administrator” means with respect to (i) the Village at Leesburg Whole Loan, the certificate administrator under the WFCM 2018-C44 PSA, (ii) the CoolSprings Galleria Whole Loan, the certificate administrator under the BANK 2018-BNK12 PSA, (iii) the 181 Fremont Street Whole Loan, (a) prior to the securitization of the related Control Note, the certificate administrator under the WFCM 2018-C44 PSA and (b) following the securitization of the related Control Note, the certificate administrator under the pooling and servicing agreement governing the securitization of such Control Note, and (iv) the Flats at East Bank Whole Loan, the certificate administrator under the CGCMT 2018-C5 PSA.
“Non-Serviced Companion Loan” means each of (i) the Village at Leesburg Companion Loan, (ii) the 181 Fremont Street Companion Loans, (iii) the CoolSprings Galleria Companion Loans, and (iv) the Flats at East Bank Companion Loans.
“Non-Serviced Directing Certificateholder” means with respect to (i) the Village at Leesburg Whole Loan, the directing certificateholder (or its equivalent) under the WFCM 2018-C44 PSA, (ii) the 181 Fremont Street Whole Loan, (a) prior to the securitization of the
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related Control Note, the directing certificateholder (or its equivalent) under the WFCM 2018-C44 PSA and (b) following the securitization of the related Control Note, the directing certificateholder (or its equivalent) under the pooling and servicing agreement governing the securitization of such Control Note, (iii) the CoolSprings Galleria Whole Loan, the directing certificateholder (or its equivalent) under the BANK 2018-BNK12 PSA, and (iv) the Flats at East Bank Whole Loan, the directing holder (or its equivalent) under the CGCMT 2018-C5.
“Non-Serviced Master Servicer” means with respect to (i) the Village at Leesburg Whole Loan, the master servicer under the WFCM 2018-C44 PSA, (ii) the 181 Fremont Street Whole Loan, (a) prior to the securitization of the related Control Note, the master servicer under the WFCM 2018-C44 PSA and (b) following the securitization of the related Control Note, the master servicer under the pooling and servicing agreement governing the securitization of such Control Note, (iii) the CoolSprings Galleria Whole Loan, the master servicer under the BANK 2018-BNK12 PSA, and (iv) the Flats at East Bank Whole Loan, the master servicer under the CGCMT 2018-C5.
“Non-Serviced Mortgage Loan” means each of the Village at Leesburg Mortgage Loan, the 181 Fremont Street Mortgage Loan, the CoolSprings Galleria Mortgage Loan and the Flats at East Bank Mortgage Loan.
“Non-Serviced Pari Passu Whole Loan” means each of the Village at Leesburg Whole Loan, the 181 Fremont Street Whole Loan and the CoolSprings Galleria Whole Loan.
“Non-Serviced PSA” means with respect to (i) the Village at Leesburg Whole Loan, the WFCM 2018-C44 PSA, (ii) the 181 Fremont Street Whole Loan (a) prior to the securitization of the related Control Note, the WFCM 2018-C44 PSA and (b) following the securitization of the related Control Note, the pooling and servicing agreement governing the securitization of such Control Note, (iii) the CoolSprings Galleria Whole Loan, the BANK 2018-BNK12 PSA, and (iv) the Flats at East Bank Whole Loan, the CGCMT 2018-C5 PSA.
“Non-Serviced Special Servicer” means with respect to (i) the Village at Leesburg Whole Loan, the special servicer under the WFCM 2018-C44 PSA, (ii) the 181 Fremont Street Whole Loan, (a) prior to the securitization of the related Control Note, the special servicer under the WFCM 2018-C44 PSA and (b) following the securitization of the related Control Note, the special servicer under the pooling and servicing agreement governing the securitization of such Control Note, (iii) the CoolSprings Galleria Whole Loan, the special servicer under the BANK 2018-BNK12 PSA, and (iv) the Flats at East Bank Whole Loan, the special servicer under the CGCMT 2018-C5 PSA.
“Non-Serviced Subordinate Companion Loan” means the Flats at East Bank Subordinate Companion Loan.
“Non-Serviced Trustee” means with respect to (i) the Village at Leesburg Whole Loan, the trustee under the WFCM 2018-C44 PSA, (ii) the 181 Fremont Street Whole Loan, (a) prior to the securitization of the related Control Note, the trustee under the WFCM 2018-C44 PSA and (b) following the securitization of the related Control Note, the trustee under the pooling and servicing agreement governing the securitization of such Control Note, (iii) the CoolSprings Galleria Whole Loan, the trustee under the BANK 2018-BNK12 PSA, and (iv) the Flats at East Bank Whole Loan, the trustee under the CGCMT 2018-C5 PSA.
“Non-Serviced Whole Loan” means the Village at Leesburg Whole Loan, the 181 Fremont Street Whole Loan, the CoolSprings Galleria Whole Loan and the Flats at East Bank Whole Loan.
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“Pari Passu Mortgage Loan” means any of the Non-Serviced Mortgage Loans.
“Subordinate Companion Loan” means each Non-Serviced Subordinate Companion Loan.
“WFCM 2018-C44 PSA” means the pooling and servicing agreement governing the servicing of (i) the Village at Leesburg Whole Loan and (ii) the 181 Fremont Street Whole Loan (prior to the securitization of the related Control Note).
The table below provides certain information with respect to each Mortgage Loan that has a corresponding Companion Loan:
Whole Loan Summary(1)
Mortgage Loan Name | Mortgage Loan Cut-off Date Balance | % of Initial Pool Balance | Pari Passu Companion Loan Cut-off Date Balance | Subordinate Companion Loan Cut-off Date Balance | Mortgage Loan LTV Ratio(2) | Whole Loan LTV Ratio(3) | Mortgage Loan Underwritten NCF DSCR(2) | Whole Loan Underwritten NCF DSCR(3) |
| Village at Leesburg | $65,250,000 | 9.9% | $66,000,000 | N/A | 58.1% | 58.1% | 1.28x | 1.28x |
| 181 Fremont Street | $20,000,000 | 3.0% | $230,000,000 | N/A | 39.6% | 39.6% | 3.14x | 3.14x |
| CoolSprings Galleria | $19,950,390 | 3.0% | $134,665,133 | N/A | 48.0% | 48.0% | 1.91x | 1.91x |
| Flats at East Bank | $13,000,000 | 2.0% | $59,000,000 | $20,829,951 | 52.0% | 67.1% | 1.90x | 1.05x |
| (1) | Any unsecuritized pari passu companion loan may be further split. |
| (2) | Calculated including any related Companion Loans but excluding any related mezzanine debt and Subordinate Companion Loan. |
| (3) | Calculated including any related Companion Loans and any related Subordinate Companion Loan excluding mezzanine debt. |
Set forth below is the identity of the initial Non-Serviced Directing Certificateholder for each Non-Serviced Whole Loan, the securitization trust or other entity holding the controlling note in such Non-Serviced Whole Loan and the related Non-Serviced PSA under which it is being serviced.
Whole Loan | Non-Serviced PSA | Controlling Noteholder | Initial Directing Party(1) |
| Village at Leesburg | WFCM 2018-C44 | WFCM 2018-C44 | RREF III-D AIV RR H, LLC |
| 181 Fremont Street | WFCM 2018-C44(2) | Deutsche Bank AG, New York Branch(2) | RREF III-D AIV RR H, LLC(2) |
| CoolSprings Galleria | BANK 2018-BNK12 | BANK 2018-BNK12 | Ellington Management Group, LLC |
| Flats at East Bank | CGCMT 2018-C5(3) | CGCMT 2018-C5(3) | Prime Finance CMBS B-Piece Holdco XVI, L.P.(4) |
| (1) | As of the closing date of the related securitization. The entity with the heading “Initial Directing Party” above reflects the party entitled to exercise control and consultation rights with respect to the related Whole Loan similar to those of the Directing Certificateholder under the PSA until such party’s rights are terminated pursuant to the related Non-Serviced PSA or intercreditor agreement, as applicable. |
| (2) | The 181 Fremont Street Whole Loan is currently being serviced under the WFCM 2018-C44 PSA. On and after the securitization of the related Control Note, the 181 Fremont Street Whole Loan will be serviced under the pooling and servicing agreement governing such securitization, such securitization will be the related Controlling Noteholder and the related initial Directing Certificateholder will be the party specified in such pooling and servicing agreement. |
| (3) | The CGCMT 2018-C5 securitization is expected to close on or about June 21, 2018. |
| (4) | The initial Directing Party is the holder of the controlling Subordinate Companion Loan, who will have certain control and consultation rights with respect to the related Whole Loan until the occurrence of a control appraisal period pursuant to the related intercreditor agreement. During the control appraisal period, the Non-Serviced Directing Certificateholder (or equivalent entity) under the identified pooling and servicing agreement is expected to exercise such control and consultation rights until such rights are terminated pursuant to such pooling and servicing agreement. |
See “Risk Factors—Risks Related to Conflicts of Interest—Potential Conflicts of Interest of the Directing Certificateholder and the Companion Holders”.
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Whole Loan Control Notes and Non-Control Notes
| Mortgage Loan | Note Name | Control Note/ Non-Control Note | Original Principal Balance | Note Holder(1) |
| Village at Leesburg | Note A-1 | Control Note | $66,000,000 | WFCM 2018-C44 |
| Note A-2 | Non-Control Note | $65,250,000 | WFCM 2018-C45 | |
| 181 Fremont Street | Note A-1 | Control Note(2) | $50,000,000 | Deutsche Bank AG, New York Branch |
| Note A-2 | Non-Control Note | $58,000,000 | BANK 2018-BNK12 | |
| Note A-3 | Non-Control Note | $22,000,000 | Wells Fargo Bank, National Association | |
| Note A-4 | Non-Control Note | $30,000,000 | Deutsche Bank AG, New York Branch | |
| Note A-5 | Non-Control Note | $40,000,000 | Deutsche Bank AG, New York Branch | |
| Note A-6-1 | Non-Control Note | $30,000,000 | WFCM 2018-C44(2) | |
| Note A-6-2 | Non-Control Note | $20,000,000 | WFCM 2018-C45 | |
| CoolSprings Galleria | Note A-1 | Control Note | $75,000,000 | BANK 2018-BNK12 |
| Note A-2 | Non-Control Note | $15,000,000 | BANK 2018-BNK12 | |
| Note A-3 | Non-Control Note | $20,000,000 | WFCM 2018-C45 | |
| Note A-4 | Non-Control Note | $45,000,000 | Wells Fargo Bank, National Association | |
| Flats at East Bank | Note A-1 | Non-Control Note | $59,000,000 | CGCMT 2018-C5(3) |
| Note A-2 | Non-Control Note | $13,000,000 | WFCM 2018-C45 | |
| Note B | Control Note(4) | $21,000,000 | ACREFI Mortgage Lending, LLC |
| (1) | Unless otherwise indicated, each note not currently held by a securitization trust is expected to be contributed to a future securitization. No assurance can be provided that any such note will not be split further. |
| (2) | The 181 Fremont Street Whole Loan is currently being serviced under the WFCM 2018-C44 PSA. On and after the securitization of the related Control Note, the 181 Fremont Street Whole Loan will be serviced under the pooling and servicing agreement for such securitization. The master servicer and special servicer for such securitization will be identified in a notice, report or statement to holders of the WFCM 2018-C45 certificates after the closing of such securitization. |
| (3) | The CGCMT 2018-C5 transaction is expected to close on or about June 21, 2018. |
| (4) | Pursuant to the related Intercreditor Agreement, (i) the Control Note (except if a Flats at East Bank Control Appraisal Period is in effect or the related noteholder is a borrower-related party) is Note B, and (ii) if a Flats at East Bank Control Appraisal Period is in effect or the holder of Note B is a borrower-related party, then Note A-1 will be the Control Note. |
The Non-Serviced Pari Passu Whole Loans
Each Non-Serviced Pari Passu Whole Loan will be serviced pursuant to the related Non-Serviced PSA in accordance with the terms of such Non-Serviced PSA and the related Intercreditor Agreement. No Non-Serviced Master Servicer, Non-Serviced Special Servicer or Non-Serviced Trustee will be required to make monthly payment advances on a Non-Serviced Mortgage Loan, but the related Non-Serviced Master Servicer or Non-Serviced Trustee, as applicable, will be required to (and the Non-Serviced Special Servicer, at its option in certain cases, may) make servicing advances on the related Non-Serviced Whole Loan in accordance with the terms of the related Non-Serviced PSA unless such advancing party (or, in certain cases, the related Non-Serviced Special Servicer, even if it is not the advancing party) determines that such a servicing advance would be a nonrecoverable advance. Monthly payment advances on each Non-Serviced Mortgage Loan will be made by the master servicer or the trustee, as applicable, to the extent provided under the PSA. None of the master servicer, the special servicer or the trustee will be obligated to make servicing advances with respect to a Non-Serviced Whole Loan. See “Pooling and Servicing
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Agreement—Servicing of the Non-Serviced Mortgage Loans” for a description of the servicing terms of the Non-Serviced PSAs.
Intercreditor Agreement
The Intercreditor Agreement related to each Non-Serviced Pari Passu Whole Loan provides that:
| ● | The promissory notes comprising such Non-Serviced Pari Passu Whole Loan (and consequently, the related Non-Serviced Mortgage Loan and each Non-Serviced Pari Passu Companion Loan) are of equal priority with each other and none of such promissory notes (or mortgage loans) will have priority or preference over any other such promissory note (or mortgage loan). |
| ● | All payments, proceeds and other recoveries on the Non-Serviced Whole Loan will be applied to the promissory notes comprising such Non-Serviced Pari Passu Whole Loan on a pro rata and pari passu basis (subject, in each case, to (a) the allocation of certain amounts to escrows and reserves required by the Mortgage Loan documents and (b) certain payment and reimbursement rights of the parties to the related Non-Serviced PSA, in accordance with the terms of the related Non-Serviced PSA). |
| ● | The transfer of up to 49% of the beneficial interest of a promissory note comprising the Non-Serviced Whole Loan is generally permitted. The transfer of more than 49% of the beneficial interest of any such promissory note is generally prohibited unless (i) the transferee is a large institutional lender or investment fund (other than a related borrower or an affiliate thereof) that satisfies minimum net worth and/or experience requirements or certain securitization vehicles that satisfy certain ratings and other requirements or (ii)(a) each non-transferring holder has consented to such transfer (which consent may not be unreasonably withheld), and (b) if any such non-transferring holder’s interest in the related Non-Serviced Whole Loan is held in a securitization, a rating agency communication is provided to each applicable rating agency (or, in certain cases, a rating agency confirmation is obtained from each applicable rating agency). The foregoing restrictions do not apply to a sale of the related Non-Serviced Mortgage Loan together with the related Non-Serviced Pari Passu Companion Loans in accordance with the terms of the related Non-Serviced PSA. |
Any losses, liabilities, claims, costs and expenses incurred in connection with a Non-Serviced Whole Loan that are not otherwise paid out of collections on such Whole Loan may, to the extent allocable to the related Non-Serviced Mortgage Loan, be payable or reimbursable out of general collections on the mortgage pool for this securitization.
Control Rights
With respect to each Non-Serviced Whole Loan, the related Control Note will be held as of the Closing Date by the Controlling Holder listed in the table entitled “Whole Loan Control Notes and Non-Control Notes” above under “—General”. The related Controlling Holder (or a designated representative) will be entitled (i) to direct the servicing of such Whole Loan in a manner that is substantially similar to the rights of the directing certificateholder, (ii) to consent to certain servicing decisions in respect of such Whole Loan and actions set forth in a related asset status report and (iii) to replace the special servicer
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with respect to such Whole Loan with or without cause; provided, that with respect to each Non-Serviced Whole Loan, if such holder (or its designated representative) is (or is an affiliate of) the related borrower or if all or a specified portion of the subject Control Note is held by the borrower or an affiliate thereof, such party will not be entitled to exercise the rights of the “Controlling Holder”, and/or there will be deemed to be no such “Controlling Holder” under the related Intercreditor Agreement.
Certain Rights of each Non-Controlling Holder
With respect to any Non-Serviced Whole Loan, the holder of any related Non-Control Note (or if such Non-Control Note has been securitized, the directing certificateholder with respect to such securitization (or other designated party under the related pooling and servicing agreement) will be entitled to certain consent and consultation rights described below; provided, that if such party or its representative is (or is an affiliate of) the related borrower or if all or a specified portion of the subject Non-Control Note is held by the borrower or an affiliate thereof, such party will not be entitled to exercise the rights of a Non-Controlling Holder, and/or there will be deemed to be no “Non-Controlling Holder” with respect to such Non-Control Note under the related Intercreditor Agreement. With respect to each Non-Serviced Whole Loan, one or more related Non-Control Notes will be included in the Trust, and the Directing Certificateholder, prior to the occurrence and continuance of a Control Termination Event, or the special servicer (consistent with the Servicing Standard), following the occurrence and during the continuance of a Control Termination Event, will be entitled to exercise the consultation rights described below.
With respect to any Non-Serviced Whole Loan, the related Non-Serviced Special Servicer or Non-Serviced Master Servicer, as applicable pursuant to the related Intercreditor Agreement, will be required (i) to provide to each Non-Controlling Holder copies of any notice, information and report that it is required to provide to the related Non-Serviced Directing Certificateholder under the related Non-Serviced PSA with respect to the implementation of any recommended actions outlined in an asset status report relating to the related Non-Serviced Whole Loan or any proposed action to be taken in respect of a major decision under the related Non-Serviced PSA with respect to such Non-Serviced Whole Loan (for this purpose, without regard to whether such items are actually required to be provided to the related Non-Serviced Directing Certificateholder due to the occurrence and continuance of a “control termination event” or a “consultation termination event” (or analogous concepts) under such Non-Serviced PSA) and (ii) to consult (or to use reasonable efforts to consult) each Non-Controlling Holder on a strictly non-binding basis (to the extent such party requests consultation after having received the aforementioned notices, information and reports) with respect to any such recommended actions by such Non-Serviced Special Servicer or any proposed action to be taken by such Non-Serviced Special Servicer in respect of the applicable major decision.
Such consultation right will generally expire ten (10) business days after the delivery to such Non-Controlling Holder of written notice of a proposed action (together with copies of the notices, information and reports required to be delivered thereto), whether or not such Non-Controlling Holder has responded within such period (unless the related Non-Serviced Special Servicer proposes a new course of action that is materially different from the action previously proposed, in which case such ten (10) business day period will be deemed to begin anew). In no event will the related Non-Serviced Special Servicer be obligated to follow or take any alternative actions recommended by any Non-Controlling Holder (or its representative).
If the related Non-Serviced Special Servicer determines that immediate action is necessary to protect the interests of the holders of the promissory notes comprising a
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Non-Serviced Whole Loan, it may take, in accordance with the servicing standard under the Non-Serviced PSA, any action constituting a major decision with respect to such Non-Serviced Whole Loan or any action set forth in any applicable asset status report before the expiration of the aforementioned typical ten (10) business day period.
In addition to the aforementioned consultation right, each Non-Controlling Holder will have the right to annual meetings (which may be held telephonically) with the related Non-Serviced Master Servicer or the related Non-Serviced Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to such Non-Serviced Master Servicer or Non-Serviced Special Servicer, as applicable, in which servicing issues related to the related Non-Serviced Whole Loan are discussed.
If the special servicer termination event under the related Non-Serviced PSA has occurred that affects a Non-Controlling Holder, such holder will have the right to direct the related Non-Serviced Trustee to terminate the related Non-Serviced Special Servicer under such Non-Serviced PSA solely with respect to the related Non-Serviced Whole Loan, other than with respect to any rights such Non-Serviced Special Servicer may have as a certificateholder under such Non-Serviced PSA, entitlements to amounts payable to such Non-Serviced Special Servicer at the time of termination, entitlements to indemnification amounts and any other entitlements of the terminated party that survive the termination.
Custody of the Mortgage File
The Non-Serviced Custodian is the custodian of the mortgage file related to the related Non-Serviced Whole Loan (other than any promissory notes not contributed to the related Non-Serviced Securitization Trust).
Sale of Defaulted Mortgage Loan
If any Non-Serviced Whole Loan becomes a defaulted mortgage loan, and if the related Non-Serviced Special Servicer decides to sell the related Companion Loan contributed to the Non-Serviced Securitization Trust, such Non-Serviced Special Servicer will be required to sell the related Non-Serviced Mortgage Loan and each Non-Serviced Pari Passu Companion Loan together as interests evidencing one whole loan. Notwithstanding the foregoing, the related Non-Serviced Special Servicer will not be permitted to sell a Non-Serviced Whole Loan without the consent of each Non-Controlling Holder unless it has delivered to such holder (a) at least fifteen (15) business days prior written notice of any decision to attempt to sell the related Non-Serviced Whole Loan, (b) at least ten (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 Non-Serviced Special Servicer, a copy of the most recent appraisal and certain other supplementary documents (if requested by such holder), and (c) until the sale is completed, and a reasonable period (but no less time than is afforded to other offerors and the applicable Non-Serviced Directing Certificateholder under the related Non-Serviced PSA) prior to the proposed sale date, all information and documents being provided to offerors or otherwise approved by the related Non-Serviced Master Servicer or Non-Serviced Special Servicer in connection with the proposed sale.
The Non-Serviced AB Whole Loan
The Flats at East Bank Whole Loan
General. The Flats at East Bank Mortgage Loan, representing approximately 2.0% of the Initial Pool Balance, is part of a Whole Loan that is part of a split loan structure comprised of two (2) senior promissory notes and one (1) subordinate promissory note, each of which is
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secured by the same mortgage instrument on the same underlying Mortgaged Property, with an aggregate initial principal balance of $93,000,000. One such senior promissory note, Note A-2, with an aggregate initial principal balance of $13,000,000 (the “Flats at East Bank Mortgage Loan”), will be deposited into this securitization.
The Flats at East Bank AB Whole Loan (as defined below), is evidenced by (i) the Flats at East Bank Mortgage Loan, (ii) one senior promissory note designated as Note A-1, with an aggregate initial principal balance of $59,000,000, which is expected to be held by the CGCMT 2018-C5 Trust, and referred to in this prospectus as (the “Flats at East Bank Pari Passu Companion Loan” and is pari passu in right of payment with the Flats at East Bank Mortgage Loan, and (iii) one (1) subordinate promissory note with an aggregate initial principal balance of $21,000,000, which is currently held by ACREFI Mortgage Lending, LLC, is referred to in this prospectus as the “Flats at East Bank Subordinate Companion Loan” and is subordinate in right of payment with the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan. The Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan are collectively referred to in this prospectus as the “Flats at East Bank Senior Loan” and the Flats at East Bank Senior Loan, together with the Flats at East Bank Subordinate Companion Loan, are collectively referred to in this prospectus as the “Flats at East Bank AB Whole Loan.” The Flats at East Bank Pari Passu Companion Loan and the Flats at East Bank Subordinate Companion Loan will not be transferred to the issuing entity and will not be part of the Mortgage Pool.
The holders of the Flats at East Bank AB Whole Loan (the “Flats at East Bank Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each Flats at East Bank Noteholder (the “Flats at East Bank Intercreditor Agreement”).
Servicing. The Flats at East Bank AB Whole Loan is expected to be serviced and administered pursuant to the terms of the CGCMT 2018-C5 PSA by Midland Loan Services, a Division of PNC Bank, National Association, as master servicer (the “CGCMT 2018-C5 Master Servicer”) and, if necessary, KeyBank National Association, as special servicer (the “CGCMT 2018-C5 Special Servicer”) pursuant to the terms of the CGCMT 2018-C5 Pooling and Servicing Agreement (the “CGCMT 2018-C5 PSA”) in the manner described under “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans—Servicing of the Flats at East Bank Mortgage Loan”, but subject to the terms of the Flats at East Bank Intercreditor Agreement. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans—Servicing of the Flats at East Bank Mortgage Loan”.
Prior to the occurrence and continuance of a Flats at East Bank Control Appraisal Period (as defined below), and for so long as the Flats at East Bank Subordinate Companion Loan Noteholder holding greater than 50% of the aggregate principal balance of the Flats at East Bank Subordinate Companion Loan evidenced by promissory Note B (the “Flats at East Bank Controlling Subordinate Companion Loan Noteholder”) is the Flats at East Bank AB Whole Loan Controlling Holder (as defined below), the Flats at East Bank Controlling Subordinate Companion Loan Noteholder will have the right to approve certain modifications and consent to certain actions to be taken with respect to the Flats at East Bank AB Whole Loan, as more fully described below. Furthermore, subject to certain conditions set forth in the Flats at East Bank Intercreditor Agreement, the Flats at East Bank Subordinate Companion Loan Noteholder will have the right to cure certain defaults by the related borrower, as more fully described below.
Application of Payments. Pursuant to the Flats at East Bank Intercreditor Agreement, prior to the occurrence and continuance of (i) an event of default with respect to an obligation to pay money due under the Flats at East Bank AB Whole Loan, (ii) any other event of default for which the Flats at East Bank AB Whole Loan is accelerated, (iii) any
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other event of default which causes the Flats at East Bank AB Whole Loan to become a Specially Serviced Loan or (iv) any bankruptcy or insolvency event that constitutes an event of default (each, a “Flats at East Bank Sequential Pay Event”) (or, if such a default has occurred, but has been cured by the Flats at East Bank AB Whole Loan Controlling Holder or the default cure period has not yet expired and the Flats at East Bank AB Whole Loan Controlling Holder is diligently exercising its cure rights under the Flats at East Bank Intercreditor Agreement), after payment of amounts for required reserves or escrows required by the mortgage loan documents and amounts payable or reimbursable with respect to the Flats at East Bank AB Whole Loan (including any penalty charges) under the CGCMT 2018-C5 PSA to the CGCMT 2018-C5 Master Servicer, the CGCMT 2018-C5 Special Servicer, the operating advisor, the asset representations reviewer, the certificate administrator or the trustee, payments and proceeds received with respect to the Flats at East Bank AB Whole Loan will generally be applied in the following order:
First, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan, on a pro rata basis in an amount equal to the accrued and unpaid interest then due and payable on the outstanding principal of their respective notes at their respective net interest rates;
Second, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan, on a pro rata and pari passu basis in an amount equal to their respective percentage interests of the net proceeds required to be applied to prepay the outstanding principal balance of the Flats at East Bank AB Whole Loan, until their principal balances have been reduced to zero;
Third, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan on a pro rata and pari passu basis up to the amount of any unreimbursed costs and expenses paid by such holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan including any recovered costs not previously reimbursed to such holders (or paid or advanced by the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer on their behalf and not previously paid or reimbursed);
Fourth, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan on a pro rata and pari passu basis in an amount equal to the product of (i) the percentage interest of each respective note multiplied by (ii) the relative spread of each respective note, and (iii) any prepayment premium payable to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan to the extent paid by the related borrower;
Fifth, to the holders of the Flats at East Bank Subordinate Companion Loan in an amount equal to the interest then due and payable on the outstanding principal of its note at its net interest rate;
Sixth, to the holders of the Flats at East Bank Subordinate Companion Loan in an amount equal to their respective percentage interest in the Flats at East Bank AB Whole Loan of principal payments received, if any, until the principal balance of the Flats at East Bank Subordinate Companion Loan has been reduced to zero;
Seventh, to the holders of the Flats at East Bank Subordinate Companion Loan in an amount equal to the product of (i) the percentage interest of their note multiplied by (ii) the relative spread for their note and (iii) any prepayment premium payable on their note to the extent paid by the related borrower;
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Eighth, to the holders of the Flats at East Bank Subordinate Companion Loan in the amount of the scheduled amortization payment for their note and then to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan in the amount of the scheduled amortization payments for their notes, as set forth on Schedule IX to the Flats at East Bank loan agreement;
Ninth, to the extent the Flats at East Bank Subordinate Companion Loan Noteholder has made any payments or advances to cure defaults pursuant to —Rights of the Flats at East Bank Companion Loan Noteholder below, to reimburse the Flats at East Bank Subordinate Companion Loan Noteholder for all such cure payments;
Tenth, if the proceeds of any foreclosure sale or any liquidation of the Flats at East Bank AB Whole Loan or the Flats at East Bank Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (first)-(ninth) and, as a result of a workout, the balance of the Flats at East Bank Subordinate Companion Loan has been reduced, to the Flats at East Bank Subordinate Companion Loan Noteholder in an amount up to the reduction, if any, of the principal balance of the Flats at East Bank Subordinate Companion Loan as a result of such workout, plus interest on such amount at the applicable net interest rate;
Eleventh, to the extent assumption or transfer fees actually paid by the related borrower are not required to be otherwise applied under the CGCMT 2018-C5 PSA, including, without limitation, to provide reimbursement for interest on any Advances, to pay any additional servicing expenses or to compensate any master servicer or applicable special servicer (in each case provided that such reimbursements or payments relate to the Flats at East Bank AB Whole Loan or the Flats at East Bank Mortgaged Property), any such assumption or transfer fees, to the extent actually paid by the borrower, will be required to be paid to the Flats at East Bank Mortgage Loan Noteholder, the Flats at East Bank Pari Passu Companion Loan Noteholder and the Flats at East Bank Subordinate Companion Loan Noteholder, pro rata, based on their respective percentage interests in the Flats at East Bank AB Whole Loan; and
Lastly, if any excess amount is available to be distributed in respect of the Flats at East Bank AB Whole Loan, and not otherwise applied in accordance with the foregoing clauses (first)-(eleventh), any remaining amount is required to be paid to the holders of the Flats at East Bank Mortgage Loan, the Flats at East Bank Pari Passu Companion Loan and the Flats at East Bank Subordinate Companion Loan, pro rata based on their respective initial percentage interests in the Flats at East Bank AB Whole Loan.
Following the occurrence and during the continuance of a Flats at East Bank Sequential Pay Event, after payment of all amounts for required reserves or escrows required by the mortgage loan documents and amounts then payable or reimbursable under the CGCMT 2018-C5 PSA to the CGCMT 2018-C5 Master Servicer, the CGCMT 2018-C5 Special Servicer, the operating advisor, the asset representations reviewer, the certificate administrator and the trustee, payments and proceeds with respect to the Flats at East Bank AB Whole Loan will generally be applied in the following order, in each case to the extent of available funds:
First, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan on a pro rata basis in an amount equal to the interest then due and payable on the outstanding principal of their respective notes at their net interest rate;
Second, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan on a pro rata basis based on the outstanding principal
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balances of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan until their principal balances have been reduced to zero;
Third, up to the amount of any unreimbursed costs and expenses paid by each of the Flats at East Bank Mortgage Loan Noteholder and the Flats at East Bank Pari Passu Companion Loan Noteholder, including any recovered costs not previously reimbursed to such holder (or paid or advanced by the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer on their behalf and not previously paid or reimbursed);
Fourth, to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan on a pro rata and pari passu basis in an amount equal to the product of (i) the percentage interest of each respective note multiplied by (ii) the relative spread of each respective note, and (iii) any prepayment premium payable to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan to the extent paid by the related borrower;
Fifth, if the proceeds of any foreclosure sale or any liquidation of the Flats at East Bank AB Whole Loan or Flats at East Bank Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing (first)-(fourth) and, as a result of a workout, the principal balance of the Flats at East Bank Mortgage Loan and Flats at East Bank Parris Passu Companion Loan has been reduced, to the holders of the Flats at East Bank Mortgage Loan and Flats at East Bank Pari Passu Companion Loan in an amount up to the reduction, if any, of the principal balance of the Flats at East Bank Mortgage Loan and Flats at East Bank Parris Passu Companion Loan as a result of such workout, plus interest on such amount at the applicable interest rate;
Sixth, to the Flats at East Bank Subordinate Companion Loan Noteholder in an amount equal to the accrued and unpaid interest then due and payable on their respective notes at their net interest rate;
Seventh, to the Flats at East Bank Subordinate Companion Loan Noteholder until its principal balance has been reduced to zero;
Eighth, to the Flats at East Bank Subordinate Companion Loan Noteholder on a pro rata and pari passu basis in an amount equal to the product of (i) the percentage interest of the related note multiplied by (ii) the relative spread for their note and (iii) any prepayment premium payable on their note to the extent paid by the related borrower;
Ninth, to the extent the Flats at East Bank Subordinate Companion Loan Noteholder has made any payments or advances to cure defaults pursuant to —“Rights of the Flats at East Bank Subordinate Companion Loan Noteholder” below, to reimburse the Flats at East Bank Subordinate Companion Loan Noteholder for all such cure payments;
Tenth, if the proceeds of any foreclosure sale or any liquidation of the Flats at East Bank AB Whole Loan or Flats at East Bank Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing (first)-(ninth) and, as a result of a workout, the balance of the Flats at East Bank Subordinate Companion Loan has been reduced, to the Flats at East Bank Subordinate Companion Loan Noteholder in an amount up to the reduction, if any, of the principal balance of the Flats at East Bank Subordinate Companion Loan as a result of such workout, plus interest on such amount at the applicable interest rate;
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Eleventh, to the extent assumption or transfer fees actually paid by the related borrower are not required to be otherwise applied under the CGCMT 2018-C5 PSA, including, without limitation, to provide reimbursement for interest on any Advances, to pay any additional servicing expenses or to compensate any master servicer or applicable special servicer (in each case provided that such reimbursements or payments relate to the Flats at East Bank AB Whole Loan or the Flats at East Bank Mortgaged Property), any such assumption or transfer fees, to the extent actually paid by the borrower, will be required to be paid to the Flats at East Bank Mortgage Loan Noteholder, the Flats at East Bank Pari Passu Companion Loan Noteholder and the Flats at East Bank Subordinate Companion Loan Noteholder, pro rata, based on their respective percentage interests in the Flats at East Bank AB Whole Loan; and
Lastly, if any excess amount is available to be distributed in respect of the Flats at East Bank AB Whole Loan, and not otherwise applied in accordance with the foregoing clauses (first)-(eleventh), any remaining amount is required to be paid to the holders of the Flats at East Bank Mortgage Loan, the Flats at East Bank Pari Passu Companion Loan and the Flats at East Bank Subordinate Companion Loan, pro rata, based on their respective initial percentage interests in the Flats at East Bank AB Whole Loan.
Application of Penalty Charges. Penalty charges paid on the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan will be allocated to the holders of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan on a pro rata and pari passu basis and applied first, to reduce, on a pro rata basis, the amounts payable on the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan by the amount necessary to pay the master servicer, the trustee, or the CGCMT 2018-C5 Special Servicer for any interest accrued on any servicing advances and reimbursement of any servicing advances in accordance with the terms of the CGCMT 2018-C5 PSA, second, to reduce, on a pro rata basis, the respective amounts payable on the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan by the amount necessary to pay the CGCMT 2018-C5 Master Servicer, trustee or the master servicer for any interest accrued on any P&I Advance made with respect to such notes by such party (if and as specified in the CGCMT 2018-C5 PSA or the PSA, as applicable), third to reduce, on a pro rata basis, the amounts payable on the Flats at East Bank Mortgage Loan and the Flats at East Bank 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) incurred with respect to the Flats at East Bank Mortgage Loan, and finally, (i) in the case of the remaining amount of penalty charges allocable pursuant to the Flats at East Bank Mortgage Loan, be paid to the CGCMT 2018-C5 Master Servicer and/or the CGCMT 2018-C5 Special Servicer as additional servicing compensation as provided in the CGCMT 2018-C5 PSA.
Notwithstanding the foregoing, if a P&I Advance is made with respect to the Flats at East Bank Mortgage Loan pursuant to the terms of the pooling and servicing agreement for this securitization, 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 Flats at East Bank Mortgage Loan or, as and to the extent described under “Pooling and Servicing Agreement—Advances” in this prospectus, out of future payments and collections on other Mortgage Loans, but not out of payments or other collections on the Flats at East Bank Pari Passu Companion Loan or any loans included in any future securitization trust related to the Flats at East Bank Pari Passu Companion Loan.
Certain costs and expenses (such as a pro rata share of any related servicing advances) allocable to a Flats at East Bank Pari Passu Companion Loan or the Flats at East Bank
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Mortgage Loan, as applicable, may be paid or reimbursed out of payments and other collections on the Mortgage Pool, subject to the issuing entity’s right, if any, to reimbursement from future payments and other collections on the Flats at East Bank Pari Passu Companion Loan or from general collections of the securitization trusts holding the Flats at East Bank Pari Passu Companion Loan. This may result in temporary (or, if not ultimately reimbursed, permanent) shortfalls to the holders of the Certificates.
Consultation and Control. Prior to the occurrence and continuance of a Flats at East Bank Control Appraisal Period (as defined below) with respect to the Flats at East Bank Subordinate Companion Loan, neither the Flats at East Bank AB Whole Loan Controlling Holder nor the operating advisor will have any consent and/or consultation rights with respect to Flats at East Bank AB Whole Loan. After the occurrence and during the continuance of a Flats at East Bank Control Appraisal Period with respect to the Flats at East Bank Subordinate Companion Loan, the Flats at East Bank AB Whole Loan Controlling Holder and the operating advisor will each have the same consent and/or consultation rights with respect to the Flats at East Bank AB Whole Loan as each does, and for so long as each does, with respect to the other Mortgage Loans included in the issuing entity. See “Pooling and Servicing Agreement—The Directing Holder”.
In addition, prior to the occurrence and continuance of a Flats at East Bank Control Appraisal Period, the consent of the Flats at East Bank Controlling Subordinate Companion Loan Noteholder as the Flats at East Bank AB Whole Loan Controlling Holder, which will be obtained by the CGCMT 2018-C5 Special Servicer, is required for any Flats at East Bank Major Decision; provided that the foregoing does not relieve the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, from complying with the Servicing Standard or any applicable law, including the REMIC Provisions.
“Flats at East Bank Major Decision” means:
(1) any proposed or actual foreclosure upon or comparable conversion (which may include acquisitions of the related REO Property) of the ownership of the Flats at East Bank Mortgaged Property if it comes into and continues in default;
(2) any modification, consent to a modification or waiver of any monetary term (other than late fees and default interest) or material non-monetary term (including, without limitation, insurance requirements, the timing of payments and acceptance of discounted pay-offs) of the Flats at East Bank AB Whole Loan or any extension of the maturity date of the Flats at East Bank AB Whole Loan;
(3) following a default or an event of default with respect to the Flats at East Bank AB Whole Loan, any exercise of remedies, including the acceleration of the Flats at East Bank AB Whole Loan or initiation of any proceedings, judicial, bankruptcy or otherwise, with respect to the applicable borrower or any guarantor or indemnitor, and the election of any action in a bankruptcy or insolvency proceeding involving the borrower or any guarantor or indemnitor under the Flats at East Bank AB Whole Loan to seek relief from the automatic stay or dismissal of a bankruptcy filing or making an §1111(b)(2) election on behalf of the holders of the Flats at East Bank AB Whole Loan;
(4) any sale of the Flats at East Bank Mortgage Loan (when it is a Defaulted Loan) or REO Property for less than the applicable Purchase Price;
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(5) any determination to bring the related REO Property into compliance with applicable environmental laws or to otherwise address hazardous materials located at the related REO Property;
(6) any direct or indirect transfer of the Flats at East Bank Mortgaged Property, release of collateral or any acceptance of substitute or additional collateral for the Flats at East Bank AB Whole Loan, or any consent to either of the foregoing, other than if otherwise required pursuant to the specific terms of the Mortgage Loan documents and for which there is no lender discretion;
(7) any (1) waiver of a “due on sale” or “due on encumbrance” clause with respect to the Flats at East Bank AB Whole Loan, (2) consent to such a waiver, consent to a transfer of the Flats at East Bank Mortgaged Property or interests in the applicable borrower or (4) any consent or approval related to the incurrence of additional debt by the applicable borrower or any mezzanine financing by any beneficial owner of a borrower, in each case other than any such transfer or incurrence of debt as may be effected as-of-right without the consent of the lender under the related loan agreement or related to an immaterial easement, right of way or similar agreement;
(8) any material modification, waiver or amendment of, or any material consent granted or withheld in connection with, or the execution of, an intercreditor agreement, co-lender agreement or similar agreement with any mezzanine lender or subordinate debt holder related to the Flats at East Bank AB Whole Loan, or any action to enforce rights (or decision not to enforce rights) with respect thereto, or any material modification, waiver or amendment thereof;
(9) any amendment, modification or termination of any management agreement, any property management company changes including, without limitation, approval of the termination of a manager and appointment of a new property manager or franchise changes (in each case, if the lender is required to consent or approve such changes under the Mortgage Loan documents);
(10) any determination that a cash sweep event period has commenced or terminated, releases of any escrow amounts, reserve accounts or letters of credit held as performance or “earn out” escrows or reserves other than those required pursuant to the specific terms of the mortgage loan documents and for which there is no lender discretion (the determination of whether the conditions precedent to releasing or reducing any such escrow accounts, reserve accounts or letters of credit have been satisfied will not constitute matters of lender discretion for purposes of this clause (ix));
(11) any acceptance of an assumption agreement (or any other agreement permitting transfers of interests in the Flats at East Bank AB Whole Loan borrower or any guarantor or indemnitor) releasing a Flats at East Bank AB Whole Loan borrower or any guarantor or indemnitor from liability under the mortgage loan documents (other than pursuant to the specific terms of the mortgage loan documents and for which there is no lender discretion);
(12) any determination of an Acceptable Insurance Default;
(13) the approval of or voting on any plan of reorganization, restructuring or similar plan in the bankruptcy of the related borrower;
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(14) any material modification, waiver or amendment of a guaranty related to the Flats at East Bank Mortgage Loan;
(15) any (A) proposed modification or waiver of any material provision in the mortgage loan documents governing the type, nature or amount of insurance coverage required to be obtained and maintained by the applicable borrower, and (B) any approval of any casualty insurance settlements or condemnation settlements related to the Flats at East Bank Mortgaged Property;
(16) any determination by the CGCMT 2018-C5 Master Servicer to transfer the Flats at East Bank Mortgage Loan to the CGCMT 2018-C5 Special Servicer based on a determination that (A) a default (other than an Acceptable Insurance Default) is reasonably foreseeable, (B) such default will materially impair the value of the related Flats at East Bank Mortgaged Property as security for such Flats at East Bank Mortgage Loan and (C) the default is likely to continue unremedied;
(17) any adoption or implementation of a budget submitted by the borrower to the extent lender approval is required under the mortgage loan documents;
(18) the approval or adoption of any material alteration at the Flats at East Bank Mortgaged Property;
(19) any approval of a major lease or any modification, waiver or amendment of any major lease, the execution of any new major lease or the granting of a subordination and nondisturbance or attornment agreement in connection with any major lease;
(20) any modification, waiver or amendment of the ground lease, the execution of any new ground lease, the granting of a subordination and nondisturbance or attornment agreement in connection with any ground lease, or any determination as to whether conditions precedent to any optional fee transfer have been satisfied;
(21) any modification, waiver or amendment of any tax increment financing document, or the execution of any new tax increment financing document; or
(22) the approval of any modification or amendment to the access lease that adversely affects the rights of access to the roadways demised under such access lease.
Notwithstanding the foregoing, pursuant to the terms of the Flats at East Bank Intercreditor Agreement, after the occurrence of and during the continuance of a Flats at East Bank Control Appraisal Period, the Flats at East Bank Pari Passu Companion Loan Noteholder (or their representatives which, at any time any related Flats at East Bank Pari Passu Companion Loan is included in one or more securitizations, may be the controlling class certificateholder for the related securitization or any other party assigned the rights to exercise the rights of the holder of the related Flats at East Bank Pari Passu Companion Loan, as and to the extent provided in the related pooling and servicing agreement) will (i) have the right to receive copies of all notices, information and reports that the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, is required to provide to the Flats at East Bank AB Whole Loan Controlling Holder (within the same time frame such notices, information and reports are or would have been required to be provided
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to the Flats at East Bank AB Whole Loan Controlling Holder under the CGCMT 2018-C5 PSA without regard to the occurrence and continuance of a control termination event or occurrence of a consultation termination event) with respect to any Flats at East Bank Major Decision or the implementation of any recommended action outlined in an asset status report relating to the Flats at East Bank AB Whole Loan and (ii) have the right to be consulted on a strictly non-binding basis to the extent the Flats at East Bank Mortgage Loan Noteholders (or their representatives) request consultation with respect to certain Flats at East Bank Major Decisions or the implementation of any recommended action outlined in an asset status report relating to the Flats at East Bank AB Whole Loan. The consultation rights of the Flats at East Bank Mortgage Loan Noteholders (or their representatives) will expire 10 business days following the delivery of written notice and information relating to the matter subject to consultation whether or not the Flats at East Bank Mortgage Loan Noteholders (or their representatives) have responded within such period; provided that if the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 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 from the date of delivery of such new proposal and delivery of all information related to such new proposal. Notwithstanding the consultation rights described above, the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, is permitted to make any material decision or take any action set forth in the asset status report before the expiration of the aforementioned 10 business day period if it reasonably determines in accordance with the Servicing Standard that failure to take such actions prior to consultation would materially and adversely affect the interests of the holders of the Flats at East Bank Mortgage Loan and the related Flats at East Bank Pari Passu Companion Loan.
Neither the CGCMT 2018-C5 Master Servicer nor the CGCMT 2018-C5 Special Servicer may follow or be required to follow any direction, advice or consultation provided by the Flats at East Bank AB Whole Loan Controlling Holder or the Flats at East Bank Mortgage Loan Noteholders (or their representatives) that would require or cause the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, to violate any applicable law, including the REMIC Regulations, be inconsistent with the servicing standard under the CGCMT 2018-C5 PSA, require or cause the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, to violate provisions of the Flats at East Bank Intercreditor Agreement or the CGCMT 2018-C5 PSA, require or cause the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, to violate the terms of the Flats at East Bank AB Whole Loan, or materially expand the scope of any of the CGCMT 2018-C5 Master Servicer’s or the CGCMT 2018-C5 Special Servicer’s, as applicable, responsibilities under the Flats at East Bank Intercreditor Agreement or the CGCMT 2018-C5 PSA.
In addition to the consultation rights of the Flats at East Bank Pari Passu Companion Loan Noteholders (or their representatives) described above, pursuant to the terms of the Flats at East Bank Intercreditor Agreement, the Flats at East Bank Mortgage Loan Noteholders (or their representatives) will have the right to attend (in-person or telephonically in the discretion of the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable) annual meetings with the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer, as applicable, for the purpose of discussing servicing issues related to the Flats at East Bank AB Whole Loan.
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The Controlling Noteholder. Pursuant to the Flats at East Bank Intercreditor Agreement, the directing holder (the “Flats at East Bank AB Whole Loan Controlling Holder”) with respect to the Flats at East Bank AB Whole Loan, as of any date of determination, will be:
| ● | the Flats at East Bank Subordinate Companion Loan Noteholder, unless a Flats at East Bank Control Appraisal Period has occurred and is continuing; and |
| ● | if a Flats at East Bank Control Appraisal Period has occurred and is continuing, the Flats at East Bank Mortgage Loan Noteholder; provided that at any time the Flats at East Bank Mortgage Loan Noteholder is the Flats at East Bank AB Whole Loan Controlling Holder, references to the Flats at East Bank AB Whole Loan Controlling Holder will mean the holders of the majority of the controlling class of securities issued in this securitization; provided, further, that if any noteholder would be the Flats at East Bank AB Whole Loan Controlling Holder, but any interest in the note of such noteholder is held by the Flats at East Bank Borrower or a related party to the applicable borrower, or which would otherwise be entitled to exercise the rights of the Flats at East Bank AB Whole Loan Controlling Holder, a Flats at East Bank Control Appraisal Period will have been deemed to have occurred with respect to such noteholder. |
A “Flats at East Bank Control Appraisal Period” will mean a period that exists with respect to the Flats at East Bank Subordinate Companion Loan, if and for so long as: (a)(i) the initial unpaid principal balance of the Flats at East Bank Subordinate Companion Loan minus (ii) the sum (without duplication) of (x) any payments of principal (whether as principal prepayments or otherwise) allocated to, and received on, the Flats at East Bank Subordinate Companion Loan after the date of creation of the Flats at East Bank Subordinate Companion Loan, (y) any Appraisal Reduction Amount for the Flats at East Bank AB Whole Loan that is allocated to the Flats at East Bank Subordinate Companion Loan and (z) without duplication, any losses realized with respect to the Flats at East Bank Mortgaged Property or the Flats at East Bank AB Whole Loan that are allocated to the Flats at East Bank Subordinate Companion Loan, is less than (b) 25% of the of the remainder of the (i) initial unpaid principal balance of the Flats at East Bank Subordinate Companion Loan less (ii) any payments of principal (whether as principal prepayments or otherwise) allocated to, and received by, the Flats at East Bank Subordinate Companion Loan Noteholder after the creation of the Flats at East Bank Subordinate Companion Loan (and not returned to the holders of the Flats at East Bank Mortgage Loan and Flats at East Bank Pari Passu Companion Loan, the CGCMT 2018-C5 Master Servicer, CGCMT 2018-C5 Special Servicer or the related borrower).
The Flats at East Bank Controlling Subordinate Companion Loan Noteholder is entitled to avoid its applicable Flats at East Bank Control Appraisal Period caused by the application of an Appraisal Reduction Amount (as opposed to a Flats at East Bank Control Appraisal Period that is deemed to have occurred as a result of any borrower related party holding an interest in the Flats at East Bank Subordinate Companion Loan or the existence of any circumstances that would otherwise permit any borrower related party to exercise the rights of the Flats at East Bank Subordinate Companion Loan as Flats at East Bank AB Whole Loan Controlling Holder) upon satisfaction of certain conditions, including without limitation, delivery of additional collateral in the form of either (x) cash collateral acceptable to the CGCMT 2018-C5 Master Servicer or the CGCMT 2018-C5 Special Servicer or (y) an unconditional and irrevocable standby letter of credit issued by a bank or other financial institution in a form acceptable to the CGCMT 2018-C5 Master Servicer or CGCMT 2018-C5 Special Servicer that meets the rating requirements as described in the Flats at East Bank Intercreditor Agreement (either (x) or (y), the “Flats at East Bank Threshold Event
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Collateral”) in an amount that, when added to the appraised value of the Flats at East Bank Mortgaged Property as used to calculate any Appraisal Reduction Amount for the Flats at East Bank AB Whole Loan pursuant to the CGCMT 2018-C5 PSA, would reduce such Appraisal Reduction Amount enough to cause the applicable Flats at East Bank Control Appraisal Period not to exist.
Cure Rights. In the event that the Flats at East Bank borrower fails to make any payment of a liquidated sum of money due on the Flats at East Bank AB Whole Loan that results in a monetary event of default or the borrower otherwise defaults with respect to the Flats at East Bank AB Whole Loan, the Flats at East Bank Subordinate Companion Loan Noteholder will have the right to cure such event of default subject to certain limitations set forth in the Flats at East Bank Intercreditor Agreement. The Flats at East Bank Subordinate Companion Loan Noteholder will be limited to, in the aggregate, six (6) cure payments over the life of the Flats at East Bank AB Whole Loan, and, with respect to monetary events of default, no more than three (3) of which may be consecutive. So long as the Flats at East Bank Subordinate Companion Loan Noteholder is permitted to make a cure payment with respect to a non-monetary event of default, and is diligently prosecuting the cure of same, under the Flats at East Bank Intercreditor Agreement, neither the CGCMT 2018-C5 Master Servicer nor the CGCMT 2018-C5 Special Servicer will be permitted to treat such event of default as such for purposes of transferring the Flats at East Bank AB Whole Loan to special servicing or exercising remedies.
Purchase Option. If an event of default with respect to the Flats at East Bank AB Whole Loan has occurred and is continuing, the Flats at East Bank Subordinate Companion Loan Noteholder will have the option to purchase the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan in whole but not in part at a price generally equal to the sum, without duplication, of (a) the principal balance of the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan, (b) accrued and unpaid interest on the Flats at East Bank Mortgage Loan and Flats at East Bank Pari Passu Companion Loan through the end of the related interest accrual period, (c) any other amounts due under the Flats at East Bank Mortgage Loan and the Flats at East Bank Pari Passu Companion Loan, but excluding prepayment premiums, default interest, late fees, exit fees and any other similar fees, (d) without duplication of amounts under clause (c), any unreimbursed property protection or servicing advances and any expenses incurred in enforcing the mortgage loan documents (including, without limitation, servicing advances payable or reimbursable to any servicer, and earned and unreimbursed special servicing fees not in excess of the limitations set forth in the Flats at East Bank Intercreditor Agreement), (e) without duplication of amounts under clause (c), any accrued and unpaid interest on Advances, (f) (i) if the borrower or borrower related party is the purchaser or (ii) if the Flats at East Bank AB Whole Loan is not purchased within 90 days after such option first becomes exercisable pursuant to the Flats at East Bank Intercreditor Agreement, any liquidation or workout fees payable under the CGCMT 2018-C5 PSA with respect to the Flats at East Bank AB Whole Loan and (g) certain additional amounts to the extent provided for in the Flats at East Bank Intercreditor Agreement.
Sale of Defaulted Flats at East Bank AB Whole Loan. Pursuant to the terms of the Flats at East Bank Intercreditor Agreement and the CGCMT 2018-C5 PSA, if an event of default with respect to the Flats at East Bank AB Whole Loan has occurred and is continuing, then the Flats at East Bank Subordinate Companion Loan Noteholder, upon written notice to the holders of the Flats at East Bank Senior Loans (the “Flats at East Bank Purchase Notice”), will have the right to purchase all (but not less than all) of the Flats at East Bank Senior Loans for the purchase price provided in the Flats at East Bank Co-Lender Agreement on a date not more than 45 days after providing written notice.
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The right of the Flats at East Bank Subordinate Companion Loan Noteholder to purchase the Flats at East Bank Senior Loans will automatically terminate upon a foreclosure sale, sale by power of sale or delivery of a deed in lieu of foreclosure with respect to the Flats at East Bank Mortgaged Property (and the Flats at East Bank Mortgage Loan Noteholder is required to give the Flats at East Bank Subordinate Companion Loan Noteholder 10 days’ written notice of its intent with respect to any such action). Notwithstanding the foregoing sentence, if title to the Flats at East Bank Mortgaged Property is transferred to the Flats at East Bank Mortgage Loan Noteholder or (or a designee on its behalf) not otherwise in connection with a consummation by the Flats at East Bank Mortgage Loan Noteholder of a foreclosure sale or sale by power of sale or acceptance of a deed in lieu of foreclosure, less than 10 days after the acceleration of the Flats at East Bank AB Whole Loan, the Flats at East Bank Mortgage Loan Noteholder must notify the Flats at East Bank Subordinate Companion Loan Noteholder and the Flats at East Bank Subordinate Companion Loan Noteholder will have a 15 day period from the date of such notice to deliver a Flats at East Bank Purchase Notice, in which case the Flats at East Bank Subordinate Companion Loan Noteholder will be obligated to purchase the Flats at East Bank Mortgaged Property, in immediately available funds, within a 15 day period at the applicable purchase price.
Special Servicer Appointment Rights. Pursuant to the Flats at East Bank Intercreditor Agreement and the CGCMT 2018-C5 PSA, the Flats at East Bank Controlling Subordinate Companion Loan Noteholder (other than during a Flats at East Bank Control Appraisal Period) will have the right, with or without cause, upon 10 days prior notice, to replace the CGCMT 2018-C5 Special Servicer then acting with respect to the Flats at East Bank AB Whole Loan and appoint a replacement special servicer in lieu of such applicable special servicer. During a Flats at East Bank Control Appraisal Period, the Controlling Class Representative (unless a Control Termination Event has occurred and is continuing), or the applicable Certificateholders with the requisite percentage of Voting Rights (if a Control Termination Event has occurred and is continuing) will have the right, with or without cause to replace the CGCMT 2018-C5 Special Servicer then acting with respect to the Flats at East Bank AB Whole Loan and appoint a replacement special servicer in lieu of such applicable special servicer, as described under “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans—Servicing of the Flats at East Bank Mortgage Loan” in this prospectus.
Additional Information
Each of the tables presented in Annex A-2 sets forth selected characteristics of the pool of Mortgage Loans as of the Cut-off Date, if applicable. For a detailed presentation of certain additional characteristics of the Mortgage Loans and the Mortgaged Properties on an individual basis, see Annex A-1. For a brief summary of the largest 15 Mortgage Loans in the pool of Mortgage Loans, see Annex A-3.
The description in this prospectus, including Annex A-1, A-2 and A-3, of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as expected to be constituted at the close of business on the Cut-off Date, as adjusted for the scheduled principal payments due on the Mortgage Loans on or before the Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan may be removed from the Mortgage Pool if the depositor deems such removal necessary or appropriate or if it is prepaid. This may cause the range of Mortgage Rates and maturities as well as the other characteristics of the Mortgage Loans to vary from those described in this prospectus.
A Form ABS-EE with the information required by Item 1125 of Regulation AB (17 C.F.R. § 229.1125), Schedule AL – Asset-Level Information will be filed or caused to be filed by the depositor with respect to the issuing entity on or prior to the date of the filing of this
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prospectus and will provide such information for a reporting period commencing on the day after the hypothetical Determination Date in July 2018 and ending on the hypothetical Determination Date in August 2018. In addition, a Current Report on Form 8-K containing detailed information regarding the Mortgage Loans will be available to persons (including beneficial owners of the Offered Certificates) who receive this prospectus and will be filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), together with the PSA, with the United States Securities and Exchange Commission (the “SEC”) on or prior to the date of the filing of the final prospectus.
Transaction Parties
The Sponsors and Mortgage Loan Sellers
Wells Fargo Bank, National Association, Barclays Bank PLC, Rialto Mortgage Finance, LLC, C-III Commercial Mortgage LLC and C-III Mortgage Funding LLC are referred to in this prospectus as the “originators”. The depositor will acquire the Mortgage Loans from Wells Fargo Bank, National Association, Barclays Bank PLC, Rialto Mortgage Finance, LLC, and C-III Commercial Mortgage LLC on or about July 17, 2018 (the “Closing Date”). Each mortgage loan seller is a “sponsor” of the securitization transaction described in this prospectus. The depositor will cause the Mortgage Loans in the Mortgage Pool to be assigned to the trustee pursuant to the PSA.
Wells Fargo Bank, National Association
General
Wells Fargo Bank, National Association (“Wells Fargo Bank”), a national banking association, is a wholly-owned subsidiary of Wells Fargo & Company (NYSE: WFC). The principal office of Wells Fargo Bank’s commercial mortgage origination division is located at 4150 E 42nd Street, 38th Floor, New York, New York 10017, and its telephone number is (212) 214-7468. Wells Fargo Bank is engaged in a general consumer banking, commercial banking, and trust business, offering a wide range of commercial, corporate, international, financial market, retail and fiduciary banking services. Wells Fargo Bank is a national banking association chartered by the Office of the Comptroller of the Currency (the “OCC”) and is subject to the regulation, supervision and examination of the OCC. Wells Fargo Bank is also the successor by merger to Wachovia Bank, National Association (“Wachovia Bank”), which, together with Wells Fargo Securities, LLC (formerly known as Wachovia Capital Markets, LLC), was previously a subsidiary of Wachovia Corporation. On December 31, 2008, Wachovia Corporation merged with and into Wells Fargo & Company. As a result of this transaction, the depositor, Wachovia Bank and Wells Fargo Securities, LLC became wholly-owned subsidiaries of Wells Fargo & Company, and affiliates of Wells Fargo Bank. On March 20, 2010, Wachovia Bank merged with and into Wells Fargo Bank.
Wells Fargo Bank, National Association’s Commercial Mortgage Securitization Program
Prior to its merger with Wachovia Bank, Wells Fargo Bank was an active participant in securitizations of commercial and multifamily mortgage loans as a mortgage loan seller and sponsor in securitizations for which unaffiliated entities acted as depositor. Between the inception of its commercial mortgage securitization program in 1995 and December 2007, Wells Fargo Bank originated approximately 5,360 fixed-rate commercial and multifamily mortgage loans with an aggregate original principal balance of approximately $32.4 billion, which were included in approximately 61 securitization transactions.
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Prior to its merger into Wells Fargo Bank, one of Wachovia Bank’s primary business lines was the underwriting and origination of mortgage loans secured by commercial or multifamily properties. With its commercial mortgage lending affiliates and predecessors, Wachovia Bank began originating and securitizing commercial mortgage loans in 1995. The total amount of commercial mortgage loans originated and securitized by Wachovia Bank from 1995 through November 2007 was approximately $87.9 billion. Approximately $81.0 billion of such commercial mortgage loans were securitized by an affiliate of Wachovia Bank acting as depositor, and approximately $6.9 billion were securitized by an unaffiliated entity acting as depositor.
Since 2010, and following the merger of Wachovia Bank into Wells Fargo Bank, Wells Fargo Bank has resumed its active participation in the securitization of commercial and multifamily mortgage loans. Wells Fargo Bank originates commercial and multifamily mortgage loans and, together with other mortgage loan sellers and sponsors, participates in the securitization of such mortgage loans by transferring them to the depositor or to an unaffiliated securitization depositor. In coordination with its affiliate, Wells Fargo Securities, LLC, and other underwriters, Wells Fargo Bank works with rating agencies, mortgage loan sellers, subordinated debt purchasers and master servicer in structuring securitizations in which it is a sponsor, a mortgage loan seller and an originator. For the twelve-month period ended December 31, 2016, Wells Fargo Bank securitized commercial and multifamily mortgage loans with an aggregate original principal balance of approximately $3.63 billion. Since the beginning of 2010, Wells Fargo Bank originated approximately 1,905 fixed-rate commercial and multifamily mortgage loans with an aggregate original principal balance of approximately $36.6 billion, which were included in 112 securitization transactions. The properties securing these loans include multifamily, office, retail, industrial, hospitality and self storage properties. Wells Fargo Bank and certain of its affiliates also originate other commercial and multifamily mortgage loans that are not securitized, including subordinated and mezzanine loans.
In addition to commercial and multifamily mortgage loans, Wells Fargo Bank and its affiliates have originated and securitized residential mortgage loans, auto loans, home equity loans, credit card receivables and student loans. Wells Fargo Bank and its affiliates have also served as sponsors, issuers, master servicer, servicers, certificate administrators, custodians and trustees in a wide array of securitization transactions.
Wells Fargo Bank’s Commercial Mortgage Loan Underwriting
General. Wells Fargo Bank’s commercial real estate finance group has the authority, with the approval from the appropriate credit authority, to originate fixed-rate, first lien commercial, multifamily or manufactured housing community mortgage loans for securitization. Wells Fargo Bank’s commercial real estate finance operation is staffed by real estate professionals. Wells Fargo Bank’s loan underwriting group is an integral component of the commercial real estate finance group which also includes groups responsible for loan origination and closing mortgage loans.
Upon receipt of an executed loan application, Wells Fargo Bank’s loan underwriters commence a review of the borrower’s financial condition and creditworthiness and the real property which will secure the loan.
Notwithstanding the discussion below, given the unique nature of income-producing real properties, the underwriting and origination procedures and the credit analysis with respect to any particular multifamily or commercial mortgage loan may differ significantly from one asset to another, and will be driven by circumstances particular to that property, including, among others, its type, current use, physical quality, size, environmental condition,
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location, market conditions, capital reserve requirements and additional collateral, tenants and leases, borrower identity, borrower sponsorship and/or performance history, and certain other factors. Consequently, we cannot assure you that the underwriting of any particular multifamily or commercial mortgage loan will conform to each of the general procedures described in this “—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting” section. For important information about the circumstances that have affected the underwriting of the mortgage loans in the mortgage pool, see the “Risk Factors” and “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” sections of this prospectus and the other subsections of this “Transaction Parties” section.
If a mortgage loan exhibits any one of the following credit positive characteristics, variances from general underwriting/origination procedures described below may 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; and (iv) elements of recourse included in the loan.
Loan Analysis. Generally, Wells Fargo Bank performs both a credit analysis and collateral analysis with respect to a loan applicant and the real estate that will secure the loan. In general, credit analysis of the borrower and the real estate includes a review of historical financial statements (or, in the case of acquisitions, often only current financial statements), rent rolls, certain leases, third-party credit reports, judgments, liens, bankruptcy and pending litigation searches and, if applicable, the loan payment history of the borrower. Wells Fargo Bank typically performs a qualitative analysis which incorporates independent credit checks and published debt and equity information with respect to certain principals of the borrower as well as the borrower itself. Borrowers are generally required to be single-purpose entities. The collateral analysis typically includes an analysis of the following, to the extent available and applicable based on property type: historical property operating statements, rent rolls, operating budgets, a projection of future performance, and a review of certain tenant leases. Depending on the type of collateral property and other factors, the credit of key tenants may also be reviewed. Each mortgaged property is generally inspected by a Wells Fargo Bank underwriter or qualified designee. Wells Fargo Bank generally requires third-party appraisals, as well as environmental and property condition reports and, if determined by Wells Fargo Bank to be applicable, seismic reports. Each report is reviewed for acceptability by a staff member of Wells Fargo Bank or a third-party consultant. Generally, the results of these reviews are incorporated into the underwriting report. In some instances, one or more of the procedures may be waived or modified by Wells Fargo Bank if it is determined not to adversely affect the mortgage loans originated by it in any material respect.
Loan Approval. Prior to loan closing, all mortgage loans to be originated by Wells Fargo Bank must be approved by one or more officers of Wells Fargo Bank (depending on loan size), who may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline a loan transaction.
Debt Service Coverage Ratios and Loan-to-Value Ratios. Generally, the debt service coverage ratios for Wells Fargo Bank mortgage loans will be equal to or greater than 1.20x; provided, however, that variances may be made when consideration is given to circumstances particular to the mortgage loan, the related mortgaged property, loan-to-value ratio, reserves or other factors. For example, Wells Fargo Bank may originate a mortgage loan with a debt service coverage ratio below 1.20x based on, among other things, the amortization features of the mortgage loan (for example, if the mortgage loan provides for relatively rapid amortization), the type of tenants and leases at the mortgaged property, the taking of additional collateral such as reserves, letters of credit and/or
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guarantees, Wells Fargo Bank’s judgment of improved property and/or market performance in the future and/or other relevant factors.
Generally, the loan-to-value ratio for Wells Fargo Bank mortgage loans will be equal to or less than 80%; provided, however, that variances may be made when consideration is given to circumstances particular to the mortgage loan, the related mortgaged property, debt service coverage, reserves or other factors. For example, Wells Fargo Bank may originate a mortgage loan with a loan-to-value ratio above 80% based on, among other things, the amortization features of the mortgage loan (for example, if the mortgage loan provides for relatively rapid amortization), the type of tenants and leases at the related mortgaged property, the taking of additional collateral such as reserves, letters of credit and/or guarantees, Wells Fargo Bank’s judgment of improved property and/or performance in the future and/or other relevant factors.
While the foregoing discussion generally reflects how calculations of debt service coverage ratios are made, it does not necessarily reflect the specific calculations made to determine the debt service coverage ratio disclosed in this prospectus with respect to the mortgage loans to be sold to the depositor by Wells Fargo Bank for deposit into the trust fund (the “Wells Fargo Bank Mortgage Loans”).
Additional Debt. When underwriting a multifamily or commercial mortgage loan, Wells Fargo Bank will take into account whether the mortgaged property and/or direct or indirect interest in a related borrower are encumbered by additional debt and will analyze the likely effect of that additional debt on repayment of the subject mortgage loan. It is possible that Wells Fargo Bank or an affiliate will be the lender on that additional debt, and may either sell such debt to an unaffiliated third party or hold it in inventory.
The combined debt service coverage ratios and loan-to-value ratios of a mortgage loan and the related additional debt may be significantly below 1.20x and significantly above 80%, notwithstanding that the mortgage loan by itself may satisfy such guidelines.
Assessments of Property Condition. As part of the underwriting process, Wells Fargo Bank will analyze the condition of the real property collateral for a prospective multifamily or commercial mortgage loan. To aid in that analysis, Wells Fargo Bank will typically inspect or retain a third party to inspect the property and will in most cases obtain the property assessments and reports described below.
Appraisals. Wells Fargo Bank will, in most cases, require that the real property collateral for a prospective multifamily or commercial mortgage loan be appraised by a state-certified appraiser, an appraiser belonging to the “Appraisal Institute”, a membership association of professional real estate appraisers, or an otherwise qualified appraiser. In addition, Wells Fargo Bank will generally require that those appraisals be conducted in accordance with the Uniform Standards of Professional Appraisal Practices developed by The Appraisal Foundation, a not-for-profit organization established by the appraisal profession. Furthermore, the appraisal report will usually include or be accompanied by a separate letter that includes a statement by the appraiser that the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 were followed in preparing the appraisal. In some cases, however, Wells Fargo Bank may establish the value of the subject real property collateral based on a cash flow analysis, a recent sales price or another method or benchmark of valuation.
Environmental Assessments. Wells Fargo Bank will, in most cases, require a Phase I environmental assessment with respect to the real property collateral for a prospective multifamily or commercial mortgage loan. However, when circumstances warrant, Wells
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Fargo Bank may utilize an update of a prior environmental assessment, a transaction screen or a desktop review. Alternatively, Wells Fargo Bank might forego an environmental assessment in limited circumstances, such as when it has obtained the benefits of an environmental insurance policy or an environmental guarantee. Furthermore, an environmental assessment conducted at any particular real property collateral will not necessarily cover all potential environmental issues. For example, an analysis for radon, lead-based paint and lead in drinking water will usually be conducted only at multifamily rental properties and only when Wells Fargo Bank or the environmental consultant believes that special circumstances warrant such an analysis.
Depending on the findings of the initial environmental assessment, Wells Fargo Bank may require additional record searches or environmental testing, such as a Phase II environmental assessment with respect to the real property collateral.
Engineering Assessments. In connection with the origination process, Wells Fargo Bank may 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, Wells Fargo Bank will determine the appropriate response, if any, to any recommended repairs, corrections or replacements and any identified deferred maintenance.
Seismic Report. In general, prospective borrowers seeking loans secured by properties located in California or in seismic zones 3 or 4 obtain a seismic engineering report of the building and, based thereon and on certain statistical information, an estimate of damage based on the percentage of the replacement cost of the building in an earthquake scenario. This percentage of the replacement cost is expressed in terms of probable maximum loss (“PML”), probable loss (“PL”), or scenario expected loss (“SEL”). Generally, any of the mortgage loans as to which the property was estimated to have PML, PL or SEL in excess of 20% of the estimated replacement cost, would either be subject to a lower loan-to-value ratio limit at origination, be conditioned on seismic upgrading (or appropriate reserves or letter of credit for retrofitting), be conditioned on satisfactory earthquake insurance, or be structured with a degree of recourse to a guarantor.
Zoning and Building Code Compliance. In connection with the origination of a multifamily or commercial mortgage loan, Wells Fargo Bank 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 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, including applicable land use and zoning regulations; title insurance endorsements; engineering or consulting reports; and/or representations by the related borrower.
Where a mortgaged property as currently operated is a permitted nonconforming use and/or the structure and the improvements may not be rebuilt to the same dimensions or used in the same manner in the event of a major casualty, Wells Fargo Bank will consider whether—
| ● | any major casualty that would prevent rebuilding has a sufficiently remote likelihood of occurring; |
| ● | casualty insurance proceeds together with the value of any additional collateral would be available in an amount estimated by Wells Fargo Bank to be sufficient to pay off the related mortgage loan in full; |
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| ● | the real property collateral, if permitted to be repaired or restored in conformity with current law, would in Wells Fargo Bank’s judgment constitute adequate security for the related mortgage loan; |
| ● | whether a variance or other similar change in applicable zoning restrictions is potentially available, or whether the applicable governing entity is likely to enforce the related limitations; and/or |
| ● | to require the related borrower to obtain law and ordinance insurance and/or alternative mitigant is in place. |
Escrow Requirements. Generally, Wells Fargo Bank requires most borrowers to fund various escrows for taxes and insurance, capital expenses and replacement reserves. Generally, the required escrows for mortgage loans originated by Wells Fargo Bank 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 Wells Fargo Bank with sufficient funds to satisfy all taxes and assessments. Tax escrows may not be required if a property is a single tenant property and the tenant is required to pay taxes directly. Wells Fargo Bank may waive this escrow requirement under certain circumstances. |
| ● | 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 Wells Fargo Bank with sufficient funds to pay all insurance premiums. Insurance escrows may not be required if (i) the borrower maintains a blanket insurance policy, or (ii) the property is a single tenant property (which may include ground leased tenants) and the tenant is required to maintain property insurance. Wells Fargo Bank may waive this escrow requirement under certain circumstances. |
| ● | Replacement Reserves—Replacement reserves are generally calculated in accordance with the expected useful life of the components of the property during the term of the mortgage loan. Annual replacement reserves are generally underwritten to the suggested replacement reserve amount from an independent, third-party property condition or engineering report, or to certain minimum requirements by property type. Replacement reserves may not be required 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. Wells Fargo Bank may waive this escrow requirement under certain circumstances. |
| ● | 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 related mortgage loan, Wells Fargo Bank generally requires that at least 115%-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 related mortgage loan. Wells Fargo Bank may waive this escrow requirement or adjust the timing to complete repairs under certain circumstances. |
| ● | Tenant Improvement/Lease Commissions—In most cases, various tenants have lease expirations within the mortgage loan term. To mitigate this risk, special reserves |
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may be required to be funded either at closing of the mortgage loan 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 occupied by such tenants. Tenant Improvement/Lease Commissions may not be required for single tenant properties with leases that extend beyond the loan term or where rent at the mortgaged property is considered below market. Wells Fargo Bank may waive this escrow requirement under certain circumstances.
Furthermore, Wells Fargo Bank 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 addressed. In some cases, Wells Fargo Bank may determine that establishing an escrow or reserve is not warranted in the event of the existence of one or more of the credit positive characteristics discussed above, or given the amounts that would be involved and Wells Fargo Bank’s evaluation of the ability of the mortgaged property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the subject expense or cost absent creation of an escrow or reserve.
Co-Originated or Third Party-Originated Mortgage Loans. From time to time, Wells Fargo Bank 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 Wells Fargo Bank as the payee. Wells Fargo Bank 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. No Wells Fargo Bank Mortgage Loan to be included in the trust fund has been co-originated as described in this paragraph.
Exceptions. One or more of Wells Fargo Bank’s Mortgage Loans may vary from the specific Wells Fargo Bank’s underwriting guidelines described above when additional credit positive characteristics are present as discussed above. In addition, in the case of one or more of Wells Fargo Bank’s Mortgage Loans, Wells Fargo Bank or another originator may not have applied each of the specific underwriting guidelines described above as the result of case-by-case permitted flexibility based upon other compensating factors. For any material exceptions to Wells Fargo Bank’s underwriting guidelines described above in respect of the Wells Fargo Bank Mortgage Loans, see “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus.
Review of Mortgage Loans for Which Wells Fargo Bank is the Sponsor
Overview. Wells Fargo Bank, in its capacity as the sponsor of the Wells Fargo Bank Mortgage Loans, has conducted a review of the Wells Fargo Bank Mortgage Loans it is selling to the depositor designed and effected to provide reasonable assurance that the disclosure related to the Wells Fargo Bank Mortgage Loans is accurate in all material respects. Wells Fargo Bank determined the nature, extent and timing of the review and the level of assistance provided by any third parties. The review of the Wells Fargo Bank Mortgage Loans was performed by a deal team comprised of real estate and securitization professionals who are employees of Wells Fargo Bank (collectively, the “Wells Fargo Bank Deal Team”) with the assistance of certain third parties. Wells Fargo Bank has ultimate authority and control over, and assumes all responsibility for and attributes to itself, the review of the Mortgage Loans that it is selling to the depositor and the review’s findings and conclusions. The review procedures described below were employed with respect to all of the Wells Fargo Bank Mortgage Loans (rather than relying on sampling procedures), except
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that certain review procedures were solely relevant to the large loan disclosures in this prospectus, as further described below.
Database. To prepare for securitization, members of the Wells Fargo Bank Deal Team created a database of loan-level and property-level information relating to each Wells Fargo Bank Mortgage Loan. The database was compiled from, among other sources, the related mortgage loan documents, third-party reports (appraisals, environmental site assessments, property condition reports, zoning reports and applicable seismic studies), insurance policies, borrower-supplied information (including, to the extent available, rent rolls, leases, operating statements and budgets) and information collected by Wells Fargo Bank during the underwriting process. Prior to securitization of each Wells Fargo Bank Mortgage Loan, the Wells Fargo Bank Deal Team may have updated the information in the database with respect to such Wells Fargo Bank Mortgage Loan based on current information 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 Wells Fargo Bank Deal Team. Such updates were not intended to be, and do not serve as, a re-underwriting of any Mortgage Loan.
A data tape (the “Wells Fargo Bank Data Tape”) containing detailed information regarding each Wells Fargo Bank Mortgage Loan was created from the information in the database referred to in the prior paragraph. The Wells Fargo Bank Data Tape was used by the Wells Fargo Bank Deal Team to provide the numerical information regarding the Wells Fargo Bank Mortgage Loans in this prospectus.
Data Comparisons and Recalculation. The depositor, on behalf of Wells Fargo Bank, engaged a third-party accounting firm to perform certain data comparison and recalculation procedures which were designed or provided by Wells Fargo Bank relating to information in this prospectus regarding the Wells Fargo Bank Mortgage Loans. These procedures included:
| ● | comparing the information in the Wells Fargo Bank Data Tape against various source documents provided by Wells Fargo Bank; |
| ● | comparing numerical information regarding the Wells Fargo Bank Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the information contained in the Wells Fargo Bank Data Tape; and |
| ● | recalculating certain percentages, ratios and other formulae relating to the Wells Fargo Bank Mortgage Loans disclosed in this prospectus. |
Legal Review. In anticipation of the securitization of each Wells Fargo Bank Mortgage Loan, mortgage loan seller counsel promulgated a form of legal summary to be completed by origination counsel that, among other things, set forth certain material terms and property diligence information, and elicited information concerning potentially outlying attributes of the mortgage loan as well as any related mitigating considerations. Mortgage loan seller’s counsel reviewed the legal summaries for each Wells Fargo Bank Mortgage Loan, together with pertinent parts of the Mortgage Loan documentation and property diligence materials, in connection with preparing or corroborating the accuracy of certain loan disclosure in this prospectus. In addition, mortgage loan seller’s counsel reviewed Wells Fargo Bank’s representations and warranties set forth on Annex D-1 and, if applicable, identified exceptions to those representations and warranties.
Securitization counsel was also engaged to assist in the review of the Wells Fargo Bank Mortgage Loans. Such assistance included, among other things, a review of a due diligence
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questionnaire completed by the Wells Fargo Bank Deal Team. Securitization counsel also reviewed the property release provisions, if any, for each Wells Fargo Bank Mortgage Loan with multiple Mortgaged Properties for compliance with the REMIC provisions.
Mortgage loan seller’s counsel or securitization counsel also assisted in the preparation of the mortgage loan summaries set forth in Annex A-3, based on their respective reviews of pertinent sections of the related mortgage loan documents and other loan information.
Other Review Procedures. Prior to securitization, Wells Fargo Bank confirmed with the related servicers for the Wells Fargo Bank Mortgage Loans that, to the best of such servicers’ knowledge and except as previously identified, material events concerning the related Mortgage Loan, the Mortgaged Property and the borrower and guarantor had not occurred since origination, including, but not limited to, (i) loan modifications or assumptions, or releases of the related borrower or Mortgaged Property; (ii) damage to the Mortgaged Property that materially and adversely affects its value as security for the Mortgage Loan; (iii) pending condemnation actions; (iv) litigation, regulatory or other proceedings against the Mortgaged Property, borrower or guarantor, or notice of non-compliance with environmental laws; (v) bankruptcies involving any borrower or guarantor, or any tenant occupying a single tenant property; and (vi) any existing or incipient material defaults.
The Wells Fargo Bank Deal Team also consulted with Wells Fargo Bank personnel responsible for the origination of the Wells Fargo Bank Mortgage Loans to confirm that the Wells Fargo Bank Mortgage Loans were originated in compliance with the origination and underwriting criteria described above under “—Wells Fargo Bank’s Commercial Mortgage Loan Underwriting,” as well as to identify any material deviations from those origination and underwriting criteria. See “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus.
Findings and Conclusions. Wells Fargo Bank found and concluded with reasonable assurance that the disclosure regarding the Wells Fargo Bank Mortgage Loans in this prospectus is accurate in all material respects. Wells Fargo Bank also found and concluded with reasonable assurance that the Wells Fargo Bank Mortgage Loans were originated in accordance with Wells Fargo Bank’s origination procedures and underwriting criteria, except as described above under “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines”.
Review Procedures in the Event of a Mortgage Loan Substitution. Wells Fargo Bank will perform a review of any Wells Fargo Bank Mortgage Loan that it elects to substitute for a Wells Fargo Bank Mortgage Loan in the pool in connection with a material breach of a representation or warranty or a material document defect. Wells Fargo Bank, 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 related pooling and servicing agreement (the “Qualification Criteria”). Wells Fargo Bank may engage a third party accounting firm to compare the Qualification Criteria against the underlying source documentation to verify the accuracy of the review by Wells Fargo Bank 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 Wells Fargo Bank to render any tax opinion required in connection with the substitution.
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Compliance with Rule 15Ga-1 under the Exchange Act
The transaction documents for certain prior transactions in which Wells Fargo Bank securitized commercial mortgage loans or participation interests (“CRE Loans”) contain covenants requiring the repurchase or replacement of an underlying CRE Loan for the breach of a related representation or warranty under various circumstances if the breach is not cured. The following table provides information regarding the demand, repurchase and replacement activity with respect to the mortgage loans securitized by Wells Fargo Bank (or a predecessor), which activity occurred during the period from April 1, 2015 to March 31, 2018 (the “Rule 15Ga-1 Reporting Period”) or is still outstanding.
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| Name of Issuing Entity(1) | Check if Registered | Name of Originator | Total Assets in ABS by Originator(2)(3) | Assets That Were Subject of Demand(3)(4) | Assets That Were Repurchased or Replaced(3)(4)(5) | Assets Pending Repurchase or Replacement (within cure period)(4)(6)(7) | Demand in Dispute(4)(6)(8) | Demand Withdrawn(4)(6)(9) | Demand Rejected(4)(6) | |||||||||||||||
| # | $ | % of principal balance | # | $ | % of principal balance | # | $ | % of principal balance | # | $ | % of principal balance | # | $ | % of principal balance | # | $ | % of principal balance | # | $ | % of principal balance | ||||
| (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | (m) | (n) | (o) | (p) | (q) | (r) | (s) | (t) | (u) | (v) | (w) | (x) | ||
| Asset Class Commercial Mortgages(1) | ||||||||||||||||||||||||
| Wachovia Commercial Mortgage Securities, Inc., Commercial Mortgage Pass-Through Certificates Series 2006-C28 | X | Wachovia Bank, National Association | 113 | 2,502,246,884.83 | 69.60 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |
| CIK #: 0001376448 | Nomura Credit & Capital, Inc. | 44 | 823,722,922.57 | 22.91 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | ||
| Artesia Mortgage Capital Corporation(10) | 50 | 269,226,893.21 | 7.49 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 13,687,005.00 | 5.71 | 0 | 0.00 | 0.00 | |||
| Issuing Entity Subtotal | 207 | 3,595,196,700.61 | 100.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 13,687,005.00 | 5.71 | 0 | 0.00 | 0.00 | |||
| Wachovia Commercial Mortgage Securities, Inc., Commercial Mortgage Pass-Through Certificates Series 2006-C33 | X | Wachovia Bank, National Association | 88 | 2,043,814,381.00 | 56.74 | 0 | 0.00 | 0 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 86,311,631.00 | 12.35 | |
| CIK #: 0001406873 | Barclays Capital Real Estate Inc. | 33 | 724,003,952.00 | 20.10 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | ||
| Nomura Credit & Capital, Inc. | 17 | 639,286,752.00 | 17.75 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| Artesia Mortgage Capital Corporation | 28 | 195,018,502.00 | 5.41 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| Issuing Entity Subtotal | 166 | 3,602,123,586.00 | 100.00 | 0 | 0.00 | 0 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 86,311,631.00 | 12.35 | |||
| Wells Fargo Commercial Mortgage Securities, Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-NXS2 | X | Natixis Real Estate Capital LLC(11) | 39 | 503,900,454.00 | 55.11 | 1 | 23,000,000.00 | 2.52 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 23,000,000.00 | 2.56 | 0 | 0.00 | 0.00 | |
| CIK #: 0001643873 | Wells Fargo Bank, National Association | 14 | 293,066,224.00 | 32.05 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | ||
| Silverpeak Real Estate Finance LLC | 10 | 117,394,863.00 | 12.84 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| Issuing Entity Subtotal | 63 | 100.00 | 1 | 23,000,000.00 | 2.52 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 23,000,000.00 | 2.56 | 0 | 0.00 | 0.00 | ||||
| WFBRS Commercial Mortgage Trust 2014-C22, Commercial Mortgage Pass-Through Certificates, Series 2014-C22 | Wells Fargo Bank, National Association | 34 | 660,152,359.00 | 44.38 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | ||
| CIK #: 1616666 | The Royal Bank of Scotland | 18 | 311,373,307.00 | 20.93 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | ||
| Rialto Mortgage Finance, LLC | 21 | 158,381,467.00 | 10.65 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| Prudential Mortgage Capital Company, LLC | 9 | 109,719,609.00 | 7.38 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| NCB, FSB | 20 | 67,614,088.00 | 4.55 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| C-III Commercial Mortgage LLC | 17 | 63,291,423.00 | 4.25 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| Basis Real Estate Capital II, LLC(12) | 6 | 58,594,540.00 | 3.94 | 1 | 15,371,874.00 | 1.06 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 15,348,545.00 | 1.06 | 0 | 0.00 | 0.00 | 1 | 15,348,545.00 | 1.06 | |||
| Walker & Dunlop Commercial Property Funding I WF, LLC | 4 | 58,473,000.00 | 3.93 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | |||
| Issuing Entity Subtotal | 73 | 1,487,599,794.00 | 100.00 | 1 | 15,371,874.00 | 1.06 | 0 | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 1 | 15,348,545.00 | 1.06 | 0 | 0.00 | 0.00 | 1 | 15,348,545.00 | 1.06 | |||
| Commercial Mortgages Asset Class Total | 628 | 9,599,281,621.61 | 2 | 38,371,874.00 | 0 | 0.00 | 0 | 0.00 | 1 | 15,348,545.00 | 2 | 36,687,005.00 | 2 | 101,660,176.00 | ||||||||||
| (1) | In connection with the preparation of this table, Wells Fargo Bank undertook the following steps to gather the information required by Rule 15Ga-1 (“Rule 15Ga-1”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (i) identifying all asset-backed securities transactions in which Wells Fargo Bank (or a predecessor) acted as a securitizer, (ii) performing a diligent search of the records of Wells Fargo Bank and the records of affiliates of Wells Fargo Bank that acted as securitizers in transactions of commercial mortgage loans for all relevant information, (iii) reviewing appropriate documentation from all relevant transactions to determine the parties responsible for enforcing representations and warranties, and any other parties who might have received repurchase requests (such parties, “Demand Entities”), and (iv) making written request of each Demand Entity to provide any information in its possession regarding requests or demands to repurchase any loans for breach of a representation or warranty with respect to any relevant transaction. In this effort, Wells Fargo Bank made written requests of all trustees and unaffiliated co-sponsors of applicable commercial mortgage-backed securities transactions. Wells Fargo Bank followed up written requests made of Demand Entities as it deemed appropriate. |
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The repurchase activity reported herein is described in terms of a particular loan’s status as of the last day of the Rule 15Ga-1 Reporting Period. (For columns j-x)
| (2) | “Originator” generally refers to the party identified in securities offering materials at the time of issuance for purposes of meeting applicable SEC disclosure requirements. (For columns d-f) |
| (3) | Reflects the number of loans, outstanding principal balance and percentage of principal balance as of the date of the closing of the related securitization. (For columns d–l) |
| (4) | Includes only new demands received during the Rule 15Ga-1 Reporting Period. (For columns g-i) |
In the event demands were received prior to the Rule 15Ga-1 Reporting Period, but activity occurred with respect to one or more loans during the Rule 15Ga-1 Reporting Period, such activity is being reported as assets pending repurchase or replacement within the cure period (columns m/n/o) or as demands in dispute (columns p/q/r), as applicable, until the earlier of the reporting of (i) the repurchase or replacement of such asset (columns j/k/l), (ii) the withdrawal of such demand (columns s/t/u), or (iii) the rejection of such demand (columns v/w/x), as applicable.
| (5) | Includes assets for which a reimbursement payment is in process and where the asset has been otherwise liquidated by or on behalf of the issuing entity at the time of initiation of such reimbursement process. Where an underlying asset has paid off or otherwise been liquidated by or on behalf of the issuing entity (other than via a repurchase by the obligated party) during the Rule 15Ga-1 Reporting Period, the corresponding principal balance utilized in calculating columns (g) through (x) will be zero. (For columns j-l) |
| (6) | Reflects the number of loans, outstanding principal balance and percentage of principal balance as of the last day of the Rule 15Ga-1 Reporting Period. (For columns m-x) |
| (7) | Includes assets that are subject to a demand and within the cure period. (For columns m-o) |
| (8) | Includes assets pending repurchase or replacement outside of the cure period. (For columns p-r) |
| (9) | Includes assets for which a reimbursement payment is in process, and where the asset has not been repurchased or replaced and remains in the transaction. Also includes assets for which the requesting party rescinds or retracts the demand in writing. (For columns s-u) |
| (10) | U.S. Bank National Association, as Trustee for Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-C28 (“U.S. Bank”) v. Dexia Real Estate Capital Markets (“Dexia”), Case No. 12 Civ 9412, filed in the United States District Court for the Southern District of New York. U.S. Bank filed its complaint against Dexia (on December 27, 2012) arguing that Dexia had breached the terms of the related mortgage loan purchase agreement in light of the determination in a Minnesota enforcement action against the guarantors of Loan #58 Marketplace Retail and Office Center (“Loan #58”) that the form of the guaranty sold to U.S. Bank pursuant to the mortgage loan purchase agreement had not been signed by the guarantors. U.S. Bank, in its complaint, seeks a judgment requiring Dexia to repurchase Loan #58 for approximately $16.5 million. Dexia filed a Notice of Motion to Dismiss and a Memorandum in Support of its Motion to Dismiss on January 25, 2013. Judge Shira A. Scheindlin entered an order denying Dexia’s motion on June 6, 2013. After completion of discovery, U.S. Bank and Dexia filed cross-motions for summary judgment, and on July 9, 2014 Judge Scheindlin entered an Opinion and Order granting the summary judgment motion of U.S. Bank and denying the summary judgment motion of Dexia. On September 12, 2014, the Court entered its judgment directing that Dexia repurchase Loan #58 for $19,627,961.66. On March 16, 2016, the United States Court of Appeals for the Second Circuit reversed, and ordered that judgment be entered in Dexia’s favor. On April 11, 2016, the United States District Court for the Southern District of New York entered judgment for Dexia and against U.S. Bank on U.S. Bank’s claims in the case. Because U.S. Bank did not appeal the District Court’s decision within the required 90-day period, this demand has been classified as “withdrawn”. |
| (11) | Rialto Capital Advisors, LLC, as special servicer for Loan #8 88 Hamilton Avenue (in such capacity, the “NXS2 Special Servicer”), claimed in a letter dated March 16, 2016, that NREC breached the representations and warranties made in the related mortgage loan purchase agreement due to the existence of a prior $4,000,000 mortgage on the related mortgaged property. On March 31, 2016, NREC rejected the claim for breach of representation or warranty and noted that a title insurance policy was obtained from Chicago Title Insurance Company, which insures the first lien status of such loan. The NXS2 Special Servicer withdrew its repurchase demand on August 15, 2017. |
| (12) | CWCapital Asset Management LLC, as special servicer for Loan No. 22, Alpha Health Center, claimed in a letter dated December 19, 2017, that Basis Real Estate Capital II, LLC (“Basis”) breached the representations and warranties made in the related mortgage loan purchase agreement due to the existence of a lawsuit that was filed against the sponsor of 300 E. Pulaski, LLC (the “Borrower”). On February 7, 2018, Basis rejected the claim for breach of representation or warranty for several reasons including (i) the lawsuit was filed after Basis had already conducted its due diligence on the Borrower and the sponsor of the Borrower and (ii) the lawsuit in question was served on the sponsor of the Borrower after Basis had originated the Alpha Health Center Loan. Basis has requested that the special servicer rescind its repurchase demand. |
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The information for Wells Fargo Bank as a securitizer of CRE Loans required to be set forth in a Form ABS-15G for the quarterly reporting period from January 1, 2018 through March 31, 2018 was set forth in (i) a Form ABS-15G filed by Wells Fargo Bank with the SEC on May 11, 2018, if such information relates to asset-backed securities in the CRE Loan asset class in which Wells Fargo Bank (or a predecessor) was a sponsor but Wells Fargo Commercial Mortgage Securities, Inc. (or a predecessor) was not the depositor, and (ii) a Form ABS-15G filed by Wells Fargo Commercial Mortgage Securities, Inc. with the SEC on May 11, 2018, if such information relates to asset-backed securities in the CRE Loan asset class in which Wells Fargo Bank (or a predecessor) was a sponsor and Wells Fargo Commercial Mortgage Securities, Inc. (or a predecessor) was the depositor. Such Forms ABS-15G are available electronically through the SEC’s EDGAR system. The Central Index Key number of Wells Fargo Bank is 0000740906. The Central Index Key number of Wells Fargo Commercial Mortgage Securities, Inc. is 0000850779.
Retained Interests in This Securitization
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. However, Wells Fargo Bank or its affiliates may retain or 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.
The information set forth under “—Wells Fargo Bank, National Association” has been provided by Wells Fargo Bank.
Barclays Bank PLC
General
Barclays Bank PLC, a public limited company registered in England and Wales under number 1026167 (“Barclays”), a sponsor and a mortgage loan seller, is an affiliate of Barclays Capital Inc., one of the underwriters. The principal offices of Barclays in the United States are located at 745 Seventh Avenue, New York, New York 10019, telephone number (212) 412-4000.
Barclays’ Securitization Program
As a sponsor, Barclays originates or acquires mortgage loans and initiates a securitization transaction by selecting the portfolio of mortgage loans to be securitized and transferring those mortgage loans to a securitization depositor who in turn transfers those mortgage loans to the issuing entity. In selecting a portfolio to be securitized, consideration is given to geographic concentration, property type concentration and rating agency models and criteria. Barclays’ role also includes leading and participating in the selection of third-party service providers such as the master servicer, the special servicer, the trustee and the certificate administrator, and engaging the rating agencies. In coordination with the underwriters for the related offering, Barclays works with rating agencies, investors, mortgage loan sellers and servicers in structuring the securitization transaction.
Barclays has been engaged in commercial mortgage loan securitization in the United States since 2004. The vast majority of commercial mortgage loans originated by Barclays are intended to be either sold through securitization transactions in which Barclays acts as a sponsor or sold to third parties in individual loan sale transactions. The following is a general description of the types of commercial mortgage loans that Barclays originates for securitization:
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| ● | Fixed rate mortgage loans generally having maturities between five and ten years and secured by commercial real estate such as office, retail, hospitality, multifamily, manufactured housing, healthcare, self storage and industrial properties. These loans are primarily originated for the purpose of securitization. |
| ● | Floating rate loans generally having shorter maturities and secured by stabilized and non-stabilized commercial real estate properties. These loans are primarily originated for securitization, though in certain cases only a senior interest in the loan is intended to be securitized. |
| ● | Subordinate mortgage loans and mezzanine loans. These loans are generally not originated for securitization and are sold in individual loan sale transactions. |
In general, Barclays does not hold the loans it originates until maturity.
Neither Barclays nor any of its affiliates act as servicer of the commercial mortgage loans in its securitization transactions. Instead, Barclays contracts with other entities to service the mortgage loans in the securitization transactions.
Barclays’ affiliates commenced selling commercial mortgage loans into U.S. securitizations in 2004. During the period commencing in 2004 and ending on June 15, 2018, Barclays’ affiliates were the loan sellers in approximately 102 commercial mortgage-backed securitization transactions. Approximately $30.8 billion of the mortgage loans included in those transactions were originated or acquired by Barclays.
The following table sets forth information with respect to originations and securitizations of fixed rate and floating rate commercial and multifamily mortgage loans by Barclays affiliates for the years ending on December 31, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017 and through June 15, 2018.
Fixed and Floating Rate Commercial Loans
Year | Aggregate Principal Balance of | |||
| 2018 | $ | 1,920,259,400 | ||
| 2017 | $ | 4,971,606,254 | ||
| 2016 | $ | 3,031,242,500 | ||
| 2015 | $ | 5,276,099,519 | ||
| 2014 | $ | 3,351,106,750 | ||
| 2013 | $ | 2,723,393,594 | ||
| 2012 | $ | 2,056,096,250 | ||
| 2011 | $ | 0 | ||
| 2010 | $ | 0 | ||
| 2009 | $ | 0 | ||
| 2008 | $ | 196,399,012 | ||
| 2007 | $ | 2,470,879,020 | ||
Review of Barclays Mortgage Loans
Overview. Barclays has conducted a review of the mortgage loans for which Barclays is a sponsor in this securitization (the “Barclays Mortgage Loans”) in connection with the
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securitization described in this prospectus. The review of the Barclays Mortgage Loans was performed by a team comprised of real estate and securitization professionals at Barclays’ offices (the “Barclays Review Team”). The review procedures described below were employed with respect to all of the Barclays Mortgage Loans. No sampling procedures were used in the review process.
Database. To prepare for securitization, members of the Barclays Review Team created a database of loan-level and property-level information relating to each Barclays Mortgage Loan. The database was compiled from, among other sources, the related 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 Barclays Review Team during the underwriting process. After origination of each Barclays Mortgage Loan, the Barclays Review Team updated the information in the database with respect to such Barclays 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 Barclays Review Team.
A data tape (the “Barclays Data Tape”) containing detailed information regarding each Barclays Mortgage Loan was created from the information in the database referred to in the prior paragraph. The Barclays Data Tape was used to provide the numerical information regarding the Barclays Mortgage Loans in this prospectus.
Data Comparison and Recalculation. The depositor, on behalf of Barclays, engaged a third party accounting firm to perform certain data comparison and recalculation procedures, the nature, extent and timing of which were designed by Barclays, relating to information in this prospectus regarding the Barclays Mortgage Loans. These procedures included:
| ● | comparing the information in the Barclays Data Tape against various source documents provided by Barclays that are described above under “—Database”; |
| ● | comparing numerical information regarding the Barclays Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the Barclays Data Tape; and |
| ● | recalculating certain percentages, ratios and other formulae relating to the Barclays Mortgage Loans disclosed in this prospectus. |
Legal Review. Barclays and the other originators of the Barclays Mortgage Loans engaged various law firms to conduct certain legal reviews of the Barclays Mortgage Loans for disclosure in this prospectus. In anticipation of the securitization of each Barclays Mortgage Loan, Barclays’ and the other originators’ origination counsel reviewed a form of securitization representations and warranties at origination and, if applicable, identified exceptions to those representations and warranties. Barclays’ and the other originators’ origination and underwriting staff also performed a review of the representations and warranties.
Legal counsel was also engaged in connection with this securitization to assist in the review of the Barclays Mortgage Loans. Such assistance included, among other things, (i) a review of Barclays’ asset summary reports for each Barclays Mortgage Loan, (ii) a review of the representations and warranties and exception reports referred to above relating to the
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Barclays Mortgage Loans prepared by origination counsel, (iii) the review and assistance in the completion by the Barclays Review Team of a due diligence questionnaire relating to the Barclays Mortgage Loans and (iv) the review of certain loan documents with respect to the Barclays Mortgage Loans.
Other Review Procedures. With respect to any material pending litigation of which Barclays was aware at the origination of any Barclays Mortgage Loan, Barclays requested updates from the related borrower, origination counsel and/or borrower’s litigation counsel.
The Barclays Review Team, with the assistance of counsel engaged in connection with this securitization, also reviewed the Barclays Mortgage Loans to determine whether any Barclays Mortgage Loan materially deviated from the underwriting guidelines set forth under “—Barclays’ Underwriting Guidelines and Processes—Exceptions” below.
Findings and Conclusions. Based on the foregoing review procedures, Barclays determined that the disclosure regarding the Barclays Mortgage Loans in this prospectus is accurate in all material respects. Barclays also determined that the Barclays Mortgage Loans were originated in accordance with Barclays’ origination procedures and underwriting criteria, except as described under “—Barclays’ Underwriting Guidelines and Processes—Exceptions” below. Barclays attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Review Procedures in the Event of a Mortgage Loan Substitution. Barclays 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. Barclays, 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 (“Barclays’ Qualification Criteria”). Barclays will engage a third party accounting firm to compare the Barclays’ Qualification Criteria against the underlying source documentation to verify the accuracy of the review by Barclays 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 Barclays to render any tax opinion required in connection with the substitution.
Barclays’ Underwriting Guidelines and Processes
After review and participation in the pre-closing due diligence and closing process by Barclays, each of the Barclays Mortgage Loans was generally originated in accordance with the underwriting criteria described below. Each lending situation is unique, however, and the facts and circumstances surrounding a particular mortgage loan, such as the quality and location of the real estate collateral, the sponsorship of the borrower and the tenancy of the collateral, will impact the extent to which the general guidelines below are applied to that specific loan. These underwriting criteria are general, and we cannot assure you that every loan will comply in all respects with the guidelines. For additional information with respect to exceptions to the underwriting guidelines, see “—Exceptions” below. Barclays originates mortgage loans principally for securitization.
General. Barclays originates commercial mortgage loans from its headquarters in New York and its West Coast office. Barclays also originates and acquires loans pursuant to table funding arrangements through third party origination platforms that have origination offices in additional locations. Bankers at Barclays and at table funded lenders focus on sourcing, structuring, underwriting and performing due diligence on their loans. Structured finance bankers work closely with the loans’ originators to ensure that the loans are suitable for
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securitization and satisfy rating agency criteria. All mortgage loans, including those originated by table funded lenders, must be approved by Barclays’ credit department, as described below under “—Loan Approval”.
With respect to certain mortgage loans, Barclays has delegated certain of its underwriting and origination functions to table funded lenders, subject to loan-by-loan oversight and ultimate review and approval by Barclays’ professionals. These functions were all performed in substantial accordance with the mortgage loan approval procedures described in this prospectus. In all cases, mortgage loans are documented on Barclays’ approved documentation.
Loan Analysis. Generally, Barclays 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 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 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.
Borrowers are generally required to be single purpose entities although they are generally not required to be structured to reduce 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 or table funded by Barclays must be approved by a credit committee. The credit committee may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline a loan transaction.
Debt Service Coverage Ratio and LTV Ratio. Barclays’ underwriting standards generally mandate minimum debt service coverage ratios and maximum loan-to-value ratios. A loan-to-value ratio, generally based upon the appraiser’s determination of value as well as the value derived using a stressed capitalization rate, is considered. The debt service coverage ratio is based upon the underwritten net cash flow and is given particular importance. However, notwithstanding such guidelines, in certain circumstances the actual debt service coverage ratios, loan-to-value ratios and amortization periods for the mortgage loans originated by Barclays may vary from these guidelines.
Escrow Requirements. Generally, Barclays requires most borrowers to fund escrows for expenses such as taxes and insurance, capital expenses and replacement reserves, in some cases upon the occurrence of a trigger event. In the case of certain hotel loans, FF&E reserves may be held by the franchisor or manager rather than the lender. Generally, the required escrows for mortgage loans originated or acquired by Barclays are as follows (see Annex A-1 for instances in which reserves were not taken):
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| ● | Taxes – Typically an initial deposit and monthly escrow deposits equal to 1/12 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. Barclays may waive this escrow requirement under appropriate circumstances including, but not limited to, (i) where a tenant is required to pay the taxes directly, (ii) where there is institutional sponsorship or a high net worth individual, (iii) where there is a low loan-to-value ratio or (iv) any Escrow/Reserve Mitigating Circumstances. |
| ● | 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 1/12 of the annual property insurance premium are required to provide the lender with sufficient funds to pay all insurance premiums. Barclays may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where a property is covered by a blanket insurance policy maintained by the borrower or loan sponsor, (ii) where there is institutional sponsorship or a high net worth individual, (iii) where an investment grade or creditworthy tenant is responsible for paying all insurance premiums, (iv) the Mortgaged Property is a single tenant property (or substantially leased to a single tenant) and the tenant maintains the property insurance or self-insures (or may waive the escrow for a portion of the Mortgaged Property which is leased to a tenant that maintains property insurance for its portion of the Mortgaged Property), (v) where there is a low loan-to-value ratio or (vi) any Escrow/Reserve Mitigating Circumstances. |
| ● | Replacement Reserves – Replacement reserves are generally calculated in accordance with the expected useful life of the components of the property during the term of the mortgage loan plus two years. Barclays relies on information provided by an independent engineer to make this determination. Barclays may waive this escrow requirement under appropriate circumstances, including, but not limited to, (i) where an investment grade or creditworthy tenant is responsible for replacements under the terms of its lease, (ii) the Mortgaged Property is a single tenant property (or substantially leased to a single tenant) and the tenant repairs and maintains the Mortgaged Property (or may waive the escrow for a portion of the Mortgaged Property which is leased to a tenant that repairs and maintains its portion of the Mortgaged Property), (iii) where there is institutional sponsorship or a high net worth individual, (iv) where there is a low loan-to-value ratio or (v) any Escrow/Reserve Mitigating Circumstances. |
| ● | 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, Barclays 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. Barclays 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, (ii) where an investment grade or creditworthy party has agreed to take responsibility, and pay, for any required repair or remediation, (iii) the Mortgaged Property is a single tenant property (or substantially |
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| leased to a single tenant) and the tenant is responsible for the repairs, (iv) the amount recommended is less than $50,000, (v) a repair or replacement item that does not materially impact the function, performance or value of the property or (v) any Escrow/Reserve Mitigating Circumstances. |
| ● | 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. Barclays 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, (ii) where tenant improvement costs are the responsibility of tenants, (iii) where rents at the Mortgaged Property are considered to be sufficiently below market, (iv) where no material leases expire within the mortgage loan term, or the lease roll is not concentrated, (v) where there is a low loan-to-value ratio or (vi) any Escrow/Reserve Mitigating Circumstances. |
| ● | For certain mortgage loans, Barclays requires reserves only upon the occurrence of certain trigger events, such as debt service coverage ratios or tenant-specific tests or occurrences. |
| ● | Other Factors – Other factors that are considered in the origination of a commercial mortgage loan include current operations, occupancy and tenant base. |
Barclays may determine that establishing any of the foregoing escrows or reserves is not warranted in one or more of the following instances (collectively, the “Escrow/Reserve Mitigating Circumstances”): (i) the amounts involved are de minimis, (ii) Barclays’ evaluation of the ability of the Mortgaged Property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the subject expense or cost absent creation of an escrow or reserve, (iii) based on the Mortgaged Property maintaining a specified debt service coverage ratio, (iv) Barclays has structured springing escrows that arise for identified risks, (v) Barclays has an alternative to a cash escrow or reserve, such as a letter of credit or a guarantee from the borrower or an affiliate of the borrower; (vi) Barclays believes there are credit positive characteristics of the borrower, the sponsor of the borrower and/or the Mortgaged Property that would offset the need for the escrow or reserve; or (vii) the reserves are being collected and held by a third party, such as a management company, a franchisor, or an association.
Servicing. Interim servicing for all loans originated or acquired by Barclays prior to securitization is typically performed by Wells Fargo Bank, National Association.
Exceptions. Notwithstanding the discussion under “—Barclays’ Underwriting Guidelines and Process” above, one or more of the Barclays Mortgage Loans may vary from, or do not comply with, Barclays underwriting guidelines described above. In addition, in the case of one or more of the Barclays Mortgage Loans, Barclays may not have strictly applied the underwriting guidelines described above as the result of a case by case permitted exception based upon other compensating factors. For any material exceptions to Barclays’ underwriting guidelines described above in respect of the Barclays Mortgage Loans, see “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus.
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Compliance with Rule 15Ga-1 under the Exchange Act
Barclays has most recently filed a Form ABS-15G on May 11, 2018 in connection with it being a securitizer of certain types of mortgage loans. Barclays’ Central Index Key is 0000312070. It has no history of repurchases or repurchase requests required to be reported by Barclays under Rule 15Ga-1 under the Exchange Act, as amended, with respect to breaches of representations and warranties made by it as a sponsor of commercial mortgage loan securitizations.
Retained Interests in This Securitization
Neither Barclays Bank PLC nor any of its affiliates intends to retain on the Closing Date any certificates issued by the issuing entity or any other economic interest in this securitization. However, Barclays Bank PLC or its affiliates may retain or own in the future certain classes. Any such party will have the right to dispose of such certificates at any time.
Neither Barclays nor any of its affiliates will insure or guarantee distributions on the certificates. The Certificateholders will have no rights or remedies against Barclays 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 Barclays in the related MLPA as described under “Description of the Mortgage Loan Purchase Agreements”.
From time to time, Barclays is involved in civil legal proceedings and arbitration proceedings concerning matters arising in connection with the conduct of its securitization business. Although there can be no assurance as to the ultimate outcome of such matters, Barclays has denied, or believes it has meritorious defenses and will deny, liability in all significant cases pending against it in its capacity as sponsor or mortgage loan seller, and intends to defend actively each such case.
The information set forth under “—Barclays Bank PLC” has been provided by Barclays.
Rialto Mortgage Finance, LLC
General
Rialto Mortgage Finance, LLC, a Delaware limited liability company formed in April 2013 (“Rialto Mortgage”), is wholly-owned by Rialto Holdings, LLC, a Delaware limited liability company that was formed in August 2013. The executive offices of Rialto Mortgage are located at 600 Madison Avenue, 12th Floor, New York, New York 10022.
Wells Fargo Bank is the purchaser under a repurchase agreement with Rialto Mortgage Finance, LLC or with a wholly-owned subsidiary or other affiliate of the subject mortgage loan seller, for the purpose of providing short-term warehousing of mortgage loans originated or acquired by each such mortgage loan seller and/or its respective affiliates. In the case of the repurchase facility provided to Rialto Mortgage Finance, LLC, Wells Fargo Bank has agreed to purchase mortgage loans from Rialto Mortgage Finance, LLC on a revolving basis. The dollar amount of the mortgage loans that are expected to be subject to the repurchase facility that will be sold by Rialto Mortgage Finance, LLC to the depositor in connection with this securitization transaction is projected to equal, as of the Cut-off Date, approximately $70,600,000. Proceeds received by Rialto Mortgage Finance, LLC in connection with this securitization transaction will be used, in part, to repurchase from Wells Fargo Bank each of the mortgage loans subject to that repurchase facility that are to be sold by Rialto Mortgage Finance, LLC to the depositor in connection with this securitization
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transaction, which mortgage loans will be transferred to the depositor free and clear of any liens.
In addition, Wells Fargo Bank is the interim custodian with respect to the loan files for all of the Rialto Mortgage Loans.
Rialto Mortgage’s Securitization Program
As a sponsor and mortgage loan seller, Rialto Mortgage 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 Mortgage (the “Rialto Mortgage Loans”) were originated, co-originated or acquired from an unaffiliated third party by Rialto Mortgage. This is the fifty-third (53rd) commercial real estate debt investment securitization to which Rialto Mortgage is contributing commercial real estate debt investments. The commercial real estate debt investments originated and acquired by Rialto Mortgage may include mortgage loans, mezzanine loans, B notes, participation interests, rake bonds, subordinate mortgage loans and preferred equity investments. Rialto Mortgage securitized approximately $712 million, $1.49 billion, $2.41 billion, $1.93 billion and $1.66 billion of multifamily and commercial mortgage loans in public and private offerings during the calendar years 2013, 2014, 2015, 2016 and 2017, respectively.
Neither Rialto Mortgage nor any of its affiliates will insure or guarantee distributions on the Certificates. The Certificateholders will have no rights or remedies against Rialto Mortgage 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 Mortgage in the applicable MLPA as described under “Description of the Mortgage Loan Purchase Agreements” in this prospectus.
Rialto Mortgage’s Underwriting Standards and Loan Analysis
Each of the Mortgage Loans originated or acquired by Rialto Mortgage was generally originated in accordance with the underwriting criteria described below. Each lending situation is unique, however, and the facts and circumstances surrounding a particular mortgage loan, such as the quality and location of the real estate collateral, the sponsorship of the borrower and the tenancy of the collateral, will impact the extent to which the general guidelines below are applied to that specific loan. These underwriting criteria are general, and we cannot assure you that every loan will comply in all respects with the guidelines.
Loan Analysis. Generally, Rialto Mortgage performs both a credit analysis and collateral analysis with respect to a loan applicant and the real estate that will secure a mortgage loan. In general, the analysis of a borrower includes a review of money laundering and background checks and the analysis of its sponsor includes a review of money laundering and background checks, third-party credit reports, bankruptcy and lien searches, general banking references and commercial mortgage related references. In general, the analysis of the collateral includes a site visit and a review of the property’s historical operating statements (if available), independent market research, an appraisal with an emphasis on rental and sales comparables, engineering and environmental reports, the property’s historic and current occupancy, financial strengths of tenants, the duration and terms of tenant leases and the use of the property. Each report is reviewed for acceptability by a real estate finance credit officer of Rialto Mortgage. The borrower’s and property manager’s experience and presence in the subject market are also reviewed. Consideration is also
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given to anticipated changes in cash flow that may result from changes in lease terms or market considerations.
Borrowers are generally required to be single-purpose entities although they are generally not required to be structured to limit the possibility of becoming insolvent or bankrupt unless the loan has a principal balance of greater than $30 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 must be approved by a credit committee that includes two officers of Rialto Mortgage and one officer of Lennar Corporation. If deemed appropriate, a member of the real estate team will visit the subject property. The credit committee may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline a loan transaction.
Property Analysis. Prior to origination of a loan, Rialto Mortgage typically performs, or causes to be performed, site inspections at each property. 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. Such inspections generally assess the submarket in which the property is located, which may include evaluating competitive or comparable properties.
Appraisal and Loan-to-Value Ratio. Rialto Mortgage typically obtains an appraisal that complies, or is certified by the appraiser to comply, with the real estate appraisal regulations issued jointly by the federal bank regulatory agencies under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended. The loan-to-value ratio of the mortgage loan is generally based on the “as-is” value set forth in the appraisal. In certain cases, an updated appraisal is obtained.
Debt Service Coverage Ratio. In connection with the origination of an asset, Rialto Mortgage 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, we cannot assure you 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
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calculating the debt service coverage ratio for a particular asset, Rialto Mortgage 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.
Generally, the debt service coverage ratio for assets originated by Rialto Mortgage, 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 Mortgage 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 Mortgage’s judgment of improved property and/or market performance in the future and/or other relevant factors.
Loan-to-Value Ratio. Rialto Mortgage also looks at the loan-to-value ratio of a prospective investment related to multi-family 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 multi-family 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 Mortgage, 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 Mortgage 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 Mortgage’s judgment of improved property and/or market performance in the future and/or other relevant factors.
Additional Debt. When underwriting an asset, Rialto Mortgage 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 Mortgage 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
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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 Mortgage will analyze the condition of the real property for a prospective asset. To aid in that analysis, Rialto Mortgage may, subject to certain exceptions, inspect or retain a third party to inspect the property and will in most cases obtain the property reports described below.
Appraisal Report. Rialto Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Mortgage may require retrofitting of the improvements or that the borrower obtain earthquake insurance if available at a commercially reasonable price.
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Zoning and Building Code Compliance. In connection with the origination of an asset related to multifamily or commercial real estate, Rialto Mortgage 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 Mortgage 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 Mortgage’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 proceeds together with the value of any additional collateral are expected to be available in an amount estimated by Rialto Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Mortgage may determine that establishing an escrow or reserve is not warranted given the amounts that would be involved and Rialto Mortgage’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 Mortgage 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 Mortgage’s underwriting guidelines as described herein 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 Mortgage or its affiliates originated or acquired certain assets. In addition, in some cases, Rialto Mortgage may not have strictly applied these underwriting guidelines as the result of a case-by-case permitted exception based upon other compensating factors.
Exceptions. Notwithstanding the discussion under “—Rialto Mortgage’s Underwriting Standards and Loan Analysis” above, one or more of the Rialto Mortgage Loans may vary from, or not comply with, Rialto Mortgage’s underwriting policies and guidelines described above. In addition, in the case of one or more of the Rialto Mortgage Loans, Rialto Mortgage or another originator may not have strictly applied the underwriting policies and
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guidelines described above as the result of a case-by-case permitted exception based upon other compensating factors. None of the Rialto Mortgage Loans were originated with any material exceptions to Rialto Mortgage’s underwriting policies, guidelines and procedures described above.
Review of Mortgage Loans for Which Rialto Mortgage is the Sponsor
Overview. Rialto Mortgage 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 Mortgage or one or more of its affiliates (the “Rialto Mortgage 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 Mortgage is the mortgage loan seller with respect to seven (7) Mortgage Loans.
Set forth below is a discussion of certain current general guidelines of Rialto Mortgage generally applicable with respect to Rialto Mortgage’s underwriting analysis of multi-family and commercial real estate properties which serve as the direct or indirect source of repayment for commercial real estate debt originated by Rialto Mortgage. 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 Mortgage.
Database. To prepare for securitization, members of the Rialto Mortgage 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 Mortgage Review Team during the underwriting process. Prior to securitization of the Rialto Mortgage Loans, the Rialto Mortgage 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 Mortgage Review Team, to the extent such updates were provided to, and deemed material by, the Rialto Mortgage 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 Mortgage Data Tape”) containing detailed information regarding the Rialto Mortgage Loans was created from the information in the database referred to above. The Rialto Mortgage Data Tape was used to provide the numerical information regarding the Rialto Mortgage Loans in this prospectus.
Data Comparison and Recalculation. The depositor, on behalf of Rialto Mortgage, engaged a third party accounting firm to perform certain data comparison and recalculation procedures designed or provided by Rialto Mortgage and relating to information in this prospectus regarding the Rialto Mortgage Loans. These procedures included:
| ● | comparing the information in the Rialto Mortgage Data Tape against various source documents provided by Rialto Mortgage; |
| ● | comparing numerical information regarding the Rialto Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the information contained in the Rialto Mortgage Data Tape; and |
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| ● | recalculating certain percentages, ratios and other formulae relating to the Rialto Mortgage Loans disclosed in this prospectus. |
Legal Review. Rialto Mortgage 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 Mortgage’s origination counsel reviewed a form of securitization representations and warranties at origination and, if applicable, identified exceptions to those representations and warranties. Rialto Mortgage’s origination and underwriting staff also performed a review of the representations and warranties.
Legal counsel was also engaged in connection with this securitization to assist in the review of the Rialto Mortgage Loans. Such assistance included, among other things, (i) a review of certain of Rialto Mortgage’s asset summary reports, (ii) the review of the representations 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 Mortgage 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 the Rialto Mortgage Loans.
Other Review Procedures. The Rialto Mortgage Review Team, with the assistance of counsel engaged in connection with this securitization, also reviewed each Rialto Mortgage Loan to determine whether it materially deviated from the underwriting guidelines set forth under “—Rialto Mortgage’s Underwriting Standards and Loan Analysis” above.
Findings and Conclusions. Based on the foregoing review procedures, Rialto Mortgage determined that the disclosure regarding the Rialto Mortgage Loans in this prospectus is accurate in all material respects. Rialto Mortgage also determined that the Rialto Mortgage Loans were not originated with any material exceptions from Rialto Mortgage’s underwriting guidelines and procedures, except as described above under “—Rialto Mortgage’s Underwriting Standards and Loan Analysis—Exceptions” above. Rialto Mortgage attributes to itself all findings and conclusions resulting from the foregoing review procedures.
Review Procedures in the Event of a Mortgage Loan Substitution. Rialto Mortgage 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 material breach of a representation or warranty or a material document defect. Rialto Mortgage, 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 MLPA and the PSA (the “Qualification Criteria”). Rialto Mortgage 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 Mortgage 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 Mortgage to render any tax opinion required in connection with the substitution.
Compliance with Rule 15Ga-1 under the Exchange Act
Rialto Mortgage most recently filed a Form ABS-15G on February 2, 2018. Rialto Mortgage’s Central Index Key number is 0001592182. With respect to the period from and including April 1, 2015 to and including March 31, 2018, Rialto Mortgage 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.
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Retained Interests in This Securitization
Neither Rialto Mortgage nor any of its affiliates intends to retain any certificates issued by the issuing entity or any other economic interest in this securitization. However, Rialto Mortgage or its affiliates may retain or own in the future certain classes of certificates. Any such party will have the right to dispose of such certificates at any time.
The information set forth under “—Rialto Mortgage Finance, LLC” has been provided by Rialto Mortgage.
C-III Commercial Mortgage LLC
General
C-III Commercial Mortgage LLC (“C-III CM”) is a sponsor of, and a seller of certain Mortgage Loans (the “C-III CM Mortgage Loans”) into, the securitization described in this prospectus. C-III CM is a limited liability company organized under the laws of the State of Delaware on June 9, 2010. C-III Capital Partners LLC (“C-III Parent”), a Delaware limited liability company, is the sole member of C-III CM.
C-III Parent is a privately-held commercial real estate company that commenced operations in March of 2010. C-III Parent, together with its direct and indirect subsidiaries, including C-III CM, are collectively referred to herein as the “C-III Capital Group”. The C-III Capital Group is engaged in a broad range of activities, including principal investment, loan origination, CDO management, fund management and primary and special loan servicing. The principal place of business of the C-III Capital Group is located at 5221 N. O’Connor Blvd., Suite 800, Irving, Texas 75039.
C-III CM originates, and acquires from unaffiliated third party originators, multifamily, manufactured housing community and commercial mortgage loans and mezzanine loans throughout the United States. Acquired loans may have been originated using underwriting guidelines not established by C-III CM.
The following table sets forth information with respect to originations and securitizations of fixed-rate multifamily, manufactured housing community and commercial mortgage loans by C-III CM during the calendar years 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2017 and the first three calendar months of 2018.
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Originations and Securitizations of Fixed-Rate Multifamily,
Manufactured Housing Community and Commercial Mortgage Loans
Originations(1) | Securitizations(2) | ||||||||||||||
No. of Loans | Approximate Aggregate Principal | No. of Loans | Approximate Aggregate Principal | ||||||||||||
| 2010(3) | 5 | $ | 30,090,000 | 0 | $ | 0 | |||||||||
| 2011 | 35 | $ | 195,668,500 | 30 | $ | 181,834,330 | |||||||||
| 2012 | 79 | $ | 365,601,000 | 72 | $ | 326,672,918 | |||||||||
| 2013 | 117 | $ | 505,529,000 | 122 | $ | 540,435,224 | |||||||||
| 2014 | 114 | $ | 539,760,700 | 97 | $ | 508,254,819 | |||||||||
| 2015 | 138 | $ | 679,606,000 | 139 | $ | 629,232,102 | |||||||||
| 2016 | 57 | $ | 254,050,500 | 68 | $ | 367,678,223 | |||||||||
| 2017 | 51 | $ | 243,645,500 | 44 | $ | 217,113,867 | |||||||||
| 2018(4) | 15 | $ | 50,353,500 | 22 | $ | 79,065,982 | |||||||||
| (1) | Includes mortgage loans that were originated by a correspondent, re-underwritten by C-III CM and acquired by C-III CM at or about the time of origination. |
| (2) | Excludes mortgage loans sold to issuers of collateralized debt obligations managed or administered by an affiliate of C-III CM. |
| (3) | C-III CM was organized on June 9, 2010. |
| (4) | Through and including March 31, 2018. |
C-III Asset Management LLC, a wholly-owned subsidiary of C-III Parent, acts as the servicer of the multifamily, manufactured housing community and commercial mortgage loans that C-III CM and C-III MF (as defined below) own pending the securitization or other disposition of those loans.
Wells Fargo Central Pacific Holdings, Inc. (which is an affiliate of Wells Fargo Bank, Wells Fargo Commercial Mortgage Securities, Inc. and Wells Fargo Securities, LLC) is an investor in C-III Parent and, as such, holds a less than 10% indirect equity interest in C-III CM. In addition, Wells Fargo Bank provides short-term warehousing of mortgage loans originated or acquired by C-III CM, indirectly through a repurchase facility between Wells Fargo Bank and a wholly-owned subsidiary of C-III CM, C-III Mortgage Funding LLC (“C-III MF”). C-III CM guarantees the performance by its wholly-owned subsidiary of certain obligations under that repurchase facility. Sixteen (16) of the C-III CM Mortgage Loans, with an aggregate Cut-off Date Balance of approximately $98,982,798, representing approximately 15.0% of the Initial Pool Balance, are currently (or, as of the Closing Date for this securitization, are expected to be) subject to such repurchase facility. C-III CM intends to use the proceeds from its sale of the C-III CM Mortgage Loans to the depositor to, among other things, reacquire the warehoused C-III CM Mortgage Loans through its wholly-owned subsidiary from Wells Fargo Bank, free and clear of any liens. Wells Fargo Bank acts (or, as of the Closing Date, is expected to act) as interim custodian for the loan files with respect to all of the C-III CM Mortgage Loans prior to securitization, which have an aggregate Cut-off Date Balance of approximately $100,732,798, representing approximately 15.3% of the Initial Pool Balance.
In addition, C-III CM or C-III MF is party to an interest rate hedging arrangement with Wells Fargo Bank with respect to all of the C-III CM Mortgage Loans, which have an aggregate Cut-off Date Balance of approximately $100,732,798, representing approximately 15.3% of the Initial Pool Balance. Those hedging arrangements will terminate upon the
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pricing of such Mortgage Loans in connection with the transfer thereof to this securitization transaction.
Based on unaudited consolidated financial statements, as of March 31, 2018, C-III CM and its wholly-owned subsidiaries had total assets of approximately $459.7 million, total liabilities of approximately $281.1 million and total member’s equity of approximately $178.6 million.
In connection with commercial mortgage securitization transactions, C-III CM will generally transfer the subject mortgage loans to the applicable depositor, who will then transfer those mortgage loans to the issuing entity for the related securitization. In return for the transfer by the applicable depositor to the issuing entity of those mortgage loans (together with any other mortgage loans being securitized), the issuing entity will issue commercial mortgage pass-through certificates that are, in whole or in part, backed by, and supported by the cash flows generated by, the mortgage loans being securitized. In coordination with underwriters or initial purchasers and the applicable depositor, C-III CM works with rating agencies, other loan sellers, servicers and investors and participates in structuring a securitization transaction to maximize the overall value and capital structure, taking into account numerous factors, including without limitation geographic and property type diversity and rating agency criteria. In connection with contributing mortgage loans to a securitization, C-III CM will make certain loan-level representations and warranties, will undertake certain loan document delivery requirements and will undertake certain obligations to repurchase or replace mortgage loans affected by uncured material breaches of those representations and warranties and/or document delivery requirements or make loss of value payments in connection therewith.
C-III CM’s Underwriting Guidelines and Processes
Set forth below is a discussion of general underwriting guidelines and processes with respect to multifamily, manufactured housing community and commercial mortgage loans originated by C-III CM for securitization.
Notwithstanding the discussion below, given the unique nature of multifamily, manufactured housing community and commercial mortgaged properties, the underwriting and origination procedures and the credit analysis with respect to any particular multifamily, manufactured housing community or commercial mortgage loan may significantly differ from one loan to another, and will be driven by circumstances particular to that property, including, among others, its type, current use, size, location, market conditions, reserve requirements and additional collateral, tenants and leases, borrower identity, sponsorship, performance history and/or other factors. Consequently, we cannot assure you that the underwriting of any particular multifamily, manufactured housing community or commercial mortgage loan originated by C-III CM will conform to the general guidelines and processes described below. For important information about the circumstances that have affected the underwriting of particular C-III CM Mortgage Loans, see “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus and “Annex D-2—Exceptions to Mortgage Loan Representations and Warranties” in this prospectus. In certain circumstances, due diligence reports and assessments of the type described below that were obtained with respect to any C-III CM Mortgage Loan may have been prepared by an affiliate of C-III CM (e.g., an affiliate that is in the business of being a title agent or a zoning consultant).
A. Loan Analysis. Generally both a credit analysis and a collateral analysis are conducted with respect to each multifamily, manufactured housing community and commercial mortgage loan. The credit analysis of the borrower generally includes a review
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of third-party credit reports or judgment, lien, bankruptcy and pending litigation searches. The collateral analysis generally includes a review of, in each case to the extent available and applicable, the historical property operating statements, rent rolls and certain significant tenant leases. The credit underwriting also generally includes a review of third-party appraisals, as well as environmental reports, engineering assessments and seismic reports, if applicable and obtained. Generally, a member of the mortgage loan underwriting team also conducts a site inspection to ascertain the overall quality, functionality and competitiveness of the property, including its neighborhood and market, accessibility and visibility, and to assess the tenancy of the property. The submarket in which the property is located is assessed to evaluate competitive or comparable properties as well as market trends.
B. Loan Approval. Prior to commitment, each multifamily, manufactured housing community and commercial mortgage loan to be originated must be approved by a loan committee that includes senior executives of C-III Parent. The committee may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline a loan transaction.
C. Debt Service Coverage Ratio and Loan-to-Value Ratio. The underwriting includes a calculation of the debt service coverage ratio and loan-to-value ratio in connection with the origination of a loan. With respect to loans originated for securitization, C-III CM’s underwriting standards generally require, without regard to any other debt, a debt service coverage ratio of not less than 1.20x and a loan-to-value ratio of not more than 80.0%.
The debt service coverage ratio will generally be calculated based on the underwritten net cash flow from the property in question as determined by C-III CM and payments on the loan based on actual (or, in some cases, assumed) principal and/or interest due on the loan. However, underwritten net cash flow is often a highly subjective number based on a variety of assumptions regarding, and adjustments to, revenues and expenses with respect to the related real property collateral. For example, when calculating the debt service coverage ratio for a multifamily, manufactured housing community or commercial mortgage loan, annual net cash flow that was calculated based on assumptions regarding projected future rental income, expenses and/or occupancy, may be utilized. We cannot assure you that the foregoing assumptions made with respect to any prospective multifamily, manufactured housing community or commercial mortgage loan will, in fact, be consistent with actual property performance. Such underwritten net cash flow may be higher than historical net cash flow reflected in recent financial statements. 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. A 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.
D. Additional Debt. Certain mortgage loans originated by C-III CM may have or permit in the future certain additional subordinate debt, whether secured or unsecured, and/or mezzanine debt. It is possible that a member of the C-III Capital Group may be the lender on that additional subordinate debt and/or mezzanine debt.
The debt service coverage ratios described above will be lower based on the inclusion of the payments related to such additional debt and the loan-to-value ratios described above will be higher based on the inclusion of the amount of any such additional subordinate debt and/or mezzanine debt.
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E. Assessments of Property Condition. As part of the underwriting process, the property assessments and reports described below generally will be obtained:
| ● | Appraisals. Independent appraisals or an update of an independent appraisal will generally be required in connection with the origination of each mortgage loan that meets the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation, or the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. In some cases, however, the value of the subject real property collateral may be established based on a cash flow analysis, a recent sales price or another method or benchmark of valuation. |
| ● | Environmental Assessment. In most cases, a Phase I environmental assessment will be required with respect to the real property collateral for a prospective multifamily, manufactured housing community or commercial mortgage loan. However, when circumstances warrant, an update of a prior environmental assessment, a transaction screen or a desktop review may be utilized. Alternatively, in limited circumstances, an environmental assessment may not be required, such as when the benefits of an environmental insurance policy or an environmental guarantee have been obtained. 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 originator or an environmental consultant believes that such an analysis is warranted under the circumstances. |
Depending on the findings of the initial environmental assessment, any of the following may be required: additional environmental testing, such as a Phase II environmental assessment with respect to the subject real property collateral; an environmental insurance policy; that the borrower conduct remediation activities or establish an operations and maintenance plan; and/or a guaranty or reserve with respect to environmental matters.
| ● | Engineering Assessment. In connection with the origination process, in most cases, it will be required that an engineering firm inspect the real property collateral for any prospective multifamily, manufactured housing community or commercial mortgage loan to assess the structure, exterior walls, roofing, interior structure and/or mechanical and electrical systems. Based on the resulting report, the appropriate response will be determined to any recommended repairs, corrections or replacements and any identified deferred maintenance. The resulting reports on some of the properties may indicate a variety of deferred maintenance items and recommended capital expenditures. In some instances, the repairs or maintenance are completed before closing or cash reserves are established to fund the deferred maintenance or replacement items or both. An engineering assessment may not be conducted with respect to a mortgaged property that lacks material improvements owned by the related borrower. |
| ● | Seismic Report. Generally, a seismic report is required for all properties located in seismic zones 3 or 4. A seismic study may not be conducted with respect to a mortgaged property that lacks material improvements owned by the related borrower. |
Notwithstanding the foregoing, engineering inspections and seismic reports will generally not be required or obtained by C-III CM in connection with the origination process in the
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case of mortgage loans secured by real properties that are subject to a ground lease, triple-net lease or other long-term lease, or in the case of mortgage loans that are not collateralized by any material improvements on the real property collateral.
F. Title Insurance. The borrower is required to provide, and C-III CM 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. In some cases, the title insurance agent may be an affiliate of C-III CM.
G. Casualty Insurance. Except in certain instances where sole or significant tenants (which may include ground tenants) are permitted to obtain insurance or may self-insure, or where another third party unrelated to the applicable borrower (such as a condominium association, franchisor or unaffiliated property manager, if applicable) is permitted to obtain insurance, or where the subject mortgaged property may be covered by a blanket policy (which may be provided by an affiliate), C-III CM 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 of the outstanding principal balance of the mortgage loan and 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.
Flood insurance, if available, must be in effect for any mortgaged property that at the time of origination included material borrower-owned improvements in any area identified in the Federal Register by the Federal Emergency Management Agency 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 material borrower owned improvements at the property or, in cases where only a portion of the property is in the flood zone, the full insurable value of the material borrower-owned improvements on the portion of the property contained in the flood zone, and (iii) the maximum amount of insurance available under the National Flood Insurance Program, except in some cases where self-insurance was 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.
Except in certain instances where sole or significant tenants (which may include ground tenants) are permitted to obtain insurance or may self-insure, or where another third party unrelated to the applicable borrower (such as a condominium association, franchisor or unaffiliated property manager, if applicable) is permitted to obtain insurance, or where the subject mortgaged property may be covered by a blanket policy (which may be provided by
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an affiliate), each mortgage instrument typically also requires the borrower to maintain: (i) 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; (ii) 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; and (iii) insurance coverage for terrorism or terrorist acts, if such coverage is available at commercially reasonable rates (although in all (or almost all) cases, there is a cap on the amount that the related borrower will be required to expend on terrorism insurance).
Although properties are typically not insured for earthquake risk, a borrower will be required to obtain earthquake insurance if the property has material borrower-owned improvements and the seismic report indicates that the probable maximum loss (“PML”) is greater than 20%.
H. Zoning and Building Code Compliance. In connection with the origination of a multifamily, manufactured housing community or commercial mortgage loan, the originator will generally examine whether the use and occupancy of the related real property collateral is in material compliance with zoning, land-use, building rules, regulations and orders then applicable to that property. Evidence of this compliance may be in the form of one or more of the following: legal opinions, surveys, recorded documents, temporary or permanent certificates of occupancy, letters from government officials or agencies, title insurance endorsements, engineering or consulting reports, zoning reports and/or representations by the related borrower. In some circumstances, zoning reports may be provided by an affiliate of C-III CM.
In some cases, a mortgaged property may constitute a legal non-conforming use or structure. In such cases, C-III CM may require an endorsement to the title insurance policy or the acquisition of law and ordinance insurance with respect to the particular non-conformity unless: (a) 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 (b) a cash reserve, a letter of credit or an agreement from a principal of the borrower is provided to cover losses. In general, C-III CM does not require zoning protection insurance.
If a material violation exists with respect to a mortgaged property, C-III CM may require the borrower to remediate such violation and, subject to the discussion under “—Escrow Requirements” below, to establish a reserve to cover the cost of such remediation, unless a cash reserve, a letter of credit or an agreement from a principal of the borrower is provided to cover losses.
I. Escrow Requirements. Generally, C-III CM requires most borrowers to fund escrows for taxes, insurance, replacement reserves, tenant improvements/leasing commissions (depending on the property type), deferred maintenance and/or environmental remediation. A case-by-case analysis will be conducted to determine the need for a particular escrow or reserve. Consequently, the aforementioned escrows and reserves are not established for every multifamily, manufactured housing community and commercial mortgage loan originated by C-III CM. In certain cases, these reserves may be released to the borrower upon satisfaction of certain conditions in the mortgage loan documents which may include, but not be limited to, achieving of leasing goals, achieving a specified debt service coverage ratio or satisfying other conditions.
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Furthermore, C-III CM 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, C-III CM may determine that establishing an escrow or reserve is not warranted given the amounts that would be involved and C-III CM’s evaluation of the ability of the 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. In some cases, C-III CM may determine that establishing an escrow or reserve is not warranted because a tenant or other third party has agreed to pay the subject cost or expense for which the escrow or reserve would otherwise have been established.
Generally, subject to the discussion in the prior paragraph, the required escrows for commercial, multifamily and manufactured housing community mortgage loans originated by C-III CM are as follows:
| ● | Taxes—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 real estate taxes and assessments, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if there is an institutional property sponsor or high net worth individual property sponsor, (ii) if and to the extent that a sole or major tenant (which may include a ground tenant) at the related mortgaged property is required to pay taxes directly or to reimburse the borrower for the payment of taxes, or (iii) in the case of hospitality properties, the escrow or reserve is being maintained by a franchisor or unaffiliated property manager. |
| ● | Insurance—Monthly escrow deposits equal to 1/12th of the annual property insurance premium are typically required to pay insurance premiums, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if there is an institutional property sponsor or high net worth individual property sponsor, (ii) if the related borrower or an affiliate thereof maintains a blanket insurance policy that covers the related mortgaged property, (iii) if and to the extent that a sole or major tenant (which may include a ground tenant) at the related mortgaged property is obligated to maintain the insurance or to reimburse the borrower for the payment of insurance premiums or is permitted to self-insure, (iv) if and to the extent that another third party unrelated to the applicable borrower (such as a condominium board, franchisor or unaffiliated property manager, if applicable) is obligated to maintain the insurance, (v) in the case of hospitality properties, the escrow or reserve is being maintained by a franchisor or unaffiliated property manager, or (vi) if a sponsor, a key principal or an affiliate of the borrower delivers a guarantee relating to the payment of insurance premiums. |
| ● | 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 and may be required to be funded either at loan origination and/or during the related mortgage loan term and/or after the occurrence and during the continuance of a specified trigger event. 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, (i) if and to the extent a tenant (which may include a ground tenant) at the related mortgaged property or other third party is responsible for all repairs and maintenance, (ii) if a sponsor, a |
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key principal or an affiliate of the borrower delivers a guarantee agreeing to take responsibility and pay for the related costs and expenses, (iii) if C-III CM determines that establishing an escrow or reserve is not warranted given the amounts that would be involved and C-III CM’s evaluation of the ability of the property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the cost of repairs and maintenance absent creation of an escrow or reserve, or (iv) in the case of hospitality properties, the escrow or reserve is being maintained by a franchisor or unaffiliated property manager.
| ● | Tenant Improvements / Leasing Commissions—In the case of retail, office and industrial properties, a tenant improvements / leasing commissions reserve may be required to be funded either at loan origination and/or during the related mortgage loan term and/or upon the occurrence or during the continuance of a specified trigger event to cover certain anticipated leasing commissions or tenant improvement costs which might be associated with re-leasing the space occupied by significant tenants, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related tenant’s lease extends beyond the loan term, (ii) if a sponsor, a key principal or an affiliate of the borrower delivers a guarantee agreeing to take responsibility and pay for the related costs and expenses, (iii) if the rent for the space in question is considered below market, or (iv) if C-III CM determines that establishing an escrow or reserve is not warranted given the amounts that would be involved and C-III CM’s evaluation of the ability of the property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the anticipated leasing commissions or tenant improvement costs absent creation of an escrow or reserve. |
| ● | Deferred Maintenance—A deferred maintenance reserve may be required to be funded at loan origination in an amount typically 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) if the sponsor, a key principal or an affiliate of the borrower delivers a guarantee to complete the immediate repairs in a specified amount of time, (ii) if the deferred maintenance amount does not materially impact the function, performance or value of the property, (iii) if a tenant (which may include a ground tenant) at the related mortgaged property or other third party is responsible for the repairs, or (iv) if C-III CM determines that establishing an escrow or reserve is not warranted given the amounts that would be involved and C-III CM’s evaluation of the ability of the property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the cost of repairs absent creation of an escrow or reserve. |
| ● | Environmental Remediation—An environmental remediation reserve may be required at loan origination in an amount typically 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, a key principal or an affiliate of the borrower delivers a guarantee agreeing to take responsibility and pay for the identified environmental issues, (ii) if environmental insurance is obtained or already in place, (iii) if a third party unrelated to the borrower is identified as the responsible party or (iv) if C-III CM determines that establishing an escrow or reserve is not warranted given the amounts that would be involved and C-III CM’s evaluation of the ability of the property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the cost of remediation absent creation of an escrow or reserve. |
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For a description of certain escrows collected with respect to the C-III CM Mortgage Loans, please see Annex A-1 to this prospectus.
C-III MF originated the Mortgage Loans secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Securitas Office and 5800 North Course Office, collectively representing approximately 2.4% of the Initial Pool Balance. It did so in accordance with C-III CM’s underwriting guidelines and processes described above.
Exceptions
Notwithstanding the discussion under “—C-III CM’s Underwriting Guidelines and Processes” above, one or more of the C-III CM Mortgage Loans may vary from, or do not comply with, C-III CM’s underwriting guidelines described above. In addition, in the case of one or more of the C-III CM Mortgage Loans, C-III CM or another originator may not have strictly applied the underwriting guidelines described above as the result of a case-by-case permitted exception based upon other compensating factors. For any material exceptions to C-III CM’s underwriting guidelines described above in respect of the C-III CM Mortgage Loans, see “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus.
Review of Mortgage Loans for Which C-III CM is the Sponsor
A. Overview. C-III CM has conducted a review of the C-III CM Mortgage Loans in connection with the securitization described in this prospectus. C-III CM determined the nature, extent and timing of the review and the level of assistance provided by any third parties. The review of the C-III CM Mortgage Loans was performed by a deal team comprised of real estate and securitization professionals who are employees of C-III CM with the assistance of certain third parties. C-III CM has ultimate authority and control over, and assumes all responsibility for and attributes to itself, the review of the C-III CM Mortgage Loans that are being sold to the depositor and the review’s findings and conclusions. The review procedures described below were employed with respect to all of the C-III CM Mortgage Loans (rather than relying on sampling procedures).
B. Data Tape. To prepare for securitization, C-III CM created a data tape of loan-level and property-level information, and prepared an asset summary report, relating to each C-III CM Mortgage Loan. The data tape and the respective asset summary reports were compiled from, among other sources, the related 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 C-III CM or a third party originator during the underwriting process. After origination of each C-III CM Mortgage Loan, C-III CM may have updated the information in the data tape and the related asset summary report with respect to such C-III CM 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 C-III CM. Such updates were not intended to be, and do not serve as, a re-underwriting of any C-III CM Mortgage Loan. The C-III CM data tape was used by C-III CM to provide the numerical information regarding the C-III CM Mortgage Loans in this prospectus.
C. Data Comparisons and Recalculation. The depositor, on behalf of C-III CM, engaged a third party accounting firm to perform certain data comparison and recalculation procedures that were designed or provided by C-III CM, relating to information in this prospectus regarding the C-III CM Mortgage Loans. These procedures included:
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| ● | comparing the information in the C-III CM data tape against various source documents obtained or provided by C-III CM; |
| ● | comparing numerical information regarding the C-III CM Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the information contained in the C-III CM data tape; and |
| ● | recalculating certain percentages, ratios and other formulae relating to the C-III CM Mortgage Loans disclosed in this prospectus. |
D. Legal Review. C-III CM engaged various law firms to conduct certain legal reviews of the C-III CM Mortgage Loans for disclosure in this prospectus. In anticipation of the securitization, lender’s origination counsel for each C-III CM Mortgage Loan reviewed a set of securitization representations and warranties provided by C-III CM and, if applicable, identified exceptions to those representations and warranties.
Legal counsel was also engaged in connection with this securitization to assist in the review of the C-III CM Mortgage Loans. Such assistance included, among other things, a review of (i) the C-III CM data tape, (ii) C-III CM’s asset summary report or credit memorandum for each C-III CM Mortgage Loan, (iii) certain reports or other written confirmations from origination or other counsel identifying the existence, or confirming the absence, of representation and warranty exceptions relating to certain C-III CM Mortgage Loans, (iv) a due diligence questionnaire completed by C-III CM with respect to the C-III CM Mortgage Loans, and (v) select provisions in certain mortgage loan documents with respect to certain of the C-III CM Mortgage Loans.
E. Other Review Procedures. With respect to any material pending litigation of which C-III CM was aware at the origination or acquisition, as applicable, of any C-III CM Mortgage Loan, C-III CM requested updates from the related borrower, origination counsel and/or borrower’s litigation counsel. If C-III CM became aware of a significant natural disaster in the vicinity of the Mortgaged Property securing any C-III CM Mortgage Loan, C-III CM obtained information on the status of the related Mortgaged Property from the related borrower to confirm no material damage to the related Mortgaged Property.
C-III CM also reviewed the C-III CM Mortgage Loans to determine, with the assistance of counsel engaged in connection with this securitization, whether any C-III CM Mortgage Loan materially deviated from the underwriting guidelines set forth under “—C-III CM’s Underwriting Guidelines and Processes” above. See “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus.
F. Findings and Conclusions. C-III CM found and concluded with reasonable assurance that the disclosure regarding the C-III CM Mortgage Loans in this prospectus is accurate in all material respects. C-III CM also found and concluded with reasonable assurance that, except as described under “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines” in this prospectus, none of the C-III CM Mortgage Loans were originated with any material exceptions to C-III CM’s origination procedures and underwriting criteria described above.
Compliance with Rule 15Ga-1 under the Exchange Act
As of the date of this prospectus, C-III CM filed its most recent Form ABS-15G with the SEC pursuant to Rule 15Ga-1 on January 31, 2018. Such Form ABS-15G is available electronically through the SEC’s EDGAR system. The Central Index Key number of C-III CM is 0001541214. For the period from and including April 1, 2015 to and including March 31,
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2018, C-III CM does not have any activity to report as required by Rule 15Ga-1, with respect to the repurchase and 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
As of the date of this prospectus, neither C-III CM nor any of its affiliates has committed or is required to retain any certificates issued by the issuing entity or any other economic interest in this securitization. However, C-III CM and its affiliates are not restricted from retaining any certificates and may, prior to the Closing Date, determine that they wish to acquire certain certificates in connection with the initial issuance thereof. In addition, C-III CM and its affiliates may acquire certificates in the secondary market. Any such party will have the right to dispose of any such certificates (whether acquired on or after the Closing Date) at any time.
The information set forth under this “—C-III Commercial Mortgage LLC” subsection has been provided by C-III CM.
The Depositor
Wells Fargo Commercial Mortgage Securities, Inc., a North Carolina corporation, is the depositor. The depositor is a special purpose corporation incorporated in the State of North Carolina in 1988, for the purpose of engaging in the business, among other things, of acquiring and depositing mortgage loans in trust in exchange for certificates evidencing interest in such trusts and selling or otherwise distributing such certificates. The depositor is a direct, wholly-owned subsidiary of Wells Fargo Bank, a sponsor, an originator, a mortgage loan seller, the master servicer, the certificate administrator, the tax administrator, the custodian and the certificate registrar and an affiliate of Wells Fargo Securities, LLC, one of the underwriters. See “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties” below.
The depositor will have minimal ongoing duties with respect to the certificates and the Mortgage Loans. The depositor’s duties will include, without limitation, (i) appointing a successor trustee in the event of the resignation or removal of the trustee, (ii) providing information in its possession with respect to the certificates to the tax administrator to the extent necessary to perform REMIC tax administration, (iii) indemnifying the trustee, the tax administrator and the issuing entity for any liability, assessment or costs arising from the depositor’s willful misconduct, bad faith or negligence in providing such information, (iv) indemnifying the trustee and the tax administrator against certain securities law liabilities, and (v) signing or contracting with the master servicer, signing any Annual Report on Form 10-K, including the certification required under the Sarbanes-Oxley Act, and any Distribution Reports on Form 10-D and Current Reports on Form 8-K required to be filed by the issuing entity. The depositor is also required under the underwriting agreement to indemnify the underwriters for certain securities law liabilities.
The depositor purchases commercial mortgage loans and interests in commercial mortgage loans for the purpose of selling those assets to trusts created in connection with the securitization of pools of assets and does not engage in any activities unrelated to those securitizations. On the Closing Date, the depositor will acquire the Mortgage Loans from each mortgage loan seller and will simultaneously transfer them, without recourse, to the trustee for the benefit of the Certificateholders.
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The depositor remains responsible under the PSA for providing the master servicer, special servicer, certificate administrator and trustee with certain information and other assistance requested by those parties and reasonably necessary to performing their duties under the PSA. The depositor also remains responsible for mailing notices to the Certificateholders upon the appointment of certain successor entities under the PSA.
The Issuing Entity
The issuing entity, Wells Fargo Commercial Mortgage Trust 2018-C45 (the “Trust”), will be a New York common law trust, formed on the Closing Date pursuant to the PSA.
The only activities that the issuing entity may perform are those set forth in the PSA, which are generally limited to owning and administering the Mortgage Loans and any REO Property, disposing of defaulted mortgage loans and REO Property, issuing the certificates, making distributions, providing reports to Certificateholders and other activities described in this prospectus. Accordingly, the issuing entity may not issue securities other than the certificates, or invest in securities, other than investing of funds in the Collection Account and other accounts maintained under the PSA in certain short-term permitted investments. The issuing entity may not lend or borrow money, except that the master servicer and the trustee may make Advances of delinquent monthly debt service payments and they and the special servicer may make Servicing Advances to the issuing entity, but only to the extent it does not deem such Advances to be nonrecoverable from the related mortgage loan; such Advances are intended to provide liquidity, rather than credit support. The PSA may be amended as set forth under “Pooling and Servicing Agreement—Amendment”. The issuing entity administers the Mortgage Loans through the trustee, the certificate administrator, the master servicer and the special servicer. A discussion of the duties of the trustee, the certificate administrator, the master servicer and the special servicer, including any discretionary activities performed by each of them, is set forth in this prospectus under “Transaction Parties—The Trustee”, “―The Certificate Administrator”, “—The Master Servicer” and “—The Special Servicer” and “Pooling and Servicing Agreement”.
The only assets of the issuing entity other than the Mortgage Loans and any REO Properties are the Collection Account and other accounts maintained pursuant to the PSA, the short-term investments in which funds in the Collection Account and other accounts are invested. The issuing entity has no present liabilities, but has potential liability relating to ownership of the Mortgage Loans and any REO Properties and certain other activities described in this prospectus, and indemnity obligations to the trustee, the certificate administrator, the depositor, the master servicer, the special servicer and the operating advisor. The fiscal year of the issuing entity is the calendar year. The issuing entity has no executive officers or board of directors and acts through the trustee, the certificate administrator, the master servicer and the special servicer.
The depositor will be contributing the Mortgage Loans to the issuing entity. The depositor will be purchasing the Mortgage Loans from the mortgage loan sellers, as described under “Description of the Mortgage Loan Purchase Agreements” in this prospectus.
The Trustee
Wilmington Trust, National Association (“WTNA”) (formerly called M & T Bank, National Association) will act as trustee on behalf of the Certificateholders pursuant to the PSA. WTNA is a national banking association with trust powers incorporated in 1995. The trustee’s principal place of business is located at 1100 North Market Street, Wilmington, Delaware 19890. WTNA is an affiliate of Wilmington Trust Company and both WTNA and
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Wilmington Trust Company are subsidiaries of Wilmington Trust Corporation and Wilmington Trust Corporation is a wholly-owned subsidiary of M&T Bank Corporation. Since 1998, Wilmington Trust Company has served as trustee in numerous asset-backed securities transactions. As of December 31, 2017, WTNA served as trustee on over 1,600 mortgage-backed related securities transactions having an aggregate original principal balance in excess of $270 billion, of which approximately 330 transactions were commercial mortgage-backed securities transactions having an aggregate original principal balance of approximately $215 billion.
The transaction parties may maintain banking and other commercial relationships with WTNA and its affiliates. In its capacity as trustee on commercial mortgage securitizations, WTNA and its affiliates are generally required to make an advance if the related servicer or special servicer fails to make a required advance. In the past three years, WTNA and its affiliates have not been required to make an advance on a commercial mortgage-backed securities transaction.
WTNA is subject to various legal proceedings that arise from time to time in the ordinary course of business. WTNA does not believe that the ultimate resolution of any of these proceedings will have a material adverse effect on its services as trustee for this transaction.
The information set forth under this sub-heading has been provided by WTNA. None of the depositor, the underwriters or any other person, other than WTNA, makes any representation or warranty as to the accuracy or completeness of such information.
The responsibilities of the trustee are set forth in the PSA. 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 “Pooling and Servicing Agreement”. In its capacity as trustee on commercial mortgage loan securitizations, WTNA and its affiliates are generally required to make an advance if the related servicer or special servicer fails to make a required advance. See “Pooling and Servicing Agreement—Advances” in this prospectus.
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” in this prospectus.
The trustee will only be liable under the PSA to the extent of the obligations specifically imposed by the PSA. For further information regarding the duties, responsibilities, rights and obligations of the trustee under the PSA, including those related to indemnification, see “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”. Certain terms of the PSA regarding the trustee’s removal, replacement or resignation are described under “Pooling and Servicing Agreement—Resignation and Removal of the Trustee and the Certificate Administrator” in this prospectus.
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The Certificate Administrator
Wells Fargo Bank will act as certificate administrator, REMIC administrator, certificate registrar, and custodian under the PSA. The certificate administrator will also be the REMIC administrator and the 17g-5 Information Provider under the PSA.
Wells Fargo Bank is a national banking association and a wholly-owned subsidiary of Wells Fargo & Company. A diversified financial services company, Wells Fargo & Company is a U.S. bank holding company with approximately $1.9 trillion in assets and approximately 268,000 employees as of September 30, 2017, which provides banking, insurance, trust, mortgage and consumer finance services throughout the United States and internationally. Wells Fargo Bank provides retail and commercial banking services and corporate trust, custody, securities lending, securities transfer, cash management, investment management and other financial and fiduciary services. The depositor, the sponsors, the master servicer, the special servicer, the trustee, the operating advisor, the asset representations reviewer and the mortgage loan sellers may maintain banking and other commercial relationships with Wells Fargo Bank and its affiliates. Wells Fargo Bank maintains principal corporate trust offices at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 (among other locations) and its office for certificate transfer services is located at 600 South 4th Street, 7th floor, MAC: N9300-070, Minneapolis, Minnesota 55479.
Under the terms of the PSA, Wells Fargo Bank is responsible for securities administration, which includes pool performance calculations, distribution calculations and related distributions to Certificateholders and the preparation of monthly distribution reports. As certificate administrator, Wells Fargo Bank is responsible for the preparation and filing of all REMIC tax returns on behalf of the Trust REMICs and the preparation of monthly reports on Form 10-D, certain current reports on Form 8-K and annual reports on Form 10-K that are required to be filed with the SEC on behalf of the issuing entity. Wells Fargo Bank has been engaged in the business of securities administration since June 30, 1995, and in connection with commercial mortgage-backed securities since 1997. As of September 30, 2017, Wells Fargo Bank was acting as securities administrator with respect to more than $415 billion of outstanding commercial mortgage-backed securities.
Wells Fargo Bank is acting as custodian (the “Custodian”) of the mortgage files pursuant to and subject to the PSA. In that capacity, Wells Fargo Bank is responsible to hold and safeguard the mortgage notes and other contents of the mortgage files on behalf of the trustee for the benefit of the Certificateholders. Wells Fargo Bank maintains each mortgage file in a separate file folder marked with a unique bar code to assure loan-level file integrity and to assist in inventory management. Files are segregated by transaction or investor. Wells Fargo Bank has been engaged in the mortgage document custody business for more than 25 years. Wells Fargo Bank maintains its commercial document custody facilities in Minneapolis, Minnesota. As of September 30, 2017, Wells Fargo Bank was acting as custodian of more than 227,000 commercial mortgage files.
Wells Fargo Bank serves or may have served within the past two years as loan file custodian for various mortgage loans owned by a sponsor or an affiliate of a sponsor, and one or more of those mortgage loans may be included in the Trust. The terms of any custodial agreement under which those services are provided by Wells Fargo Bank are customary for the mortgage-backed securitization industry and provide for the delivery, receipt, review and safekeeping of mortgage loan files.
For three CMBS transactions in its portfolio, Wells Fargo Bank disclosed material noncompliance on its related 2017 Annual Statement of Compliance furnished pursuant to Item 1123 of Regulation AB to the required recipients for such transactions. For one CMBS
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transaction, an administrative error caused an underpayment to certain classes and a correlating overpayment to certain classes on one distribution date in 2017. The affected distributions were revised to correct the error before the next distribution date. For the second CMBS transaction, an administrative error resulted in certain holders of definitive certificates not receiving a distribution on one distribution date in 2017. The error was corrected when the required distributions were made the next day. For the third CMBS transaction, required distributions for one distribution date in 2017 were made eight days late as a result of an inadvertent payment systems error.
On June 18, 2014, a group of institutional investors filed a civil complaint in the Supreme Court of the State of New York, New York County, against Wells Fargo Bank, National Association (“Wells Fargo Bank”) in its capacity as trustee under 276 residential mortgage-backed securities (“RMBS”) trusts, which was later amended on July 18, 2014, to increase the number of trusts to 284 RMBS trusts. On November 24, 2014, the plaintiffs filed a motion to voluntarily dismiss the state court action without prejudice. That same day, a group of institutional investors filed a putative class action complaint in the United States District Court for the Southern District of New York (the “District Court”) against Wells Fargo Bank, alleging claims against the bank in its capacity as trustee for 274 RMBS trusts (the “Federal Court Complaint”). In December 2014, the plaintiffs’ motion to voluntarily dismiss their original state court action was granted. As with the prior state court action, the Federal Court Complaint is one of six similar complaints filed contemporaneously against RMBS trustees (Deutsche Bank, Citibank, HSBC, Bank of New York Mellon and US Bank) by a group of institutional investor plaintiffs. The Federal Court Complaint against Wells Fargo Bank alleges that the trustee caused losses to investors and asserts causes of action based upon, among other things, the trustee’s alleged failure to: (i) notify and enforce repurchase obligations of mortgage loan sellers for purported breaches of representations and warranties, (ii) notify investors of alleged events of default, and (iii) abide by appropriate standards of care following alleged events of default. Relief sought includes money damages in an unspecified amount, reimbursement of expenses, and equitable relief. Other cases alleging similar causes of action have been filed against Wells Fargo Bank and other trustees in the District Court by RMBS investors in these and other transactions, and these cases against Wells Fargo Bank are proceeding before the same District Court judge. A similar complaint was also filed May 27, 2016 in New York state court by a different plaintiff investor. On January 19, 2016, an order was entered in connection with the Federal Court Complaint in which the District Court declined to exercise jurisdiction over 261 trusts at issue in the Federal Court Complaint; the District Court also allowed plaintiffs to file amended complaints as to the remaining, non-dismissed trusts, if they so chose, and three amended complaints have been filed. On December 17, 2016, the investor plaintiffs in the 261 trusts dismissed from the Federal Court Complaint filed a new complaint in New York state court (the “State Court Complaint”).
In September 2017, Royal Park Investments SA/NV (“Royal Park”), one of the plaintiffs in the District Court cases against Wells Fargo Bank, filed a putative class action complaint relating to two trusts seeking declaratory and injunctive relief and money damages based on Wells Fargo Bank’s indemnification from trust funds for legal fees and expenses Wells Fargo Bank incurs or has incurred in defending the District Court case filed by Royal Park. With respect to the foregoing litigations, Wells Fargo Bank believes plaintiffs’ claims are without merit and intends to contest the claims vigorously, but there can be no assurances as to the outcome of the litigations or the possible impact of the litigations on Wells Fargo Bank or the RMBS trusts.
Except as set forth herein with respect to Wells Fargo Bank as Master Servicer, neither Wells Fargo Bank nor any of its affiliates intends to retain any certificates issued by the
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issuing entity or any other economic interest in this securitization. However, each of Wells Fargo Bank and its affiliates will be entitled at their discretion to acquire certificates issued by the issuing entity and in each such case will have the right to dispose of any such certificates at any time.
The foregoing information set forth under this heading “—The Certificate Administrator” has been provided by Wells Fargo Bank.
For a description of any material affiliations, relationships and related transactions between the certificate administrator and the other transaction parties, see “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
The certificate administrator will only be liable under the PSA to the extent of the obligations specifically imposed by the PSA. For further information regarding the duties, responsibilities, rights and obligations of the certificate administrator under the PSA, including those related to indemnification, see “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”. Certain terms of the PSA regarding the certificate administrator’s removal, replacement or resignation are described under “Pooling and Servicing Agreement—Resignation and Removal of the Trustee and the Certificate Administrator” in this prospectus.
The Master Servicer
Wells Fargo Bank will act as the master servicer under the PSA. Wells Fargo Bank is a national banking association organized under the laws of the United States of America, and is a wholly-owned indirect subsidiary of Wells Fargo & Company. On December 31, 2008, Wells Fargo & Company acquired Wachovia Corporation, the owner of Wachovia Bank, and Wachovia Corporation merged with and into Wells Fargo & Company. On March 20, 2010, Wachovia Bank merged with and into Wells Fargo Bank. Like Wells Fargo Bank, Wachovia Bank acted as master servicer of securitized commercial and multifamily mortgage loans and, following the merger of the holding companies, Wells Fargo Bank and Wachovia Bank integrated their two servicing platforms under a senior management team that is a combination of both legacy Wells Fargo Bank managers and legacy Wachovia Bank managers.
Wells Fargo Bank is also a sponsor, an originator, a mortgage loan seller, the certificate administrator and the custodian under this securitization, is the holder of the Village at Leesburg Companion Loan and the CoolSprings Galleria Companion Loan, and is an affiliate of Wells Fargo Commercial Mortgage Securities, Inc., the depositor, and of Wells Fargo Securities, LLC, an underwriter. In addition, Wells Fargo Bank is (i) the master servicer, the certificate administrator and the custodian under the WFCM 2018-C44 PSA, which governs the servicing and administration of the Village at Leesburg Whole Loan and the 181 Fremont Street Whole Loan (prior to the securitization of the related Control Note), and (ii) the master servicer, the certificate administrator and the custodian under the BANK 2018-BNK12 PSA, which governs the servicing and administration of the CoolSprings Galleria Whole Loan. Wells Fargo Bank is the purchaser under repurchase agreements with each of Rialto Mortgage and C-III CM, respectively, or, in any such case, with a wholly-owned subsidiary or other affiliate of the subject mortgage loan seller, for the purpose of providing short-term warehousing of mortgage loans originated or acquired by each of Rialto Mortgage and C-III CM, respectively, or in any such case by its respective affiliates. Pursuant to certain interim servicing agreements between Wells Fargo Bank, on the one hand, and Barclays, a sponsor, an originator and a mortgage loan seller, and certain affiliates of Barclays, on the other hand, Wells Fargo Bank acts from time to time as primary servicer with respect to certain mortgage loans owned by Barclays and/or such affiliates of
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Barclays, including, prior to their inclusion in the issuing entity, some or all of the Barclays Mortgage Loans. There are currently no outstanding servicing advances made by Wells Fargo Bank in regards to any Barclays Mortgage Loan that is serviced by Wells Fargo Bank prior to its inclusion in the issuing entity. Pursuant to certain interim servicing agreements between Wells Fargo Bank and Rialto Mortgage, a sponsor, an originator and a mortgage loan seller, or certain affiliates of Rialto Mortgage, Wells Fargo Bank acts from time to time as primary servicer with respect to certain mortgage loans owned by Rialto Mortgage or such affiliates of Rialto Mortgage (subject, in some cases, to the repurchase facility described above in this paragraph), including, prior to their inclusion in the issuing entity, some or all of the Rialto Mortgage Loans. There are currently no outstanding servicing advances made by Wells Fargo Bank in regards to any Rialto Mortgage Loan that is serviced by Wells Fargo Bank prior to its inclusion in the issuing entity. Wells Fargo Bank acts as primary servicer with respect to certain mortgage loans it owns, including, prior to their inclusion in the issuing entity, some or all of the Wells Fargo Bank Mortgage Loans. There are currently no outstanding servicing advances made by Wells Fargo Bank in regards to any Wells Fargo Bank Mortgage Loan that is serviced by Wells Fargo Bank prior to its inclusion in the issuing entity. Wells Fargo Bank is expected to enter into one or more agreements with the other sponsors to purchase the master 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 to purchase the primary servicing rights to certain of the Mortgage Loans.
The principal west coast commercial mortgage master servicing offices of Wells Fargo Bank are located at MAC A0227-020, 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing offices of Wells Fargo Bank are located at Three Wells Fargo, MAC D1050-084, 401 South Tryon Street, Charlotte, North Carolina 28202.
Wells Fargo Bank has been master servicing securitized commercial and multifamily mortgage loans in excess of ten years. Wells Fargo Bank’s primary servicing system runs on McCracken Financial Solutions software, Strategy CS. Wells Fargo Bank reports to trustees and certificate administrators in the CREFC® format. The following table sets forth information about Wells Fargo Bank’s portfolio of master or primary serviced commercial and multifamily mortgage loans (including loans in securitization transactions and loans owned by other investors) as of the dates indicated:
Commercial and | As of 12/31/2015 | As of 12/31/2016 | As of 12/31/2017 | As of 3/31/2018 |
| By Approximate Number: | 32,716 | 31,128 | 30,017 | 30,146 |
| By Approximate Aggregate Unpaid Principal Balance (in billions): | $503.34 | $506.83 | $527.63 | $538.27 |
Within this portfolio, as of March 31, 2018, are approximately 21,044 commercial and multifamily mortgage loans with an unpaid principal balance of approximately $414.2 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, 2018, 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.
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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 2015 | $401,673,056,650 | $1,600,995,208 | 0.40% |
| Calendar Year 2016 | $385,516,905,565 | $838,259,754 | 0.22% |
| Calendar Year 2017 | $395,462,169,170 | $647,840,559 | 0.16% |
| YTD Q1, 2018 | $403,608,365,979 | $557,167,664 | 0.14% |
| * | “UPB” means unpaid principal balance, “P&I” means principal and interest advances and “PPA” means property protection advances. |
Wells Fargo Bank is rated by Fitch Ratings, Inc. (“Fitch”), S&P Global Ratings (“S&P”) and Morningstar Credit Ratings, LLC (“Morningstar”) as a primary servicer, a master servicer and a special servicer of commercial mortgage loans in the US. Wells Fargo Bank’s servicer ratings by each of these agencies are outlined below:
| US Servicer Ratings | Fitch | S&P | Morningstar |
| Primary Servicer: | CPS1- | Strong | MOR CS1 |
| Master Servicer: | CMS1- | Strong | MOR CS1 |
| Special Servicer: | CSS2 | Above Average | MOR CS2 |
The long-term issuer ratings of Wells Fargo Bank are rated “A+” 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 policies and procedures are updated periodically to keep pace with the changes in the commercial mortgage-backed securities industry and have been generally consistent for the last three years in all material respects. The only significant changes in Wells Fargo Bank’s policies and procedures have come in response to changes in federal or state law or investor requirements, such as updates issued by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation.
Wells Fargo Bank may perform any of its obligations under the PSA through one or more third-party vendors, affiliates or subsidiaries. Notwithstanding the foregoing, Wells Fargo Bank, as the master servicer, will remain responsible for its duties under the PSA. Wells
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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; |
| ● | audit services; |
| ● | 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 and underwriting 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; |
| ● | Uniform Commercial Code searches and filings; |
| ● | Insurance Tracking and Compliance; |
| ● | Onboarding-New Loan Setup; |
| ● | Lien Release-Filing & Tracking; |
| ● | Credit Investigation & Background Checks; and |
| ● | Defeasance Calculations |
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.
In its capacity as the master servicer, 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, and also provides borrowers with access to current and historical loan and property information for these transactions.
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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.
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. However, Wells Fargo Bank or its affiliates may retain or 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.
The foregoing information set forth under this sub-heading regarding Wells Fargo Bank has been provided by Wells Fargo Bank.
For a description of any material affiliations, relationships and related transactions between Wells Fargo Bank, in its capacity as master servicer, and the other transaction parties, see “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
Wells Fargo Bank will have various duties under the PSA. Certain duties and obligations of Wells Fargo Bank are described under “Pooling and Servicing Agreement—General” and “—Enforcement of ‘Due-on-Sale’ and ‘Due-on-Encumbrance’ Provisions”. The ability of the master servicer to waive or modify any terms, fees, penalties or payments on the Mortgage Loans (other than a Non-Serviced Mortgage Loan), and the effect of that ability on the potential cash flows from such Mortgage Loans, are described under “Pooling and Servicing Agreement—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 “Pooling and Servicing Agreement—Advances”.
Wells Fargo Bank, in its capacity as master servicer, will only be liable under the PSA to the extent of the obligations specifically imposed by the PSA. Certain terms of the PSA regarding the master servicer’s removal, replacement or resignation are described under “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”, “—Termination of the Master Servicer or Special Servicer for Cause—Servicer Termination Events”, “—Rights Upon Servicer Termination Event” and “—Waiver of Servicer Termination Event”. The master servicer’s rights and obligations with respect to indemnification, and certain limitations on the master servicer’s liability under the PSA, are described under “Pooling and Servicing Agreement—Limitation on Liability; Indemnification” in this prospectus.
The Special Servicer
LNR Partners, LLC (“LNR Partners”), a Florida limited liability company and a subsidiary of Starwood Property Trust, Inc. (“STWD”), a Maryland corporation, will initially be appointed to act as special servicer for the Mortgage Loans to be deposited into the issuing entity (other than any Non-Serviced Mortgage Loan (except as described in this prospectus) and any Excluded Special Servicer Loan). The principal executive offices of LNR Partners are located at 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139 and its telephone number is (305) 695-5600.
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STWD through its subsidiaries, affiliates and joint ventures, is involved in the real estate finance, management and development business and engages in, among other activities:
| ● | acquiring, developing, repositioning, managing and selling commercial and multifamily residential real estate properties, |
| ● | investing in high-yielding real estate-related debt and equity, and |
| ● | investing in, and managing as special servicer, unrated, below investment grade rated and investment grade rated commercial mortgage backed securities. |
LNR Partners and its affiliates have substantial experience in working out loans and in performing the other obligations of the special servicer as more particularly described in the PSA, including, but not limited to, processing borrower requests for lender consent to assumptions, leases, easements, partial releases and expansion and/or redevelopment of the mortgaged properties. LNR Partners and its affiliates have been engaged in the special servicing of commercial real estate assets for over 22 years. The number of commercial mortgage backed securitization pools specially serviced by LNR Partners and its affiliates has increased from 46 in December 1998 to 160 as of March 31, 2018. More specifically, LNR Partners (and its predecessors in interest) acted as special servicer with respect to:
| ● | 84 domestic commercial mortgage backed securitization pools as of December 31, 2001, with a then current face value in excess of $53 billion; |
| ● | 101 domestic commercial mortgage backed securitization pools as of December 31, 2002, with a then current face value in excess of $67 billion; |
| ● | 113 domestic commercial mortgage backed securitization pools as of December 31, 2003, with a then current face value in excess of $79 billion; |
| ● | 134 domestic commercial mortgage backed securitization pools as of December 31, 2004, with a then current face value in excess of $111 billion; |
| ● | 142 domestic commercial mortgage backed securitization pools as of December 31, 2005, with a then current face value in excess of $148 billion; |
| ● | 143 domestic commercial mortgage backed securitization pools as of December 31, 2006, with a then current face value in excess of $201 billion; |
| ● | 143 domestic commercial mortgage backed securitization pools as of December 31, 2007 with a then current face value in excess of $228 billion; |
| ● | 138 domestic commercial mortgage backed securitization pools as of December 31, 2008 with a then current face value in excess of $210 billion; |
| ● | 136 domestic commercial mortgage backed securitization pools as of December 31, 2009 with a then current face value in excess of $191 billion; |
| ● | 144 domestic commercial mortgage backed securitization pools as of December 31, 2010 with a then current face value in excess of $201 billion; |
| ● | 140 domestic commercial mortgage backed securitization pools as of December 31, 2011 with a then current face value in excess of $176 billion; |
| ● | 131 domestic commercial mortgage backed securitization pools as of December 31, 2012 with a then current face value in excess of $136 billion; |
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| ● | 141 domestic commercial mortgage backed securitization pools as of December 31, 2013 with a then current face value in excess of $133 billion; |
| ● | 152 domestic commercial mortgage backed securitization pools as of December 31, 2014 with a then current face value in excess of $135 billion; |
| ● | 159 domestic commercial mortgage backed securitization pools as of December 31, 2015 with a then current face value in excess of $111 billion; and |
| ● | 153 domestic commercial mortgage backed securitization pools as of December 31, 2016 with a then current face value in excess of $87 billion. |
| ● | 160 domestic commercial mortgage backed securitization pools as of December 31, 2017 with a then current face value in excess of $68.9 billion. |
| ● | 160 domestic commercial mortgage backed securitization pools as of March 31, 2018 with a then current face value in excess of $72.9 billion. |
As of March 31, 2018, LNR Partners has resolved approximately $72.5 billion of U.S. commercial and multifamily loans over the past 22 years, including approximately $1.1 billion of U.S. commercial and multifamily mortgage loans during 2001, $1.9 billion of U.S. commercial and multifamily mortgage loans during 2002, $1.5 billion of U.S. commercial and multifamily mortgage loans during 2003, $2.1 billion of U.S. commercial and multifamily mortgage loans during 2004, $2.4 billion of U.S. commercial and multifamily mortgage loans during 2005, $0.9 billion of U.S. commercial and multifamily mortgage loans during 2006, $1.4 billion of U.S. commercial and multifamily mortgage loans during 2007, $1.0 billion of U.S. commercial and multifamily mortgage loans during 2008, $1.2 billion of U.S. commercial and multifamily mortgage loans during 2009, $7.7 billion of U.S. commercial and multifamily mortgage loans during 2010, $10.9 billion of U.S. commercial and multifamily mortgage loans during 2011, $11.7 billion of U.S. commercial and multifamily mortgage loans during 2012, $6.5 billion of U.S. commercial and multifamily mortgage loans during 2013, $6.3 billion of U.S. commercial and multifamily mortgage loans during 2014, approximately $6 billion of U.S. commercial and multifamily mortgage loans during 2015, approximately $3.9 billion of U.S. commercial and multifamily mortgage loans through December 31, 2016, $4.5 billion of U.S. commercial and multifamily mortgage loans through December 31, 2017, and approximately $0.93 billion of U.S. commercial and multifamily mortgage loans through March 31, 2018.
STWD or one of its affiliates generally seeks CMBS investments where it has the right to appoint LNR Partners as the special servicer. LNR Partners and its affiliates have regional offices located across the country in Florida, Georgia, Massachusetts, California, New York and North Carolina. As of March 31, 2018, LNR Partners and its affiliates specially service a portfolio, which included approximately 4,944 assets across the United States and various international properties with a then current face value of approximately $72.9 billion, all of which are commercial real estate assets. Those commercial real estate assets include mortgage loans secured by the same types of income producing properties as secure the mortgage loans backing the Certificates. Accordingly, the assets of LNR Partners and its affiliates may, depending upon the particular circumstances, including the nature and location of such assets, compete with the mortgaged real properties securing the underlying mortgage loans for tenants, purchasers, financing and so forth. LNR Partners does not service any assets other than commercial real estate assets.
LNR Partners maintains internal and external watch lists, corresponds with master servicers on a monthly basis and conducts overall deal surveillance and shadow servicing.
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LNR Partners has developed distinct strategies and procedures for working with borrowers on problem loans (caused by delinquencies, bankruptcies or other breaches of the loan documents) designed to maximize value from the assets for the benefit of the certificateholders. These strategies and procedures vary on a case by case basis, and include, but are not limited to, liquidation of the underlying collateral, note sales, discounted payoffs, and borrower negotiation or workout in accordance with the applicable servicing standard. Generally, four basic factors are considered by LNR Partners as part of its analysis and determination of what strategies and procedures to utilize in connection with problem loans. They are (i) the condition and type of mortgaged property, (ii) the borrower, (iii) the jurisdiction in which the mortgaged property is located and (iv) the actual terms, conditions and provisions of the underlying loan documents. After each of these items is evaluated and considered, LNR Partners’ strategy is guided by the servicing standard and all relevant provisions of the applicable pooling and servicing agreement pertaining to specially serviced and REO mortgage loans.
LNR Partners has the highest ratings afforded to special servicers by S&P and is rated “CSS1-” by Fitch.
There have not been, during the past three years, any material changes to the policies or procedures of LNR Partners in the servicing function it will perform under the PSA for assets of the same type included in this securitization transaction. LNR Partners has not engaged, and currently does not have any plans to engage, any sub-servicers to perform on its behalf any of its duties with respect to this securitization transaction. LNR Partners does not believe that its financial condition will have any adverse effect on the performance of its duties under the PSA and, accordingly, will not have any material impact on the Mortgage Pool performance or the performance of the Certificates. Generally, LNR Partners’ servicing functions under pooling and servicing agreements do not include collection on the pool assets, however LNR Partners does maintain certain operating accounts with respect to REO mortgage loans in accordance with the terms of the applicable pooling and servicing agreements and consistent with the servicing standard set forth in each of such pooling and servicing agreements. LNR Partners does not have any material advancing obligations with respect to the commercial mortgage backed securitization pools as to which it acts as special servicer. Generally, LNR Partners has the right, but not the obligation, to make property related servicing advances in emergency situations with respect to commercial mortgage backed securitization pools as to which it acts as special servicer.
LNR Partners will not have primary responsibility for custody services of original documents evidencing the underlying mortgage loans. On occasion, LNR Partners may have custody of certain of such documents as necessary for enforcement actions involving particular mortgage loans or otherwise. To the extent that LNR Partners has custody of any such documents, such documents will be maintained in a manner consistent with the Servicing Standard.
No securitization transaction involving commercial or multifamily mortgage loans in which LNR Partners was acting as special servicer has experienced an event of default as a result of any action or inaction by LNR Partners as special servicer. LNR Partners has not been terminated as servicer in a commercial mortgage loan securitization, either due to a servicing default or to application of a servicing performance test or trigger. In addition, there has been no previous disclosure of material noncompliance with servicing criteria by LNR Partners with respect to any other securitization transaction involving commercial or multifamily mortgage loans in which LNR Partners was acting as special servicer.
There are, to the actual current knowledge of LNR Partners, no special or unique factors of a material nature involved in special servicing the particular types of assets included in
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the subject securitization, as compared to the types of assets specially serviced by LNR Partners in other commercial mortgage backed securitization pools generally, for which LNR Partners has developed processes and procedures which materially differ from the processes and procedures employed by LNR Partners in connection with its special servicing of commercial mortgaged backed securitization pools generally.
There are currently no legal proceedings pending, and no legal proceedings known to be contemplated, by governmental authorities, against LNR Partners or of which any of its property is the subject, that are material to the Certificateholders.
In the commercial mortgage backed securitizations in which LNR Partners acts as special servicer, LNR Partners may enter into one or more arrangements with any party entitled to appoint or remove and replace the special servicer to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, LNR Partners’ appointment as special servicer under the applicable servicing agreement and limitations on such person’s right to replace LNR Partners as the special servicer.
LNR Partners is not an affiliate of the depositor, the underwriters, the issuing entity, the master servicer, the trustee, the certificate administrator, the operating advisor, the asset representations reviewer, any sponsor, any originator or any significant obligor.
Except as disclosed in this prospectus and except for LNR Partners acting as special servicer for this securitization transaction there are no specific relationships that are material involving or relating to this securitization transaction or the Mortgage Loans between LNR Partners or any of its affiliates, on the one hand, and the issuing entity, the sponsors, the trustee, the certificate administrator, any originator, any significant obligor, the master servicer, the operating advisor or the asset representations reviewer, on the other hand, that currently exist or that existed during the past two years. In addition, other than as disclosed in this prospectus, there are no business relationships, agreements, arrangements, transactions or understandings that have been entered into outside the ordinary course of business or on terms other than would be obtained in an arm’s length transaction with an unrelated third party – apart from this securitization transaction – between LNR Partners or any of its affiliates, on the one hand, and the issuing entity, the sponsors, the trustee, the certificate administrator, any originator, any significant obligor, the master servicer, the operating advisor or the asset representations reviewer, on the other hand, that currently exist or that existed during the past two years and that are material to an investor’s understanding of the certificates.
LNR Partners assisted Prime Finance Long Duration (B-Piece) II Holdco I, L.P. (or its affiliate), which is expected to purchase the Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR and Class V certificates and is expected to be appointed as the initial directing certificateholder, with due diligence relating to the mortgage loans to be included in the mortgage pool.
Except for fees and additional special servicing compensation under the PSA, neither LNR Partners nor any of its affiliates intends to retain any economic interest in this securitization as of the Closing Date, including without limitation any certificates issued by the issuing entity. However, each of LNR Partners and its affiliates will be entitled at their discretion to acquire certificates issued by the issuing entity, and in each such case will have the right to dispose of any such certificates at any time
The information set forth under this sub-heading “The Special Servicer” has been provided by LNR Partners.
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Affiliated Servicer
Rialto Capital Advisors, LLC, a Delaware limited liability company (“Rialto”), has been appointed as the special servicer under the WFCM 2018-C44 PSA and in such capacity will initially be responsible for the servicing and administration of the Village at Leesburg Whole Loan and the 181 Fremont Street Whole Loan (prior to the securitization of the related Control Note), and any associated REO Property and, in certain circumstances, will review, evaluate and provide or withhold consent as to certain major decisions and special servicer decisions and other transactions relating to the Village at Leesburg Whole Loan or the 181 Fremont Street Whole Loan, as applicable. Rialto maintains its principal servicing office at 790 NW 107th Avenue, 4th Floor, Miami, Florida 33172.
Rialto has been engaged in the special servicing of commercial mortgage loans for commercial real estate securitizations since approximately May 2012. Rialto currently has a commercial mortgage-backed securities special servicer rating of “CSS2” by Fitch, a commercial loan special servicer ranking of “Above Average” by S&P and a commercial mortgage special servicer ranking of “MOR CS2” by Morningstar.
Rialto is an affiliate of Rialto Capital Management, LLC, a Delaware limited liability company (“RCM”). RCM is a vertically integrated commercial real estate investment and asset manager and is an indirect wholly-owned subsidiary of Lennar Corporation (“Lennar”) (NYSE: LEN and LEN.B), a national homebuilder with over 8,000 employees across the country’s largest real estate markets. In that regard, Lennar has engaged Wells Fargo Securities, LLC and Deutsche Bank Securities Inc. to advise Lennar regarding possible strategic alternatives that may be available with regard to RCM and its investment and asset management platform. As of March 31, 2018, RCM was the sponsor of, and certain of its affiliates were investors in, ten private equity funds (collectively, the “Funds”) and RCM also advised four separately managed accounts, having over $5.4 billion of regulatory assets under management in the aggregate (calculated as of December 31, 2017). Four of such Funds are focused on distressed and value-add real estate related investments and/or commercial mortgage backed securities, four of such Funds are focused on investments in commercial mortgage-backed securities and the other two Funds and the separately managed accounts are focused on mezzanine debt and credit investments. Through March 31, 2018, RCM has acquired and/or is managing over $7.5 billion of non- and sub-performing real estate assets, representing approximately 11,000 loans.
In addition, RCM has underwritten and purchased, primarily for the Funds, over $6.1 billion in face value of subordinate, newly-originated commercial mortgage-backed securities certificates in approximately 88 different securitizations totaling approximately $92.0 billion in overall transaction size. RCM (or an affiliate) has the right to appoint the special servicer for each of these transactions.
RCM has over 350 employees as of March 31, 2018, and is headquartered in Miami with two other main offices located in New York City and Atlanta. RCM’s commercial real estate platform has twelve additional offices across the U.S. and four offices in Europe.
Rialto has detailed operating policies and procedures which are reviewed at least annually and updated as appropriate. These policies and procedures for the performance of its special servicing obligations are, among other things, in compliance with the applicable servicing criteria set forth in Item 1122 of Regulation AB under the Securities Act. Rialto has developed strategies and procedures for managing delinquent loans, loans subject to bankruptcies of the borrowers and other breaches by borrowers of the underlying loan documents that are designed to maximize value from the assets for the benefit of certificateholders. These strategies and procedures vary on a case by case basis, and
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include, but are not limited to, liquidation of the underlying collateral, note sales, discounted payoffs, and borrower negotiation or workout in accordance with the related servicing standard. The strategy pursued by Rialto for any particular property depends upon, among other things, the terms and provisions of the underlying loan documents, the jurisdiction where the underlying property is located and the condition and type of underlying property. Standardization and automation have been pursued, and continue to be pursued, wherever possible so as to provide for continued accuracy, efficiency, transparency, monitoring and controls.
Rialto is subject to external and internal audits and reviews. Rialto is subject to Lennar’s internal audit reviews, typically on a semi-annual basis, which focus on specific business areas such as finance, reporting, loan asset management and REO management. Rialto is also subject to external audits as part of the external audit of Lennar and stand-alone audits of the Funds. As part of such external audits, auditors perform test work and review internal controls throughout the year. As a result of this process, Rialto has been determined to be Sarbanes-Oxley compliant.
Rialto maintains a web-based asset management system that contains performance information at the portfolio, loan and property levels on the various loan and REO assets that it services. Additionally, Rialto has a formal, documented disaster recovery and business continuity plan which is managed by Lennar’s on-site staff.
As of March 31, 2018, Rialto and its affiliates were actively special servicing approximately 173 portfolio loans with a principal balance of approximately $213 million and were responsible for approximately 194 portfolio REO assets with a principal balance of approximately $242 million.
Rialto is also currently performing special servicing for approximately 92 commercial real estate securitizations. With respect to such securitization transactions, Rialto is administering approximately 6,511 assets with an original principal balance at securitization of approximately $94 billion. The asset pools specially serviced by Rialto include residential, multifamily/condo, office, retail, hotel, healthcare, industrial, manufactured housing and other income-producing properties as well as residential and commercial land.
The table below sets forth information about Rialto’s portfolio of specially serviced commercial and multifamily mortgage loans and REO properties in commercial mortgage-backed securitization transactions as of the dates indicated:
CMBS Pools | As of 12/31/2014 | As of 12/31/2015 | As of 12/31/2016 | As of 12/31/2017 | As of 3/3/2018 |
| Number of CMBS Pools Named Special Servicer | 45 | 59 | 75 | 90 | 82 |
| Approximate Aggregate Unpaid Principal Balance(1) | $49.2 billion | $63.6 billion | $79 billion | $91.8 billion | $94.1 billion |
| Approximate Number of Specially Serviced Loans or REO Properties(2) | 28 | 17 | 37 | 77 | 94 |
| Approximate Aggregate Unpaid Principal Balance of Specially Serviced Loans or REO Properties(2) | $126.9 million | $141.9 million | $320 million | $1.1 billion | $1.4 billion |
| (1) | Includes all commercial and multifamily mortgage loans and related REO properties in Rialto’s portfolio for which Rialto is the named special servicer, regardless of whether such mortgage loans and related REO properties are, as of the specified date, specially serviced by Rialto. |
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| (2) | Includes only those commercial and multifamily mortgage loans and related REO properties in Rialto’s portfolio for which Rialto is the named special servicer that are, as of the specified date, specially serviced by Rialto. Does not include any resolutions during the specified year. |
In its capacity as the special servicer under the WFCM 2018-C44 PSA, Rialto will not have primary responsibility for custody services of original documents evidencing the Village at Leesburg Whole Loan or the 181 Fremont Street Whole Loan, respectively. Rialto may from time to time have custody of certain of such documents as necessary for enforcement actions involving the Village at Leesburg Whole Loan or the 181 Fremont Street Whole Loan or otherwise. To the extent that Rialto has custody of any such documents for any such servicing purposes, such documents will be maintained in a manner consistent with the servicing standard under the WFCM 2018-C44 PSA.
Rialto does not have any material advancing rights or obligations with respect to the commercial mortgage-backed securities pools as to which it acts as special servicer. In certain instances Rialto may have the right or be obligated to make property related servicing advances in emergency situations with respect to certain commercial mortgage-backed securities pools as to which it acts as special servicer.
There are, to the actual current knowledge of Rialto, no special or unique factors of a material nature involved in special servicing the Village at Leesburg Whole Loan or the 181 Fremont Street Whole Loan, as applicable, as compared to the types of assets specially serviced by Rialto in other commercial mortgage-backed securitization pools generally, for which Rialto has developed processes and procedures which materially differ from the processes and procedures employed by Rialto in connection with its special servicing of commercial mortgage-backed securitization pools generally.
There have not been, during the past three years, any material changes to the policies or procedures of Rialto in the servicing function it will perform under the WFCM 2018-C44 PSA for assets of the same type included in the WFCM 2018-C44 securitization transaction, including the Village at Leesburg Whole Loan and the 181 Fremont Street Whole Loan. No securitization transaction in which Rialto was acting as special servicer has experienced a servicer event of default as a result of any action or inaction of Rialto as special servicer, including as a result of a failure by Rialto to comply with the applicable servicing criteria in connection with any securitization transaction. Rialto has not been terminated as special servicer in any securitization, either due to a servicing default or the application of a servicing performance test or trigger. Rialto has made all advances required to be made by it under the servicing agreements related to the securitization transactions in which Rialto is acting as special servicer. There has been no previous disclosure of material noncompliance with the applicable servicing criteria by Rialto in connection with any securitization in which Rialto was acting as special servicer. Rialto does not believe that its financial condition will have any adverse effect on the performance of its duties under the WFCM 2018-C44 PSA and, accordingly, Rialto believes that its financial condition will not have any material impact on the performance of the Village at Leesburg Whole Loan, the 181 Fremont Street Whole Loan or the performance of the certificates issued in connection with the WFCM 2018-C44 securitization transaction.
From time to time Rialto is a party to lawsuits and other legal proceedings as part of its duties as a loan servicer (e.g., enforcement of loan obligations) and/or arising in the ordinary course of business. Rialto does not believe that any such lawsuits or legal proceedings would, individually or in the aggregate, have a material adverse effect on its business or its ability to service the Village at Leesburg Whole Loan or the 181 Fremont Street Whole Loan (prior to the securitization of the related Control Note) pursuant to the WFCM 2018-C44 PSA.
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There are currently no legal proceedings pending, and no legal proceedings known to be contemplated by governmental authorities, against Rialto or of which any of its property is the subject, which are material to Certificateholders. Rialto occasionally engages consultants to perform property inspections and to provide surveillance on a property and its local market; it currently does not have any plans to engage sub-servicers to perform on its behalf any of its duties with respect to this transaction with the exception of some outsourced base servicing functions.
In the commercial mortgage-backed securitizations in which Rialto acts as special servicer, Rialto may enter into one or more arrangements with any party entitled to appoint or remove and replace the special servicer to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, Rialto’s appointment as special servicer under the applicable servicing agreement and limitations on such person’s right to replace Rialto as the special servicer.
Rialto is an affiliate of Rialto Mortgage, a sponsor, a mortgage loan seller and an originator. Rialto and Rialto Mortgage are also affiliates of the entity that is the initial directing holder under the WFCM 2018-C44 PSA.
Except as described herein, 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. From time to time, Rialto and/or its affiliates may purchase securities, including CMBS certificates. Rialto and/or its affiliates may review this prospectus and purchase certificates issued in this offering or in the secondary market. Any such party will have the right to dispose of such certificates at any time.
The information set forth under this sub-heading “—Affiliated Servicer” regarding Rialto has been provided by Rialto.
The Operating Advisor and Asset Representations Reviewer
Park Bridge Lender Services LLC (“Park Bridge Lender Services”), a New York limited liability company and an indirect, wholly owned subsidiary of Park Bridge Financial LLC (“Park Bridge Financial”), will act as operating advisor and asset representations reviewer under the PSA with respect to each Mortgage Loan (other than any Non-Serviced Mortgage Loan). 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 March 31, 2018, Park Bridge Lender Services was acting as operating advisor or trust advisor for commercial mortgage-backed securities transactions with an approximate aggregate initial principal balance of $153.052 billion issued in 173 transactions.
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As of March 31, 2018, Park Bridge Lender Services was acting as asset representations reviewer for commercial mortgage-backed securities transactions with an approximate aggregate initial principal balance of $60.551 billion issued in 69 transactions.
Park Bridge Lender Services satisfies each of the standards of “Eligible Operating Advisor” set forth in “The Pooling and Servicing Agreement—The Operating Advisor—Eligibility of Operating Advisor”. Park Bridge Lender Services: (a) is an operating advisor on other CMBS transactions rated by any of Moody’s, Fitch, KBRA, S&P, DBRS and/or Morningstar and none of those rating agencies has qualified, downgraded or withdrawn any of its rating or ratings of one or more classes of certificates for any such transaction citing concerns with Park Bridge Lender Services as the sole or material factor in such rating action; (b) (x) has been regularly engaged in the business of analyzing and advising clients in commercial mortgage-backed securities matters and has at least five years of experience in collateral analysis and loss projections, and (y) has at least five years of experience in commercial real estate asset management and experience in the workout and management of distressed commercial real estate assets; (c) can and is making the representations and warranties as operating advisor set forth in the PSA; (d) is not (and is not affiliated with) the depositor, the trustee, the certificate administrator, the master servicer, the special servicer, any mortgage loan seller, the Directing Certificateholder, or a depositor, trustee, certificate administrator, master servicer, or special servicer with respect to the securitization of any Companion Loan or any of their respective affiliates; (e) has not been paid by the special servicer or any successor special servicer any fees, compensation or other remuneration (x) in respect of its obligations under the PSA 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; and (f) does not directly or indirectly, through one or more affiliates or otherwise, own any interest in any certificates, any Mortgage Loans, any Companion Loan or any securities backed by a Companion Loan or otherwise have any financial interest in the securitization transaction to which the PSA relates, other than its fees from its role as operating advisor and asset representations reviewer.
In addition, Park Bridge Lender Services believes that its financial condition will not have any material adverse effect on the performance of its duties under the Pooling and Servicing Agreement.
There are no legal proceedings pending against Park Bridge Lender Services, or to which any property of Park Bridge Lender Services is subject, that are material to the Certificateholders, nor does Park Bridge Lender Services have actual knowledge of any proceedings of this type contemplated by governmental authorities.
The foregoing information under this heading “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” has been provided by Park Bridge Lender Services.
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Credit Risk Retention
General
Regulation RR implementing the risk retention requirements of Section 15G of the Exchange Act (the “Credit Risk Retention Rules”) will apply to this securitization. Wells Fargo Bank will act as the “retaining sponsor” (as defined in the Credit Risk Retention Rules, the “Retaining Sponsor”), and is expected to satisfy its risk retention requirement initially through the purchase by a “third-party purchaser” (as defined in the Credit Risk Retention Rules) (the “Third-Party Purchaser”), which is expected to be Prime Finance Long Duration (B-Piece) II Holdco I, L.P., a Delaware limited partnership, of the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates (collectively, the “Horizontal Risk Retention Certificates”), with an aggregate initial Certificate Balance of approximately $66,112,419, representing approximately 5.05% (the “Horizontal Risk Retention Percentage”) of the aggregate fair value of the certificates (other than the Class R certificates) as of the Closing Date, determined in accordance with Generally Accepted Accounting Principles (“GAAP”). The Horizontal Risk Retention Certificates will constitute an “eligible horizontal residual interest” (as such term is defined in the Credit Risk Retention Rules).
The Horizontal Risk Retention Percentage, as noted in the preceding paragraph, will equal at least 5.0% of the aggregate fair value of all the certificates (other than the Class R certificates) as of the Closing Date.
None of the sponsors, the depositor or any other party to the transaction intends to retain a material net economic interest in the securitization constituted by the issue of the offered certificates in accordance with the EU Risk Retention and Due Diligence Requirements or to take any other action which may be required by EEA-regulated investors for the purposes of their compliance with the EU Risk Retention and Due Diligence requirements or similar requirements. See “Risk Factors—Other Risks Relating to the Certificates—Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity of the Offered Certificates”.
Notwithstanding any references in this prospectus to the Credit Risk Retention Rules, Regulation RR, the Retaining Sponsor, the Third-Party Purchaser and other risk retention related matters, in the event the Credit Risk Retention Rules and/or Regulation RR (or any relevant portion thereof) are repealed or determined by applicable regulatory agencies to be no longer applicable to this securitization transaction, none of the Retaining Sponsor, the Third-Party Purchaser or any other party will be required to comply with or act in accordance with the Credit Risk Retention Rules or Regulation RR (or such relevant portion thereof).
Qualifying CRE Loans
The Retaining Sponsor has determined that 0.0% of the Initial Pool Balance (the “Qualifying CRE Loan Percentage”) is comprised of mortgage loans that are “qualifying CRE loans” as such term is described in §___.17 of the Credit Risk Retention Rules.
The total required credit risk retention percentage (the “Required Credit Risk Retention Percentage”) for this transaction is 5.0%. The Required Credit Risk Retention Percentage is equal to the product of (i) 1 minus the Qualifying CRE Loan Percentage (expressed as a decimal) and (ii) 5%; subject to a minimum Required Credit Risk Retention Percentage of no less than 2.50% if the issuing entity includes any non-qualifying CRE loans.
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Third-Party Purchaser
Prime Finance Long Duration (B-Piece) II Holdco I, L.P. a Delaware limited partnership (“Holdco”) is expected, on the Closing Date, (i) to purchase for cash the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR Certificates and (ii) to act as the initial Third-Party Purchaser.
Holdco is a subsidiary of Prime Finance Long Duration (B-Piece) II, L.P., a Delaware limited partnership and Prime Finance Long Duration (B-Piece) II (Parallel Entity), L.P., a Delaware limited partnership (collectively, the “Fund”) formed primarily to acquire or invest in unrated or below investment-grade commercial mortgage backed securities and certain other investments. The Fund is expected to commence operations on or about July 13, 2018, and has total investor capital commitments of $326.45 million to date. This will represent the Fund’s first purchase of CMBS B-Piece Securities.
The Fund is advised by Prime Finance Advisor, L.P. (“Prime Finance”). Prime Finance is an experienced commercial real estate debt investor. The six members of Prime Finance’s investment committee had an average of more than 25 years of real estate experience as of May 11, 2018. Funds advised by Prime Finance have made investments in floating-rate whole loans on transitional properties, subordinate debt, preferred equity and CMBS B-Piece Securities. As of May 11, 2018, funds advised by Prime Finance own approximately 186 separate real estate credit investments, including fifteen CMBS B-Piece Securities.
As of May 11, 2018, 2018, Prime Finance affiliates have originated or acquired over $10 billion of commercial real estate debt investments. Prime is registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended.
Solely for its own purposes and benefit, the Third-Party Purchaser has completed an independent review of the credit risk of each mortgage loan consisting of a review of the sponsors’ underwriting standards, the collateral and expected cash flows. Such review was based on the mortgage loan files and information regarding the mortgage loans provided by or on behalf of the sponsors. The Third-Party Purchaser has no liability to any person or entity for the manner in which it conducted its due diligence or the extent of such due diligence. The Third-Party Purchaser is not required to take into account the interests of any other investor in the certificates or any other party in conducting its due diligence or in exercising remedies or voting or other rights in its capacity as owner of its certificates or in making requests or recommendations to the sponsors as to the selection of the mortgage loans and the establishment of other transaction terms. The Third-Party Purchaser’s acceptance of a mortgage loan does not constitute, and may not be construed as, an endorsement or approval of any such mortgage loan, the underwriting for such mortgage loan or of the originator of such mortgage loan. The Third-Party Purchaser will have no liability to any certificateholder for any actions taken by it and the PSA will provide that each certificateholder, by its acceptance of a certificate, forever waives and releases any claims against Third-Party Purchaser and such buyers, and their respective affiliates, in respect of such actions.
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Horizontal Risk Retention Certificates
General
The Third-Party Purchaser is expected to purchase the Horizontal Risk Retention Certificates, consisting of the classes of certificates identified in the table below.
Class of Horizontal Risk Retention Certificates | Expected Initial | Estimated Fair Value of | Expected Purchase Price(2) |
| Class E-RR | $ 14,234,000(3) | $7,301,090 / 0.99% - 1.18%(3) | 51.2933% |
| Class F-RR | $ 8,235,000 | $4,209,364 / 0.61% - 0.64% | 51.1155% |
| Class G-RR | $ 9,881,000 | $5,050,725 / 0.74% - 0.77% | 51.1155% |
| Class H-RR | $ 7,411,000 | $3,788,172 / 0.55% - 0.58% | 51.1155% |
| Class J-RR | $ 26,351,419 | $13,469,667 / 1.96% - 2.06% | 51.1155% |
| (1) | The estimated fair value (expressed as a dollar amount) and estimated range of fair value (expressed as a percentage of the aggregate fair value of all of the certificates (other than the Class R Certificates)) of the Horizontal Risk Retention Certificates. The fair value of the Horizontal Risk Retention Certificates is not subject to a range and has been determined as described under “—Yield-Priced Principal Balance Certificates—Third-Party Purchaser Assumed Certificate Characteristics”. The fair value of the other Certificates is unknown and has been determined by the Retaining Sponsor as described under “—Determination of Amount of Required Horizontal Credit Risk Retention” below. |
| (2) | Expressed as a percentage of the expected initial Certificate Balance of each class of the Horizontal Risk Retention Certificates, excluding accrued interest. The aggregate purchase price expected to be paid for the Horizontal Risk Retention Certificates to be acquired by the Third-Party Purchaser is approximately $33,819,017, excluding accrued interest. |
| (3) | The approximate initial Certificate Balance of the Class E-RR certificates is estimated based in part on the estimated ranges of Certificate Balances and estimated fair values described herein under “Credit Risk Retention”. The Class E-RR certificates are expected to have an initial Certificate Balance that falls within a range of $12,641,000 and $15,827,000. The Class E-RR certificates are expected to have an estimated fair value that falls within a range of $6,483,814 and $8,118,365. |
The aggregate fair value of the Horizontal Risk Retention Certificates is expected to be equal to or above 5.0% of the aggregate fair value, as of the Closing Date, of all of the certificates (other than the Class R certificates). The Retaining Sponsor estimates that, relying solely on retaining an “eligible horizontal residual interest” in order to meet the credit risk retention requirements of the Credit Risk Retention Rules with respect to this securitization transaction, it is required to retain an eligible horizontal residual interest with an aggregate fair value dollar amount of between $32,692,512 and $34,336,941, representing at least 5% of the aggregate fair value, as of the Closing Date, of all of the certificates (other than the Class R certificates).
Material Terms of the Eligible Horizontal Residual Interest
On any Distribution Date, the aggregate amount available for distributions from the Mortgage Loans, net of specified servicing and administrative costs and expenses, will be distributed to the certificates in sequential order in accordance with their respective principal and interest entitlements (beginning with the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B and Class X-D certificates), in each case as set forth under “Description of the Certificates—Available Funds—Priority of Distributions”. On any Distribution Date, Realized Losses on the Mortgage Loans will be allocated first, to the Class J-RR certificates, second, to the Class H-RR certificates, third, to the Class G-RR certificates, fourth, to the Class F-RR certificates, fifth, to the Class E-RR certificates, sixth, to the Class D certificates, seventh, to the Class C certificates, eighth, to the Class B certificates, ninth, to the Class A-S certificates, and finally, pro rata based on their respective Certificate Balances, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, in each case until the Certificate Balance of that class has been reduced to
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zero. See “Description of the Certificates—Available Funds—Priority of Distributions” and “Pooling and Servicing Agreement—The Directing Certificateholder”.
For a description of other material payment terms of the Classes of Yield-Priced Principal Balance Certificates identified in the table above in “—General”, see “Description of the Certificates”.
Determination of Amount of Required Horizontal Credit Risk Retention
General
CMBS such as the Principal Balance Certificates are typically priced based relative to either the swap yield curve or to a targeted yield. The method of pricing used is primarily a function of the rating, but can also be determined by prevailing market conditions or investor preference. For this transaction, the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D certificates (the “Swap-Priced Principal Balance Certificates”) are anticipated to be priced based on the swap yield curve, and the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates (the “Yield-Priced Principal Balance Certificates”) are anticipated to be priced based on a targeted yield. The Retaining Sponsor calculated the expected scheduled principal payments (the “Scheduled Certificate Principal Payments”) on each class of Swap-Priced Principal Balance Certificates and each class of Yield Priced Principal Balance Certificates as described below. CMBS such as the Class X-A, Class X-B and Class X-D certificates (the “Interest-Only Certificates”) are typically priced relative to the treasury yield curve. The Retaining Sponsor made its determination of the fair value of the Swap-Priced Principal Balance Certificates and the Interest-Only Certificates based on a number of inputs and assumptions consistent with these typical pricing methodologies in the manner described below for the applicable class of Certificates. It should be noted in reviewing the fair value discussion below, that certain of the inputs and assumptions, such as yields, credit spreads, prices and coupons, are not directionally correlated. Variations from the base case in the direction of the high or low estimates will not necessarily occur in the same manner, in the same direction or to the same degree for each applicable input or assumption at any given point in time or as a result of any particular market condition. For example, with respect to any particular class of certificates, swap yields may widen in the direction of the high estimate provided, while credit spreads may tighten in the direction of the low estimate provided.
Swap-Priced Principal Balance Certificates
Based on the Structuring Assumptions and assuming a 0% CPR prepayment rate, the Retaining Sponsor calculated what the Scheduled Certificate Principal Payments on each Class of Swap-Priced Principal Balance Certificates would be over the course of this securitization based on when principal payments were required to be made under the terms of the underlying mortgage loan documents during each Collection Period and which classes of Swap-Priced Principal Balance Certificates would be entitled to receive principal payments based on the certificate payment priorities described in “Description of the Certificates—Distributions—Priority of Distributions”. On the basis of the Scheduled Certificate Principal Payments, the Retaining Sponsor calculated the weighted average life for each class of Swap-Priced Principal Balance Certificates.
Swap Yield Curve
The Retaining Sponsor utilized the assumed swap yield curve in the table below in determining the range of estimated fair values of the Swap-Priced Principal Balance Certificates. The actual swap yield curve that will be used as a basis for determining the
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price of the Swap-Priced Principal Balance Certificates is not known at this time and differences in the swap yield curve will ultimately result in higher or lower fair value calculations. For an expected range of values at specified points along the swap yield curve, see the table below titled “Range of Swap Yields for the Swap-Priced Principal Balance Certificates”. The Retaining Sponsor identified the range presented in the table below at each maturity on the swap yield curve, which represents the Retaining Sponsor’s estimate of the largest increase or decrease in the swap yield at that maturity reasonably expected to occur prior to pricing of the Swap-Priced Principal Balance Certificates, based on 10 business day rolling periods over the past 6 months.
Range of Swap Yields for the Swap-Priced Principal Balance Certificates
Tenor | Low Estimate of | Base Case | High Estimate of |
| 2YR | 2.621% | 2.835% | 3.072% |
| 3YR | 2.653% | 2.917% | 3.175% |
| 4YR | 2.660% | 2.944% | 3.198% |
| 5YR | 2.658% | 2.953% | 3.199% |
| 6YR | 2.664% | 2.961% | 3.199% |
| 7YR | 2.673% | 2.970% | 3.200% |
| 8YR | 2.686% | 2.980% | 3.217% |
| 9YR | 2.700% | 2.990% | 3.233% |
| 10YR | 2.717% | 3.003% | 3.250% |
Based on the swap yield curve, the Retaining Sponsor will determine for each class of Swap-Priced Principal Balance Certificates the swap yield reflected on the swap yield curve (the “Interpolated Yield”) that corresponds to that class’s weighted average life, by using a linear interpolation using the swap yield curve with 2, 3, 4, 5, 6, 7, 8, 9 and 10 year maturities if the weighted average life does not correspond to a specified maturity on the swap yield curve.
Credit Spread Determination
The Retaining Sponsor determined the credit spread for each class of Swap-Priced Principal Balance Certificates on the basis of market bids obtained for similar CMBS with similar credit ratings, pool composition and asset quality, payment priority and weighted average lives of the related class of Swap-Priced Principal Balance Certificates as of the date of this prospectus. The actual credit spread for a particular class of Swap-Priced Principal Balance Certificates at the time of pricing is not known at this time and differences in the then-current credit spread demanded by investors for similar CMBS will ultimately result in higher or lower fair values. The Retaining Sponsor identified the range presented in the table below from the base case credit spread percentage, which represents the Retaining Sponsor’s estimate of the largest increase or decrease in the credit spread for newly issued CMBS reasonably expected to occur prior to pricing of the Swap-Priced Principal Balance Certificates based on the Retaining Sponsor’s observation and experience in the placement of CMBS with similar characteristics.
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Range of Credit Spreads for the Swap-Priced Principal Balance Certificates
Class of Certificates | Low Estimate of | Base Case | High Estimate of |
| Class A-1 | 0.20% | 0.25% | 0.30% |
| Class A-2 | 0.40% | 0.45% | 0.60% |
| Class A-SB | 0.65% | 0.70% | 0.80% |
| Class A-3 | 0.78% | 0.83% | 0.93% |
| Class A-4 | 0.80% | 0.85% | 0.95% |
| Class A-S | 0.95% | 1.05% | 1.15% |
| Class B | 1.05% | 1.20% | 1.40% |
| Class C | 1.75% | 1.85% | 2.10% |
| Class D | 2.50% | 2.75% | 3.25% |
Discount Yield Determination
The discount yield (the “Discount Yield”) for each class of Swap-Priced Principal Balance Certificates is the sum of the Interpolated Yield for such class and the related credit spread established at pricing. For an expected range of estimated values for each class of Swap-Priced Principal Balance Certificates, see the table titled “Range of Discount Yields for the Swap-Priced Principal Balance Certificates” below. The Retaining Sponsor identified the range presented in the table below for each such class of Swap-Priced Principal Balance Certificates as the range from (i) the sum of the lowest estimated Interpolated Yield for that class and the lowest estimated credit spread to (ii) the sum of the highest estimated Interpolated Yield for that class and the highest estimated credit spread.
Range of Discount Yields for the Swap-Priced Principal Balance Certificates
Class of Certificates | Low Estimate of Discount Yield | Base Case | High Estimate of Discount Yield |
| Class A-1 | 2.849% | 3.156% | 3.462% |
| Class A-2 | 3.059% | 3.400% | 3.799% |
| Class A-SB | 3.326% | 3.672% | 4.003% |
| Class A-3 | 3.493% | 3.830% | 4.176% |
| Class A-4 | 3.515% | 3.851% | 4.198% |
| Class A-S | 3.665% | 4.052% | 4.398% |
| Class B | 3.765% | 4.202% | 4.648% |
| Class C | 4.465% | 4.852% | 5.348% |
| Class D | 5.215% | 5.752% | 6.498% |
Determination of Class Sizes
The Retaining Sponsor was provided credit support levels for each class of Swap-Priced Principal Balance Certificates by each Rating Agency. A credit support level for a particular class of Swap-Priced Principal Balance Certificates reflects the Rating Agency’s assessment of the aggregate principal balance of Principal Balance Certificates that would be required to be subordinate to that class of Swap-Priced Principal Balance Certificates in order to satisfy that Rating Agency’s internal ratings criteria to permit it to issue a particular credit rating. Based on the individual credit support levels (expressed as a percentage) provided by the Rating Agencies, or a stipulation by the b-piece buyer, if applicable, the Retaining Sponsor determined the highest required credit support level of the Rating Agencies selected to rate a particular class of Swap-Priced Principal Balance Certificates, or of the b-piece buyer, if applicable (the “Constraining Level”). In certain circumstances the Retaining Sponsor may have elected not to engage an NRSRO for particular Classes of Principal Balance Certificates, based in part on the credit support levels provided by that NRSRO. See “Risk Factors—
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Other Risks Relating to the Certificates—Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded”. The aggregate Certificate Balance for the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 Certificates was determined by multiplying the Initial Pool Balance by a percentage equal to 1.0 minus 0.30. The Certificate Balance for the Class A-S certificates was determined by multiplying the Initial Pool Balance by a percentage equal to 1.0 minus such class’s Constraining Level, minus the percentage of the Initial Pool Balance represented by the aggregate Certificate Balances of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 Certificates. For each other subordinate class of Swap-Priced Principal Balance Certificates, that class’s Certificate Balance was determined by multiplying the Initial Pool Balance by a percentage equal to the difference between the Constraining Level for the immediately senior class of Swap-Priced Principal Balance Certificates and such subordinate class’s Constraining Level.
Target Price Determination
The Retaining Sponsor determined a target price (the “Target Price”) for each class of Swap-Priced Principal Balance Certificates (other than the Class D Certificates) on the basis of the price (expressed as a percentage of the certificate balance of that class) that similar CMBS with similar credit ratings, similar average lives, cash flow profiles and prepayment risk have priced at in recent securitization transactions. The Target Price was utilized for each class of Swap-Priced Principal Balance Certificates is set forth in the table below. The Target Prices utilized by the Retaining Sponsor have not changed materially during the prior year.
Class of Certificates | Target Price |
| Class A-1 | 100% |
| Class A-2 | 103% |
| Class A-SB | 103% |
| Class A-3 | 101% |
| Class A-4 | 103% |
| Class A-S | 103% |
| Class B(1) | 103%(1) |
| Class C(1) | 100%(1) |
| (1) | The Target Price may not be realized for the Class B or Class C Certificates if such class accrues interest at the WAC Rate. |
Determination of Assumed Certificate Coupon
Based on the Target Price, the Discount Yield and the Scheduled Certificate Principal Payments for each class of Swap-Priced Principal Balance Certificates, the Retaining Sponsor determined the assumed certificate coupon (the “Assumed Certificate Coupon”) by calculating what coupon would be required to be used based on the Scheduled Certificate Principal Payments for such class of Swap-Priced Principal Balance Certificates in order to achieve the related Target Price for that class of Swap-Priced Principal Balance Certificates when utilizing the related Discount Yield in determining that Target Price. With respect to the Class D Certificates, the Retaining Sponsor determined the Assumed Certificate Coupon to be 3.000%, which was set based on expected market demand for the Class D and Class X-D Certificates. The Assumed Certificate Coupon for each class of Swap-Priced Principal Balance Certificates and Range of Assumed Certificate Coupons generated as a result of the estimated range of Discount Yields as of the Closing Date is set forth in the table below.
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Range of Assumed Certificate Coupons for the Swap-Priced Principal Balance Certificates
Class of Certificates | Low Estimate of Assumed Certificate Coupon | Base Case | High Estimate of Assumed Certificate Coupon |
| Class A-1 | 2.872% | 3.181% | 3.487% |
| Class A-2 | 3.764% | 4.109% | 4.512% |
| Class A-SB | 3.796% | 4.146% | 4.480% |
| Class A-3 | 3.605% | 3.941% | 4.285% |
| Class A-4 | 3.866% | 4.205% | 4.554% |
| Class A-S | 4.017% | 4.406% | 4.755% |
| Class B | 4.118% | 4.557% | 5.034%(1) |
| Class C | 4.446% | 4.827% | 5.034%(1) |
| Class D | 3.000% | 3.000% | 3.000% |
| (1) | Expected to accrue interest at the WAC Rate. |
Determination of Swap-Priced Expected Price
Based on the Assumed Certificate Coupons, the Discount Yield and the Scheduled Certificate Principal Payments for each class of Swap-Priced Principal Balance Certificates, the Retaining Sponsor determined the price (the “Swap-Priced Expected Price”) expressed as a percent of the certificate balance of that class by determining the net present value of the Scheduled Certificate Principal Payments and interest accruing at the related Assumed Certificate Coupon discounted at the related Discount Yield.
Interest-Only Certificates
Based on the Structuring Assumptions and assuming a 100% CPY prepayment rate, the Retaining Sponsor calculated what the expected scheduled interest payments on each class of Interest-Only Certificates would be over the course of the transaction (for each class of certificates, the “Scheduled Certificate Interest Payments”) based on what the Notional Amount of the related class of Interest-Only Certificates would be during each Collection Period as a result of the application of the expected principal payments during such Collection Period under the terms of the underlying Mortgage Loan documents and the payment priorities described in “Description of the Certificates—Distributions—Priority of Distributions”. On the basis of the periodic reduction in the Notional Amount of each Class of Interest-Only Certificates, the Retaining Sponsor calculated the weighted average life for each such class of Interest-Only Certificates.
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Treasury Yield Curve
The Retaining Sponsor utilized the assumed treasury yield curve in the table below in determining the range of estimated fair value for the Interest-Only Certificates. The actual treasury yield curve that will be used as a basis for determining the price of the Interest-Only Certificates is not known at this time and differences in the treasury yield curve will ultimately result in higher or lower fair value calculations. For an expected range of values at specified points along the treasury yield curve, see the table below titled “Range of Treasury Yield Curve Values”. The Retaining Sponsor identified the range presented in the table below at each maturity on the treasury yield curve, which represents the Retaining Sponsor’s estimate of the largest increase or decrease in the treasury yield at that maturity reasonably expected to occur prior to pricing of the Interest-Only Certificates, based on 10 business day rolling periods over the past 6 months.
Range of Treasury Yield Curve Values
Tenor | Low Estimate of Treasury Yield | Base Case Treasury Yield | High Estimate of Treasury Yield |
| 7YR | 2.577% | 2.900% | 3.150% |
| 10YR | 2.644% | 2.935% | 3.180% |
Based on the treasury yield curve, the Retaining Sponsor will determine for each class of Interest-Only Certificates the yield reflected on the treasury yield curve (the “Interpolated Yield”) that corresponds to that class’s weighted average life, by using a linear interpolation using treasury yield curves with 7 and 10 year maturity if the weighted average life does not correspond to a specified maturity on the treasury yield curve.
Credit Spread Determination
The Retaining Sponsor determined the credit spread for each class of Interest-Only Certificates on the basis of market bids obtained for similar CMBS with similar credit ratings, pool composition and asset quality, payment priority and weighted average lives of such class of Interest-Only Certificates as of the date of this prospectus. The actual credit spread for a particular class of Interest-Only Certificates at the time of pricing is not known at this time and differences in the then current credit spread demanded by investors for similar CMBS will ultimately result in higher or lower fair values. The Retaining Sponsor identified the range presented in the table below from the base case credit spread percentage, which is the Retaining Sponsor’s estimate of the largest increase or decrease in the credit spread for newly issued CMBS reasonably expected to occur prior to pricing of the Certificates based on the Retaining Sponsor’s experience in the placement of CMBS with similar characteristics.
Range of Credit Spreads for the Interest-Only Certificates
Class of Certificates | Low Estimate of | Base Case | High Estimate of |
| Class X-A | 1.00% | 1.25% | 1.50% |
| Class X-B | 1.00% | 1.25% | 1.50% |
| Class X-D | 1.25% | 1.50% | 2.00% |
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Discount Yield Determination
Discount Yield for each class of Interest-Only Certificates is the sum of the Interpolated Yield for such class and the related credit spread. For an expected range of values for each class of Interest-Only Certificates, see the table titled “Range of Discount Yields for the Interest-Only Certificates” below. The Retaining Sponsor identified the range presented in the table below for each such class of certificates as the range from (i) the sum of the lowest estimated Interpolated Yield for that class and the lowest estimated credit spread to (ii) the sum of the highest estimated Interpolated Yield for that class and the highest estimated credit spread.
Range of Discount Yields for the Interest-Only Certificates
Class of Certificates | Low Estimate of | Base Case | High Estimate of |
| Class X-A | 3.624% | 4.174% | 4.671% |
| Class X-B | 3.637% | 4.181% | 4.677% |
| Class X-D | 3.888% | 4.432% | 5.177% |
Determination of Scheduled Certificate Interest Payments
Based on the range of Assumed Certificate Coupons determined for the Principal Balance Certificates, the Retaining Sponsor determined the range of Scheduled Certificate Interest Payments for each scenario for each Class of Interest-Only Certificates based on the difference between the WAC Rate in effect from time to time, over the weighted average of the Pass-Through Rate(s) of the underlying Class(es) of Principal Balance Certificates upon which the Notional Amount of such Class of Interest-Only Certificates is based.
Determination of Interest-Only Expected Price
Based on the Discount Yield and the Scheduled Certificate Interest Payments for each class of Interest-Only Certificates, the Retaining Sponsor determined the price (the “Interest-Only Expected Price”) expressed as a percent of the Notional Amount of that class by determining the net present value of the Scheduled Certificate Interest Payments discounted at the related Discount Yield. The Retaining Sponsor determined the Interest-Only Expected Price for each class of Interest-Only Certificates based on the low estimate and high estimate of Assumed Certificate Coupons. The lower the Assumed Certificate Coupon for the Principal Balance Certificates, the higher the corresponding Interest-Only Expected Price for a class of certificates will be, therefore, the low range of estimated fair values of the Interest-Only Certificates will correspond to the high range of the estimate of Assumed Certificate Coupons for the Principal Balance Certificates and correspondingly, the high range of estimated fair values of the Interest-Only Certificates will correspond to the low range of the estimate of Assumed Certificate Coupons for the Principal Balance Certificates.
Yield-Priced Principal Balance Certificates
The Yield-Priced Principal Balance Certificates are anticipated to be acquired by the Third-Party Purchaser based on a targeted discount yield of 14.4376% (inclusive of agreed upon price adjustments, if applicable) for each class of Yield-Priced Principal Balance Certificates, an Assumed Certificate Coupon equal to the WAC Rate for each class of Yield-Priced Principal Balance Certificates, the Structuring Assumptions and 0% CPY, each as agreed to among the sponsors and the Third-Party Purchaser.
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Determination of Class Size
The Retaining Sponsor determined the Certificate Balance of each class of Yield-Priced Principal Balance Certificates in the same manner described above under “—Determination of Amount of Required Horizontal Credit Risk Retention—Swap-Priced Principal Balance Certificates—Determination of Class Sizes”.
Determination of Yield-Priced Expected Price
Based on the Assumed Certificate Coupons, the targeted discount yield and the Scheduled Certificate Principal Payments for each class of Yield-Priced Principal Balance Certificates, the Retaining Sponsor determined the price (the “Yield-Priced Expected Price”) expressed as a percent of the Certificate Balance of that class by determining the net present value of the Scheduled Certificate Principal Payments and interest accruing at the related Assumed Certificate Coupon discounted at the related Discount Yield.
Calculation of Fair Value
The Retaining Sponsor determined that the Class V Certificates have a fair value equal to zero based on the fact that no Excess Interest is expected to be received and, accordingly, there is no market for the Class V Certificates.
Based on the Swap-Priced Expected Prices, the Interest-Only Expected Prices and the Yield-Priced Expected Prices, as applicable, the Retaining Sponsor determined the estimated fair value of each class of certificates (other than the Class V Certificates) by multiplying the range of the Swap-Priced Expected Prices, the Interest-Only Expected Prices and the Yield-Priced Expected Prices, as applicable, by the related Certificate Balance or Notional Amount. The Retaining Sponsor determined the range of estimated fair values for each class of certificates based on the low estimate and high estimate of expected prices.
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Range of Fair Value
Class of Certificates | Low Estimate of Fair Value (Based on High Estimate of Discount Yield) | Base Case Fair Value | High Estimate of Fair Value (Based on Low Estimate of Discount Yield) | |||||||||
| Class A-1 | $ | 14,404,969 | $ | 14,404,878 | $ | 14,404,624 | ||||||
| Class A-2 | $ | 5,725,562 | $ | 5,725,599 | $ | 5,725,722 | ||||||
| Class A-SB | $ | 38,508,955 | $ | 38,509,225 | $ | 38,508,421 | ||||||
| Class A-3(1) | $ | 181,792,221 | $ | 181,795,845 | $ | 181,790,700 | ||||||
| Class A-4(1) | $ | 230,487,772 | $ | 230,480,786 | $ | 230,478,678 | ||||||
| Class X-A | $ | 17,269,261 | $ | 29,593,543 | $ | 42,282,238 | ||||||
| Class X-B | $ | 654,625 | $ | 3,200,357 | $ | 6,874,472 | ||||||
| Class A-S | $ | 47,497,281 | $ | 47,495,532 | $ | 47,495,154 | ||||||
| Class B | $ | 32,905,052 | $ | 33,077,496 | $ | 33,077,655 | ||||||
| Class C | $ | 31,183,179 | $ | 32,114,077 | $ | 32,114,769 | ||||||
| Class D(2) | $ | 17,052,972 | $ | 16,850,396 | $ | 16,282,374 | ||||||
| Class X-D(2) | $ | 3,366,657 | $ | 3,236,807 | $ | 3,067,713 | ||||||
| Class E-RR(3) | $ | 6,483,814 | $ | 7,301,090 | $ | 8,118,365 | ||||||
| Class F-RR | $ | 4,209,364 | $ | 4,209,364 | $ | 4,209,364 | ||||||
| Class G-RR | $ | 5,050,725 | $ | 5,050,725 | $ | 5,050,725 | ||||||
| Class H-RR | $ | 3,788,172 | $ | 3,788,172 | $ | 3,788,172 | ||||||
| Class J-RR | $ | 13,469,667 | $ | 13,469,667 | $ | 13,469,667 | ||||||
| Class V | $ | 0 | $ | 0 | $ | 0 | ||||||
| (1) | The approximate initial Certificate Balances of the Class A-3 and Class A-4 Certificates are unknown and will be determined based on the final pricing of those Classes of Certificates. However, the initial Certificate Balance of the Class A-3 Certificates is expected to be within a range of $150,000,000 and $200,000,000, and the initial Certificate Balance of the Class A-4 Certificates is expected to be within a range of $203,783,000 and $253,783,000. The aggregate initial Certificate Balance of the Class A-3 and Class A-4 Certificates is expected to be approximately $403,783,000, subject to a variance of plus or minus 5%. For purposes of providing the range of estimated fair values for the certificates in the table above, the Certificate Balance of the Class A-3 Certificates is assumed to be $180,000,000 and the Certificate Balance of the Class A-4 Certificates is assumed to be $223,783,000. |
| (2) | The approximate initial Certificate Balance of the Class D Certificates is estimated based in part on the estimated ranges of Certificate Balances and estimated fair values described under this “Credit Risk Retention” section. The initial Certificate Balance of the Class D certificates is expected to fall within a range of $19,581,000 and $22,767,000, with the ultimate Certificate Balance determined such that the aggregate fair value of the Yield-Priced Principal Balance Certificates will equal at least 5% of the estimated fair value of all the certificates (other than the Class R certificates). Any variation in the initial certificate balance of the Class D certificates would affect the initial Notional Amount of the Class X-D certificates. |
| (3) | The approximate initial Certificate Balance of the Class E-RR Certificates is estimated based in part on the estimated ranges of Certificate Balances and estimated fair values described under this “Credit Risk Retention” section. The initial Certificate Balance of the Class E-RR certificates is expected to fall within a range of $12,641,000 and $15,827,000, with the ultimate Certificate Balance determined such that the aggregate fair value of the Yield-Priced Principal Balance Certificates will equal at least 5% of the estimated fair value of all the certificates (other than the Class R certificates). |
The estimated range of fair value for all the Certificates is approximately $653,850,248 to $686,738,813.
Hedging, Transfer and Financing Restrictions
The Third-Party Purchaser will be required to comply with the hedging, transfer and financing restrictions applicable to a “retaining sponsor” under the Credit Risk Retention Rules.
These restrictions will include an agreement by the Third-Party Purchaser not to transfer the Horizontal Risk Retention Certificates (except to a majority-owned affiliate) until July 17,
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2023. On and after that date, the Third-Party Purchaser may transfer the eligible horizontal residual interest to a successor third-party purchaser as long as the Third-Party Purchaser satisfies all applicable provisions of the Credit Risk Retention Rules, including providing the sponsors with complete identifying information for the successor third-party purchaser and the successor third-party purchaser agreeing to comply with the hedging, transfer, financing and other restrictions applicable to subsequent third-party purchasers (and its affiliates) under the Credit Risk Retention Rules.
The restrictions on hedging and transfer under the Credit Risk Retention Rules as in effect on the Closing Date of this transaction will expire on and after the date that is the latest of (i) the date on which the aggregate principal balance of the Mortgage Loans has been reduced to 33% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date; (ii) the date on which the total unpaid principal obligations under the certificates has been reduced to 33% of the aggregate total unpaid principal obligations under the certificates as of the Closing Date; or (iii) two years after the Closing Date.
Operating Advisor
The operating advisor for the transaction is Park Bridge Lender Services LLC, a New York limited liability company. As described under “Pooling and Servicing Agreement—The Operating Advisor”, the operating advisor will, in general and under certain circumstances described in this prospectus, have the following responsibilities with respect to the Mortgage Loans:
| ● | review the actions of the special servicer with respect to any Specially Serviced Loan to the extent set forth in the PSA; |
| ● | review reports provided by the special servicer to the extent set forth in the PSA; |
| ● | review for accuracy certain calculations made by the special servicer to the extent set forth in the PSA; and |
| ● | issue an annual report generally setting forth whether the operating advisor believes, in its sole discretion exercised in good faith, that the special servicer is operating in compliance with the Servicing Standard with respect to its performance of its duties under the PSA with respect to Specially Serviced Loans. |
In addition, if the operating advisor determines, in its sole discretion exercised in good faith, that (1) the special servicer has failed to comply with the Servicing Standard and (2) a replacement of the special servicer would be in the best interest of the Certificateholders (as a collective whole), the operating advisor will have the right at any time to recommend the replacement of the special servicer with respect to the Mortgage Loans. See “Pooling and Servicing Agreement—The Operating Advisor—Recommendation of the Replacement of the Special Servicer” and “—Termination of the Master Servicer and Special Servicer for Cause”.
Further, after the occurrence and during the continuance of an Operating Advisor Consultation Event, the operating advisor will be required to consult on a non-binding basis with the special servicer with respect to Asset Status Reports prepared for each Specially Serviced Loan and with respect to Major Decisions in respect of the Mortgage Loans for which the operating advisor has received a Major Decision Reporting Package. The operating advisor will generally have no obligations or consultation rights as operating advisor under the PSA for this transaction with respect to any Non-Serviced Mortgage Loan or any related REO Property; provided, however, that the operating advisor may have limited consultation
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rights with a Non-Serviced Special Servicer pursuant to the Non-Serviced Pooling and Servicing Agreement. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” and “Pooling and Servicing Agreement—The Operating Advisor”.
An “Operating Advisor Consultation Event” will occur when the Certificate Balances of the classes of Horizontal Risk Retention Certificates in the aggregate (taking into account the application of any Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balances of such classes) is 25% or less of the initial Certificate Balances of such classes in the aggregate.
The certificate administrator will be required to notify the operating advisor, the master servicer and the special servicer of the commencement or cessation of any Operating Advisor Consultation Event.
The operating advisor will be entitled to compensation in the form of the Operating Advisor Fee, the Operating Advisor Consulting Fee and reimbursement of any Operating Advisor Expenses. For additional information, see “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Operating Advisor Compensation”.
The operating advisor is required to be an Eligible Operating Advisor at all times that it is acting as operating advisor under the PSA. As a result of Park Bridge Lender Services’ experience and independence as described under “Transaction Parties—The Operating Advisor and Asset Representations Reviewer”, the representations and warranties being given by Park Bridge Lender Services under the PSA and satisfaction that no payments have been paid by any special servicer to Park Bridge Lender Services of any fees, compensation or other remuneration (x) in respect of its obligations under the PSA, or (y) for the appointment or recommendation for replacement of a successor special servicer to become the special servicer, Park Bridge Lender Services qualifies as an Eligible Operating Advisor under the PSA.
For additional information regarding the operating advisor, a description of how the operating advisor satisfies the requirements of an Eligible Operating Advisor, a description of the material terms of the PSA with respect to the operating advisor’s obligations under the PSA and any material conflicts of interest or material potential conflicts of interest between the operating advisor and another party to this securitization transaction, see “Risk Factors—Risks Related to Conflicts of Interest—Potential Conflicts of Interest of the Operating Advisor”, “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” and “Pooling and Servicing Agreement—The Operating Advisor”.
The disclosures set forth in this prospectus under the headings referenced in the preceding paragraphs are hereby incorporated by reference in this “Credit Risk Retention—Operating Advisor” section.
Representations and Warranties
Each of Wells Fargo Bank (solely in its capacity as a mortgage loan seller), Barclays, Rialto Mortgage and C-III CM, will make the representations and warranties identified on Annex D-1 with respect to their respective Mortgage Loans, subject in each case to the exceptions to these representations and warranties set forth in Annex D-2, the “Exception Schedules”).
At the time the decision to include its Mortgage Loans in this transaction, each of Wells Fargo Bank, National Association and C-III CM determined either that the risks associated
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with the matters giving rise to each exception set forth on Annex D-2 would not have a material adverse effect on the use, operation or value of the related Mortgaged Property or on its related security interest in such Mortgaged Property, or were mitigated in a manner consistent with customary or otherwise appropriate lending practices by one or more compensating factors, including without limitation: (i) affirmative borrower covenants to effect curative requirements, including the imposition of personal liability to the borrower and guarantor on a losses-only or full recourse basis if risk-related events are triggered, or the requirement to obtain rating agency confirmation prior to taking an action related to such exception; (ii) opinions of legal counsel, or other expert evaluations as to materiality of related risks and remediation, as appropriate; (iii) cash- or letter of credit-funded reserves or the collateral assignments of similar security, or the imposition of cash management controls; (iv) insurance benefiting the loan, including title insurance, property and liability insurance, environmental or lease-related insurance, among other things; (v) positive loan underwriting metrics (such as comparatively low loan-to-value ratio, high debt service coverage ratio or debt yield, or any combination of such factors); or (vi) other loan underwriting-related facts and circumstances reducing the related risk of default or loss, such as strong sponsorship, desirable property type, favorable sub-market conditions, strong tenancy at the related Mortgaged Property or otherwise favorable lease provisions pertaining to the related risk, or the likelihood of near-term curative action within foreseeable cost parameters. However, there can be no assurance that the compensating factors or other circumstances upon which each of Wells Fargo Bank, National Association and C-III CM based its decisions will in fact sufficiently mitigate those risks. In particular, we note that an evaluation of the risks presented by such exceptions, including whether any mitigating factors or circumstances are sufficient, may necessarily involve an assessment as to the likelihood of future events as to which no assurance can be given.
At the time of the decision to include its Mortgage Loans in this transaction, each of Barclays and Rialto Mortgage determined either that the risks associated with the matters giving rise to each exception in respect of its Mortgage Loans set forth on Annex D-2 were not material or were mitigated by one or more compensating factors, including without limitation, reserves, title insurance or other relevant insurance, opinions of legal counsel, letters of credit, a full or partial recourse guaranty from the mortgage loan sponsor, a full or partial cash sweep, positive credit metrics (such as low loan to value ratio, high debt service coverage ratio or debt yield, or any combination of such factors), or by other circumstances, such as strong sponsorship, a desirable property type, strong tenancy at the related Mortgaged Property, the likelihood that the related mortgage loan borrower or a third party may (and/or is required to under the related loan documents) resolve the matter soon, any requirements to obtain rating agency confirmation prior to taking an action related to such exception, a determination by Barclays or Rialto Mortgage, as applicable, that the acceptance of the related fact or circumstance by the related originator was prudent and consistent with market standards after consultation with appropriate industry experts or a determination by Barclays or Rialto Mortgage, as applicable, that the circumstances that gave rise to such exception should not have a material adverse effect on the use, operation or value of the related Mortgaged Property or on any related lender’s security interest in such Mortgaged Property. However, there can be no assurance that the compensating factors or other circumstances upon which each of Barclays and Rialto Mortgage based its decisions will in fact sufficiently mitigate those risks. In particular, we note that an evaluation of the risks presented by such exceptions, including whether any mitigating factors or circumstances are sufficient, may necessarily involve an assessment as to the likelihood of future events as to which no assurance can be given.
Additional information regarding the applicable Mortgage Loans, including the risks related thereto, is described under “Risk Factors” and “Description of the Mortgage Pool”.
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Description of the Certificates
General
The certificates will be issued pursuant to a pooling and servicing agreement, among the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the operating advisor and the asset representations reviewer (the “PSA”) and will represent in the aggregate the entire ownership interest in the issuing entity. The assets of the issuing entity will consist of: (1) the Mortgage Loans and all payments under and proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of payments of principal and/or interest due on or before the Cut-off Date and interest relating to periods prior to, but due after, the Cut-off Date); (2) any REO Property but, with respect to any Whole Loan, only to the extent of the issuing entity’s interest in such Whole Loan; (3) those funds or assets as from time to time are deposited in the accounts discussed in “Pooling and Servicing Agreement—Accounts” (such accounts collectively, the “Securitization Accounts”) (but, with respect to any Whole Loan, only to the extent of the issuing entity’s interest in such Whole Loan), if established; (4) the rights of the mortgagee under all insurance policies with respect to its Mortgage Loans; and (5) certain rights of the depositor under each MLPA relating to Mortgage Loan document delivery requirements and the representations and warranties of each mortgage loan seller regarding the Mortgage Loans it sold to the depositor.
The Commercial Mortgage Pass-Through Certificates, Series 2018-C45 will consist of the following classes: the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates (collectively, with the Class A-S certificates, the “Class A Certificates”), Class X-A, Class X-B, Class X-D, Class A-S, Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR, Class V and Class R certificates.
The Class X-A, Class X-B and Class X-D certificates are referred to collectively in this prospectus as the “Class X Certificates”. The Class A Certificates (other than the Class A-S certificates) and the Class X Certificates are referred to collectively in this prospectus as the “Senior Certificates”. The Class A-S, Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates are referred to collectively in this prospectus as the “Subordinate Certificates”. The Class R certificates are sometimes referred to in this prospectus as the “Residual Certificates”. The Senior Certificates and the Subordinate Certificates are collectively referred to in this prospectus as the “Regular Certificates”. The Senior Certificates (other than the Class X-A, Class X-B and Class X-D certificates) and the Subordinate Certificates are collectively referred to in this prospectus as the “Principal Balance Certificates”. The Class A Certificates and the Class X-A, Class X-B, Class B and Class C certificates are also referred to in this prospectus as the “Offered Certificates”. The Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates are also referred to in this prospectus as the “Horizontal Risk Retention Certificates” and are expected to be purchased and retained by Prime Finance Long Duration (B-Piece) II Holdco I, L.P.
Upon initial issuance, the Principal Balance Certificates will have the respective Certificate Balances, and the Class X Certificates will have the respective Notional Amounts, shown below (in each case, subject to a variance of plus or minus 5%):
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Class | Approx. Initial | |||
| Offered Certificates | ||||
| A-1 | $ | 14,405,000 | ||
| A-2 | $ | 5,559,000 | ||
| A-SB | $ | 37,388,000 | ||
| A-3 | (1) | |||
| A-4 | (1) | |||
| X-A | $ | 461,135,000 | ||
| X-B | $ | 110,344,000 | ||
| A-S | $ | 46,114,000 | ||
| B | $ | 32,115,000 | ||
| C | $ | 32,115,000 | ||
| Non-Offered Certificates | ||||
| X-D | $ | 21,174,000(2) | ||
| D | $ | 21,174,000(2) | ||
| E-RR | $ | 14,234,000(2) | ||
| F-RR | $ | 8,235,000 | ||
| G-RR | $ | 9,881,000 | ||
| H-RR | $ | 7,411,000 | ||
| J-RR | $ | 26,351,419 | ||
| V | NAP | |||
| R | NAP | |||
| (1) | The approximate initial Certificate Balances of the Class A-3 and Class A-4 Certificates are unknown and will be determined based on the final pricing of those Classes of Certificates. However, the initial Certificate Balance of the Class A-3 Certificates is expected to be within a range of $150,000,000 and $200,000,000, and the initial Certificate Balance of the Class A-4 Certificates is expected to be within a range of $203,783,000 and $253,783,000. The aggregate initial Certificate Balance of the Class A-3 and Class A-4 Certificates is expected to be approximately $403,783,000, subject to a variance of plus or minus 5%. |
| (2) | The initial Certificate Balance of each of the Class D and Class E-RR certificates is estimated based in part on the estimated ranges of Certificate Balances and estimated fair values described in “Credit Risk Retention”. The initial Certificate Balance of the Class D certificates is expected to fall within a range of $19,581,000 and $22,767,000, and the initial Certificate Balance of the Class E-RR certificates is expected to fall within a range of $12,641,000 and $15,827,000, with the ultimate initial Certificate Balance of each determined such that the aggregate fair value of the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates will equal at least 5% of the estimated fair value as of the Closing Date of all of the classes of certificates (other than the Class R certificates) issued by the issuing entity. Any variation in the initial Certificate Balance of the Class D certificates would affect the initial Notional Amount of the Class X-D certificates. |
The “Certificate Balance” of any class of Principal Balance Certificates outstanding at any time represents the maximum amount that its holders are entitled to receive as distributions allocable to principal from the cash flow on the Mortgage Loans and the other assets in the issuing entity, all as described in this prospectus. On each Distribution Date, the Certificate Balance of each class of Principal Balance Certificates will be reduced by any distributions of principal actually made on, and by any Realized Losses actually allocated to, that class of Principal Balance Certificates on that Distribution Date. In the event that Realized Losses previously allocated to a class of Principal Balance Certificates in reduction of its Certificate Balance are recovered subsequent to such Certificate Balance being reduced to zero, holders of such class of Principal Balance Certificates may receive distributions in respect of such recoveries in accordance with the distribution priorities described under “—Distributions—Priority of Distributions” below.
The Residual Certificates will not have a Certificate Balance or entitle their holders to distributions of principal or interest.
The Class X Certificates will not have Certificate Balances, nor will they entitle their holders to distributions of principal, but the Class X Certificates will represent the right to
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receive distributions of interest in an amount equal to the aggregate interest accrued on their respective notional amounts (each, a “Notional Amount”). The Notional Amount of the Class X-A certificates will equal the aggregate of the Certificate Balances of the Class A Certificates (other than the Class A-S certificates) outstanding from time to time. The initial Notional Amount of the Class X-A certificates will be approximately $461,135,000. The Notional Amount of the Class X-B certificates will equal the aggregate of the Certificate Balances of the Class A-S, Class B and Class C certificates outstanding from time to time. The initial Notional Amount of the Class X-B certificates will be approximately $110,344,000. 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 initial Notional Amount of the Class X-D certificates will be approximately $21,174,000.
The Class V certificates will not have a Certificate Balance nor will they entitle their holders to distributions of principal, but the Class V certificates will represent the right to receive their allocable portion of Excess Interest received on any ARD Loan allocated as described under “—Available Funds—Excess Interest” below.
“Excess Interest” with respect to an ARD Loan is the interest accrued at the Revised Rate in respect of such ARD Loan in excess of the interest accrued at the Initial Rate, plus any related interest accrued on such amounts, to the extent permitted by applicable law and the related Mortgage Loan documents.
The Mortgage Loans (exclusive of Excess Interest) will be held by the lower-tier REMIC (the “Lower-Tier REMIC”). The certificates (other than the Class V certificates and its right to receive a portion of the Excess Interest) will be issued by the upper-tier REMIC (the “Upper-Tier REMIC”) (collectively with the Lower-Tier REMIC, the “Trust REMICs”). The Class V certificates will be issued by the grantor trust (the “Grantor Trust”).
Distributions
Method, Timing and Amount
Distributions on the certificates are required to be made by the certificate administrator, to the extent of available funds as described in this prospectus, on the 4th business day following each Determination Date (each, a “Distribution Date”). The “Determination Date” will be the 11th day of each calendar month (or, if the 11th calendar day of that month is not a business day, then the next business day) commencing in August 2018.
All distributions (other than the final distribution on any certificate) are required to be made to the Certificateholders in whose names the certificates are registered at the close of business on each Record Date. With respect to any Distribution Date, the “Record Date” will be the last business day of the month immediately 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 5 business days prior to the related Record Date (which wiring instructions may be in the form of a standing order applicable to all subsequent distributions) or otherwise by check mailed to the Certificateholder. The final distribution on any certificate is required to be made in like manner, but only upon presentation and surrender of the certificate at the location that will be specified in a notice of the pendency of the final distribution. All distributions made with respect to a class of certificates will be allocated pro rata among the outstanding certificates of that class based on their respective Percentage Interests.
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The “Percentage Interest” evidenced by any certificate (other than a Class V or 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.
The master servicer is authorized but not required to direct the investment of funds held in the Collection Account maintained by it, 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 PSA. The certificate administrator is authorized but not required to direct the investment of funds held in the Lower-Tier REMIC Distribution Account, the Upper-Tier REMIC Distribution Account, the Interest Reserve Account, the Excess Interest Distribution Account and the Gain-on-Sale Reserve Account in Permitted Investments. The certificate administrator will be entitled to retain any interest or other income earned on such funds and the certificate administrator will be required to bear any losses resulting from the investment of such funds, as provided in the PSA.
Available Funds
The aggregate amount available for distribution to holders of the certificates on each Distribution Date (the “Available Funds”) will, in general, equal the sum of the following amounts (without duplication):
(a) the aggregate amount of all cash received on the Mortgage Loans (in the case of each Non-Serviced Mortgage Loan, only to the extent received by the issuing entity pursuant to the related Non-Serviced PSA) and any REO Property 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), as of the related P&I Advance Date, exclusive of (without duplication):
| ● | all scheduled payments of principal and/or interest and any balloon payments paid by the borrowers of a Mortgage Loan (such amounts other than any Excess Interest, the “Periodic Payments”), that are due on a Due Date after the end of the related Collection Period, excluding interest relating to periods prior to, but due after, the Cut-off Date; |
| ● | all unscheduled payments of principal (including prepayments), unscheduled interest, liquidation proceeds, insurance proceeds and condemnation proceeds and other unscheduled recoveries received subsequent to the related Determination Date (or, with respect to voluntary prepayments of principal of each Mortgage Loan with a Due Date occurring after the related Determination Date, subsequent to the related Due Date) allocable to the Mortgage Loans; |
| ● | all amounts in the Collection Account that are due or reimbursable to any person other than the Certificateholders; |
| ● | with respect to each Actual/360 Loan and any Distribution Date occurring in each February and in any January occurring in a year that is not a leap year (in each case, unless such Distribution Date is the final Distribution Date), the related Withheld Amount to the extent those funds are on deposit in the Collection Account; |
| ● | all Excess Interest allocable to the Mortgage Loans (which is separately distributed to the Class V certificates); |
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| ● | all Yield Maintenance Charges and Prepayment Premiums; |
| ● | all amounts deposited in the Collection Account in error; and |
| ● | any late payment charges or accrued interest on a Mortgage Loan actually collected thereon and 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), the aggregate amount transferred from the REO Accounts allocable to the Mortgage Loans to the Collection Account for such Distribution Date;
(c) all Compensating Interest Payments made by the master servicer with respect to the Mortgage Loans with respect to such Distribution Date and P&I Advances made by the master servicer or the trustee, as applicable, with respect to the Distribution Date (net of certain amounts that are due or reimbursable to persons other than the Certificateholders);
(d) with respect to each Actual/360 Loan and any Distribution Date occurring in each March (or February, if such Distribution Date is the final Distribution Date), the related Withheld Amounts as required to be deposited in the Lower-Tier REMIC Distribution Account pursuant to the PSA; and
(e) the Gain-on-Sale Remittance Amount for such Distribution Date.
The “Gain-on-Sale Entitlement Amount” for each Distribution Date will be equal to the aggregate amount of (i) the sum of (a) the aggregate portion of the Interest Distribution Amount for each Class of Regular Certificates that would remain unpaid as of the close of business on such Distribution Date, and (b) the amount by which the Principal Distribution Amount exceeds the aggregate amount that would actually be distributed on such Distribution Date in respect of such Principal Distribution Amount, and (ii) any Realized Losses outstanding immediately after such Distribution Date, in each case, to the extent such amounts would occur on such Distribution Date or would be outstanding immediately after such Distribution Date, as applicable, without the inclusion of the Gain-on-Sale Remittance Amount as part of the definition of Available Funds.
The “Collection Period” for each Distribution Date and any Mortgage Loan (including any Companion Loan) will be the period commencing on the day immediately succeeding the Due Date for such Mortgage Loan (including any Companion Loan) in the month preceding the month in which that Distribution Date occurs or the date that would have been the Due Date if such Mortgage Loan (including any Companion Loan) had a Due Date in such preceding month and ending on and including the Due Date for such Mortgage Loan (including any related Companion Loan) occurring in the month in which that Distribution Date occurs. Notwithstanding the foregoing, in the event that the last day of a Collection Period is not a business day, any Periodic Payments received with respect to Mortgage Loans (including any periodic payments for any Companion Loan) relating to such Collection Period on the business day immediately following such day will be deemed to have been received during such Collection Period and not during any other Collection Period.
“Due Date” means, with respect to each Mortgage Loan (including any Companion Loan), the date on which scheduled payments of principal, interest or both are required to be made by the related borrower.
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The “Gain-on-Sale Remittance Amount” for each Distribution Date will be equal to the lesser of (i) the amount on deposit in the Gain-on-Sale Reserve Account on such Distribution Date, and (ii) the Gain-on-Sale Entitlement Amount.
Priority of Distributions
On each Distribution Date, for so long as the Certificate Balances or Notional Amounts of the Regular Certificates have not been reduced to zero, the certificate administrator is required to apply amounts on deposit in the Distribution Account, to the extent of the Available Funds, in the following order of priority:
First, to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B and Class X-D certificates, in respect of interest, up to an amount equal to, and pro rata in accordance with, the respective Interest Distribution Amounts for such classes;
Second, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, in reduction of the Certificate Balances of those classes, in the following priority:
(i) prior to the Cross-Over Date:
(a) to the Class A-SB certificates, in an amount equal to the Principal Distribution Amount for such Distribution Date until the Certificate Balance of the Class A-SB certificates is reduced to the Class A-SB Planned Principal Balance for such Distribution Date;
(b) to the Class A-1 certificates, in an amount equal to the Principal Distribution Amount (or the portion of it remaining after payments specified in clause (a) above have been made) for such Distribution Date until the Certificate Balance of the Class A-1 certificates is reduced to zero;
(c) to the Class A-2 certificates, in an amount equal to the Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (a) and (b) above have been made) for such Distribution Date until the Certificate Balance of the Class A-2 certificates is reduced to zero;
(d) to the Class A-3 certificates, in an amount equal to the Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (a), (b) and (c) above have been made) for such Distribution Date until the Certificate Balance of the Class A-3 certificates is reduced to zero;
(e) to the Class A-4 certificates, in an amount equal to the Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (a), (b), (c) and (d) above have been made) for such Distribution Date until the Certificate Balance of the Class A-4 certificates is reduced to zero;
(f) to the Class A-SB certificates, in an amount equal to the Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (a), (b), (c), (d) and (e) above have been made) for such Distribution Date, until the Certificate Balance of the Class A-SB certificates is reduced to zero;
(ii) on or after the Cross-Over Date, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, pro rata (based upon their respective Certificate Balances), in an amount equal to the Principal Distribution Amount for such Distribution Date, until the Certificate Balances of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates are reduced to zero;
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Third, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, first, (i) up to an amount equal to, and pro rata in accordance with, the aggregate unreimbursed Realized Losses previously allocated to each such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Fourth, to the Class A-S certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Fifth, after the Certificate Balances of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates have been reduced to zero, to the Class A-S certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Sixth, to the Class A-S certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Seventh, to the Class B certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Eighth, after the Certificate Balances of the Class A Certificates have been reduced to zero, to the Class B certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Ninth, to the Class B certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Tenth, to the Class C certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Eleventh, after the Certificate Balances of the Class A Certificates and the Class B certificates have been reduced to zero, to the Class C certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Twelfth, to the Class C certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Thirteenth, to the Class D certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
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Fourteenth, after the Certificate Balances of the Class A Certificates and the Class B and Class C certificates have been reduced to zero, to the Class D certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Fifteenth, to the Class D certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Sixteenth, to the Class E-RR certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Seventeenth, after the Certificate Balances of the Class A Certificates and the Class B, Class C and Class D certificates have been reduced to zero, to the Class E-RR certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Eighteenth, to the Class E-RR certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Nineteenth, to the Class F-RR certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Twentieth, after the Certificate Balances of the Class A Certificates and the Class B, Class C, Class D and Class E-RR certificates have been reduced to zero, to the Class F-RR certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Twenty-first, to the Class F-RR certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Twenty-second, to the Class G-RR certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Twenty-third, after the Certificate Balances of the Class A Certificates and the Class B, Class C, Class D, Class E-RR and Class F-RR certificates have been reduced to zero, to the Class G-RR certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Twenty-fourth, to the Class G-RR certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to
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an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Twenty-fifth, to the Class H-RR certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Twenty-sixth, after the Certificate Balances of the Class A Certificates and the Class B, Class C, Class D, Class E-RR, Class F-RR and Class G-RR certificates have been reduced to zero, to the Class H-RR certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Twenty-seventh, to the Class H-RR certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Twenty-eighth, to the Class J-RR certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such class;
Twenty-ninth, after the Certificate Balances of the Class A Certificates and the Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR and Class H-RR certificates have been reduced to zero, to the Class J-RR certificates, in reduction of their 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 their Certificate Balance is reduced to zero;
Thirtieth, to the Class J-RR certificates, first, (i) up to an amount equal to the aggregate unreimbursed Realized Losses previously allocated to such class, then, (ii) up to an amount equal to all accrued and unpaid interest on the amount set forth in clause (i) at the Pass-Through Rate for such class compounded monthly from the date the related Realized Loss was allocated to such class until the date such Realized Loss is reimbursed;
Thirty-first, to the Class R certificates, any remaining amounts.
The “Cross-Over Date” means the Distribution Date on which the Certificate Balances of the Subordinate Certificates have all previously 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.
If and to the extent that any Nonrecoverable Advances (plus interest on such Nonrecoverable Advances) that were reimbursed from principal collections on the Mortgage Loans (including REO Loans) and previously resulted in a reduction of the Principal Distribution Amount are subsequently recovered on the related Mortgage Loan or REO Property, then (on the Distribution Date related to the Collection Period during which the recovery occurred): (i) the amount of such recovery will be added to the Certificate Balance(s) of the class or classes of Principal Balance Certificates that previously were allocated Realized Losses, in the order of distributions set forth in “—Priority of Distributions” above, in each case up to the lesser of (A) the unallocated portion of the
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amount of such recovery and (B) the amount of the unreimbursed Realized Losses previously allocated to the subject class of certificates; and (ii) the Interest Shortfall with respect to each affected class of Certificates for the next Distribution Date will be increased by the amount of interest that would have accrued through the then current Distribution Date if the restored write-down for the reimbursed class of Principal Balance Certificates had never been written down. If the Certificate Balance of any class of Principal Balance Certificates is so increased, the amount of unreimbursed Realized Losses of such class of certificates will be decreased by such amount.
Pass-Through Rates
The interest rate (the “Pass-Through Rate”) applicable to each class of Regular Certificates for any Distribution Date will equal the rates set forth below:
The Pass-Through Rate on the Class A-1 certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class A-2 certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class A-SB certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class A-3 certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class A-4 certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class A-S certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class B certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class C certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class D certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class E-RR certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class F-RR certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class G-RR certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class H-RR certificates will be a per annum rate equal to [_]%.
The Pass-Through Rate on the Class J-RR certificates will be a per annum rate equal to [_]%.
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The Pass-Through Rate for the Class X-A certificates for any Distribution Date will be a per annum rate equal to the excess, if any of (a) the WAC Rate for the related Distribution Date, over (b) the weighted average of the Pass-Through Rates on the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates for such Distribution Date, weighted on the basis of their respective Certificate Balances immediately prior to that Distribution Date.
The Pass-Through Rate for the Class X-B certificates for any Distribution Date will be a per annum rate equal to the excess, if any, of (a) the WAC Rate for the related Distribution Date, over (b) the weighted average of the Pass-Through Rates on the Class A-S, Class B and Class C certificates for the related 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-D certificates for any Distribution Date will be a per annum rate equal to the excess, if any, of (a) the WAC Rate for the related Distribution Date, over (b) the Pass-Through Rate on the Class D certificates for the related Distribution Date.
The Class V certificates will not have a Pass-Through Rate or be entitled to distributions in respect of interest other than the Excess Interest, if any, with respect to any ARD Loan.
The “WAC Rate” with respect to any Distribution Date is equal to the weighted average of the applicable Net Mortgage Rates of the Mortgage Loans (including any Non-Serviced Mortgage Loan) as of the first day of the related Collection Period, weighted on the basis of their respective Stated Principal Balances as of the first day of such Collection Period (after giving effect to any payments received during any applicable grace period).
The “Net Mortgage Rate” for each Mortgage Loan (including any Non-Serviced Mortgage Loan) and any REO Loan (other than the portion of the REO Loan related to any Companion Loan) is equal to the related Mortgage Rate then in effect (without regard to any increase in the interest rate of any ARD Loan after the related Anticipated Repayment Date), minus the related Administrative Cost Rate; provided, however, that for purposes of calculating Pass-Through Rates, the Net Mortgage Rate for any Mortgage Loan will be determined without regard to any modification, waiver or amendment of the terms of the related Mortgage Loan, whether agreed to by the master servicer, the special servicer, a Non-Serviced Master Servicer or a Non-Serviced Special Servicer or resulting from a bankruptcy, insolvency or similar proceeding involving the related borrower. Notwithstanding the foregoing, for Mortgage Loans that do not accrue interest on a 30/360 Basis, then, solely for purposes of calculating the Pass-Through Rates and the WAC Rate, the Net Mortgage Rate of any Mortgage Loan for any one-month period preceding a related Due Date will be the annualized rate at which interest would have to accrue in respect of the Mortgage Loan on the basis of a 360-day year consisting of twelve 30-day months in order to produce the aggregate amount of interest actually required to be paid in respect of the Mortgage Loan during the one-month period at the related Net Mortgage Rate; provided, however, that with respect to each Actual/360 Loan, the Net Mortgage Rate for the one-month period (1) prior to the Due Dates in January and February in any year which is not a leap year or in February in any year which is a leap year (in either case, unless the related Distribution Date is the final Distribution Date) will be determined exclusive of Withheld Amounts, and (2) prior to the Due Date in March (or February, if the related Distribution Date is the final Distribution Date), will be determined inclusive of Withheld Amounts for the immediately preceding February and January, as applicable. With respect to any REO Loan, the Net Mortgage Rate will be calculated as described above, as if the predecessor Mortgage Loan had remained outstanding.
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“Administrative Cost Rate” as of any date of determination will be a per annum rate equal to the sum of the Servicing Fee Rate, the Certificate Administrator/Trustee Fee Rate, the Operating Advisor Fee Rate, the Asset Representations Reviewer Fee Rate and the CREFC® Intellectual Property Royalty License Fee Rate.
“Mortgage Rate” with respect to any Mortgage Loan (including any Non-Serviced Mortgage Loan) or any related Companion Loan is the per annum rate at which interest accrues on the Mortgage Loan or the related Companion Loan as stated in the related Mortgage Note or the promissory note evidencing such Companion Loan without giving effect to any default rate or Revised Rate.
Interest Distribution Amount
The “Interest Distribution Amount” with respect to any Distribution Date and each class of Regular Certificates will equal (A) the sum of (i) the Interest Accrual Amount with respect to such class for such Distribution Date and (ii) the Interest Shortfall, if any, with respect to such class for such Distribution Date, less (B) any Excess Prepayment Interest Shortfall allocated to such class on such Distribution Date.
The “Interest Accrual Amount” with respect to any Distribution Date and any class of Regular Certificates will be equal to the interest for the related Interest Accrual Period accrued at the Pass-Through Rate for such class on the Certificate Balance or Notional Amount, as applicable, for such class immediately prior to that Distribution Date. Calculations of interest for each Interest Accrual Period will be made on 30/360 Basis.
An “Interest Shortfall” with respect to any Distribution Date for any class of Regular Certificates will be equal to the sum of (a) the portion of the Interest Distribution Amount for such class remaining unpaid as of the close of business on the preceding Distribution Date, and (b) to the extent permitted by applicable law, (i) other than in the case of certificates with a Notional Amount, one month’s interest on that amount remaining unpaid at the Pass-Through Rate applicable to such class for the current Distribution Date and (ii) in the case of the certificates with a Notional Amount, one-month’s interest on that amount remaining unpaid at the WAC Rate for such 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:
(a) the Scheduled Principal Distribution Amount for that Distribution Date,
(b) the Unscheduled Principal Distribution Amount for that Distribution Date, and
(c) the Principal Shortfall for such Distribution Date;
provided that the Principal Distribution Amount for any Distribution Date will be reduced, to not less than zero, by the amount of any reimbursements of:
(A) Nonrecoverable Advances (including any servicing advance with respect to any Non-Serviced Mortgage Loan under the related Non-Serviced PSA reimbursed out of general collections on the Mortgage Loans), with interest on such Nonrecoverable Advances at the Reimbursement Rate, that are paid or reimbursed
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from principal collections on the Mortgage Loans in a period during which such principal collections would have otherwise been included in the Principal Distribution Amount for such Distribution Date, and
(B) Workout-Delayed Reimbursement Amounts paid or reimbursed from principal collections on the Mortgage Loans in a period during which such principal collections would have otherwise been included in the Principal Distribution Amount for such Distribution Date,
provided, further, that in the case of clauses (A) and (B) above, if any of the amounts that were reimbursed from principal collections on the Mortgage Loans (including REO Loans) are subsequently recovered on the related Mortgage Loan (or REO Loan), such recovery will increase the Principal Distribution Amount for the Distribution Date related to the period in which such recovery occurs.
The “Scheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of the principal portions of (a) all Periodic Payments (excluding balloon payments) with respect to the Mortgage Loans due during or, if and to the extent not previously received or advanced and distributed to Certificateholders on a preceding Distribution Date, prior to the related Collection Period and all Assumed Scheduled Payments with respect to the Mortgage Loans for the related Collection Period, in each case to the extent paid by the related borrower as of the related Determination Date (or, with respect to each Mortgage Loan with a Due Date occurring, or a grace period ending, after the related Determination Date, the related Due Date or, last day of such grace period, as applicable, to the extent received by the master servicer as of the business day preceding the P&I Advance Date) or advanced by the master servicer or the trustee, as applicable, and (b) all balloon payments with respect to the Mortgage Loans to the extent received on or prior to the related Determination Date (or, with respect to each Mortgage Loan with a Due Date occurring, or a grace period ending, after the related Determination Date, the related Due Date or, last day of such grace period, as applicable, to the extent received by the master servicer as of the business day preceding the related P&I Advance Date), and to the extent not included in clause (a) above. The Scheduled Principal Distribution Amount from time to time will include all late payments of principal made by a borrower with respect to the Mortgage Loans, including late payments in respect of a delinquent balloon payment, received by the times described above in this definition, except to the extent those late payments are otherwise available to reimburse the master servicer or the trustee, as the case may be, for prior Advances, as described above.
The “Unscheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of the following: (a) all prepayments of principal received on the Mortgage Loans as of the Determination Date; and (b) any other collections (exclusive of payments by borrowers) received on the Mortgage Loans and any REO Properties on or prior to the related Determination Date whether in the form of Liquidation Proceeds, Insurance and Condemnation Proceeds, net income, rents, and profits from REO Property or otherwise, that were identified and applied by the master servicer as recoveries of previously unadvanced principal of the related Mortgage Loan; provided that all such Liquidation Proceeds and Insurance and Condemnation Proceeds will be reduced by any unpaid Special Servicing Fees, Liquidation Fees, any amount related to the Loss of Value Payments to the extent that such amount was transferred into the Collection Account during the related Collection Period, accrued interest on Advances and other additional trust fund expenses incurred in connection with the related Mortgage Loan, thus reducing the Unscheduled Principal Distribution Amount.
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The “Assumed Scheduled Payment” for any Collection Period and with respect to any Mortgage Loan (including any Non-Serviced Mortgage Loan) that is delinquent in respect of its balloon payment or any REO Loan (excluding, for purposes of any P&I Advances, the portion allocable to any related Companion Loan), is an amount equal to the sum of (a) the principal portion of the Periodic Payment that would have been due on such Mortgage Loan or REO Loan on the related Due Date based on the constant payment required by such related Mortgage Note or the original amortization schedule of the Mortgage Loan, as the case may be (as calculated with interest at the related Mortgage Rate), if applicable, assuming the related balloon payment has not become due, after giving effect to any reduction in the principal balance occurring in connection with a modification of such Mortgage Loan in connection with a default or a bankruptcy (or similar proceeding), and (b) interest on the Stated Principal Balance of that Mortgage Loan or REO Loan (excluding, for purposes of any P&I Advances, the portion allocable to any related Companion Loan) at its Mortgage Rate (net of interest at the applicable rate at which the Servicing Fee is calculated).
The “Principal Shortfall” for any Distribution Date means the amount, if any, by which (1) the Principal Distribution Amount for the prior Distribution Date exceeds (2) the aggregate amount actually distributed on the preceding Distribution Date in respect of such Principal Distribution Amount.
The “Class A-SB Planned Principal Balance” for any Distribution Date is the balance shown for such Distribution Date in the table set forth in Annex E. Such balances were calculated using, among other things, certain weighted average life assumptions. See “Yield and Maturity Considerations—Weighted Average Life”. Based on such assumptions, the Certificate Balance of the Class A-SB certificates on each Distribution Date would be expected to be reduced to the balance indicated for such Distribution Date in the table set forth in Annex E. We cannot assure you, however, that the mortgage loans will perform in conformity with our assumptions. Therefore, we cannot assure you that the balance of the Class A-SB certificates on any Distribution Date will be equal to the balance that is specified for such Distribution Date in the table.
Certain Calculations with Respect to Individual Mortgage Loans
The “Stated Principal Balance” of each Mortgage Loan will be an amount equal to its unpaid principal balance as of the Cut-off Date or, in the case of a replacement Mortgage Loan, as of the date it is added to the trust, after application of all payments of principal due during or prior to the month of substitution, whether or not those payments have been received, minus the sum of:
(i) the principal portion of each Periodic Payment due on such Mortgage Loan after the Cut-off Date (or in the case of a replacement Mortgage Loan, due after the Due Date in the related month of substitution), to the extent received from the borrower or advanced by the master servicer;
(ii) all principal prepayments received with respect to such Mortgage Loan after the Cut-off Date (or in the case of a replacement Mortgage Loan, after the Due Date in the related month of substitution);
(iii) the principal portion of all Insurance and Condemnation Proceeds (to the extent allocable to principal on such Mortgage Loan) and Liquidation Proceeds received with respect to such Mortgage Loan after the Cut-off Date (or in the case of a replacement Mortgage Loan, after the Due Date in the related month of substitution); and
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(iv) any reduction in the outstanding principal balance of such Mortgage Loan resulting from a valuation by a court in a bankruptcy proceeding that is less than the then outstanding principal amount of such Mortgage Loan or a modification of such Mortgage Loan pursuant to the terms and provisions of the PSA that occurred prior to the end of the Collection Period for the most recent Distribution Date.
The Stated Principal Balance of any REO Loan that is a successor to a Mortgage Loan, as of any date of determination, will be an amount equal to (x) the Stated Principal Balance of the predecessor Mortgage Loan as of the date of the related REO Property was acquired for U.S. federal tax purposes, minus (y) the sum of:
(i) the principal portion of any P&I Advance made with respect to such REO Loan; and
(ii) the principal portion of all Insurance and Condemnation Proceeds (to the extent allocable to principal on the related Mortgage Loan), Liquidation Proceeds and all income rents and profits received with respect to such REO Loan.
See “Certain Legal Aspects of Mortgage Loans” below.
With respect to any Companion Loan on any date of determination, the Stated Principal Balance will equal the unpaid principal balance of such Companion Loan as of such date. On any date of determination, the Stated Principal Balance of any Whole Loan will equal the sum of the Stated Principal Balances of the related Mortgage Loan and the related Companion Loan(s), as applicable, on such date.
With respect to any REO Loan that is a successor to a Companion Loan as of any date of determination, the Stated Principal Balance will equal (x) the Stated Principal Balance of the predecessor Companion Loan as of the date of the related REO acquisition, minus (y) the principal portion of any amounts allocable to the related Companion Loan in accordance with the related Intercreditor Agreement.
If any Mortgage Loan or REO Loan is paid in full or the Mortgage Loan or REO Loan (or any REO Property) is otherwise liquidated, then, as of the first Distribution Date that follows the end of the Collection Period in which that payment in full or liquidation occurred and notwithstanding that a loss may have occurred in connection with any liquidation, the Stated Principal Balance of the Mortgage Loan or REO Loan will be zero.
For purposes of calculating allocations of, or recoveries in respect of, Realized Losses, as well as for purposes of calculating the Servicing Fee, Certificate Administrator/Trustee Fee, Operating Advisor Fee and Asset Representations Reviewer Fee payable each month, each REO Property (including any REO Property with respect to a Non-Serviced Mortgage Loan held pursuant to the related Non-Serviced PSA) will be treated as if there exists with respect to such REO Property an outstanding Mortgage Loan and, if applicable, each related Companion Loan (an “REO Loan”), and all references to Mortgage Loan or Companion Loan and pool of Mortgage Loans in this prospectus, when used in that context, will be deemed to also be references to or to also include, as the case may be, any REO Loans. Each REO Loan will generally be deemed to have the same characteristics as its actual predecessor Mortgage Loan (including related Companion Loan), including the same fixed Mortgage Rate (and, accordingly, the same Net Mortgage Rate) and the same unpaid principal balance and Stated Principal Balance. Amounts due on the predecessor Mortgage Loan (including related Companion Loan) including any portion of it payable or reimbursable to the master servicer, the special servicer, the operating advisor, the asset representations reviewer, the certificate administrator or the trustee, as applicable, will continue to be “due” in respect of
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the REO Loan; and amounts received in respect of the related REO Property, net of payments to be made, or reimbursement to the master servicer or the 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 related Companion Loan.
Excess Interest
On each Distribution Date, the certificate administrator is required to distribute any Excess Interest received with respect to an ARD Loan on or prior to the related Determination Date to the holders of the Class V certificates. Excess Interest will not be available to make distributions to any other class of certificates or to provide credit support for other classes of certificates or offset any interest shortfalls or to pay any other amounts to any other party under the PSA.
Application Priority of Mortgage Loan Collections or Whole Loan Collections
Absent express provisions in the related Mortgage Loan documents or to the extent otherwise agreed to by the related borrower in connection with a workout of a Mortgage Loan, 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 will be applied pursuant to the PSA in the following order of priority:
First, as a recovery of any unreimbursed Advances (including any Workout-Delayed Reimbursement Amount) with respect to the related Mortgage Loan and unpaid interest at the Reimbursement Rate on such Advances and, if applicable, unreimbursed and unpaid additional trust fund expenses;
Second, as a recovery of Nonrecoverable Advances and any interest on those Nonrecoverable Advances at the Reimbursement Rate, to the extent previously paid or reimbursed from principal collections on the Mortgage Loans (as described in the first proviso in the definition of Principal Distribution Amount);
Third, to the extent not previously so allocated pursuant to clause First or Second above, as a recovery of accrued and unpaid interest on such Mortgage Loan to the extent of the excess of (i) accrued and unpaid interest (exclusive of default interest and Excess 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) after taking into account any allocations pursuant to clause Fifth below on earlier dates, the aggregate portion of the accrued and unpaid interest described in subclause (i) of this clause Third that either (A) was not advanced because 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 or (B) accrued at the related Net Mortgage Rate on the portion of the Stated Principal Balance of such Mortgage Loan equal to any related Collateral Deficiency Amount in effect from time to time and as to which no P&I Advance was made;
Fourth, to the extent not previously so allocated pursuant to clause First or Second above, 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);
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Fifth, as a recovery of accrued and unpaid interest on such Mortgage Loan to the extent of the sum of (A) the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts, plus (B) any unpaid interest (exclusive of default interest and Excess Interest) that accrued at the related Net Mortgage Rate on the portion of the Stated Principal Balance of such Mortgage Loan equal to any related Collateral Deficiency Amount in effect from time to time and as to which no P&I Advance was made (to the extent collections have not been allocated as recovery of such 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, to the extent required under the loan documents, escrowed for the future payment of, real estate taxes, assessments and insurance premiums and similar items relating to such Mortgage Loan;
Seventh, as a recovery of any other reserves to the extent then required to be held in escrow with respect to such Mortgage Loan;
Eighth, as a recovery of any Yield Maintenance Charge or Prepayment Premium then due and owing under such Mortgage Loan;
Ninth, as a recovery of any late payment charges and default interest then due and owing under such Mortgage Loan;
Tenth, as a recovery of any assumption fees and Modification Fees then due and owing under such Mortgage Loan;
Eleventh, as a recovery of any other amounts then due and owing under such Mortgage Loan other than remaining unpaid principal (if both consent fees and Operating Advisor Consulting Fees are due and owing, first, allocated to consent fees 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, 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 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, unless otherwise permitted under the applicable REMIC rules as evidenced by an opinion of counsel provided to the trustee) may be required to be collected and allocated to reduce the principal balance of the Mortgage Loan) in the manner required by such REMIC provisions.
Collections by or on behalf of the issuing entity in respect of any REO Property (exclusive of the amounts to be allocated to the payment of the costs of operating, managing, leasing, maintaining and disposing of such REO Property) will be applied pursuant to the PSA in the following order of priority:
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First, as a recovery of any unreimbursed Advances (including any Workout-Delayed Reimbursement Amount) with respect to the related Mortgage Loan and interest at the Reimbursement Rate on all Advances and, if applicable, unreimbursed and unpaid additional trust fund expenses with respect to the related Mortgage Loan;
Second, as a recovery of Nonrecoverable Advances and any interest on those Nonrecoverable Advances at the Reimbursement Rate, to the extent previously paid or reimbursed from principal collections on the Mortgage Loans (as described in the first proviso in the definition of Principal Distribution Amount);
Third, to the extent not previously so allocated pursuant to clause First or Second above, as a recovery of accrued and unpaid interest on such Mortgage Loan to the extent of the excess of (i) accrued and unpaid interest (exclusive of default interest and Excess 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) after taking into account any allocations pursuant to clause Fifth below or clause Fifth of the prior paragraph on earlier dates, the aggregate portion of the accrued and unpaid interest described in subclause (i) of this clause Third that either (A) was not advanced because 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 or (B) accrued at the related Net Mortgage Rate on the portion of the Stated Principal Balance of such Mortgage Loan equal to any related Collateral Deficiency Amount in effect from time to time and as to which no P&I Advance was made;
Fourth, to the extent not previously so allocated pursuant to clause First or Second above, as a recovery of principal of such Mortgage Loan to the extent of its entire unpaid principal balance;
Fifth, as a recovery of accrued and unpaid interest on such Mortgage Loan to the extent of the sum of (A) the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts, plus (B) any unpaid interest (exclusive of default interest and Excess Interest) that accrued at the related Net Mortgage Rate on the portion of the Stated Principal Balance of such Mortgage Loan equal to any related Collateral Deficiency Amount in effect from time to time and as to which no P&I Advance was made (to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to this clause Fifth or clause Fifth of the prior paragraph on earlier dates);
Sixth, as a recovery of any Yield Maintenance Charge or Prepayment Premium then due and owing under such Mortgage Loan;
Seventh, as a recovery of any late payment charges and default interest then due and owing under such Mortgage Loan;
Eighth, as a recovery of any assumption fees and Modification Fees then due and owing under such Mortgage Loan;
Ninth, as a recovery of any other amounts then due and owing under such Mortgage Loan other than remaining unpaid principal (if both consent fees and Operating Advisor Consulting Fees are due and owing, first, allocated to consent fees and then, allocated to Operating Advisor Consulting Fees); and
Tenth, in the case of an ARD Loan after the related Anticipated Repayment Date, any accrued but unpaid Excess Interest.
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Allocation of Yield Maintenance Charges and Prepayment Premiums
If any Yield Maintenance Charge or Prepayment Premium is collected during any particular Collection Period with respect to any Mortgage Loan, then on the Distribution Date corresponding to that Collection Period, the certificate administrator will pay that Yield Maintenance Charge or Prepayment Premium (net of liquidation fees or workout fees payable therefrom) in the following manner: (1) to each of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D certificates, the product of (a) such Yield Maintenance Charge or Prepayment Premium, (b) the related Base Interest Fraction for such class, and (c) a fraction, the numerator of which is equal to the amount of principal distributed to such class for that Distribution Date, and the denominator of which is the total amount of principal distributed to all Principal Balance Certificates for that Distribution Date, (2) to the Class X-A certificates, the excess, if any, of (a) the product of (i) such Yield Maintenance Charge or Prepayment Premium and (ii) a fraction, the numerator of which is equal to the amount of principal distributed to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates for that Distribution Date, and the denominator of which is the total amount of principal distributed to all Principal Balance Certificates for that Distribution Date, over (b) the amount of such Yield Maintenance Charge or Prepayment Premium distributed to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates as described above, and (3) to the Class X-B certificates, any remaining portion of such Yield Maintenance Charge or Prepayment Premium not distributed as described above.
“Base Interest Fraction” means, with respect to any principal prepayment of any Mortgage Loan that provides for the payment of a Yield Maintenance Charge or Prepayment Premium, and with respect to any class of Principal Balance Certificates, a fraction (A) the numerator of which is the greater of (x) zero and (y) the difference between (i) the pass-through rate on that class, and (ii) the applicable Discount Rate and (B) the denominator of which is the difference between (i) the mortgage interest rate on the related Mortgage Loan and (ii) the applicable Discount Rate; provided, however, that:
| ● | under no circumstances will the Base Interest Fraction be greater than one; |
| ● | if the applicable Discount Rate is greater than or equal to the mortgage interest rate on the related Mortgage Loan and is greater than or equal to the pass-through rate on that class, then the Base Interest Fraction will equal zero; and |
| ● | if the applicable Discount Rate is greater than or equal to the mortgage interest rate on the related Mortgage Loan and is less than the pass-through rate on that class, then the Base Interest Fraction will be equal to 1.0. |
“Discount Rate” means, with respect to any principal prepayment of any Mortgage Loan that provides for the payment of a Yield Maintenance Charge or Prepayment Premium—
| ● | if a discount rate was used in the calculation of the applicable Yield Maintenance Charge or Prepayment Premium pursuant to the terms of the Mortgage Loan or REO Loan, that discount rate, converted (if necessary) to a monthly equivalent yield, or |
| ● | if a discount rate was not used in the calculation of the applicable Yield Maintenance Charge or Prepayment Premium pursuant to the terms of the Mortgage Loan or REO Loan, the yield calculated by the linear interpolation of the yields, as reported in Federal Reserve Statistical Release H.15 (519)—Selected Interest Rates under the heading “U.S. government securities/treasury constant maturities” for the week ending prior to the date of the relevant prepayment (or deemed prepayment), of |
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| U.S. Treasury constant maturities with a maturity date, one longer and one shorter, most nearly approximating the maturity date or Anticipated Repayment Date, as applicable, of that Mortgage Loan or REO Loan, such interpolated treasury yield converted to a monthly equivalent yield. |
For purposes of the immediately preceding bullet, the master servicer will select a comparable publication as the source of the applicable yields of U.S. Treasury constant maturities if Federal Reserve Statistical Release H.15 is no longer published.
“Prepayment Premium” means, with respect to any Mortgage Loan, any premium, fee or other additional amount (other than a Yield Maintenance Charge) paid or payable, as the context requires, by a borrower in connection with a principal prepayment on, or other early collection of principal of, that Mortgage Loan or any successor REO Loan with respect thereto (including any payoff of a Mortgage Loan by a mezzanine lender on behalf of the subject borrower if and as set forth in the related intercreditor agreement).
“Yield Maintenance Charge” means, with respect to any Mortgage Loan, any premium, fee or other additional amount paid or payable, as the context requires, by a borrower in connection with a principal prepayment on, or other early collection of principal of, a Mortgage Loan, calculated, in whole or in part, pursuant to a yield maintenance formula or otherwise pursuant to a formula that reflects the lost interest, including any specified amount or specified percentage of the amount prepaid which constitutes the minimum amount that such Yield Maintenance Charge may be.
No Prepayment Premiums or Yield Maintenance Charges will be distributed to the holders of the Class X-D, Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR, Class V or Class R certificates.
For a description of Yield Maintenance Charges, see “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans” and “Certain Legal Aspects of Mortgage Loans—Default Interest and Limitations on Prepayments”.
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 of that class of certificates would be reduced to zero based on the assumptions set forth below. The Assumed Final Distribution Date with respect to each class of Offered Certificates will in each case be as follows:
Class | Assumed Final |
| Class A-1 | March 2023 |
| Class A-2 | March 2023 |
| Class A-SB | December 2027 |
| Class A-3 | May 2028 – May 2028(1) |
| Class A-4 | June 2028 – June 2028(2) |
| Class X-A | NAP |
| Class X-B | NAP |
| Class A-S | June 2028 |
| Class B | June 2028 |
| Class C | June 2028 |
| (1) | The range of Assumed Final Distribution Dates is based on the initial Certificate Balance of the Class A-3 Certificates ranging from $150,000,000 to $200,000,000. |
| (2) | The range of Assumed Final Distribution Dates is based on the initial Certificate Balance of the Class A-4 Certificates ranging from $203,783,000 to $253,783,000. |
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The Assumed Final Distribution Dates set forth above were calculated without regard to any delays in the collection of balloon payments and without regard to delinquencies, defaults or liquidations. Accordingly, in the event of defaults on the Mortgage Loans, the actual final Distribution Date for one or more classes of the Offered Certificates may be later, and could be substantially later, than the related Assumed Final Distribution Date(s).
In addition, the Assumed Final Distribution Dates set forth above were calculated on the basis of a 0% CPR prepayment rate and the Structuring Assumptions. Since the rate of payment (including prepayments) of the Mortgage Loans may exceed the scheduled rate of payments, and could exceed the scheduled rate by a substantial amount, the actual final Distribution Date for one or more classes of the Offered Certificates may be earlier, and could be substantially earlier, than the related Assumed Final Distribution Date(s). The rate of payments (including prepayments) on the Mortgage Loans will depend on the characteristics of the Mortgage Loans, as well as on the prevailing level of interest rates and other economic factors, and we cannot assure you as to actual payment experience.
The “Rated Final Distribution Date” for each class of Offered Certificates will be the Distribution Date in June 2051. See “Ratings”.
Prepayment Interest Shortfalls
If a borrower prepays a Mortgage Loan (other than a Non-Serviced Mortgage Loan) in whole or in part, after the due date but on or before the Determination Date in any calendar month, the amount of interest (net of related Servicing Fees and any Excess Interest) accrued on such prepayment from such due date to, but not including, the date of prepayment (or any later date through which interest accrues) will, to the extent actually collected (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 (other than a Non-Serviced Mortgage Loan) in whole or in part after the Determination Date (or, with respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) with a due date occurring after the related Determination Date, the related Due Date) in any calendar month and does not pay interest on such prepayment through the following Due Date, then the shortfall in a full month’s interest (net of related Servicing Fees and any Excess 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 a Non-Serviced Mortgage 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 on each P&I Advance Date, without any right of reimbursement thereafter, a cash payment (a “Compensating Interest Payment”) in an aggregate amount, equal to the lesser of:
(i) the aggregate amount of Prepayment Interest Shortfalls incurred in connection with voluntary principal prepayments received in respect of the Mortgage Loans (other than a Non-Serviced Mortgage Loan) (other than a Specially Serviced Loan or a Mortgage 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 (other than a Non-Serviced Mortgage Loan) and REO Loan for which such Servicing Fees are being paid to the master servicer in such Collection Period, calculated at a rate of
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0.00250% per annum, (B) all Prepayment Interest Excesses received by the master servicer during such Collection Period with respect to the Mortgage Loans (other than a Non-Serviced Mortgage Loan) subject to such prepayment and (C) to the extent earned on voluntary principal prepayments, net investment earnings payable to the master servicer for such Collection Period received by the master servicer during such Collection Period with respect to the Mortgage Loans (other than a Non-Serviced Mortgage Loan), subject to such prepayment. In no event will the rights of the Certificateholders to the offset of the aggregate Prepayment Interest Shortfalls be cumulative.
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 (v) any Non-Serviced Mortgage Loan, (w) subsequent to a default under the related Mortgage Loan documents or if the Mortgage Loan is a Specially Serviced Loan, (x) 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, (y)(i) at the request or with the consent of the special servicer or, (ii) so long as no Control Termination Event has occurred or is continuing, and with respect to the Mortgage Loans other than an Excluded Loan, at the request or with the consent of the Directing Certificateholder 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 aggregate amount of Prepayment Interest Shortfalls with respect to such Mortgage Loan otherwise described in clause (i) above in connection with such Prohibited Prepayments.
The aggregate of any Prepayment Interest Shortfalls resulting from any principal prepayments made on the Mortgage Loans to be included in the Available Funds for any Distribution Date that are not covered by the master servicer’s Compensating Interest Payment for the related Distribution Date and the portion of the compensating interest payments allocable to each Non-Serviced Mortgage Loan to the extent received from the related Non-Serviced Master Servicer is referred to in this prospectus as the “Excess Prepayment Interest Shortfall” and will be allocated on that Distribution Date among each class of Regular Certificates, pro rata, in accordance with their respective Interest Accrual Amounts for that Distribution Date.
Subordination; Allocation of Realized Losses
The rights of holders of the Subordinate Certificates to receive distributions of amounts collected or advanced on the Mortgage Loans and allocable to the certificates will be subordinated, to the extent described in this prospectus, to the rights of holders of the Senior Certificates. In particular, the rights of the holders of the Class A-S, Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates to receive distributions of interest and principal, as applicable, will be subordinated to such rights of the holders of the Senior Certificates. The Class A-S certificates will likewise be protected by the subordination of the Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates. The Class B certificates will likewise be protected by the subordination of the Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates. The Class C certificates will likewise be protected by the subordination of the Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates.
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This subordination will be effected in two ways: (i) by the preferential right of the holders of a class of certificates to receive on any Distribution Date the amounts of interest and/or principal allocable to the certificates and distributable to them prior to any distribution being made on such Distribution Date in respect of any classes of certificates subordinate to that class (as described above under “—Distributions—Priority of Distributions”) and (ii) by the allocation of Realized Losses to classes of certificates that are subordinate to more senior classes, as described below.
No other form of credit support will be available for the benefit of the Offered Certificates.
Prior to the Cross-Over Date, allocation of principal that is allocable to the Certificates on any Distribution Date will be made as described under “—Distributions—Priority of Distributions” above. On or after the Cross-Over Date, allocation of principal will be made to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates that are still outstanding, pro rata (based upon their respective Certificate Balances), without regard to the Class A-SB Planned Principal Balance, until their Certificate Balances have been reduced to zero. See “—Distributions—Priority of Distributions” above.
Allocation to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, for so long as they are outstanding, of the entire Principal Distribution Amount for each Distribution Date will have the effect of reducing the aggregate Certificate Balance of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates at a proportionately faster rate than the rate at which the aggregate Stated Principal Balance of the pool of Mortgage Loans will decline. Therefore, as principal is distributed to the holders of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, the percentage interest in the issuing entity evidenced by the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates will be decreased (with a corresponding increase in the percentage interest in the issuing entity evidenced by the Subordinate Certificates), thereby increasing, relative to their respective Certificate Balances, the subordination afforded to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates by the Subordinate Certificates.
Following retirement of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, the successive allocation on each Distribution Date of the remaining Principal Distribution Amount to the Class A-S, Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates, in that order, for so long as they are outstanding, will provide a similar, but diminishing benefit to those certificates (other than to the Class J-RR 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 Realized Loss for such Distribution Date.
The “Realized Loss” with respect to any Distribution Date is 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 Loans (but in each case, excluding any Companion Loan) expected to be outstanding immediately following that Distribution Date is less than (ii) the then aggregate Certificate Balance of the Principal Balance Certificates after giving effect to distributions of principal on
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that Distribution Date. The certificate administrator will be required to allocate any Realized Losses among the respective classes of Principal Balance Certificates in the following order, until the Certificate Balance of each such class is reduced to zero:
first, to the Class J-RR certificates;
second, to the Class H-RR certificates;
third, to the Class G-RR certificates;
fourth, to the Class F-RR certificates;
fifth, to the Class E-RR certificates;
sixth, to the Class D certificates;
seventh, to the Class C certificates;
eighth, to the Class B certificates;
ninth, to the Class A-S certificates.
Following the reduction of the Certificate Balances of all classes of Subordinate Certificates to zero, the certificate administrator will be required to allocate Realized Losses among the Senior Certificates (other than the Class X-A, Class X-B and Class X-D Certificates), pro rata, based upon their respective Certificate Balances, until their respective Certificate Balances have been reduced to zero.
Realized Losses will not be allocated to the Class V or Class R certificates and will not be directly allocated to the Class X Certificates. However, the Notional Amounts of the classes of Class X Certificates will be reduced if the related classes of Principal Balance Certificates are reduced by such Realized Losses.
In general, Realized Losses could result from the occurrence of: (1) losses and other shortfalls on or in respect of the Mortgage Loans, including as a result of defaults and delinquencies on the related Mortgage Loans, Nonrecoverable Advances made in respect of the Mortgage Loans, the payment to the special servicer of any compensation as described in “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, and the payment of interest on Advances and certain servicing expenses; and (2) certain unanticipated, non-Mortgage Loan specific expenses of the issuing entity, including certain reimbursements to the certificate administrator or trustee as described under “Transaction Parties—The Trustee” 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 Considerations”.
A class of Regular Certificates will be considered outstanding until its Certificate Balance or Notional Amount, as the case may be, is reduced to zero. 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.
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Reports to Certificateholders; Certain Available Information
Certificate Administrator Reports
On each Distribution Date, based in part on information delivered to it by the master servicer or special servicer, as applicable, the certificate administrator will be required to prepare and make available to each Certificateholder of record a Distribution Date Statement providing the information required under Regulation AB and in the form of Annex B relating to distributions made on that date for the relevant class and the recent status of the Mortgage Loans.
In addition, the certificate administrator will include (to the extent it receives such information) (i) the identity of any Mortgage Loans permitting additional debt, identifying (A) the amount of any additional debt incurred during the related Collection Period, (B) the total 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, 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 with (i) the amount of the distribution on each Distribution Date in reduction of the Certificate Balance of the certificates and (ii) the amount of the distribution on each Distribution Date of the applicable Interest Accrual Amount, in each case, as to the applicable class, aggregated for the related calendar year or applicable partial year during which that person was a Certificateholder, together with any other information that the certificate administrator deems necessary or desirable, or that a Certificateholder or Certificate Owner reasonably requests, to enable Certificateholders to prepare their tax returns for that calendar year. This obligation of the certificate administrator will be deemed to have been satisfied to the extent that substantially comparable information will be provided by the certificate administrator pursuant to any requirements of the Code as from time to time are in force.
In addition, the certificate administrator will make available on its website (www.ctslink.com), to the extent received from the applicable person, on each Distribution Date to each Privileged Person the following reports (other than clause (1) below, the “CREFC® Reports”) prepared by the master servicer, the certificate administrator or the special servicer, as applicable (substantially in the form provided in the PSA, in the case of the Distribution Date Statement, which form is subject to change, and as required in the PSA in the case of the CREFC® Reports) and including substantially the following information:
(1) a report as of the close of business on the immediately preceding Determination Date, containing the information provided for in Annex B (the “Distribution Date Statement”);
(2) a Commercial Real Estate Finance Council (“CREFC®”) delinquent loan status report;
(3) a CREFC® historical loan modification/forbearance and corrected mortgage loan report;
(4) a CREFC® advance recovery report;
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(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 (to the extent delivery is required under the PSA); and
(15) a CREFC® loan periodic update file.
The master servicer or special servicer, as applicable, may omit any information from these reports that the master servicer or special servicer regards as confidential. Subject to any potential liability for willful misconduct, bad faith or negligence as described under “Pooling and Servicing Agreement—Termination of the Master Servicer or Special Servicer for Cause—Limitation on Liability; Indemnification”, none of the master servicer, the special servicer, the trustee or the certificate administrator will be responsible for the accuracy or completeness of any information supplied to it by a borrower, a mortgage loan seller or another party to the PSA or a party under any Non-Serviced PSA that is included in any reports, statements, materials or information prepared or provided by it. Some information will be made available to Certificateholders by electronic transmission as may be agreed upon between the depositor and the certificate administrator.
Before each Distribution Date, the master servicer will deliver to the certificate administrator by electronic means:
| ● | a CREFC® property file; |
| ● | a CREFC® financial file; |
| ● | a CREFC® loan setup file (to the extent delivery is required under the PSA); |
| ● | a CREFC® loan periodic update file; |
| ● | a CREFC® appraisal reduction template (to the extent received by the master servicer from the special servicer); and |
| ● | a CREFC® Schedule AL file |
In addition, the master servicer (with respect to a Mortgage Loan that is not a Specially Serviced Loan or a Non-Serviced Mortgage Loan) or special servicer (with respect to Specially Serviced Loans and REO Properties), as applicable, is also required to prepare the following for each Mortgaged Property securing a Mortgage Loan (other than a Non-Serviced Mortgage Loan) and REO Property:
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| ● | Within 45 days after receipt of a quarterly operating statement, if any, commencing within 45 days of receipt of such quarterly operating statement for the quarter ending September 30, 2018, 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 or REO Property unless such Mortgaged Property or REO Property is analyzed on a trailing 12-month basis, or if the related Mortgage Loan (other than a Non-Serviced Mortgage Loan) is on the CREFC® Servicer Watch List). |
| ● | Within 45 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 or a Non-Serviced Mortgage Loan) of any annual operating statements or rent rolls (if and to the extent any such information is in the form of normalized year-end financial statements that has been based on a minimum number of months of operating results as recommended by CREFC® in the instructions to the CREFC® guidelines) commencing within 45 days of receipt of such annual operating statement for the calendar year ending December 31, 2018, a CREFC® net operating income adjustment worksheet, 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, presenting the computation made in accordance with the methodology in the PSA to “normalize” the full year net operating income and debt service coverage numbers used by the master servicer to prepare the CREFC® comparative financial status report. |
Certificate Owners who are also Privileged Persons may also obtain access to any of the certificate administrator reports upon request and pursuant to the provisions of the PSA. 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.
“Privileged Person” includes the depositor and its designees, the initial purchasers, the underwriters, the mortgage loan sellers, the master servicer, the special servicer (including, for the avoidance of doubt any Excluded Special Servicer), the trustee, the certificate administrator, any additional servicer designated by the master servicer or the special servicer, the operating advisor, any affiliate of the operating advisor designated by the operating advisor, the asset representations reviewer, any holder of a Companion Loan who provides an Investor Certification, any Non-Serviced Master Servicer, any Non-Serviced Special Servicer and any person (including the Directing Certificateholder) 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 an NRSRO Certification to the certificate administrator, which Investor Certification and NRSRO Certification may be submitted electronically via the certificate administrator’s website; provided that in no event may a Borrower Party (other than a Borrower Party that is the special servicer) be entitled to receive (i) if such party is the Directing Certificateholder or any Controlling Class Certificateholder (each such party, as applicable, an “Excluded Controlling Class Holder”),
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any Excluded Information via the certificate administrator’s website unless a loan-by-loan segregation is later performed by the certificate administrator, in which case such access will only be prohibited with respect to the related Excluded Controlling Class Loans, and (ii) if such party is not the Directing Certificateholder or any Controlling Class Certificateholder, any information other than the Distribution Date Statement; provided, further, however, that, if the special servicer obtains knowledge that it has become a Borrower Party, the special servicer will not directly or indirectly provide any information solely related to any related Excluded Special Servicer Loan, which may include any asset status reports, Final Asset Status Reports (or summaries thereof), and such other information as may be specified in the PSA pertaining to such Excluded Special Servicer Loan to the related Borrower Party, any of the special servicer’s employees or personnel or any of its affiliates involved in the management of any investment in the related Borrower Party or the related Mortgaged Property or, to its actual knowledge, any non-affiliate that holds a direct or indirect ownership interest in the related Borrower Party, and will maintain sufficient internal controls and appropriate policies and procedures in place in order to comply with those obligations; provided, further, however, that the special servicer will at all times be a Privileged Person, despite such restriction on information; provided, further, however, that any Excluded Controlling Class Holder will be permitted to reasonably request and obtain from the master servicer or the special servicer, in accordance with terms of the PSA, any Excluded Information relating to any Excluded Controlling Class Loan with respect to which such Excluded Controlling Class Holder is not a Borrower Party (if such Excluded Information is not otherwise available via the certificate administrator’s website on account of it constituting Excluded Information). Notwithstanding any provision to the contrary herein, neither the master servicer nor the certificate administrator will have any obligation to restrict access by the special servicer or any Excluded Special Servicer to any information related to any Excluded Special Servicer Loan.
In determining whether any person is an additional servicer or an affiliate of the operating advisor, the certificate administrator may rely on a certification by the master servicer, the special servicer, a mortgage loan seller or the operating advisor, as the case may be.
“Borrower Party” means a borrower, a mortgagor, a manager of a Mortgaged Property, an Accelerated Mezzanine Loan Lender, or any Borrower Party Affiliate.
“Borrower Party Affiliate” means, with respect to a borrower, a mortgagor, a manager of a Mortgaged Property or an Accelerated Mezzanine Loan Lender, (a) any other person controlling or controlled by or under common control with such borrower, mortgagor, manager or Accelerated Mezzanine Loan Lender, as applicable, or (b) any other person owning, directly or indirectly, 25% or more of the beneficial interests in such borrower, mortgagor, manager or Accelerated Mezzanine Loan Lender, as applicable. For purposes of this definition, “control” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Accelerated Mezzanine Loan Lender” means a mezzanine lender under a mezzanine loan that has been accelerated or as to which foreclosure or enforcement proceedings have been commenced against the equity collateral pledged to secure such mezzanine loan.
“Excluded Controlling Class Loan” means a Mortgage Loan or Whole Loan with respect to which the Directing Certificateholder or any Controlling Class Certificateholder is a Borrower Party.
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“Excluded Information” means, with respect to any Excluded Controlling Class Loan, any information solely related to such Excluded Controlling Class Loan, which may include any asset status reports, Final Asset Status Reports (or summaries thereof), inspection reports related to Specially Serviced Loans conducted by the special servicer or any Excluded Special Servicer and such other information as may be specified in the PSA specifically pertaining to such Excluded Controlling Class Loan and/or the related Mortgaged Properties, other than such information with respect to such Excluded Controlling Class Loan(s) that is aggregated with information of other Mortgage Loans at a pool level.
“Excluded Loan” means a Mortgage Loan or Whole Loan with respect to which, as of any date of determination, the Directing Certificateholder or the holder of the majority of the Controlling Class is a Borrower Party. As of the Closing Date, it is expected that there will be no Excluded Loans with respect to this securitization.
“Investor Certification” means a certificate (which may be in electronic form), substantially in the form attached to the PSA or in the form of an electronic certification contained on the certificate administrator’s website (which may be a click-through confirmation), representing (i) that such person executing the certificate is a Certificateholder, the Directing Certificateholder, a beneficial owner of a certificate, a Companion Holder or a prospective purchaser of a certificate (or any investment advisor, manager or other representative of the foregoing), (ii) that either (a) such person is not a Borrower Party, in which case such person will have access to all the reports and information made available to Certificateholders via the certificate administrator’s website under the PSA, or (b) such person is a Borrower Party, in which case (1) if such person is the Directing Certificateholder or a Controlling Class Certificateholder, such person will have access to all the reports and information made available to Certificateholders via the certificate administrator’s website under the PSA other than any Excluded Information as set forth in the PSA, or (2) if such person is not the Directing Certificateholder or a Controlling Class Certificateholder, such person will only receive access to the Distribution Date Statements prepared by the certificate administrator, (iii) (other than with respect to a Companion Holder) that such person has received a copy of the final prospectus and (iv) such person agrees to keep any Privileged Information confidential and will not violate any securities laws; provided, however, that any Excluded Controlling Class Holder (i) will be permitted to reasonably request and obtain from the master servicer or the special servicer, as applicable, in accordance with terms of PSA, any Excluded Information relating to any Excluded Controlling Class Loan with respect to which such Excluded Controlling Class Holder is not a Borrower Party (if such Excluded Information is not otherwise available via the certificate administrator’s website on account of it constituting Excluded Information) and (ii) will be considered a Privileged Person for all other purposes, except with respect to its ability to obtain information with respect to any related Excluded Controlling Class Loan. The Certificate Administrator may require that Investor Certifications be re-submitted from time to time in accordance with its policies and procedures and will restrict access to the Certificate Administrator’s website to any mezzanine lender upon notice from any party to the PSA that such mezzanine lender has become an Accelerated Mezzanine Loan Lender.
A “Certificateholder” is the person in whose name a certificate is registered in the certificate register or any beneficial owner thereof; provided, however, that solely for the purposes of giving any consent, approval, waiver or taking any action pursuant to the PSA, any certificate registered in the name of or beneficially owned by the master servicer, the special servicer (including, for the avoidance of doubt, any Excluded Special Servicer), the trustee, the certificate administrator, the depositor, any mortgage loan seller, a Borrower Party, or any affiliate of any of such persons will be deemed not to be outstanding (provided
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that notwithstanding the foregoing, any Controlling Class certificates owned by an Excluded Controlling Class Holder will not be deemed to be outstanding as to such Excluded Controlling Class Holder solely with respect to any related Excluded Controlling Class Loan; and provided, further, that any Controlling Class certificates owned by the special servicer or an affiliate thereof will not be deemed to be outstanding as to the special servicer or such affiliate solely with respect to any related Excluded Special Servicer Loan), and the Voting Rights to which it is entitled will not be taken into account in determining whether the requisite percentage of Voting Rights necessary to effect any such consent, approval, waiver or take any such action has been obtained; provided, however, that the foregoing restrictions will not apply in the case of the master servicer, the special servicer (including, for the avoidance of doubt, any Excluded Special Servicer), the trustee, the certificate administrator, the depositor, any mortgage loan seller or any affiliate of any of such persons unless such consent, approval or waiver sought from such party would in any way increase its compensation or limit its obligations in the named capacities under the PSA, waive a Servicer Termination Event or trigger an Asset Review (with respect to an Asset Review and any mortgage loan seller, solely with respect to any related Mortgage Loan subject to the Asset Review); provided, further, that so long as there is no Servicer Termination Event with respect to the master servicer or the special servicer, as applicable, the master servicer or special servicer or such affiliate of either will be entitled to exercise such Voting Rights with respect to any issue which could reasonably be believed to adversely affect such party’s compensation or increase its obligations or liabilities under the PSA; and provided, further, that such restrictions will not apply to (i) the exercise of the special servicer’s, the master servicer’s or any mortgage loan seller’s rights, if any, or any of their affiliates as a member of the Controlling Class or (ii) any affiliate of the depositor, the master servicer, the special servicer, the trustee or the certificate administrator that has provided an Investor Certification in which it has certified as to the existence of certain policies and procedures restricting the flow of information between it and the depositor, the master servicer, the special servicer, the trustee or the certificate administrator, as applicable.
“NRSRO Certification” means a certification (a) executed by an NRSRO or (b) provided electronically and executed by such NRSRO by means of a “click-through” confirmation on the 17g-5 Information Provider’s website in favor of the 17g-5 Information Provider that states that such NRSRO is a Rating Agency as such term is defined in the PSA or that such NRSRO has provided the depositor with the appropriate certifications pursuant to paragraph (e) of Rule 17g-5 under the Exchange Act (“Rule 17g-5”), that such NRSRO has access to the depositor’s 17g-5 Information Provider’s website, and that such NRSRO will keep such information confidential except to the extent such information has been made available to the general public.
Certain information concerning the Mortgage Loans and the certificates, including the Distribution Date Statements, CREFC® reports and supplemental notices with respect to such Distribution Date Statements and CREFC® reports, may be provided by the certificate administrator at the direction of the depositor to certain market data providers, such as Bloomberg, L.P., Trepp, LLC, Intex Solutions, Inc., Interactive Data Corp., Markit Group Limited, BlackRock Financial Management, Inc., CMBS.com, Moody’s Analytics, MBS Data, LLC and Thomson Reuters Corporation, pursuant to the terms of the PSA.
Upon the reasonable request of any Certificateholder that has delivered an Investor Certification to the master servicer or special servicer, as applicable, the master servicer (with respect to non-Specially Serviced Loans) and the special servicer (with respect to Specially Serviced Loans) may provide (or make available electronically) at the expense of such Certificateholder copies of any appraisals, operating statements, rent rolls and financial statements obtained by the master servicer or special servicer, as the case may be, at the
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expense of such Certificateholder; provided that in connection with such request, the master servicer or special servicer, as applicable, may require a written confirmation executed by the requesting person substantially in such form as may be reasonably acceptable to the master servicer or special servicer, as applicable, 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 under the PSA. Upon the request of any Privileged Person (other than the NRSROs) to receive copies of annual operating statements, budgets and rent rolls either collected by the master servicer or the special servicer or caused to be prepared by the special servicer in respect of each REO Property, the master servicer or the special servicer, as the case may be, will be required to deliver copies of such items to the certificate administrator to be posted on the certificate administrator’s website. 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 initially located at www.ctslink.com (and will make available to the general public this prospectus, Distribution Date Statements, the PSA, the MLPAs and the SEC EDGAR filings referred to below):
| ● | the following “deal documents”: |
| ○ | this prospectus; |
| ○ | the PSA, each sub-servicing agreement delivered to the certificate administrator from and after the Closing Date, if any, and the MLPAs and any amendments and exhibits to those agreements; and |
| ○ | the CREFC® loan setup file delivered to the certificate administrator by the master servicer; |
| ● | the following “SEC EDGAR filings”: |
| ○ | any reports on Forms 10-D, 10-K, 8-K and ABS-EE that have been filed by the certificate administrator with respect to the issuing entity through the SEC’s Electronic Data Gathering and Retrieval (EDGAR) system; |
| ● | the following documents, which will be made available under a tab or heading designated “periodic reports”: |
| ○ | the Distribution Date Statements; |
| ○ | the CREFC® bond level files; |
| ○ | the CREFC® collateral summary files; |
| ○ | the CREFC® Reports, other than the CREFC® loan setup file (provided that they are received by the certificate administrator); and |
| ○ | the annual reports as provided by the operating advisor; |
| ● | the following documents, which will be made available under a tab or heading designated “additional documents”: |
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| ○ | the summary of any Final Asset Status Report as provided by the special servicer; |
| ○ | any property inspection reports, any environmental reports and appraisals delivered to the certificate administrator in electronic format; |
| ○ | any appraisals delivered in connection with any Asset Status Report; and |
| ○ | any CREFC® appraisal reduction template received by the certificate administrator; |
| ● | the following documents, which will be made available under a tab or heading designated “special notices”: |
| ○ | notice of any release based on an environmental release under the PSA; |
| ○ | notice of any waiver, modification or amendment of any term of any Mortgage Loan; |
| ○ | notice of final payment on the certificates; |
| ○ | all notices of the occurrence of any Servicer Termination Event received by the certificate administrator or any notice to Certificateholders of the termination of the master servicer or 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; |
| ○ | 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; |
| ○ | notice of the certificate administrator’s determination that an Asset Review Trigger has occurred and a copy of any Asset Review Report Summary received by the certificate administrator; |
| ○ | officer’s certificates supporting any determination that any Advance was (or, if made, would be) a Nonrecoverable Advance; |
| ○ | any notice of the termination of the issuing entity; |
| ○ | any notice that a Control Termination Event has occurred or is terminated or that a Consultation Termination Event has occurred or is terminated (provided that with respect to a Control Termination Event or a Consultation Termination Event deemed to exist due solely to the existence of an Excluded Loan, the certificate |
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| administrator will only be required to make available such notice of the occurrence and continuance of a Control Termination Event or the notice of the occurrence and continuance of a Consultation Termination Event to the extent the certificate administrator has been notified of such Excluded Loan); |
| ○ | any notice that an Operating Advisor Consultation Event has occurred or is terminated; |
| ○ | any notice of the occurrence of an Operating Advisor Termination Event; |
| ○ | any notice of the occurrence of an Asset Representations Reviewer Termination Event; |
| ○ | any Proposed Course of Action Notice; |
| ○ | any assessment of compliance delivered to the certificate administrator; |
| ○ | any Attestation Reports delivered to the certificate administrator; and |
| ○ | any “special notices” requested by a Certificateholder to be posted on the certificate administrator’s website described under “—Certificateholder Communication” below; |
| ○ | Any notice or documents provided to the Certificate Administrator by the Depositor or the Master Servicer directing the Certificate Administrator to post to the “Special Notices” tab; |
| ● | the “Investor Q&A Forum”; |
| ● | solely to Certificateholders and Certificate Owners that are Privileged Persons, the “Investor Registry”; and |
| ● | the “Risk Retention Special Notices” tab, |
provided that with respect to a Control Termination Event or a Consultation Termination Event that is deemed to exist due solely to the existence of an Excluded Loan, the certificate administrator will only be required to provide notice of the occurrence and continuance of such event if it has been notified of or has knowledge of the existence of such Excluded Loan.
The certificate administrator will, in addition to posting the applicable notices on the “risk retention special notices” tab described above, provide email notification to any Privileged Person (other than financial market publishers) that has registered to receive access to the certificate administrator’s website that a notice has been posted to the “risk retention special notices” tab. In the event that the Retaining Sponsor determines that the Third-Party Purchaser no longer complies with certain specified provisions of the Credit Risk Retention Rules, it will be required to send written notice of such non-compliance to the Certificate Administrator, who will be required to post such notice on its website under the “Risk Retention Special Notices” tab.
Notwithstanding the foregoing, if the Directing Certificateholder or any Controlling Class Certificateholder, as applicable, is an Excluded Controlling Class Holder, such Excluded Controlling Class Holder is required to promptly notify the master servicer, the special servicer, the operating advisor, the trustee and the certificate administrator pursuant to the PSA and provide an Investor Certification pursuant to the PSA and will not be entitled to
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access any Excluded Information (unless a loan-by-loan segregation is later performed by the certificate administrator in which case such access will only be prohibited with respect to the related Excluded Controlling Class Loan(s)) made available on the certificate administrator’s website for so long as it is an Excluded Controlling Class Holder. The PSA will require each Excluded Controlling Class Holder in such new Investor Certification to certify that it acknowledges and agrees that it is prohibited from accessing and reviewing (and it agrees not to access and review) any Excluded Information. In addition, if the Directing Certificateholder or any Controlling Class Certificateholder is not an Excluded Controlling Class Holder, such person will certify and agree that they will not share any Excluded Information with any Excluded Controlling Class Holder.
Notwithstanding the foregoing, nothing set forth in the PSA will prohibit the Directing Certificateholder or any Controlling Class Certificateholder from receiving, requesting or reviewing any Excluded Information relating to any Excluded Controlling Class Loan with respect to which the Directing Certificateholder or such Controlling Class Certificateholder is not a Borrower Party and, if such Excluded Information is not available via the certificate administrator’s website on account of it constituting Excluded Information, such Directing Certificateholder or Controlling Class Certificateholder that is not a Borrower Party with respect to the related Excluded Controlling Class Loan will be permitted to obtain such information in accordance with the terms of the PSA.
Any reports on Form 10-D filed by the certificate administrator will (i) contain the information required by Rule 15Ga-1(a) concerning all Mortgage Loans held by the issuing entity that were the subject of a demand to repurchase or replace due to a breach or alleged breach of one or more representations and warranties made by the related mortgage loan seller, (ii) contain 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, (iii) contain certain account balances to the extent available to the certificate administrator and (iv) incorporate the most recent Form ABS-EE filing by reference (which such Form ABS-EE will be filed on or prior to the filing of the applicable report on Form 10-D).
The certificate administrator will not make any representation or warranty as to the accuracy or completeness of any report, document or other information made available on the certificate administrator’s website and will assume no responsibility for any such report, document or other information, other than with respect to such reports, documents or other information prepared by the certificate administrator. In addition, the certificate administrator may disclaim responsibility for any information distributed by it for which it is not the original source.
In connection with providing access to the certificate administrator’s website (other than with respect to access provided to the general public in accordance with the PSA), the certificate administrator may require registration and the acceptance of a disclaimer, including an agreement to keep certain nonpublic information made available on the website confidential, as required under the PSA. The certificate administrator will not be liable for the dissemination of information in accordance with the PSA.
The certificate administrator will make the “Investor Q&A Forum” available to Privileged Persons via the certificate administrator’s website under a tab or heading designated “Investor Q&A Forum”, where (i) Certificateholders and beneficial owners that are Privileged Persons may submit inquiries to (a) the certificate administrator relating to the Distribution Date Statements, (b) the master servicer or special servicer relating to servicing reports prepared by that party, the Mortgage Loans (excluding each Non-Serviced Mortgage Loan) or the related Mortgaged Properties or (c) the operating advisor relating to annual or other
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reports prepared by the operating advisor or actions by the special servicer referenced in such reports, and (ii) Privileged Persons may view previously submitted inquiries and related answers. The certificate administrator will forward such inquiries to the appropriate person and, in the case of an inquiry relating to a Non-Serviced Mortgage Loan, to the applicable party under the related Non-Serviced PSA. The certificate administrator, the master servicer, the special servicer or the operating advisor, as applicable, will be required to answer each inquiry, unless such party determines (i) the question is beyond the scope of the topics detailed above, (ii) that answering the inquiry would not be in the best interests of the issuing entity and/or the Certificateholders, (iii) that answering the inquiry would be in violation of applicable law, the PSA (including requirements in respect of non-disclosure of Privileged Information) or the Mortgage Loan documents, (iv) that answering the inquiry would materially increase the duties of, or result in significant additional cost or expense to, the certificate administrator, the master servicer, the special servicer or the operating advisor, as applicable, (v) that answering the inquiry would require the disclosure of Privileged Information (subject to the Privileged Information Exception), (vi) that answering the inquiry would or is reasonably expected to result in a waiver of an attorney-client privilege or disclosure of attorney work product or (vii) that answering the inquiry is otherwise, for any reason, not advisable. In addition, no party will post or otherwise disclose any direct communications with the Directing Certificateholder as part of its responses to any inquiries. In the case of an inquiry relating to a Non-Serviced Mortgage Loan, the certificate administrator is required to make reasonable efforts to obtain an answer from the applicable party under the related Non-Serviced PSA; provided that the certificate administrator will not be responsible for the content of such answer, or any delay or failure to obtain such answer. The certificate administrator will be required to post the inquiries and related answers, if any, on the Investor Q&A Forum, subject to and in accordance with the PSA. The Investor Q&A Forum may not reflect questions, answers and other communications that are not submitted through the certificate administrator’s website. Answers posted on the Investor Q&A Forum will be attributable only to the respondent, and will not be deemed to be answers from any of the depositor, the underwriters or any of their respective affiliates. None of the underwriters, depositor, any of their respective affiliates or any other person will certify as to the accuracy of any of the information posted in the Investor Q&A Forum and no such person will have any responsibility or liability for the content of any such information.
The certificate administrator will make the “Investor Registry” available to any Certificateholder and beneficial owner that is a Privileged Person via the certificate administrator’s website. Certificateholders and beneficial owners may register on a voluntary basis for the “Investor Registry” and obtain contact information for any other Certificateholder or beneficial owner that has also registered, provided that they comply with certain requirements as provided for in the PSA.
The certificate administrator’s internet website will initially be located at www.ctslink.com. Access will be provided by the certificate administrator to such persons upon receipt by the certificate administrator from such person of an Investor Certification or NRSRO Certification in the form(s) attached to the PSA, which form(s) will also be located on and submitted electronically via the certificate administrator’s internet website. The parties to the PSA will not be required to provide that certification. In connection with providing access to the certificate administrator’s internet website, the certificate administrator may require registration and the acceptance of a disclaimer. The certificate administrator will not be liable for the dissemination of information in accordance with the terms of the PSA. The certificate administrator will make no representation or warranty as to the accuracy or completeness of such documents and will assume no responsibility for them. In addition, the certificate administrator may disclaim responsibility for any
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information distributed by the certificate administrator for which it is not the original source. Assistance in using the certificate administrator’s internet website can be obtained by calling the certificate administrator’s customer service desk at 866-846-4526.
The certificate administrator is responsible for the preparation of tax returns on behalf of the issuing entity and the preparation of Distribution Reports on Form 10-D (based on information included in each monthly Distribution Date Statement and other information provided by other transaction parties) and Annual Reports on Form 10-K and certain other reports on Form 8-K that are required to be filed with the SEC on behalf of the issuing entity.
“17g-5 Information Provider“ means the certificate administrator.
The PSA will permit the master servicer and the special servicer, at their respective sole cost and expense, to make available by electronic media, bulletin board service or internet website any reports or other information the master servicer or the special servicer, as applicable, is required or permitted to provide to any party to the PSA, the Rating Agencies or any Certificateholder or any prospective Certificateholder that has provided the master servicer or the special servicer, as applicable, with an Investor Certification or has executed a “click-through” confidentiality agreement in accordance with the PSA to the extent such action does not conflict with the terms of the PSA (including, without limitation, any requirements to keep Privileged Information confidential), the terms of the Mortgage Loans or applicable law. However, the availability of such information or reports on the internet or similar electronic media will not be deemed to satisfy any specific delivery requirements in the PSA except as set forth therein.
Except as otherwise set forth in this paragraph, until the time definitive certificates are issued, notices and statements required to be mailed to holders of certificates will be available to Certificate Owners of certificates only to the extent they are forwarded by or otherwise available through DTC and its Participants. Conveyance of notices and other communications by DTC to Participants, and by Participants to Certificate Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Except as otherwise set forth in this paragraph, the master servicer, the special servicer, the trustee, the certificate administrator and the depositor are required to recognize as Certificateholders only those persons in whose names the certificates are registered on the books and records of the certificate registrar. The initial registered holder of the certificates will be Cede & Co., as nominee for DTC.
Voting Rights
At all times during the term of the PSA, the voting rights for the certificates (the “Voting Rights“) will be allocated among the respective classes of Certificateholders as follows:
(1) 2% in the case of the Class X Certificates, allocated pro rata, based upon their respective Notional Amounts as of the date of determination, and
(2) in the case of any Principal Balance Certificates, a percentage equal to the product of 98% and a fraction, the numerator of which is equal to the aggregate Certificate Balance (and solely in connection with certain votes relating to the replacement of the special servicer, operating advisor or asset representations reviewer as described in this prospectus, taking into account any notional reduction in the Certificate Balance for Cumulative Appraisal Reduction Amounts allocated to the certificates) of the class, in each case, determined as of the prior Distribution Date, and the denominator of which is equal to
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the aggregate Certificate Balance (and solely in connection with certain votes relating to the replacement of the special servicer, the operating advisor or the asset representations reviewer as described in this prospectus, taking into account any notional reduction in the Certificate Balance for Cumulative Appraisal Reduction Amounts allocated to the certificates) of the Principal Balance Certificates, determined as of the prior Distribution Date.
The Voting Rights of any class of certificates are required to be allocated among Certificateholders of such class in proportion to their respective Percentage Interests.
The Class V and 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 Certificate 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.
Book-Entry Registration
The Offered Certificates will initially be represented by one or more global certificates for each such class registered in the name of a nominee of The Depository Trust Company (“DTC“). The depositor has been informed by DTC that DTC’s nominee will be Cede & Co. No holder of an Offered Certificate will be entitled to receive a certificate issued in fully registered, certificated form (each, a “Definitive Certificate“) representing its interest in such class, except under the limited circumstances described under “―Definitive Certificates” below. Unless and until Definitive Certificates are issued, all references to actions by holders of the Offered Certificates will refer to actions taken by DTC upon instructions received from holders of Offered Certificates through its participating organizations (together with Clearstream Banking, société anonyme (“Clearstream“) and Euroclear Bank, as operator of the Euroclear System (“Euroclear“) participating organizations, the “Participants“), and all references in this prospectus to payments, notices, reports, statements and other information to holders of Offered Certificates will refer to payments, notices, reports and statements to DTC or Cede & Co., as the registered holder of the Offered Certificates, for distribution to holders of Offered Certificates through its Participants in accordance with DTC procedures; provided, however, that to the extent that the party to the PSA responsible for distributing any report, statement or other information has been provided in writing with the name of the Certificate Owner of such an Offered Certificate (or the prospective transferee of such Certificate Owner), such report, statement or other information will be provided to such Certificate Owner (or prospective transferee).
Until Definitive Certificates are issued in respect of the Offered Certificates, interests in the Offered Certificates will be transferred on the book-entry records of DTC and its Participants. The certificate administrator will initially serve as certificate registrar for purposes of recording and otherwise providing for the registration of the Offered Certificates.
Holders of Offered Certificates may hold their certificates through DTC (in the United States) or Clearstream or Euroclear (in Europe) if they are Participants of such system, or indirectly through organizations that are participants in such systems. Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream Participants and the
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Euroclear Participants, respectively, through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositories (collectively, the “Depositories“), which in turn will hold such positions in customers’ securities accounts in the Depositories’ names on the books of DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the 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 Depository; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures 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 Depository to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to the Depositories.
Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a DTC Participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and such credits or any transactions in such securities settled during such processing will be reported to the relevant Clearstream Participant or Euroclear Participant on such business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.
The holders of Offered Certificates that are not Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, such Offered Certificates may do so only through Participants and Indirect Participants. In addition, holders of Offered Certificates in global form (“Certificate Owners“) will receive all distributions of principal and interest through the Participants who in turn will receive them from DTC. Under a book-entry format, holders of such Offered Certificates may experience some delay in their receipt of payments, since such payments will be forwarded by the certificate administrator to Cede & Co., as nominee for DTC. DTC will forward such payments to its Participants, which thereafter will forward them to Indirect Participants or the applicable Certificate Owners. Certificate Owners will not be recognized by the trustee,
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the certificate administrator, the certificate registrar, the operating advisor, the special servicer or the master servicer as holders of record of certificates and Certificate Owners will be permitted to receive information furnished to Certificateholders and to exercise the rights of Certificateholders only indirectly through DTC and its Participants and Indirect Participants, except that Certificate Owners will be entitled to receive or have access to notices and information and to exercise certain rights as holders of beneficial interests in the certificates through the certificate administrator and the trustee to the extent described in “—Reports to Certificateholders; Certain Available Information”, “—Certificateholder Communication” and “—List of Certificateholders” and “Pooling and Servicing Agreement—The Operating Advisor”, “—The Asset Representations Reviewer”,”—Replacement of the Special Servicer Without Cause”, “—Replacement of the Special Servicer After Operating Advisor Recommendation and Certificateholder Vote”, “—Limitation on Rights of Certificateholders to Institute a Proceeding”, “—Termination; Retirement of Certificates” and “—Resignation and Removal of the Trustee and the Certificate Administrator”.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the “DTC Rules“), DTC is required to make book-entry transfers of Offered Certificates in global form among Participants on whose behalf it acts with respect to such Offered Certificates and to receive and transmit distributions of principal of, and interest on, such Offered Certificates. Participants and Indirect Participants with which the Certificate Owners have accounts with respect to the Offered Certificates similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Certificate Owners. Accordingly, although the Certificate Owners will not possess the Offered Certificates, the DTC Rules provide a mechanism by which Certificate Owners will receive payments on Offered Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of a holder of Offered Certificates in global form to pledge such Offered Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Offered Certificates, may be limited due to the lack of a physical certificate for such Offered Certificates.
DTC has advised the depositor that it will take any action permitted to be taken by a holder of an Offered Certificate under the PSA only at the direction of one or more Participants to whose accounts with DTC such certificate is credited. DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of Participants whose holdings include such undivided interests.
Clearstream is incorporated under the laws of Luxembourg and is a global securities settlement clearing house. Clearstream holds securities for its participating organizations (“Clearstream Participants“) and facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in Clearstream in numerous currencies, including United States dollars. Clearstream provides to its Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. Clearstream is regulated as a bank by the Luxembourg Monetary Institute. Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the underwriters. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant, either directly or indirectly.
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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 book-entry certificates of any class will not be entitled to receive physical delivery of Definitive Certificates unless: (i) DTC advises the certificate registrar in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the book-entry certificates of such class or ceases to be a clearing agency, and the certificate administrator and the depositor are unable to locate a qualified successor within 90 days of such notice or (ii) the trustee has instituted or has been directed to institute any judicial proceeding to enforce the rights of the Certificateholders of such class and the trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the trustee to obtain possession of the certificates of such class.
The Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates may only be issued as Definitive Certificates and held by the certificate administrator pursuant to the PSA. Any request for release of a Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificate is subject to any additional requirements pursuant to the PSA.
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The Class R certificates may only be issued as Definitive Certificates.
Certificateholder Communication
Access to Certificateholders’ Names and Addresses
Upon the written request of any Certificateholder or Certificate Owner that has delivered an executed Investor Certification to the trustee or the certificate administrator (a “Certifying Certificateholder“), the certificate administrator (in its capacity as certificate registrar) will promptly furnish or cause to be furnished to such requesting party a list of the names and addresses of the certificateholders as of the most recent Record Date as they appear in the certificate register, at the expense of the requesting party.
Requests to Communicate
The PSA will require that the certificate administrator include on any Form 10–D any request received prior to the Distribution Date to which such Form 10-D relates (and on or after the Distribution Date preceding such Distribution Date) from a Certificateholder or Certificate Owner to communicate with other Certificateholders or Certificate Owners related to Certificateholders or Certificate Owners exercising their rights under the terms of the PSA. Any Form 10-D containing such disclosure regarding the request to communicate is required to include the following and no more than the following: (i) the name of the Certificateholder or Certificate Owner making the request, (ii) the date the request was received, (iii) a statement to the effect that the certificate administrator has received such request, stating that such Certificateholder or Certificate Owner is interested in communicating with other Certificateholders or Certificate Owners with regard to the possible exercise of rights under the PSA, and (iv) a description of the method other Certificateholders or Certificate Owners may use to contact the requesting Certificateholder or Certificate Owner.
Any Certificateholder or Certificate Owner wishing to communicate with other Certificateholders and Certificate Owners regarding the exercise of its rights under the terms of the PSA (such party, a “Requesting Investor“) should deliver a written request (a “Communication Request“) signed by an authorized representative of the Requesting Investor to the certificate administrator at the address below:
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention: Corporate Trust Administration Group – WFCM 2018-C45
With a copy to:
trustadministrationgroup@wellsfargo.com
Any Communication Request must contain the name of the Requesting Investor and the method other Certificateholders and Certificate Owners should use to contact the Requesting Investor, and, if the Requesting Investor is not the registered holder of a class of certificates, then the Communication Request must contain (i) a written certification from the Requesting Investor that it is a beneficial owner of a class of certificates, and (ii) one of the following forms of documentation evidencing its beneficial ownership in such class of certificates: (A) a trade confirmation, (B) an account statement, (C) a medallion stamp guaranteed letter from a broker or dealer stating the Requesting Investor is the beneficial owner, or (D) a document acceptable to the certificate administrator that is similar to any of the documents identified in clauses (A) through (C). The certificate administrator will not be permitted to require any information other than the foregoing in verifying a
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certificateholder’s or certificate owner’s identity in connection with a Communication Request. Requesting Investors will be responsible for their own expenses in making any Communication Request, but will not be required to bear any expenses of the certificate administrator.
List of Certificateholders
Upon the written request of any Certificateholder, which is required to include a copy of the communication the Certificateholder proposes to transmit, that has provided an Investor Certification, which request is made for purposes of communicating with other holders of certificates of the same series with respect to their rights under the PSA or the certificates, the certificate registrar or other specified person will, within 10 business days after receipt of such request afford such Certificateholder (at such Certificateholder’s sole cost and expense) access during normal business hours to the most recent list of Certificateholders related to the class of certificates.
Description of the Mortgage Loan Purchase Agreements
General
On the Closing Date, the depositor will acquire the Mortgage Loans from each mortgage loan seller pursuant to a separate mortgage loan purchase agreement (each, an “MLPA“), between the related mortgage loan seller and the depositor.
Under the applicable MLPA, the depositor will require each mortgage loan seller to deliver to the certificate administrator, in its capacity as custodian, among other things, generally the following documents (except that the documents with respect to any Non-Serviced Whole Loans (other than the original promissory note) will be held by the custodian under the related Non-Serviced PSA) with respect to each Mortgage Loan sold by the mortgage loan seller (collectively, as to each Mortgage Loan, the “Mortgage File“):
(i) the original Mortgage Note, endorsed on its face or by allonge to the Mortgage Note, without recourse, to the order of the trustee or in blank and further showing a complete, unbroken chain of endorsement from the originator (or, if the original Mortgage Note has been lost, an affidavit to such effect from the related mortgage loan seller or another prior holder, together with a copy of the Mortgage Note and an indemnity properly assigned and endorsed to the trustee);
(ii) the original or a copy of the Mortgage, together with an original or copy of any intervening assignments of the Mortgage, in each case with evidence of recording indicated thereon or certified to have been submitted for recording;
(iii) an original assignment of the Mortgage in favor of the trustee or in blank and (subject to the completion of certain missing recording information and, if applicable, the assignee’s name) in recordable form (or, if the related mortgage loan seller is responsible for the recordation of that assignment, a copy thereof certified to be the copy of such assignment submitted or to be submitted for recording);
(iv) the original or a copy of any related assignment of leases and of any intervening assignments (if such item is a document separate from the Mortgage), with evidence of recording indicated thereon or certified to have been submitted for recording;
(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
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(subject to the completion of certain missing recording information and, if applicable, the assignee’s name) in recordable form (or, if the related mortgage loan seller is responsible for the recordation of that assignment, a copy thereof certified to be the copy of such assignment submitted or to be submitted for recording);
(vi) the original assignment of all unrecorded documents relating to the Mortgage Loan, if not already assigned pursuant to items (iii) or (v) above;
(vii) originals or copies of all modification, consolidation, assumption, written assurance and substitution agreements in those instances in which the terms or provisions of the Mortgage or Mortgage Note have been modified or the Mortgage Loan has been assumed or consolidated;
(viii) the original or a copy of the policy or certificate of lender’s title insurance issued in connection with the origination of such Mortgage Loan, or, if such policy has not been issued or located, an irrevocable, binding commitment (which may be a marked version of the policy that has been executed by an authorized representative of the title company or an agreement to provide the same pursuant to binding escrow instructions executed by an authorized representative of the title company) to issue such title insurance policy;
(ix) any filed copies (bearing evidence of filing) or evidence of filing of any Uniform Commercial Code financing statements, related amendments and continuation statements in the possession of the related mortgage loan seller;
(x) an original assignment in favor of the trustee of any financing statement executed and filed in favor of the related mortgage loan seller or an affiliate thereof in the relevant jurisdiction (or, if the related mortgage loan seller is responsible for the filing of that assignment, a copy thereof certified to be the copy of such assignment submitted or to be submitted for recording);
(xi) the original or a copy of any intercreditor agreement relating to existing debt of the borrower;
(xii) the original or copies of any loan agreement, escrow agreement, security agreement or letter of credit relating to a Mortgage Loan;
(xiii) the original or a copy of any ground lease, ground lessor estoppel, environmental insurance policy, environmental indemnity or guaranty relating to a Mortgage Loan;
(xiv) the original or a copy of any property management agreement relating to a Mortgage Loan;
(xv) the original or a copy of any franchise agreements and comfort letters or similar agreements relating to a Mortgage Loan and, with respect to any franchise agreement, comfort letter or similar agreement, any assignment of such agreements or any notice to the franchisor of the transfer of a Mortgage Loan and/or request for the issuance of a new comfort letter in favor of the trustee, in each case as applicable;
(xvi) the original or a copy of any lock-box or cash management agreement relating to a Mortgage Loan;
(xvii) the original or a copy of any related mezzanine intercreditor agreement;
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(xviii) the original or a copy of all related environmental insurance policies; and
(xix) ��a list related to such Mortgage Loan indicating the related Mortgage Loan documents included in the related Mortgage File as of the Closing Date;
provided that with respect to any Mortgage Loan which is a Non-Serviced Mortgage Loan on the Closing Date, the foregoing documents (other than the documents described in clause (i) above) will be delivered to and held by the custodian under the related Non-Serviced PSA on or prior to the Closing Date.
In addition, each mortgage loan seller will be required to deliver the Diligence Files for each of its Mortgage Loans to the depositor by uploading such Diligence Files to the designated website, and the depositor will deliver to the certificate administrator an electronic copy of such Diligence Files to be posted to the secure data room.
“Diligence File“ means with respect to each Mortgage Loan or Companion Loan, if applicable, generally the following documents in electronic format:
| (a) | A copy of each of the following documents: |
(i) the Mortgage Note, endorsed on its face or by allonge attached to the Mortgage Note, without recourse, to the order of the trustee or in blank and further showing a complete, unbroken chain of endorsement from the originator (or, if the original Mortgage Note has been lost, an affidavit to such effect from the applicable mortgage loan seller or another prior holder, together with a copy of the Mortgage Note and an indemnity properly assigned and endorsed to the trustee);
(ii) the Mortgage, together with a copy of any intervening assignments of the Mortgage, in each case with evidence of recording indicated thereon or certified to have been submitted for recording (if in the possession of the applicable mortgage loan seller);
(iii) any related assignment of leases and of any intervening assignments (if such item is a document separate from the Mortgage), with evidence of recording indicated thereon or certified to have been submitted for recording (if in the possession of the applicable mortgage loan seller);
(iv) all modification, consolidation, assumption, written assurance and substitution agreements in those instances in which the terms or provisions of the Mortgage or Mortgage Note have been modified or the Mortgage Loan has been assumed or consolidated;
(v) the policy or certificate of lender’s title insurance issued on the date of the origination of such Mortgage Loan, or, if such policy has not been issued or located, an irrevocable, binding commitment (which may be a marked version of the policy that has been executed by an authorized representative of the title company or an agreement to provide the same pursuant to binding escrow instructions executed by an authorized representative of the title company) to issue such title insurance policy;
(vi) any UCC financing statements, related amendments and continuation statements in the possession of the applicable mortgage loan seller;
(vii) any intercreditor agreement relating to permitted debt of the mortgagor, including any related mezzanine intercreditor agreement;
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(viii) any loan agreement, escrow agreement, security agreement or letter of credit relating to a Mortgage Loan;
(ix) any ground lease, related ground lessor estoppel, indemnity or guaranty relating to a Mortgage Loan;
(x) any property management agreement relating to a Mortgage Loan;
(xi) any franchise agreements and comfort letters or similar agreements relating to a Mortgage Loan or a Serviced Whole Loan and, with respect to any franchise agreement, comfort letter or similar agreement, any assignment of such agreements or any notice to the franchisor of the transfer of a Mortgage Loan;
(xii) any lock-box or cash management agreement relating to a Mortgage Loan;
(xiii) all related environmental reports; and
(xiv) all related environmental insurance policies;
| (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 or an affiliate thereof, 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(ies); |
| (h) | for any Mortgage Loan that the related Mortgaged Property(ies) 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; |
| (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; |
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| (o) | a copy of all litigation searches; |
| (p) | a copy of all bankruptcy searches; |
| (q) | a copy of any origination settlement statement; |
| (r) | a copy of the insurance summary report; |
| (s) | a copy of organizational documents of the related mortgagor and any guarantor; |
| (t) | a copy of all escrow statements related to the escrow account balances as of the Mortgage Loan origination date; |
| (u) | a copy of all related environmental reports that were received by the applicable mortgage loan seller; |
| (v) | a copy of any closure letter (environmental); and |
| (w) | a copy of any environmental remediation agreement for the related Mortgaged Property or Mortgaged Properties; |
in each case, to the extent that the originator received such documents or information in connection with the origination of such Mortgage Loan. In the event any of the items identified above were not included in connection with the origination of such Mortgage Loan (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 a Mortgage Loan of that structure or type), the Diligence File will be required to include a statement to that effect. No information that is proprietary to the related originator or mortgage loan seller or any draft documents or privileged or internal communications 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 mortgage loan seller may, without any obligation to do so, include such other documents or information as part of the Diligence File that such mortgage loan seller believes should be included to enable the asset representations reviewer to perform the Asset Review on such Mortgage Loan; provided that such documents or information are clearly labeled and identified.
Each MLPA will contain certain representations and warranties of the applicable mortgage loan seller with respect to each Mortgage Loan sold by that mortgage loan seller. Those representations and warranties are set forth in Annex D-1, and will be made as of the Closing Date, or as of another date specifically provided in the representation and warranty, subject to certain exceptions to such representations and warranties as set forth in Annex D-2.
If any of the documents required to be included in the Mortgage File for any Mortgage Loan is missing from the Mortgage File or is defective or if there is a breach of a representation or warranty relating to any Mortgage Loan, and, in either case, such omission, defect or breach materially and adversely affects the value of the related Mortgage Loan, the value of the related Mortgaged Property or the interests of any Certificateholders in the Mortgage Loan or Mortgaged Property or causes the Mortgage Loan to be other than a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury Regulations Section 1.860G-2(f)(2) that causes a defective obligation to be treated as a “qualified mortgage” (a “Material Defect“), the applicable mortgage loan seller will be required to, no later than 90 days following:
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| (x) | such mortgage loan seller’s discovery of the Material Defect or receipt of notice of the Material Defect from any party to the PSA (a “Breach Notice“), except in the case of the following clause (y); or |
| (y) | in the case of such Material Defect that would cause the Mortgage Loan not to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective obligation to be treated as a qualified mortgage, the earlier of (A) discovery by the related mortgage loan seller or any party to the PSA of such Material Defect, or (B) receipt of a Breach Notice by the mortgage loan seller, |
| (A) | cure such Material Defect in all material respects, at its own expense, |
| (B) | repurchase the affected Mortgage Loan or REO Loan at the Purchase Price, or |
| (C) | substitute a Qualified Substitute Mortgage Loan (other than with respect to any Whole Loans, as applicable, for which no substitution will be permitted) for such affected Mortgage Loan, and pay a shortfall amount in connection with such substitution; |
provided that no such substitution may occur on or after the second anniversary of the Closing Date; provided, however, that the applicable mortgage loan seller will generally have an additional 90-day period to cure such Material Defect (or, failing such cure, to repurchase the affected Mortgage Loan or REO Loan or, if applicable, substitute a Qualified Substitute Mortgage Loan (other than with respect to any related Whole Loan, for which no substitution will be permitted), if it is diligently proceeding toward that cure, and has delivered to the master servicer, the special servicer, the certificate administrator (who will promptly deliver a copy of such officer’s certificate to the 17g-5 Information Provider), the trustee, the operating advisor and, prior to the occurrence and continuance of a Consultation Termination Event, the Directing Certificateholder, an officer’s certificate that describes the reasons that a cure was not effected within the initial 90-day period; provided that if any such Material Defect is not cured after the initial cure period and any such extended cure period solely due to the failure of the mortgage loan seller to have received the recorded document, then the mortgage loan seller will be entitled to continue to defer its cure, repurchase and/or substitution obligations in respect of such Material Defect until eighteen (18) months after the closing date so long as the mortgage loan seller certifies to the trustee, the master servicer, the special servicer, the Directing Certificateholder (prior to the occurrence and continuance of a Consultation Termination Event) and the certificate administrator no less than every ninety (90) days beginning at the end of such extended cure period, that the Material Defect is still in effect solely because of its failure to have received the recorded document and that the mortgage loan seller is diligently pursuing the cure of such Material Defect (specifying the actions being taken). Notwithstanding the foregoing, there will be no such 90-day extension if such Material Defect would cause the related Mortgage Loan not to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage.
However, a delay in either the discovery of a Material Defect or in providing notice of such Material Defect will relieve the applicable mortgage loan seller of its obligation to cure, repurchase or substitute for (or make a Loss of Value Payment with respect to) the related Mortgage Loan if (i) the mortgage loan seller did not otherwise discover or have knowledge of such Material Defect, (ii) such delay is the result of the failure by a party to the PSA to promptly provide a notice of such Material Defect as required by the terms of the MLPA or the PSA after such party has actual knowledge of such defect or breach (knowledge will not
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be deemed to exist by reason of the custodian’s exception report), (iii) such Material Defect does not relate to the applicable Mortgage Loan not being 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 obligation to be treated as a qualified mortgage, and (iv) such delay or failure to provide notice (as required by the terms of the MLPA or PSA) prevented the mortgage loan seller from curing such Material Defect and such Material Defect was otherwise curable. Notwithstanding the foregoing, if a Mortgage Loan is not secured by a Mortgaged Property that is, in whole or in part, a hotel, restaurant (operated by a borrower), healthcare facility, nursing home, assisted living facility, self storage facility, theater or fitness center (operated by a borrower), then the failure to deliver copies of the UCC financing statements with respect to such Mortgage Loan will not be a Material Defect.
If there is a Material Defect with respect to one or more Mortgaged Properties with respect to a Mortgage Loan, the applicable mortgage loan seller will not be obligated to repurchase the Mortgage Loan if (i) the affected Mortgaged Property may be released pursuant to the terms of any partial release provisions in the related Mortgage Loan documents (and such Mortgaged Property is, in fact, released pursuant to such terms), (ii) the remaining Mortgaged Property(ies) satisfy the requirements, if any, set forth in the Mortgage Loan documents and the applicable mortgage loan seller provides an opinion of counsel to the effect that such release in lieu of repurchase would not (A) cause any Trust REMIC to fail to qualify as a REMIC or (B) result in the imposition of a tax upon any Trust REMIC or the issuing entity and (iii) each applicable Rating Agency has provided a Rating Agency Confirmation.
Notwithstanding the foregoing, in lieu of a mortgage loan seller repurchasing, substituting or curing such Material Defect, to the extent that the mortgage loan seller and the master servicer or the special servicer, as applicable (in either case with the consent of the Directing Certificateholder in respect of any Mortgage Loan that is not an Excluded Loan and for so long as no Control Termination Event has occurred and is continuing) are able to agree upon a cash payment payable by the mortgage loan seller to the issuing entity that would be deemed sufficient to compensate the issuing entity for such Material Defect (a “Loss of Value Payment“), the mortgage loan seller may elect, in its sole discretion, to pay such Loss of Value Payment. Upon its making such payment, the mortgage loan seller will be deemed to have cured such Material Defect in all respects. A Loss of Value Payment may not be made with respect to any such Material Defect that would cause the applicable Mortgage Loan not to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage.
In addition, each MLPA provides that, with respect to any Non-Serviced Whole Loan, if a material document defect exists under the related Non-Serviced PSA, and the related seller repurchases the related Non-Serviced Companion Loan from the related non-serviced securitization trust, such mortgage loan seller is required to repurchase the related Non-Serviced Mortgage Loan; provided, however, that no such repurchase obligation will apply to any material document defect related solely to the promissory notes for any Companion Loan contained in the related non-serviced securitization trust.
With respect to any Mortgage Loan, the “Purchase Price“ equals the sum of (1) the outstanding principal balance of such Mortgage Loan (or related REO Loan (excluding, for such purpose, the related Companion Loan, if applicable)), as of the date of purchase, (2) all accrued and unpaid interest on the Mortgage Loan (or any related REO Loan (excluding, for such purpose, the related Companion Loan, if applicable)) at the related Mortgage Rate in effect from time to time (excluding any portion of such interest that
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represents default interest or Excess Interest on an ARD Loan), to, but not including, the due date immediately preceding or coinciding with the Determination Date for the Collection Period of purchase, (3) all related unreimbursed Servicing Advances plus accrued and unpaid interest on all related Advances at the Reimbursement Rate, Special Servicing Fees (whether paid or unpaid) and any other additional trust fund expenses (except for Liquidation Fees) in respect of such Mortgage Loan or related REO Loan (excluding, for such purposes, any Companion Loan, if any), (4) solely in the case of a repurchase or substitution by a mortgage loan seller, all reasonable out-of-pocket expenses reasonably incurred or to be incurred by the master servicer, the special servicer, the depositor, the certificate administrator or the trustee in respect of the omission, breach or defect giving rise to the repurchase or substitution obligation, including any expenses arising out of the enforcement of the repurchase or substitution obligation, including, without limitation, legal fees and expenses and any additional trust fund expenses relating to such Mortgage Loan or related REO Loan; provided, however, that such out-of-pocket expenses will not include expenses incurred by investors in instituting an Asset Review Vote Election, in taking part in an Asset Review Vote or in utilizing the dispute resolution provisions described below under “—Dispute Resolution Provisions”, (5) Liquidation Fees, if any, payable with respect to the affected Mortgage Loan or related REO Loan (which will not include any Liquidation Fees if such affected Mortgage Loan is repurchased or a Loss of Value Payment is received during the initial 90-day period or, if applicable, prior to the expiration of the additional 90-day period immediately following the initial 90-day period) and (6) solely in the case of a repurchase or substitution by the related mortgage loan seller, the Asset Representations Reviewer Asset Review Fee for such Mortgage Loan, to the extent not previously paid by the related mortgage loan seller.
A “Qualified Substitute Mortgage Loan“ is a substitute mortgage loan (other than with respect to any Whole Loan, for which no substitution will be permitted) replacing a Mortgage Loan with respect to which a material breach or document defect exists that must, on the date of substitution:
(a) have an outstanding principal balance, after application of all scheduled payments of principal and interest due during or prior to the month of substitution, whether or not received, not in excess of the Stated Principal Balance of the removed Mortgage Loan as of the due date in the calendar month during which the substitution occurs;
(b) have a fixed Mortgage Rate not less than the Mortgage Rate of the removed Mortgage Loan (determined without regard to any prior modification, waiver or amendment of the terms of the removed Mortgage Loan);
(c) have the same due date and a grace period no longer than that of the removed Mortgage Loan;
(d) accrue interest on the same basis as the removed Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve 30-day months);
(e) have a remaining term to stated maturity not greater than, and not more than five years less than, the remaining term to stated maturity of the removed Mortgage Loan;
(f) have a then-current loan-to-value ratio equal to or less than the lesser of (i) the loan-to-value ratio for the removed Mortgage Loan as of the Closing Date and (ii) 75%, in each case using a “value” for the Mortgaged Property as determined using
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an appraisal conducted by a member of the Appraisal Institute (“MAI“) prepared in accordance with the requirements of the FIRREA;
(g) comply as of the date of substitution in all material respects with all of the representations and warranties set forth in the related MLPA;
(h) have an environmental report that indicates no material adverse environmental conditions with respect to the related Mortgaged Property and that will be delivered as a part of the related Mortgage File;
(i) have a then-current debt service coverage ratio at least equal to the greater of (i) the original debt service coverage ratio of the removed Mortgage Loan as of the Closing Date and (ii) 1.25x;
(j) constitute a “qualified replacement mortgage” within the meaning of Code Section 860G(a)(4) as evidenced by an opinion of counsel (provided at the related mortgage loan seller’s expense);
(k) not have a maturity date or an amortization period that extends to a date that is after the date five years prior to the Rated Final Distribution Date;
(l) have comparable prepayment restrictions to those of the removed Mortgage Loan;
(m) not be substituted for a removed Mortgage Loan unless the trustee and the certificate administrator have received a Rating Agency Confirmation from each of the Rating Agencies (the cost, if any, of obtaining such Rating Agency Confirmation to be paid by the related mortgage loan seller);
(n) have been approved, so long as no Control Termination Event has occurred and is continuing and the affected Mortgage Loan is not an Excluded Loan, by the Directing Certificateholder;
(o) prohibit defeasance within two years of the Closing Date;
(p) not be substituted for a removed Mortgage Loan if it would result in the termination of the REMIC status of any Trust REMIC or the imposition of tax on the Trust or any Trust REMIC other than a tax on income expressly permitted or contemplated to be imposed by the terms of the PSA, as determined by an opinion of counsel at the cost of the related mortgage loan seller;
(q) have an engineering report that indicates no material adverse property condition or deferred maintenance with respect to the related Mortgaged Property that will be delivered as a part of the related servicing file; and
(r) be current in the payment of all scheduled payments of principal and interest then due.
In the event that more than one Mortgage Loan is substituted for a removed Mortgage Loan or Mortgage Loans, then (x) the amounts described in clause (a) are required to be determined on the basis of aggregate principal balances and (y) each such proposed Qualified Substitute Mortgage Loan must individually satisfy each of the requirements specified in clauses (b) through (r) of the preceding sentence, except (z) the rates described in clause (b) above and the remaining term to stated maturity referred to in clause (e) above are required to be determined on a weighted average basis, provided that no
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individual Mortgage Rate (net of the Servicing Fee Rate, the Certificate Administrator/Trustee Fee Rate, the Operating Advisor Fee Rate, the Asset Representations Reviewer Fee Rate and the CREFC® Intellectual Property Royalty License Fee Rate) may be lower than the highest fixed Pass-Through Rate (not based on or subject to a cap equal to or based on the WAC Rate) of any class of Principal Balance Certificates having a principal balance then-outstanding. When a Qualified Substitute Mortgage Loan is substituted for a removed Mortgage Loan, the applicable mortgage loan seller will be required to certify that the Mortgage Loan meets all of the requirements of the above definition and send the certification to the trustee the certificate administrator and, prior to the occurrence and continuance of a Consultation Termination Event, the Directing Certificateholder.
The foregoing repurchase or substitution obligation or the obligation to pay the Loss of Value Payment will constitute the sole remedy available to the Certificateholders and the trustee under the PSA for any uncured breach of any mortgage loan seller’s representations and warranties regarding the Mortgage Loans or any uncured document defect; provided, that if any breach pertains to a representation or warranty that the related Mortgage Loan documents or any particular Mortgage Loan document requires the related borrower to bear the costs and expenses associated with any particular action or matter under such Mortgage Loan document(s), then the applicable mortgage loan seller may cure such breach within the applicable cure period (as the same may be extended) by reimbursing the issuing entity (by wire transfer of immediately available funds) for (i) the reasonable amount of any such costs and expenses incurred by parties to the PSA or the issuing entity that are incurred as a result of such breach and have not been reimbursed by the related borrower and (ii) the amount of any fees of the asset representations reviewer attributable to the Asset Review of such Mortgage Loan; provided, further, that in the event any such costs and expenses exceed $10,000, the applicable mortgage loan seller will have the option to either repurchase or substitute for the related Mortgage Loan as provided above or pay such costs and expenses. The applicable mortgage loan seller will remit the amount of these costs and expenses and upon its making such remittance, the applicable mortgage loan seller (or other applicable party) will be deemed to have cured the breach in all respects. The applicable mortgage loan seller will be the sole warranting party in respect of the Mortgage Loans sold by that mortgage loan seller to the depositor, and none of its affiliates and no other person will be obligated to repurchase or replace any affected Mortgage Loan or make a Loss of Value Payment in connection with a breach of any representation and warranty or in connection with a document defect if the applicable mortgage loan seller defaults on its obligation to do so.
Dispute Resolution Provisions
The mortgage loan seller will be subject to the dispute resolution provisions described under “Pooling and Servicing Agreement—Dispute Resolution Provisions” to the extent those provisions are triggered with respect to any mortgage loan sold to the depositor by the mortgage loan seller and will be obligated under the related MLPA to comply with all applicable provisions and to take part in any mediation or arbitration proceedings that may result.
Asset Review Obligations
The mortgage loan seller will be obligated to perform its obligations described under “Pooling and Servicing Agreement—The Asset Representations Reviewer—Asset Review” relating to any Asset Reviews performed by the asset representations reviewer, and the mortgage loan seller will have the rights described under that heading.
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Pooling and Servicing Agreement
General
The servicing and administration of the Mortgage Loans (other than any Non-Serviced Mortgage Loan) and any related REO Properties will be governed by the PSA and any related Intercreditor Agreement.
Each Non-Serviced Mortgage Loan, the related Non-Serviced Companion Loans and any related REO Properties (including the issuing entity’s interest in REO Property acquired with respect to a Non-Serviced Whole Loan) will be serviced by the related Non-Serviced Master Servicer and the related Non-Serviced Special Servicer under the related Non-Serviced PSA in accordance with such Non-Serviced PSA and the related Intercreditor Agreement. Unless otherwise specifically stated and except where the context otherwise indicates (such as with respect to P&I Advances), discussions in this section or in any other section of this prospectus regarding the servicing and administration of the Mortgage Loans should be deemed to not to include any Non-Serviced Mortgage Loan, any Non-Serviced Companion Loan and any related REO Property.
The following summaries describe certain provisions of the PSA relating to the servicing and administration of the Mortgage Loans (excluding each Non-Serviced Mortgage Loan) and any related REO Properties.
Certain provisions of each Non-Serviced PSA relating to the servicing and administration of the related Non-Serviced Mortgage Loan, the related Non-Serviced Companion Loans, the related REO Properties and the related Intercreditor Agreement are summarized under “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans”, “—The Non-Serviced AB Whole Loan” and “—Servicing of the Non-Serviced Mortgage Loans” below.
Assignment of the Mortgage Loans
The depositor will purchase the Mortgage Loans to be included in the issuing entity on or before the Closing Date from each of the mortgage loan sellers pursuant to separate MLPAs. See “Transaction Parties—The Sponsors and Mortgage Loan Sellers” and “Description of the Mortgage Loan Purchase Agreements”.
On the Closing Date, the depositor will sell, transfer or otherwise convey, assign or cause the assignment of the Mortgage Loans, without recourse, together with the depositor’s rights and remedies against the mortgage loan sellers under the MLPAs, to the trustee for the benefit of the holders of the certificates. On or prior to the Closing Date, the depositor will require each mortgage loan seller to deliver to the certificate administrator, in its capacity as custodian, the Mortgage Notes and certain other documents and instruments with respect to each Mortgage Loan (other than any Non-Serviced Mortgage Loan). The custodian will hold such documents in the name of the issuing entity for the benefit of the holders of the certificates. The custodian is obligated to review certain documents for each Mortgage Loan within 60 days of the Closing Date and report any missing documents or certain types of document defects to the parties to the PSA, the Directing Certificateholder (for so long as no Consultation Termination Event has occurred and is continuing and other than in respect of an Excluded Loan) and the related mortgage loan seller.
In addition, pursuant to the related MLPA, each mortgage loan seller will be required to deliver the Diligence File for each of its Mortgage Loans to the depositor by uploading such Diligence File to the designated website within 60 days following the Closing Date, and
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the depositor will deliver to the certificate administrator an electronic copy of such Diligence Files to be posted to the secure data room.
Pursuant to the PSA, the depositor will assign to the trustee for the benefit of Certificateholders the representations and warranties made by the mortgage loan sellers to the depositor in the MLPAs and any rights and remedies that the depositor has against the mortgage loan sellers under the MLPAs with respect to any Material Defect. See “—Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA” below and “Description of the Mortgage Loan Purchase Agreements”.
Servicing Standard
The master servicer and the special servicer will be required to diligently service and administer the Mortgage Loans (excluding each Non-Serviced Mortgage Loan) and the related REO Properties (other than any REO Property related to a Non-Serviced Mortgage Loan) for which it is responsible in accordance with applicable law, the terms of the PSA, the Mortgage Loan documents, and the related Intercreditor Agreements and, to the extent consistent with the foregoing, in accordance with the higher of the following standards of care: (1) the same manner in which, and with the same care, skill, prudence and diligence with which the master servicer or special servicer, as the case may be, services and administers similar mortgage loans for other third-party portfolios, and (2) the same care, skill, prudence and diligence with which the master servicer or special servicer, as the case may be, services and administers similar mortgage loans owned by the master servicer or special servicer, as the case may be, with a view to: (A) the timely recovery of all payments of principal and interest under the Mortgage Loans or (B) in the case of a Specially Serviced Loan or an REO Property, the maximization of recovery of principal and interest on a net present value basis on the Mortgage Loans, and the best interests of the issuing entity and the Certificateholders (as a collective whole as if such Certificateholders constituted a single lender) (and, in the case of any Whole Loan, the best interests of the issuing entity, the Certificateholders and the holder of the related Companion Loan (as a collective whole as if such Certificateholders and the holder or holders of the related Companion Loan constituted a single lender), taking into account the subordinate or pari passu nature, as applicable, of the related Companion Loan), as determined by the master servicer or special servicer, as the case may be, in its reasonable judgment, in either case giving due consideration to the customary and usual standards of practice of prudent, institutional commercial and multifamily mortgage loan servicers, but without regard to any conflict of interest arising from:
(A) any relationship that the master servicer or special servicer, as the case may be, or any of their respective affiliates, may have with any of the underlying borrowers, the sponsors, the mortgage loan sellers, the originators, any party to the PSA or any affiliate of the foregoing;
(B) the ownership of any certificate (or any interest in any Companion Loan, mezzanine loan or subordinate debt relating to a Mortgage Loan) by the master servicer or special servicer, as the case may be, or any of their respective affiliates;
(C) the obligation, if any, of the master servicer to make advances;
(D) the right of the master servicer or special servicer, as the case may be, or any of its affiliates to receive compensation or reimbursement of costs under the PSA generally or with respect to any particular transaction;
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(E) the ownership, servicing or management for others of (i) a Non-Serviced Mortgage Loan and a Non-Serviced Companion Loan or (ii) any other mortgage loans, subordinate debt, mezzanine loans or properties not covered by the PSA or held by the issuing entity by the master servicer or special servicer, as the case may be, or any of its affiliates;
(F) any debt that the master servicer or special servicer, as the case may be, or any of its affiliates, has extended to any underlying borrower or an affiliate of any borrower (including, without limitation, any mezzanine financing);
(G) any option to purchase any Mortgage Loan or the related Companion Loan the master servicer or special servicer, as the case may be, or any of its affiliates, may have; and
(H) any obligation of the master servicer or special servicer, or any of their respective affiliates, to repurchase or substitute for a Mortgage Loan as a mortgage loan seller (if the master servicer or special servicer or any of their respective affiliates is a mortgage loan seller) (the foregoing, collectively referred to as the “Servicing Standard“).
All net present value calculations and determinations made under the PSA with respect to any Mortgage Loan, Mortgaged Property or REO Property (including for purposes of the definition of “Servicing Standard” set forth above) will be made in accordance with the Mortgage Loan documents or, in the event the Mortgage Loan documents are silent, by using a discount rate (i) for principal and interest payments on the Mortgage Loan or sale by the special servicer of a Defaulted Loan, the highest of (1) the rate determined by the master servicer or special servicer, as applicable, that approximates the market rate that would be obtainable by the related borrower on similar non-defaulted debt of such borrower as of such date of determination, (2) the Mortgage Rate and (3) the yield on 10-year U.S. treasuries as of such date of determination and (ii) for all other cash flows, including property cash flow, the “discount rate” set forth in the most recent appraisal (or updated appraisal) of the related Mortgaged Property.
In the case of each Non-Serviced Mortgage Loan, the master servicer and the special servicer will be required to act in accordance with the Servicing Standard with respect to any action required to be taken regarding such Non-Serviced Mortgage Loan pursuant to their respective obligations under the PSA.
Subservicing
The master servicer and the special servicer may delegate and/or assign some or all of its respective servicing obligations and duties with respect to some or all of the Mortgage Loans (other than a Non-Serviced Mortgage Loan) to one or more third-party sub-servicers, provided that the master servicer and the special servicer, as applicable, will remain obligated under the PSA. A sub-servicer may be an affiliate of the depositor, the master servicer or the special servicer. Notwithstanding the foregoing, the special servicer may not enter into any sub-servicing agreement which provides for the performance by third parties of any or all of its obligations under the PSA without, with respect to any Mortgage Loan other than an Excluded Loan and prior to the occurrence and continuance of a Control Termination Event and other than with respect to any Excluded Loan, the consent of the Directing Certificateholder, except to the extent necessary for the special servicer to comply with applicable regulatory requirements.
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Each sub-servicing agreement between the master servicer or special servicer and a sub-servicer (a “Sub-Servicing Agreement“) will generally be required to provide that (i) if for any reason the master servicer or special servicer, as applicable, is no longer acting in that capacity (including, without limitation, by reason of a Servicer Termination Event), the trustee or any successor master servicer or special servicer, as applicable, may, except with respect to certain initial Sub-Servicing Agreements, assume or terminate such party’s rights and obligations under such Sub-Servicing Agreement and (ii) the sub-servicer will be in default under such Sub-Servicing Agreement and such Sub-Servicing Agreement will be terminated (following the expiration of any applicable grace period) if the sub-servicer fails (A) to deliver by the due date any Exchange Act reporting items required to be delivered to the master servicer, the certificate administrator or the depositor pursuant to the PSA or such Sub-Servicing Agreement or to the master servicer under any other pooling and servicing agreement that the depositor is a party to, 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 PSA to perform its obligations under the PSA or under the Exchange Act reporting requirements of any other pooling and servicing agreement to which the depositor is a party. The master servicer or special servicer, as applicable, will be required to monitor the performance of sub-servicers retained by it and, subject to the terms of the related Sub-Servicing Agreement, will have the right to remove a sub-servicer retained by it at any time it considers removal to be in the best interests of Certificateholders. 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 or special servicer, as applicable.
Generally, the master servicer will be solely liable for all fees owed by it to any sub-servicer retained by the master servicer, without regard to whether the master servicer’s compensation pursuant to the PSA is sufficient to pay those fees. Each sub-servicer will be required to be reimbursed by the master servicer for certain expenditures which such sub-servicer makes, only to the same extent the master servicer is reimbursed under the PSA.
Advances
P&I Advances
On the business day immediately preceding each Distribution Date (the “P&I Advance Date“), except as otherwise described below, the master servicer will be obligated, unless determined to be nonrecoverable as described below, to make advances (each, a “P&I Advance“) out of its own funds or, subject to the replacement of those funds as provided in the PSA, certain funds held in the Collection Account that are not required to be part of the Available Funds for that Distribution Date, in an amount equal to (but subject to reduction as described below) the aggregate of:
(1) all Periodic Payments (other than balloon payments) (net of any applicable Servicing Fees) that were due on the Mortgage Loans (including any Non-Serviced Mortgage Loan) and any REO Loan (other than any portion of an REO Loan related to a Companion Loan) during the related Collection Period and not received as of the business day preceding the P&I Advance Date; and
(2) in the case of each Mortgage Loan that is delinquent in respect of its balloon payment as of the P&I Advance Date (including any REO Loan (other than any portion of an REO Loan related to a Companion Loan) as to which the balloon
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payment would have been past due), an amount equal to its Assumed Scheduled Payment.
The master servicer’s obligations to make P&I Advances in respect of any Mortgage Loan (including any Non-Serviced Mortgage Loan) or REO Loan (other than any portion of an REO Loan related to a Companion Loan) will continue, except if a determination as to non-recoverability is made, through and up to liquidation of the Mortgage Loan or disposition of the REO Property, as the case may be. To the extent that the master servicer fails to make a P&I Advance that it is required to make under the PSA, the trustee will be required to make the required P&I Advance in accordance with the terms of the PSA.
If an Appraisal Reduction Amount has been determined with respect to any Mortgage Loan (or, in the case of a Non-Serviced Whole Loan, an appraisal reduction has been made in accordance with the related Non-Serviced PSA and the master servicer has notice of such appraisal reduction amount) and such Mortgage Loan experiences subsequent delinquencies, then the interest portion of any P&I Advance in respect of that Mortgage Loan for the related Distribution Date will be reduced (there will be no reduction in the principal portion, if any, of such P&I Advance) to equal the product of (x) the amount of the interest portion of the P&I Advance for that Mortgage Loan for the related Distribution Date without regard to this sentence, and (y) a fraction, expressed as a percentage, the numerator of which is equal to the Stated Principal Balance of that Mortgage Loan immediately prior to the related Distribution Date, net of the related Appraisal Reduction Amount (or, in the case of any Whole Loan, the portion of such Appraisal Reduction Amount allocated to the related Mortgage Loan), if any, and the denominator of which is equal to the Stated Principal Balance of that Mortgage Loan immediately prior to the related Distribution Date.
Neither the master servicer nor the trustee will be required to make a P&I Advance for a balloon payment, default interest, late payment charges, Yield Maintenance Charges, Prepayment Premiums or Excess Interest or with respect to any Companion Loan.
Servicing Advances
In addition to P&I Advances, except as otherwise described under “—Recovery of Advances” below and except in certain limited circumstances described below, the master servicer will also be obligated (subject to the limitations described in this prospectus), to make advances (“Servicing Advances“ and, collectively with P&I Advances, “Advances“) in connection with the servicing and administration of any Mortgage Loan (other than a Non-Serviced Mortgage Loan) in respect of which a default, delinquency or other unanticipated event has occurred or is reasonably foreseeable, or, in connection with the servicing and administration of any Mortgaged Property securing such Mortgage Loan (other than a Non-Serviced Mortgage Loan) or REO Property (other than REO Property related to a Non-Serviced Mortgage Loan), in order to pay delinquent real estate taxes, assessments and hazard insurance premiums and to cover other similar costs and expenses necessary to preserve the priority of or enforce the related Mortgage Loan documents or to protect, lease, manage and maintain the related Mortgaged Property. To the extent that the master servicer fails to make a Servicing Advance that it is required to make under the PSA and the trustee has received notice or otherwise has actual knowledge of this failure, the trustee will be required to make the required Servicing Advance in accordance with the terms of the PSA.
The special servicer will have no obligation to make any Advances. However, in an urgent or emergency situation requiring the making of a Servicing Advance, the special servicer, in its sole discretion, may make such Servicing Advance, and the master servicer
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will be required to reimburse the special servicer for such Advance (with interest on that Advance) within a specified number of days as set forth in the PSA, unless such Advance is determined to be nonrecoverable by the master servicer in its reasonable judgment (in which case it will be reimbursed out of the Collection Account). Once the special servicer is reimbursed, the master servicer will be deemed to have made the special servicer’s Servicing Advance as of the date made by the special servicer, and will be entitled to reimbursement with interest on that Advance in accordance with the terms of the PSA.
Any requirement of the master servicer or the trustee to make an Advance in the PSA is intended solely to provide liquidity for the benefit of the Certificateholders and not as credit support or otherwise to impose on any such person the risk of loss with respect to one or more Mortgage Loans or the related Companion Loan.
With respect to a Non-Serviced Whole Loan, the applicable servicer under the related Non-Serviced PSA will be obligated to make property protection advances with respect to such Non-Serviced Whole Loan. See “—Servicing of the Non-Serviced Mortgage Loans” and “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
Nonrecoverable Advances
Notwithstanding the foregoing, none of the master servicer, the special servicer or the trustee will be obligated to make any Advance that the master servicer or the special servicer, in accordance with the Servicing Standard, or the trustee, in its good faith business judgment, determines would, if made, not be recoverable (including recovery of interest on the Advance) out of Related Proceeds (a “Nonrecoverable Advance“). In addition, the special servicer may, at its option make a determination in accordance with the Servicing Standard that any P&I Advance or Servicing Advance, if made, would be a Nonrecoverable Advance, and if it makes such a determination, must deliver to the master servicer (and, with respect to each Non-Serviced Mortgage Loan, the related Non-Serviced Master Servicer and Non-Serviced Special Servicer), the certificate administrator, the trustee, the operating advisor and the 17g-5 Information Provider notice of such determination, which determination may be conclusively relied upon by, but will not be binding upon, the master servicer and the trustee. The special servicer will have no such obligation to make an affirmative determination that any P&I Advance or Servicing Advance is, or would be, recoverable, and in the absence of a determination by the special servicer that such an Advance is nonrecoverable, each such decision will remain with the master servicer or the trustee, as applicable. If the special servicer makes a determination that only a portion, and not all, of any previously made or proposed P&I Advance or Servicing Advance is nonrecoverable, the master servicer and the trustee will have the right to make its own subsequent determination that any remaining portion of any such previously made or proposed P&I Advance or Servicing Advance is nonrecoverable.
In making such non-recoverability determination, each person will be entitled to consider (among other things): (a) (i) the obligations of the borrower under the terms of the related Mortgage Loan or Companion Loan, as applicable, as it may have been modified, and (ii) the related Mortgaged Properties in their “as-is” or then-current conditions and occupancies, as modified by such party’s assumptions regarding the possibility and effects of future adverse change with respect to such Mortgaged Properties, (b) estimated future expenses, (c) estimated timing of recoveries, and (d) the existence of any Nonrecoverable Advances which, at the time of such consideration, the recovery of which are being deferred or delayed by the master servicer or the trustee because there is insufficient principal available for such recovery, in light of the fact that Related Proceeds are a source of recovery not only for the Advance under consideration but also a potential source of
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recovery for such delayed or deferred Advance. In addition, any such person may update or change its recoverability determinations (but not reverse any other person’s determination that an Advance is nonrecoverable) at any time and may obtain at the expense of the issuing entity any reasonably required analysis, appraisals or market value estimates or other information for such purposes. Absent bad faith, any non-recoverability determination described in this paragraph will be conclusive and binding on the Certificateholders, and may be conclusively relied upon by, but is not binding upon, the master servicer and the trustee. The master servicer and the trustee will be entitled to rely conclusively on any non-recoverability determination of the special servicer. Nonrecoverable Advances will represent a portion of the losses to be borne by the Certificateholders.
With respect to a Non-Serviced Whole Loan, if any servicer under the related Non-Serviced PSA determines that a principal and interest advance with respect to the related Non-Serviced Companion Loan, if made, would be nonrecoverable, such determination will not be binding on the master servicer and the trustee as it relates to any proposed P&I Advance with respect to such Non-Serviced Mortgage Loan. Similarly, with respect to a Non-Serviced Mortgage Loan, if the master servicer or the special servicer determines that any P&I Advance with respect to such Non-Serviced Mortgage Loan, if made, would be nonrecoverable, such determination will not be binding on the related Non-Serviced Master Servicer and Non-Serviced Trustee as such determination relates to any proposed P&I Advance with respect to the related Non-Serviced Companion Loan (unless the related Non-Serviced PSA provides otherwise).
Recovery of Advances
The master servicer, the special servicer and the trustee, as applicable, will be entitled to recover (a) any Servicing Advance made out of its own funds from any amounts collected in respect of a Mortgage Loan as to which such Servicing Advance was made, and (b) any P&I Advance made out of its own funds from any amounts collected in respect of the Mortgage Loan as to which such P&I Advance was made, whether in the form of late payments, insurance and condemnation proceeds, liquidation proceeds or otherwise from the related Mortgage Loan or Mortgaged Property (“Related Proceeds“). The master servicer, the special servicer and the trustee will be entitled to recover any Advance by it that it subsequently determines to be a Nonrecoverable Advance out of general collections on or relating to the Mortgage Loans on deposit in the Collection Account (first from principal collections and then from any other collections).
If the funds in the Collection Account relating to the Mortgage Loans allocable to principal on the Mortgage Loans are insufficient to fully reimburse the party entitled to reimbursement, then such party as an accommodation may elect, on a monthly basis, at its sole option and discretion to defer reimbursement of the portion that exceeds such amount allocable to principal (in which case interest will continue to accrue on the unreimbursed portion of the advance) for a time as required to reimburse the excess portion from principal for a consecutive period up to 12 months (provided that, with respect to any Mortgage Loan other than an Excluded Loan, any such deferral exceeding 6 months will require, prior to the occurrence and continuance of any Control Termination Event, the consent of the Directing Certificateholder) and any election to so defer will be deemed to be in accordance with the Servicing Standard; provided that no such deferral may occur at any time to the extent that amounts otherwise distributable as principal are available for such reimbursement.
In connection with a potential election by the master servicer or the trustee to refrain from the reimbursement of all or a portion of a particular Nonrecoverable Advance during the one month collection period ending on the related Determination Date for any Distribution Date, the master servicer or the trustee will be authorized to wait for principal
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collections on the Mortgage Loans to be received until the end of such collection period before making its determination of whether to refrain from the reimbursement of all or a portion of a particular Nonrecoverable Advance; provided, however, that if, at any time the master servicer or the trustee, as applicable, elects, in its sole discretion, not to refrain from obtaining such reimbursement or otherwise determines that the reimbursement of a Nonrecoverable Advance during a one month collection period will exceed the full amount of the principal portion of general collections on or relating to the Mortgage Loans deposited in the Collection Account for such Distribution Date, then the master servicer or the trustee, as applicable, will be required to use its reasonable efforts to give the 17g-5 Information Provider 15 days’ notice of such determination for posting on the 17g-5 Information Provider’s website, unless extraordinary circumstances make such notice impractical, which means (1) that party determines in its sole discretion that waiting 15 days after such a notice could jeopardize its ability to recover such Nonrecoverable Advance, (2) changed circumstances or new or different information becomes known to that party that could affect or cause a determination or whether any Advance is a Nonrecoverable Advance or whether to deter reimbursement of a Nonrecoverable Advance or the determination in clause (1) above, or (3) in the case of the master servicer, it has not timely received from the trustee information required by the master servicer to consider in determining whether to defer reimbursement of a Nonrecoverable Advance. If any of the circumstances described in clause (1), clause (2) or clause (3) above apply, the master servicer or trustee, as applicable, must give the 17g-5 Information Provider notice (in accordance with the procedures regarding Rule 17g-5 set forth in the PSA) of the anticipated reimbursement as soon as reasonably practicable. Notwithstanding the foregoing, failure to give such notice will in no way affect the master servicer’s or the trustee’s election whether to refrain from obtaining such reimbursement or right to obtain reimbursement.
The master servicer, the special servicer and the trustee will be entitled to recover any Advance that is outstanding at the time that a Mortgage Loan is modified but is not repaid in full by the borrower in connection with such modification but becomes an obligation of the borrower to pay such amounts in the future (such Advance, together with interest on that Advance, a “Workout-Delayed Reimbursement Amount“) out of principal collections on the Mortgage Loans in the Collection Account.
Any amount that constitutes all or a portion of any Workout-Delayed Reimbursement Amount may in the future be determined to constitute a Nonrecoverable Advance and thereafter will be recoverable as any other Nonrecoverable Advance.
In connection with its recovery of any Advance, the master servicer, the special servicer and the trustee will be entitled to be paid, out of any amounts relating to the Mortgage Loans then on deposit in the Collection Account, interest at the Prime Rate (the “Reimbursement Rate“) accrued on the amount of the Advance from the date made to, but not including, the date of reimbursement. Neither the master servicer nor the trustee will be entitled to interest on P&I Advances if the related Periodic Payment is received on or before the related Due Date and any applicable grace period has expired or if the related Periodic Payment is received after the Determination Date but on or prior to the P&I Advance Date. The “Prime Rate“ will be the prime rate, for any day, set forth in The Wall Street Journal, New York City edition.
See “—Servicing of the Non-Serviced Mortgage Loans” for reimbursements of servicing advances made in respect of a Non-Serviced Whole Loan under the related Non-Serviced PSA.
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Accounts
The master servicer is required to establish and maintain, or cause to be established and maintained, one or more accounts and subaccounts (collectively, the “Collection Account“) in its own name on behalf of the trustee and for the benefit of the Certificateholders. The master servicer is required to deposit in the Collection Account on a daily basis (and in no event later than the 2nd business day following receipt in available and properly identified funds) all payments and collections due after the Cut-off Date and other amounts received or advanced with respect to the Mortgage Loans (including, without limitation, all proceeds (the “Insurance and Condemnation Proceeds“) received under any hazard, title or other insurance policy that provides coverage with respect to a Mortgaged Property or the related Mortgage Loan or in connection with the full or partial condemnation of a Mortgaged Property (other than proceeds applied to the restoration of the Mortgaged Property or released to the related borrower in accordance with the Servicing Standard (or, if applicable, the special servicer) and/or the terms and conditions of the related Mortgage) and all other amounts received and retained in connection with the liquidation (including any full, partial or discounted payoff) of any Mortgage Loan that is defaulted and any related defaulted Companion Loan or property acquired by foreclosure or otherwise (the “Liquidation Proceeds“)) together with the net operating income (less reasonable reserves for future expenses) derived from the operation of any REO Properties. Notwithstanding the foregoing, the collections on any Whole Loan will be limited to the portion of such amounts that are payable to the holder of the related Mortgage Loan pursuant to the related Intercreditor Agreement.
With respect to each Distribution Date, the master servicer will be required to disburse from the Collection Account and remit to the certificate administrator for deposit into the Lower-Tier REMIC Distribution Account, to the extent of funds on deposit in the Collection Account, on the related P&I Advance Date, the Available Funds for such Distribution Date and any Yield Maintenance Charges or Prepayment Premiums received as of the related Determination Date. The certificate administrator is required to establish and maintain various accounts, including a “Lower-Tier REMIC Distribution Account” and a “Upper-Tier REMIC Distribution Account”, both of which may be sub-accounts of a single account, (collectively, the “Distribution Accounts“), in its own name on behalf of the trustee and for the benefit of the Certificateholders.
On each Distribution Date, the certificate administrator is required to apply amounts on deposit in the Upper-Tier REMIC Distribution Account (which will include all funds that were remitted by the master servicer from the Collection Account, plus, among other things, any P&I Advances less amounts, if any, distributable to the Class V and Class R certificates) as set forth in the PSA generally to make distributions of interest and principal from Available Funds to the holders of the Regular Certificates as described under “Description of the Certificates—Distributions—Priority of Distributions”.
The certificate administrator is also required to establish and maintain an account (the “Interest Reserve Account“) which may be a sub-account of the Distribution Account, in its own name on behalf of the trustee for the benefit of the Certificateholders. On the P&I Advance Date occurring each February and on any P&I Advance Date occurring in any January which occurs in a year that is not a leap year (in each case, unless the related Distribution Date is the final Distribution Date), the certificate administrator will be required to deposit amounts remitted by the master servicer or P&I Advances made on the related Mortgage Loans into the Interest Reserve Account during the related interest period, in respect of the Mortgage Loans that accrue interest on an Actual/360 Basis (collectively, the “Actual/360 Loans“), in an amount equal to one day’s interest at the Net Mortgage Rate for each such Actual/360 Loan on its Stated Principal Balance and as of the Due Date in the
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month preceding the month in which the P&I Advance Date occurs, to the extent a Periodic Payment or P&I Advance or other deposit is made in respect of the Mortgage Loans (all amounts so deposited in any consecutive January (if applicable) and February, “Withheld Amounts“). On the P&I Advance Date occurring each March (or February, if the related Distribution Date is the final Distribution Date), the certificate administrator will be required to withdraw from the Interest Reserve Account an amount equal to the Withheld Amounts from the preceding January (if applicable) and February, if any, and deposit that amount into the Lower-Tier REMIC Distribution Account.
The certificate administrator is also required to establish and maintain an account (the “Excess Interest Distribution Account“), which may be a sub account of the Distribution Account, in its own name on behalf of the trustee for the benefit of the holders of the Class V certificates. Prior to the applicable Distribution Date, the master servicer is required to remit to the certificate administrator for deposit into the Excess Interest Distribution Account an amount equal to the Excess Interest received by the master servicer on or prior to the related Determination Date.
The certificate administrator may be required to establish and maintain an account (the “Gain-on-Sale Reserve Account“ , which may be a sub-account of the Distribution Account, in its own name on behalf of the trustee for the benefit of the Certificateholders. To the extent that any gains are realized on sales of Mortgaged Properties (or, with respect to any Whole Loan, the portion of such amounts that are payable on the related Mortgage Loan pursuant to the related Intercreditor Agreement), such gains will be deposited into the Gain-on-Sale Reserve Account. Amounts in the Gain-on-Sale Reserve Account will be applied on the applicable Distribution Date as part of Available Funds to all amounts due and payable on the Regular Certificates (including to reimburse for Realized Losses previously allocated to such certificates. Any remaining amounts will be held in the Gain-on-Sale Reserve Account and applied to offset shortfalls and losses incurred on subsequent Distribution Dates as described above. Any remaining amounts not necessary to offset any shortfalls or losses on the final Distribution Date will be distributed on the Class R certificates after all amounts payable to the Regular Certificates have been made.
Other accounts to be established pursuant to the PSA are one or more segregated custodial accounts (each, an “REO Account“) for collections from REO Properties for which the special servicer is responsible. Each REO Account will be maintained by the special servicer in its own name on behalf of the trustee and for the benefit of the Certificateholders.
The Collection Account, the Distribution Accounts, the Interest Reserve Account, the Excess Interest Distribution Account, the Gain-on-Sale Reserve Account and the REO Accounts are collectively referred to as the “Securitization Accounts“ (but with respect to any Whole Loan, only to the extent of the issuing entity’s interest in the Whole Loan). Each of the foregoing accounts will be held at a depository institution or trust company meeting the requirements of the PSA.
Amounts on deposit in the foregoing accounts may be invested in certain United States government securities and other investments meeting the requirements of the PSA (“Permitted Investments“). Interest or other income earned on funds in the accounts maintained by the master servicer, the certificate administrator or the special servicer will be payable to each of them as additional compensation, and each of them will be required to bear any losses resulting from its investment of such funds.
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Withdrawals from the Collection Account
The master servicer may, from time to time, make withdrawals from the Collection Account (or the applicable subaccount of the Collection Account) for any of the following purposes, in each case only to the extent permitted under the PSA (the order set forth below not constituting an order of priority for such withdrawals):
(i) to remit on each P&I Advance Date (A) to the certificate administrator for deposit into the Lower-Tier REMIC Distribution Account certain portions of the Available Funds and any Prepayment Premiums or Yield Maintenance Charges attributable to the Mortgage Loans on the related Distribution Date or (B) to the certificate administrator for deposit into the Excess Interest Distribution Account an amount equal to the Excess Interest received by the master servicer in the applicable one-month period ending on the related Determination Date, if any;
(ii) to pay or reimburse the master servicer, the special servicer and the trustee, as applicable, pursuant to the terms of the PSA for Advances made by any of them and interest on Advances (the master servicer’s, special servicer’s or the trustee’s respective right, as applicable, to reimbursement for items described in this clause (ii) being limited as described above under “—Advances”);
(iii) to pay to the master servicer and special servicer, as compensation, the aggregate unpaid servicing compensation;
(iv) to pay to the operating advisor the Operating Advisor Consulting Fee (but, with respect to the period when the outstanding Certificate Balances of the Control Eligible Certificates have not been reduced to zero as a result of the allocation of Realized Losses to such certificates, only to the extent actually received from the related borrower) or the Operating Advisor Fee;
(v) to pay to the asset representations reviewer the Asset Representations Reviewer Fee and any unpaid Asset Representations Reviewer Asset Review Fee (but only to the extent such Asset Representations Reviewer Asset Review Fee is to be paid by the issuing entity);
(vi) to reimburse the trustee, the special servicer and the master servicer, as applicable, for certain Nonrecoverable Advances or Workout-Delayed Reimbursement Amounts;
(vii) to reimburse the master servicer, the special servicer or the trustee, as applicable, for any unreimbursed expenses reasonably incurred with respect to each related Mortgage Loan that has been repurchased or substituted by such person pursuant to the PSA or otherwise;
(viii) to reimburse the master servicer or the special servicer for any unreimbursed expenses reasonably incurred by such person in connection with the enforcement of the related mortgage loan seller’s obligations under the applicable section of the related MLPA;
(ix) to pay for any unpaid costs and expenses incurred by the issuing entity;
(x) to pay itself and the special servicer, as applicable, as additional servicing compensation, (A) interest and investment income earned in respect of amounts relating to the issuing entity held in the Collection Account (but only to the
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extent of the net investment earnings during the applicable one month period ending on the related Distribution Date) and (B) certain penalty charges and default interest;
(xi) to recoup any amounts deposited in the Collection Account in error;
(xii) 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 operating advisor, the asset representations reviewer, the depositor or any of their respective directors, officers, members, managers, employees and agents, unpaid additional expenses of the issuing entity and certain other unreimbursed expenses incurred by such person pursuant to and to the extent reimbursable under the PSA and to satisfy any indemnification obligations of the issuing entity under the PSA;
(xiii) to pay for the cost of the opinions of counsel or the cost of obtaining any extension to the time in which the issuing entity is permitted to hold REO Property;
(xiv) to pay any applicable federal, state or local taxes imposed on any Trust REMIC, or any of their assets or transactions, together with all incidental costs and expenses, to the extent that none of the master servicer, the special servicer, the certificate administrator or the trustee is liable under the PSA;
(xv) to pay the CREFC® Intellectual Property Royalty License Fee;
(xvi) to reimburse the certificate administrator out of general collections on the Mortgage Loans and REO Properties for legal expenses incurred by and reimbursable to it by the issuing entity of any administrative or judicial proceedings related to an examination or audit by any governmental taxing authority;
(xvii) to pay the related mortgage loan seller or any other person, with respect to each Mortgage Loan, if any, previously purchased or replaced by such person pursuant to the PSA, all amounts received thereon subsequent to the date of purchase or replacement relating to periods after the date of purchase or replacement;
(xviii) to remit to the certificate administrator for deposit in the Interest Reserve Account the amounts required to be deposited in the Interest Reserve Account pursuant to the PSA; and
(xix) to clear and terminate the Collection Account pursuant to a plan for termination and liquidation of the issuing entity.
The master servicer will also be entitled to make withdrawals, from time to time, from the Collection Account of amounts necessary for the payments or reimbursements required to be paid to the parties to the applicable Non-Serviced PSA, pursuant to the applicable Intercreditor Agreement and the applicable Non-Serviced PSA. See “—Servicing of the Non-Serviced Mortgage Loans”.
If a P&I Advance is made with respect to any Mortgage Loan (other than any Non-Serviced Mortgage Loan) that is part of a Whole Loan, then that P&I Advance, together with interest on such P&I Advance, may only be reimbursed out of future payments and collections on that Mortgage Loan or, as and to the extent described under “—Advances” above, on other Mortgage Loans. Likewise, the Certificate Administrator/Trustee Fee, the Operating Advisor Fee and the Asset Representations Reviewer Fee that accrue with respect
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to any Mortgage Loan (other than any Non-Serviced Mortgage Loan) that is part of a Whole Loan and any other amounts payable to the operating advisor may only be paid out of payments and other collections on such Mortgage Loan and/or the Mortgage Pool generally.
Servicing and Other Compensation and Payment of Expenses
General
The parties to the PSA other than the depositor will be entitled to payment of certain fees as compensation for services performed under the PSA. Below is a summary of the fees payable to the parties to the PSA from amounts that the issuing entity is entitled to receive. In addition, CREFC® will be entitled to a license fee for use of its names and trademarks, including the CREFC® Investor Reporting Package. Certain additional fees and costs payable by the related borrowers are allocable to the parties to the PSA other than the depositor, but such amounts are not payable from amounts that the issuing entity is entitled to receive.
The amounts available for distribution on the certificates on any Distribution Date will generally be net of the following amounts:
Type/Recipient(1) | Amount(1) | Source(1) | Frequency | |||
| Fees | ||||||
| Master Servicing Fee / Master Servicer | With respect to the Mortgage Loans, the product of the monthly portion of the related annual Servicing Fee Rate calculated on the Stated Principal Balance of such Mortgage Loan. | Out of recoveries of interest with respect to the related Mortgage Loan or if unpaid after final recovery on the related Mortgage Loan, out of general collections on deposit in the Collection Account with respect to the other Mortgage Loans. | Monthly | |||
| Special Servicing Fee / Special Servicer | With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) that are Specially Serviced Loans, the product of the monthly portion of the related annual Special Servicing Fee Rate calculated on the Stated Principal Balance of such Specially Serviced Loan. | First, from Liquidation Proceeds, Insurance and Condemnation Proceeds, and collections in respect of the related Mortgage Loan, and then from general collections on deposit in the Collection Account with respect to the other Mortgage Loans. | Monthly | |||
| Workout Fee / Special Servicer(2) | With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) that are Corrected Loans, the Workout Fee Rate multiplied by all payments of interest and principal received on such Mortgage Loan for so long as they remain a Corrected Loan. | Out of each collection of interest, principal, and prepayment consideration received on the related Mortgage Loan and then from general collections on deposit in the Collection Account with respect to the other Mortgage Loans. | Time to time | |||
| Liquidation Fee | With respect to each | From any Liquidation | Time to time |
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Type/Recipient(1) | Amount(1) | Source(1) | Frequency | |||
| Fees | ||||||
| /Master Servicer(2) | Mortgage Loan (other than a Non-Serviced Mortgage Loan) with respect to which the master servicer acts as Enforcing Servicer and obtains (i) any Liquidation Proceeds or Insurance and Condemnation Proceeds, or (ii) Loss of Value Payments, an amount calculated by application of a Liquidation Fee Rate to the related payment or proceeds (exclusive of default interest). | Proceeds, Insurance and Condemnation Proceeds, Loss of Value Payments and any other revenues received with respect to the related Mortgage Loan and then from general collections on deposit in the Collection Account with respect to the other Mortgage Loans. | ||||
| Liquidation Fee /Special Servicer(2) | With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) that is a Specially Serviced Loan (or REO Property) or for which the special servicer is the enforcing servicer for which the special servicer obtains (i) a full, partial or discounted payoff, (ii) any Liquidation Proceeds or Insurance and Condemnation Proceeds, or (iii) Loss of Value Payments or Purchase Price paid by a Mortgage Loan Seller, an amount calculated by application of a Liquidation Fee Rate to the related payment or proceeds (exclusive of default interest). | From any Liquidation Proceeds, Insurance and Condemnation Proceeds, Loss of Value Payments and any other revenues received with respect to the related Mortgage Loan and then from general collections on deposit in the Collection Account with respect to the other Mortgage Loans. | Time to time | |||
| Additional Servicing Compensation / Master Servicer and/or Special Servicer(3) | All modification fees, assumption application fees, defeasance fees, assumption, waiver, consent and earnout fees, late payment charges, default interest, review fees and other similar fees actually collected on the Mortgage Loans (other than a Non-Serviced Mortgage Loan). | Related payments made by borrowers with respect to the related Mortgage Loans. | Time to time | |||
| Certificate Administrator / Trustee Fee / | With respect to each Distribution Date, an amount equal to the | Out of general collections with respect to Mortgage Loans on deposit in the | Monthly |
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Type/Recipient(1) | Amount(1) | Source(1) | Frequency | |||
| Fees | ||||||
| Certificate Administrator | product of the monthly portion of the annual Certificate Administrator/Trustee Fee Rate multiplied by the Stated Principal Balance of each Mortgage Loan. | Collection Account or the Distribution Account. | ||||
| Certificate Administrator / Trustee Fee / Trustee | With respect to each Distribution Date, an amount equal to the monthly portion of the annual Certificate Administrator/Trustee Fee. | Out of general collections with respect to Mortgage Loans on deposit in the Collection Account or the Distribution Account. | Monthly | |||
| Operating Advisor Fee / Operating Advisor | With respect to each Distribution Date, an amount equal to the product of the monthly portion of the annual Operating Advisor Fee Rate multiplied by the Stated Principal Balance of each Mortgage Loan (excluding each Non-Serviced Mortgage Loan, and each related Companion Loan). | First, out of recoveries of interest with respect to the related Mortgage Loan and then, if the related Mortgage Loan has been liquidated, out of general collections on deposit in the Collection Account with respect to the other Mortgage Loans. | Monthly | |||
| Operating Advisor Consulting Fee / Operating Advisor | $10,000 for each Major Decision made with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan and each related Companion Loan) or, with respect to the period when the outstanding Certificate Balances of the Control Eligible Certificates have not been reduced to zero as a result of the allocation of Realized Losses to such certificates, such lesser amount as the related borrower agrees to pay with respect to such Mortgage Loan. | Payable by the related borrower when incurred during the period when the outstanding Certificate Balances of the Control Eligible Certificates have not been reduced to zero as a result of the allocation of Realized Losses to such certificates; and when incurred subsequent to such period, out of general collections on deposit in the Collection Account. | Time to time | |||
| Asset Representations Reviewer Fee / Asset Representations Reviewer | With respect to each Distribution Date, an amount equal to the product of the monthly portion of the annual Asset Representations Reviewer Fee Rate multiplied by the Stated Principal Balance of each Mortgage Loan | Out of general collections on deposit in the Collection Account. | Monthly |
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Type/Recipient(1) | Amount(1) | Source(1) | Frequency | |||
| Fees | ||||||
| (including each Non-Serviced Mortgage Loan, but excluding each Companion Loan). | ||||||
| Asset Representations Reviewer Upfront Fee | A fee of $5,000 on the Closing Date. | Payable by the mortgage loan sellers. | At closing | |||
| Asset Representations Reviewer Asset Review Fee | For each Delinquent Loan, the sum of (i) $15,000 plus (ii) $2,000 per additional Mortgaged Property in excess of one Mortgaged Property with respect to such Delinquent Loan, plus (iii) $2,000 per Mortgaged Property subject to a ground lease with respect to such Delinquent Loan, plus (iv) $1,500 per Mortgaged Property with respect to such Delinquent Loan subject to a franchise, hotel management 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 of the occurrence of the Asset Review. | Payable 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 trust out of general collections on deposit in the Collection Account. | In connection with each Asset Review with respect to a Delinquent Loan. | |||
| Servicing Advances / Master Servicer, Special Servicer or Trustee | To the extent of funds available, the amount of any Servicing Advances. | First, from funds collected with respect to the related Mortgage Loan, and then with respect to any Nonrecoverable Advance or a Workout-Delayed Reimbursement Amount, out of general collections with respect to Mortgage Loans on deposit in the Collection Account, subject to certain limitations. | Time to time | |||
| Interest on Servicing Advances / Master Servicer, Special | At a rate per annum equal to the Reimbursement Rate calculated on the | First, out of late payment charges and default interest on the related Mortgage | Time to time |
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Type/Recipient(1) | Amount(1) | Source(1) | Frequency | |||
| Fees | ||||||
| Servicer or Trustee | number of days the related Advance remains unreimbursed. | Loan, and then, after or at the same time such Servicing Advance is reimbursed, out of any other amounts then on deposit in the Collection Account, subject to certain limitations. | ||||
| P&I Advances / Master Servicer and Trustee | To the extent of funds available, the amount of any P&I Advances. | First, from funds collected with respect to the related Mortgage Loan and then, with respect to a Nonrecoverable Advance or a Workout-Delayed Reimbursement Amount, out of general collections on deposit in the Collection Account. | Time to time | |||
| Interest on P&I Advances / Master Servicer and Trustee | At a rate per annum equal to the Reimbursement Rate calculated on the number of days the related Advance remains unreimbursed. | First, out of default interest and late payment charges on the related Mortgage Loan and then, after or at the same time such P&I Advance is reimbursed, out of general collections then on deposit in the Collection Account with respect to the other Mortgage Loans. | Monthly | |||
| Indemnification Expenses / Trustee, Certificate Administrator, Depositor, Master Servicer, Special Servicer, Operating Advisor or Asset Representations Reviewer and any director, officer, employee or agent of any of the foregoing parties | Amount to which such party is entitled for indemnification under the PSA. | Out of general collections with respect to Mortgage Loans on deposit in the Collection Account or the Distribution Account. | Time to time | |||
| CREFC® Intellectual Property Royalty License Fee / CREFC® | With respect to each Distribution Date, an amount equal to the product of the CREFC® Intellectual Property Royalty License Fee Rate multiplied by the outstanding principal amount of each Mortgage Loan. | Out of general collections with respect to Mortgage Loans on deposit in the Collection Account. | Monthly | |||
| Expenses of the | Based on third party | First from collections on the |
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Type/Recipient(1) | Amount(1) | Source(1) | Frequency | |||
| Fees | ||||||
| issuing entity not advanced (which may include reimbursable expenses incurred by the operating advisor or asset representations reviewer, expenses relating to environmental remediation or appraisals, expenses of operating REO Property and expenses incurred by any independent contractor hired to operate REO Property) | charges. | related Mortgage Loan (income on the related REO Property), if applicable, and then from general collections with respect to Mortgage Loans in the Collection Account, subject to certain limitations. |
| (1) | With respect to any Mortgage Loan (or any Specially Serviced Loan) in respect of which an REO Property was acquired, all references to Mortgage Loan, Companion Loan, Specially Serviced Loan in this table will be deemed to also be references to or to also include any REO Loans. With respect to each Non-Serviced Mortgage Loan, the related master servicer, special servicer, certificate administrator, trustee, operating advisor, if any, and/or asset representations reviewer, if any, under the related Non-Serviced PSA will be entitled to receive similar fees and reimbursements with respect to that Non-Serviced Mortgage Loan in amounts, from sources and at frequencies that are similar, but not necessarily identical, to those described above and, in certain cases (for example, with respect to unreimbursed special servicing fees and servicing advances with respect to each Non-Serviced Whole Loan), such amounts may be reimbursable from general collections on the other Mortgage Loans to the extent not recoverable from the related Non-Serviced Whole Loan. |
| (2) | Subject to certain offsets as described below. Circumstances as to when a Liquidation Fee is not payable are set forth in this “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” section. |
| (3) | Allocable between the master servicer and the special servicer as provided in the PSA. |
Master Servicing Compensation
The fee of the master servicer including the fee of any primary or other sub-servicer (the “Servicing Fee“) will be payable monthly from amounts allocable in respect of interest received in respect of each Mortgage Loan and REO Loan (other than the portion of any REO Loan related to any Non-Serviced Companion Loan) (including Specially Serviced Loans and any Non-Serviced Mortgage Loan constituting a “specially serviced loan” under any related Non-Serviced PSA), and will accrue at a rate (the “Servicing Fee Rate“) on the Stated Principal Balance of such Mortgage Loan or REO Loan, equal to a per annum rate ranging from 0.00500% to 0.05500%.
In addition to the Servicing Fee, the master servicer will be entitled to retain, as additional servicing compensation (other than with respect to a Non-Serviced Mortgage Loan), the following amounts to the extent collected from the related borrowers:
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| ● | 100% of Excess Modification Fees related to any modifications, waivers, extensions or amendments of any such Mortgage Loans (other than a Non-Serviced Mortgage Loan) that are not Specially Serviced Loans, that are Master Servicer Decisions; provided that if any such matter involves a Major Decision, then the master servicer will be entitled to 50% of such Excess Modification Fees; |
| ● | 100% of all assumption application fees and other similar items received on any such Mortgage Loans that are non-Specially Serviced Loans to the extent the master servicer is processing the underlying transaction and 100% of all defeasance fees (provided that for the avoidance of doubt, any such defeasance fee will not include any modification fees or waiver fees in connection with a defeasance that the special servicer is entitled to under the PSA); |
| ● | 100% of assumption, waiver, consent and earnout fees and other similar fees (other than assumption application fees and defeasance fees) pursuant to the PSA on any such Mortgage Loans that are not Specially Serviced Loans relating to Master Servicer Decisions; provided that if any such matter involves a Major Decision, then the master servicer will be entitled to 50% of such assumption, waiver, consent and earnout fees and other similar fees; |
| ● | with respect to accounts held by the master servicer, 100% of charges by the master servicer collected for checks returned for insufficient funds; |
| ● | 100% of charges for beneficiary statements or demands actually paid by the related borrowers under such Mortgage Loans that are not Specially Serviced Loans; |
| ● | the excess, if any, of Prepayment Interest Excesses over Prepayment Interest Shortfalls arising from any principal prepayments on such Mortgage Loans; and |
| ● | late payment charges and default interest paid by such borrowers (that were accrued while the related Mortgage Loans (other than a Non-Serviced Mortgage Loan) were not Specially Serviced Loans), but only to the extent such late payment charges and default interest are not needed to pay interest on Advances or certain additional trust fund expenses (excluding Special Servicing Fees, Liquidation Fees and Workout Fees) incurred with respect to the related Mortgage Loan since the Closing Date. |
Notwithstanding anything to the contrary, (A) the master servicer will be entitled to that portion, if any, of a penalty charge collected on a Specially Serviced Loan to the extent accrued prior to the related servicing transfer event and (B) if the related Special Servicer has partially waived any penalty charge (part of which accrued prior to the related servicing transfer event), any collections in respect of such penalty charge will be shared pro rata by the master servicer and the special servicer based on the respective portions of such penalty charge to which each would otherwise have been entitled.
Notwithstanding anything to the contrary, the master servicer and the special servicer will each be entitled to charge and retain reasonable review fees in connection with any borrower request to the extent such fees are not prohibited under the related Mortgage Loan documents and are actually paid by or on behalf of the related borrower. In addition, the master servicer also is authorized but not required to invest or direct the investment of
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funds held in the Collection Account in Permitted Investments, 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 PSA. The master servicer also is entitled to retain any interest earned on any servicing escrow account maintained by the master servicer, to the extent the interest is not required to be paid to the related borrowers.
See “—Modifications, Waivers and Amendments”.
“Excess Modification Fees“ means, with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan), the sum of (A) the excess, if any, of (i) any and all Modification Fees with respect to a modification, waiver, extension or amendment of any of the terms of such Mortgage Loan, over (ii) all unpaid or unreimbursed additional expenses (including, without limitation, reimbursement of 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 with respect to the related Mortgage Loan, and 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 or otherwise.
“Modification Fees“ means, with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan), any and all fees with respect to a modification, extension, waiver or amendment that modifies, extends, amends or waives any term of such Mortgage Loan documents (as evidenced by a signed writing) agreed to by the master servicer or the special servicer, as applicable (other than all assumption fees, assumption application fees, consent fees, defeasance fees, Special Servicing Fees, Liquidation Fees or Workout Fees).
With respect to the master servicer and the special servicer, the Excess Modification Fees collected and earned by such person from the related borrower (taken in the aggregate with any other Excess Modification Fees collected and earned by such person from the related borrower within the prior 12 months of the collection of the current Excess Modification Fees) will be subject to a cap of 1.0% of the outstanding principal balance of the related Mortgage Loan on the closing date of the related modification, extension, waiver or amendment (after giving effect to such modification, extension, waiver or amendment) with respect to any Mortgage Loan.
The Servicing Fee is calculated on the Stated Principal Balance of each Mortgage Loan (including each Non-Serviced Mortgage Loan and any successor REO Loan) in the same manner as interest is calculated on such Mortgage Loans. The Servicing Fee for each Mortgage Loan and any successor REO Loan is included in the Administrative Cost Rate listed for that Mortgage Loan on Annex A-1. Any Servicing Fee Rate calculated on an Actual/360 Basis will be recomputed on the basis of twelve 30-day months, assuming a 360-day year (“30/360 Basis“) for purposes of calculating the Net Mortgage Rate.
Pursuant to the terms of the PSA, Wells Fargo Bank will be entitled to retain a portion of the Servicing Fee with respect to each Mortgage Loan and any successor REO Loan (other than a Non-Serviced Mortgage Loan), notwithstanding any termination or resignation of such party as master servicer; provided that Wells Fargo Bank may not retain any portion of the Servicing Fee to the extent that portion of the Servicing Fee is required to appoint a successor 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.
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The master servicer will be required to pay its overhead and any general and administrative expenses incurred by it in connection with its servicing activities under the PSA. The master servicer will not be entitled to reimbursement for any expenses incurred by it except as expressly provided in the PSA. The master servicer will be responsible for all fees payable to any sub-servicers. See “Description of the Certificates—Distributions—Method, Timing and Amount”.
A Liquidation Fee will be payable to the master servicer with respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) with respect to which the master servicer acts as Enforcing Servicer and obtains (i) any Liquidation Proceeds or Insurance and Condemnation Proceeds or (ii) Loss of Value Payments (including with respect to the related Companion Loan, if applicable).
With respect to a Non-Serviced Mortgage Loan, the related Non-Serviced Master Servicer (or primary servicer) will be entitled to a primary servicing fee accruing at a rate equal to (i) 0.00250% per annum with respect to the Village at Leesburg Mortgage Loan, (ii) 0.00250% per annum with respect to the 181 Fremont Street Mortgage Loan, (iii) 0.00250% per annum with respect to the CoolSprings Galleria Mortgage Loan, and (iv) 0.00500% per annum with respect to the Flats at East Bank Mortgage Loan.
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 each REO Loan (other than a Non-Serviced Mortgage Loan) on a loan-by-loan basis at a rate equal to the greater of (i) a per annum rate of 0.25% and (ii) the per annum rate that would result in a special servicing fee of $3,500 for the related month (the “Special Servicing Fee Rate”), calculated on the basis of the Stated Principal Balance of the related Mortgage Loan (including any REO Loan) and Companion Loan, as applicable, and in the same manner as interest is calculated on the Specially Serviced Loans, and will be payable monthly, first from Liquidation Proceeds, Insurance and Condemnation Proceeds, and collections in respect of the related REO Property or Specially Serviced Loan and then from general collections on all the Mortgage Loans (other than a Non-Serviced Mortgage Loan) and any REO Properties. Each Non-Serviced Whole Loan will be subject to a similar special servicing fee pursuant to the related Non-Serviced PSA. For further detail, see “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
The “Workout Fee” will generally be payable with respect to each Corrected Loan and will be calculated by application of a “Workout Fee Rate” of 1.00% to each collection (other than penalty charges and Excess Interest) of interest and principal (other than any amount for which a Liquidation Fee would be paid) (including scheduled payments, prepayments, balloon payments, and payments at maturity or anticipated repayment date) received on the Corrected Loan for so long as it remains a Corrected Loan; provided, however, that after receipt by the special servicer of Workout Fees with respect to such Corrected Loan in an amount equal to $25,000, any Workout Fees in excess of such amount will be reduced by the Excess Modification Fee Amount; provided, further, however, that in the event the Workout Fee collected over the course of such workout calculated at the Workout Fee Rate is less than $25,000, then the special servicer will be entitled to an amount from the final payment on the related Corrected Loan that would result in the total Workout Fees payable to the special servicer in respect of that Corrected Loan equal to $25,000. The “Excess
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Modification Fee Amount” with respect to the master servicer or special servicer, any Corrected Loan and any particular modification, waiver, extension or amendment with respect to such Corrected Loan that gives rise to the payment of a Workout Fee, is an amount equal to the aggregate of any Excess Modification Fees paid by or on behalf of the related borrower with respect to the related Mortgage Loan and received and retained by the master servicer or special servicer, as applicable, as compensation within the prior 12 months of such modification, waiver, extension or amendment, but only to the extent those fees have not previously been deducted from a Workout Fee or Liquidation Fee. Each Non-Serviced Whole Loan will be subject to a similar workout fee pursuant to the related Non-Serviced PSA. For further details, see “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans”, “—The Non-Serviced AB Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
The Workout Fee with respect to any Corrected Loan will cease to be payable if the Corrected Loan again becomes a Specially Serviced Loan but will become payable again if and when the Mortgage Loan again becomes a Corrected Loan. The Workout Fee with respect to any Specially Serviced Loan that becomes a Corrected Loan will be reduced by any Excess Modification Fees paid by or on behalf of the related borrower with respect to a related Mortgage Loan or REO Loan and received by the special servicer as compensation within the prior 12 months, but only to the extent those fees have not previously been deducted from a Workout Fee or Liquidation Fee.
If the special servicer is terminated (other than for cause) or resigns, it will retain the right to receive any and all Workout Fees payable with respect to a Mortgage Loan that became a Corrected Loan during the period that it acted as special servicer and remained a Corrected Loan at the time of that termination or resignation, except that such Workout Fees will cease to be payable 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. If the special servicer resigns or is terminated (other than for cause), it will receive any Workout Fees payable on Specially Serviced Loans for which the resigning or terminated special servicer had determined to grant a forbearance or 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 made 3 consecutive timely Periodic Payments and which subsequently becomes a Corrected Loan as a result of the borrower making such 3 consecutive timely Periodic Payments.
A Liquidation Fee will be payable to the special servicer with respect to each (a) non-Specially Serviced Loan with respect to which it acts as the Enforcing Servicer, (b) Specially Serviced Loan or (c) REO Property (except with respect to any Non-Serviced Mortgage Loan) as to which the special servicer obtains (i) a full, partial or discounted payoff from the related borrower, (ii) any Liquidation Proceeds or Insurance and Condemnation Proceeds or (iii) Loss of Value Payments or Purchase Price (including with respect to the related Companion Loan, if applicable).
A “Liquidation Fee”, with respect to a Mortgage Loan, an REO Property, a Loss of Value Payment or a Purchase Price, will be an amount payable from, and calculated by application of a “Liquidation Fee Rate” of 1.00% to the related payment or proceeds (or, if such rate would result in an aggregate liquidation fee less than $25,000, then the Liquidation Fee Rate will be equal to such higher rate as would result in an aggregate liquidation fee equal to $25,000); provided that the Liquidation Fee with respect to any Mortgage Loan will be reduced by the amount of any Excess Modification Fees paid by or on behalf of the related borrower with respect to the related Mortgage Loan or REO Property and received by the special servicer as compensation within the prior 12 months, but only
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to the extent those fees have not previously been deducted from a Workout Fee or Liquidation Fee.
Notwithstanding anything to the contrary described above, no Liquidation Fee will be payable based upon, or out of, Liquidation Proceeds or a Loss of Value Payment received in connection with:
(i) (A) the repurchase of, or substitution for, any Mortgage Loan by a mortgage loan seller for a breach of representation or warranty or for defective or deficient Mortgage Loan documentation within the time period (or extension of such time period) provided for such repurchase or substitution if such repurchase or substitution occurs prior to the termination of such extended period, or (B) the payment of a Loss of Value Payment in connection with any such breach or document defect if the applicable mortgage loan seller makes such Loss of Value Payment within the 90-day initial cure period or, if applicable, within the subsequent 90-day extended cure period,
(ii) the purchase of any Specially Serviced Loan or an REO Property that is subject to mezzanine indebtedness by the holder of the related mezzanine loan, in each case, within 90 days of such holder’s purchase option first becoming exercisable during the period prior to such Mortgage Loan becoming a Corrected Loan,
(iii) the purchase of all of the Mortgage Loans and REO Properties in connection with any termination of the issuing entity,
(iv) the purchase of any Specially Serviced Loan by the special servicer or its affiliate (except if such affiliate purchaser is the Directing Certificateholder or its affiliate; provided, however, that if no Control Termination Event has occurred and is continuing, and such affiliated Directing Certificateholder or its affiliate purchases any Specially Serviced Loan within 90 days after the special servicer delivers to such Directing Certificateholder for approval the initial asset status report with respect to such Specially Serviced Loan, the special servicer will not be entitled to a liquidation fee in connection with such purchase by the Directing Certificateholder or its affiliates), or
(v) if a Mortgage Loan becomes a Specially Serviced Loan only because of an event described in clause (1) of the definition of “Specially Serviced Loan” under the heading “Pooling and Servicing Agreement—General” and the related Liquidation Proceeds are received within 90-days following the related maturity date as a result of the related Mortgage Loan being refinanced or otherwise repaid in full.
Notwithstanding the foregoing, in the event that a liquidation fee is not payable due to the application of any of clauses (i) through (v) above, the special servicer may still collect and retain a liquidation fee and similar fees from the related borrower to the extent provided for in, or not prohibited by, the related Mortgage Loan documents. Each Non-Serviced Whole Loan will be subject to a similar liquidation fee pursuant to the related Non-Serviced PSA. For further detail, see “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
The special servicer will also be entitled to additional servicing compensation relating to each Mortgage Loan in the form of:
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(i) 100% of Excess Modification Fees related to modifications, waivers, extensions or amendments of any Specially Serviced Loans,
(ii) 100% of assumption application fees and other similar items received with respect to Specially Serviced Loans and 100% of assumption application fees and other similar items received with respect to Mortgage Loans (other than Non-Serviced Mortgage Loans) that are not Specially Serviced Loans to the extent the special servicer is processing the underlying transaction,
(iii) 100% of waiver, consent and earnout fees on any Specially Serviced Loan or certain other similar fees paid by the related borrower,
(iv) 100% of assumption fees and other related fees as further described in the PSA, received with respect to Specially Serviced Loans,
(v) 50% of all Excess Modification Fees and assumption, waiver, consent and earnout fees and other similar fees received with respect to any Mortgage Loans (other than Non-Serviced Mortgage Loans) that are not Specially Serviced Loans to the extent that the matter involves a Major Decision; and
(vi) late payment charges and default interest paid by such borrowers (that were accrued while the related Mortgage Loans (other than a Non-Serviced Mortgage Loan) were Specially Serviced Loans), but only to the extent such late payment charges and default interest are not needed to pay interest on Advances or certain additional trust fund expenses (excluding Special Servicing Fees, Liquidation Fees and Workout Fees) incurred with respect to the related Mortgage Loan since the Closing Date.
Notwithstanding anything to the contrary, (A) the special servicer will be entitled to that portion, if any, of a penalty charge collected on a Mortgage Loan to the extent accrued subsequent to a special servicing transfer event and prior to the date such Mortgage Loan became a Corrected Loan and (B) if the master servicer has partially waived any penalty charge (part of which accrued subsequent to the occurrence of a special servicing transfer event and prior to the date such Mortgage Loan became a Corrected Loan), any collections in respect of such penalty charge will be shared pro rata by the master servicer and the special servicer based on the respective portions of such penalty charge to which each would otherwise have been entitled.
For the avoidance of doubt, with respect to any fee split (other than a fee split with regard to penalty charges) between the master servicer and the special servicer pursuant to the terms of the PSA, the master servicer and the special servicer will each have the right, but not any obligation, to reduce or elect not to charge its respective percentage interest in any such fee; provided, however, that (x) neither the master servicer nor the special servicer will have the right to reduce or elect not to charge the percentage interest of any fee due to the other and (y) to the extent either of the master servicer or the special servicer exercises its right to reduce or elect not to charge its respective percentage interest in any fee, the party that reduced or elected not to charge such fee will not have any right to share in any portion of the other party’s fee. For the avoidance of doubt, if the master servicer decides not to charge any fee (other than penalty charges), the special servicer will still be entitled to charge the portion of the related fee the special servicer would have been entitled to if the master servicer had charged a fee and the master servicer will not be entitled to any percentage interest of such fee charged by the special servicer. Similarly, if the special servicer decides not to charge any fee (other than penalty charges), the master servicer will still be entitled to charge the portion of the related fee the master servicer
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would have been entitled to if the special servicer had charged a fee and the special servicer will not be entitled to any percentage interest of such fee charged by the master servicer.
The special servicer also is authorized but not required to invest or direct the investment of funds held in the REO Accounts and any loss of value reserve fund in Permitted Investments, and the special 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 PSA.
Each Non-Serviced Mortgage Loan is serviced under the related Non-Serviced PSA (including on those occasions under such Non-Serviced PSA when the servicing of such Non-Serviced Mortgage Loan has been transferred from the related Non-Serviced Master Servicer to the related Non-Serviced Special Servicer). Accordingly, in its capacity as the special servicer under the PSA, the special servicer will not be entitled to receive any special servicing compensation for any Non-Serviced Mortgage Loan. Only the related Non-Serviced Special Servicer will be entitled to special servicing compensation on any such Non-Serviced Mortgage Loan and only the related Non-Serviced Special Servicer will be entitled to special servicing compensation on any related Non-Serviced Whole Loan.
Disclosable Special Servicer Fees
The PSA will provide that the special servicer and its affiliates will be prohibited from receiving or retaining any Disclosable Special Servicer Fees in connection with the disposition, workout or foreclosure of any Mortgage Loan, the management or disposition of any REO Property, or the performance of any other special servicing duties under the PSA. The PSA will also provide that, with respect to each Distribution Date, the special servicer must deliver or cause to be delivered to the master servicer within two (2) business days following the Determination Date, and the master servicer must deliver, to the extent it has received, to the certificate administrator, without charge and on the P&I Advance Date, an electronic report which discloses and contains an itemized listing of any Disclosable Special Servicer Fees received by the special servicer or any of its affiliates with respect to such Distribution Date, provided that no such report will be due in any month during which no Disclosable Special Servicer Fees were received.
“Disclosable Special Servicer Fees” means, with respect to any Mortgage Loan (other than any Non-Serviced Mortgage Loan) (including any related REO Property), any compensation and other remuneration (including, without limitation, in the form of commissions, brokerage fees, rebates, or as a result of any other fee-sharing arrangement) received or retained by the special servicer or any of its affiliates that is paid by any person (including, without limitation, the issuing entity, any mortgagor, any manager, any guarantor or indemnitor in respect of such Mortgage Loan and any purchaser of such Mortgage Loan or REO Property) in connection with the disposition, workout or foreclosure of any Mortgage 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 PSA, other than (1) any Permitted Special Servicer/Affiliate Fees and (2) any compensation to which the special servicer is entitled pursuant to the PSA.
“Permitted Special Servicer/Affiliate Fees” means any commercially reasonable treasury management fees, banking fees, title insurance (or title agency) and/or other fees, insurance commissions or fees and appraisal fees received or retained by the special servicer or any of its affiliates in connection with any services performed by such party with respect to any Mortgage Loan (other than any Non-Serviced Mortgage Loan) (including any related REO Property) in accordance with the PSA.
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The special servicer will be required to pay its overhead and any general and administrative expenses incurred by it in connection with its servicing activities under the PSA. The special servicer will not be entitled to reimbursement for any expenses incurred by it except as expressly provided in the PSA. See “Description of the Certificates—Distributions—Method, Timing and Amount”.
Certificate Administrator and Trustee Compensation
As compensation for the performance of its routine duties, the trustee and the certificate administrator will be paid a fee (collectively, the “Certificate Administrator/Trustee Fee”); provided that the Certificate Administrator/Trustee Fee includes the trustee fee, and the certificate administrator will pay the trustee fee to the trustee in an amount equal to $290 per month. The Certificate Administrator/Trustee Fee will be payable monthly from amounts received in respect of the Mortgage Loans and will be equal to the product of a rate equal to 0.01070% per annum (the “Certificate Administrator/Trustee Fee Rate”) and the Stated Principal Balance of the Mortgage Loans and any REO Loans and will be calculated in the same manner as interest is calculated on such Mortgage Loans or REO Loans.
Operating Advisor Compensation
The fee of the operating advisor (the “Operating Advisor Fee”) will be payable monthly from amounts received in respect of each Mortgage Loan (excluding each Non-Serviced Mortgage Loan and any Companion Loan) and REO Loan, and will be equal to the product of a per annum rate equal to 0.00297% (the “Operating Advisor Fee Rate”), and the Stated Principal Balance of the Mortgage Loans and any REO Loans and will be calculated in the same manner as interest is calculated on Mortgage Loans and REO Loans.
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 obligations and performed its duties with respect to that Major Decision. The Operating Advisor Consulting Fee will be a fee for each such Major Decision equal to $10,000 (or such lesser amount as the related borrower agrees to pay) with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan and any related Companion Loan); provided that the operating advisor may in its sole discretion reduce the Operating Advisor Consulting Fee with respect to any Major Decision; provided, further, however, that to the extent such fee is incurred after the outstanding Certificate Balances of the Control Eligible Certificates have been reduced to zero as a result of the allocation of Realized Losses to such certificates, such fee will be payable in full to the operating advisor as a trust fund expense.
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 above in “—Withdrawals from the Collection Account”, but with respect to the Operating Advisor Consulting Fee, only as and to the extent that such fee is actually received from the related borrower (other than as described above). If the operating advisor has consultation rights with respect to a Major Decision, the PSA will require the master servicer or 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 that are consistent with the efforts in accordance with the Servicing Standard that the master servicer or the special servicer, as applicable, would use to collect any borrower-paid fee not specified in the Mortgage Loan documents owed to it, and only to the extent not prohibited by the related Mortgage Loan documents, and in no event will it take any enforcement action with respect to the collection of such Operating Advisor
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Consulting Fee other than requests for collection. The master servicer or special servicer, as applicable, will each be permitted to waive or reduce the amount of any such Operating Advisor Consulting Fee payable by the related borrower if it determines that such full or partial waiver is in accordance with the Servicing Standard; provided that the master servicer or special servicer, as applicable, will be required to consult, on a non-binding basis, with the operating advisor prior to any such waiver or reduction.
In addition to the Operating Advisor Fee and the Operating Advisor Consulting Fee, the operating advisor will be entitled to reimbursement of Operating Advisor Expenses in accordance with the terms of the PSA. “Operating Advisor Expenses” for each Distribution Date will equal any unreimbursed indemnification amounts or additional trust fund expenses payable to the operating advisor pursuant to the PSA (other than the Operating Advisor Fee and the Operating Advisor Consulting Fee).
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. As compensation for the performance of its routine duties, the asset representations reviewer will be paid a fee (the “Asset Representations Reviewer Fee”). The Asset Representations Reviewer Fee will be payable monthly from amounts received in respect of each Mortgage Loan (including each Non-Serviced Mortgage Loan, but excluding any Companion Loan) and REO Loan, and will be equal to the product of a rate equal to 0.00046% per annum (the “Asset Representations Reviewer Fee Rate”) and the Stated Principal Balance of each such Mortgage Loan, Non-Serviced Mortgage Loan and REO Loan, and will be calculated in the same manner as interest is calculated on such Mortgage Loans. In connection with each Asset Review with respect to each Delinquent Loan, the asset representations reviewer will be required to be paid a fee equal to (i) $15,000, plus (ii) $2,000 per additional Mortgaged Property in excess of one Mortgaged Property with respect to such Delinquent Loan, plus (iii) $2,000 per Mortgaged Property subject to a ground lease with respect to such Delinquent Loan, plus (iv) $1,500 per Mortgaged Property with respect to such Delinquent Loan subject to a franchise, hotel management 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 of the occurrence of the Asset Review (any such fee, the “Asset Representations Reviewer Asset Review Fee”).
The Asset Representations Reviewer 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 above in “—Withdrawals from the Collection Account”. 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 trust following delivery by the asset representations reviewer of evidence reasonably satisfactory to the master servicer of such insolvency or failure to pay such amount (which evidence may be an officer’s certificate of the asset representations reviewer); 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 Enforcing Servicer will be required to pursue remedies against such mortgage loan seller 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 Purchase Price for any Mortgage Loan that was the subject of a
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completed Asset Review and that is repurchased by the related mortgage loan seller, and such portion of the Purchase Price received will be used to reimburse the trust for any such fees paid to the asset representations reviewer pursuant to the terms of the PSA.
CREFC® Intellectual Property Royalty License Fee
CREFC® Intellectual Property Royalty License Fee will be paid to CREFC® on a monthly basis.
“CREFC® Intellectual Property Royalty License Fee” with respect to each Mortgage Loan and REO Loan 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 and REO Loan as of the close of business on the Distribution Date in such Interest Accrual Period; provided that such amounts will be computed for the same period and on the same interest accrual basis respecting which any related interest payment due or deemed due on the related Mortgage Loan and REO Loan is computed and will be prorated for partial periods. The CREFC® Intellectual Property Royalty License Fee is a fee payable to CREFC® for a license to use the CREFC® Investor Reporting Package in connection with the servicing and administration, including delivery of periodic reports to the Certificateholders, of the issuing entity pursuant to the PSA. No CREFC® Intellectual Property Royalty License Fee will be paid on any Companion Loan.
“CREFC® Intellectual Property Royalty License Fee Rate” with respect to each Mortgage Loan is a rate equal to 0.00050% per annum.
Appraisal Reduction Amounts
After an Appraisal Reduction Event has occurred with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan), an Appraisal Reduction Amount is required to be calculated. An “Appraisal Reduction Event” will occur on the earliest of:
(1) 120 days after an uncured delinquency (without regard to the application of any grace period), other than any uncured delinquency in respect of a balloon payment, occurs in respect of the Mortgage Loan or a related Companion Loan, as applicable;
(2) the date on which a reduction in the amount of Periodic Payments on the Mortgage Loan or Companion Loan, as applicable, or a change in any other material economic term of the Mortgage Loan or Companion Loan, as applicable (other than an extension of its maturity), becomes effective as a result of a modification of the related Mortgage Loan or Companion Loan, as applicable, by the special servicer;
(3) 30 days after the date on which a receiver has been appointed for the Mortgaged Property;
(4) 30 days after the date on which a borrower or the tenant at a single tenant property declares bankruptcy (and the bankruptcy petition is not otherwise dismissed within such time);
(5) 60 days after the date on which an involuntary petition of bankruptcy is filed with respect to the borrower if not dismissed within such time;
(6) 90 days after an uncured delinquency occurs in respect of a balloon payment with respect to such Mortgage Loan or Companion Loan, except where a
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refinancing is anticipated within 120 days after the maturity date of the Mortgage Loan and related Companion Loan in which case 120 days after such uncured delinquency; and
(7) immediately after a Mortgage Loan or related Companion Loan becomes an REO Loan;
provided, however, that the 30-day period referenced in clauses (3) and (4) above will not apply if the related Mortgage Loan is a Specially Serviced Loan.
No Appraisal Reduction Event may occur at any time when the Certificate Balances of all classes of Subordinate Certificates have been reduced to zero.
The “Appraisal Reduction Amount” for any Distribution Date and for any Mortgage Loan (other than any Non-Serviced Mortgage Loan) as to which any Appraisal Reduction Event has occurred, will be an amount, calculated by the special servicer (and, prior to the occurrence and continuance of a Consultation Termination Event, in consultation with the Directing Certificateholder (except in the case of an Excluded Loan) and, after the occurrence and during the continuance of a Control Termination Event, in consultation with the Directing Certificateholder (except with respect to an Excluded Loan) and the operating advisor and, after the occurrence and during the continuance of a Consultation Termination Event, in consultation with the operating advisor), as of the first Determination Date that is at least 10 business days following the date the special servicer receives an appraisal (together with information requested by the special servicer from the master servicer in accordance with the PSA that is in the possession of the master servicer and reasonably necessary to calculate the Appraisal Reduction Amount) or conducts a valuation described below equal to the excess of:
(a) the Stated Principal Balance of that Mortgage Loan, over
(b) the excess of
| 1. | the sum of |
| a) | 90% of the appraised value of the related Mortgaged Property as determined (A) by one or more MAI appraisals obtained by the special servicer with respect to that Mortgage Loan with an outstanding principal balance equal to or in excess of $2,000,000 (the costs of which will be paid by the master servicer as an Advance), or (B) by an internal valuation performed by the special servicer (or at the special servicer’s election, by one or more MAI appraisals obtained by the special servicer) with respect to any Mortgage Loan with an outstanding principal balance less than $2,000,000, minus with respect to any MAI appraisals such downward adjustments as the special servicer may make (without implying any obligation to do so) based upon its review of the appraisals and any other information it deems relevant; and |
| b) | all escrows, letters of credit and reserves in respect of that Mortgage Loan as of the date of calculation; over |
| 2. | the sum as of the Due Date occurring in the month of the date of determination of |
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| a) | to the extent not previously advanced by the master servicer or the trustee, all unpaid interest due on that Mortgage Loan at a per annum rate equal to the Mortgage Rate, |
| b) | all P&I Advances on the related Mortgage Loan and all Servicing Advances on the related Mortgage Loan not reimbursed from the proceeds of such Mortgage Loan and interest on those Advances at the Reimbursement Rate in respect of that Mortgage Loan, and |
| 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 (including any capitalized interest whether or not then due and payable) with respect to such Mortgage Loan (which taxes, premiums, ground rents and other amounts have not been the subject of an Advance by the master servicer, the special servicer or the trustee, as applicable). |
The special servicer will be required to use reasonable efforts to order an appraisal or conduct a valuation promptly upon the occurrence of an Appraisal Reduction Event (other than with respect to a Non-Serviced Whole Loan). On the first Determination Date occurring on or after the tenth business day following the receipt of the MAI appraisal or the completion of the valuation, the special servicer will be required to calculate and report to the master servicer, the trustee, the certificate administrator, the operating advisor and, prior to the occurrence and continuance of any Consultation Termination Event, the Directing Certificateholder, the Appraisal Reduction Amount, taking into account the results of such appraisal or valuation and receipt of information requested by the special servicer from the master servicer that is in the possession of the master servicer and reasonably necessary to calculate the Appraisal Reduction Amount.
Following the master servicer’s receipt from the special servicer of the calculation of the Appraisal Reduction Amounts, the master servicer will be required to provide such information to the certificate administrator in the form of the CREFC® loan periodic update file and CREFC® appraisal reduction template provided to it by the special servicer.
In the event that the special servicer has not received any required MAI appraisal within 60 days after the Appraisal Reduction Event (or, in the case of an appraisal in connection with an Appraisal Reduction Event described in clauses (1) and (6) of the definition of Appraisal Reduction Event above, within 120 days (in the case of clause (1)) or 90 or 120 days (in the case of clause (6)), respectively, after the initial delinquency for the related Appraisal Reduction Event), the Appraisal Reduction Amount will be deemed to be an amount equal to 25% of the current Stated Principal Balance of the related Mortgage Loan until an MAI appraisal is received by the special servicer and the Appraisal Reduction Amount is calculated as of the first Determination Date that is at least 10 business days after the special servicer’s receipt of such MAI appraisal or completion of its internal valuation. The master servicer will provide (via electronic delivery) the special servicer with any information in its possession that is reasonably required to determine, redetermine, calculate or recalculate any Appraisal Reduction Amount pursuant to its definition using reasonable efforts to deliver such information within four business days of the special servicer’s reasonable request; provided, however, that the special servicer’s failure to timely make such a request will not relieve the master servicer of its obligation to use reasonable efforts to provide such information to the special servicer within 4 business days following
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the special servicer’s reasonable request. The master servicer will not calculate Appraisal Reduction Amounts.
With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) as to which an Appraisal Reduction Event has occurred (unless the Mortgage Loan has remained current for 3 consecutive Periodic Payments, and with respect to which no other Appraisal Reduction Event has occurred with respect to that Mortgage Loan during the preceding 3 months (for such purposes taking into account any amendment or modification of such Mortgage Loan), the special servicer is required (i) within 30 days of each anniversary of the related Appraisal Reduction Event and (ii) upon its determination that the value of the related Mortgaged Property has materially changed, to notify the master servicer of the occurrence of such anniversary or determination and to order an appraisal (which may be an update of a prior appraisal), the cost of which will be paid by the master servicer as a Servicing Advance (or to the extent it would be a Nonrecoverable Advance, an expense of the issuing entity paid out of the Collection Account), or to conduct an internal valuation, as applicable. Based upon the appraisal or valuation and receipt of information reasonably requested by the special servicer from the master servicer necessary to calculate the Appraisal Reduction Amount, the special servicer is required to determine or redetermine, as applicable, and report to the master servicer, the trustee, the certificate administrator, the operating advisor and, prior to the occurrence and continuance of a Consultation Termination Event, and other than with respect to an Excluded Loan, the Directing Certificateholder, the amount and calculation or recalculation of the Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, with respect to the Mortgage Loan. Prior to the occurrence and continuance of a Consultation Termination Event other than with respect to an Excluded Loan, the special servicer will consult with the Directing Certificateholder, with respect to any appraisal, valuation or downward adjustment in connection with an Appraisal Reduction Amount. Notwithstanding the foregoing, the special servicer will not be required to obtain an appraisal or valuation with respect to a Mortgage Loan that is the subject of an Appraisal Reduction Event to the extent the special servicer has obtained an appraisal or valuation with respect to the related Mortgaged Property within the 12-month period prior to the occurrence of the Appraisal Reduction Event. Instead, the special servicer may use the prior appraisal or valuation in calculating any Appraisal Reduction Amount with respect to the Mortgage Loan, provided that the special servicer is not aware of any material change to the Mortgaged Property that has occurred that would affect the validity of the appraisal or valuation.
Each Non-Serviced Mortgage Loan is subject to provisions in the related Non-Serviced PSA relating to appraisal reductions that are similar, but not necessarily identical, to the provisions described above. The existence of an appraisal reduction under a Non-Serviced PSA in respect of the related Non-Serviced Mortgage Loan will proportionately reduce the master servicer’s or the trustee’s, as the case may be, obligation to make P&I Advances on the related Non-Serviced Mortgage Loan and will generally have the effect of reducing the amount otherwise available for distributions to the Certificateholders. Pursuant to such Non-Serviced PSA, the related Non-Serviced Mortgage Loan will be treated, together with each related Non-Serviced Companion Loan, as a single mortgage loan for purposes of calculating an appraisal reduction amount with respect to the loans that comprise a Non-Serviced Whole Loan. Any appraisal reduction amount calculated with respect to a Non-Serviced Whole Loan will generally be allocated first, to any related Subordinate Companion Loan(s) and then, to the related Non-Serviced Mortgage Loan and the related Non-Serviced Pari Passu Companion Loan(s) on a pro rata basis based upon their respective Stated Principal Balances. Any appraisal reduction amount determined under such Non-Serviced PSA and allocable to such Non-Serviced Mortgage Loan pursuant
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to the related intercreditor agreement will constitute an “Appraisal Reduction Amount” under the terms of the PSA with respect to the Non-Serviced Mortgage Loan.
If any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or any Serviced Whole Loan previously subject to an Appraisal Reduction Amount becomes a Corrected Loan, and no other Appraisal Reduction Event has occurred and is continuing with respect to such Mortgage Loan, the Appraisal Reduction Amount and the related Appraisal Reduction Event will cease to exist.
As a result of calculating one or more Appraisal Reduction Amounts (and, in the case of any Whole Loan, to the extent allocated in the related Mortgage Loan), the amount of any required P&I Advance will be reduced, which will have the effect of reducing the allocable amount of interest available to the most subordinate class of certificates then-outstanding (i.e., first, to the Class J-RR certificates, second, to the Class H-RR certificates, third, to the Class G-RR certificates, fourth, to the Class F-RR certificates, fifth, to the Class E-RR certificates, sixth, to the Class D certificates, seventh, to the Class C certificates, eighth, to the Class B certificates, ninth, to the Class A-S certificates, and finally, pro rata based on their respective interest entitlements, to the Senior Certificates). See “—Advances”.
As of the first Determination Date following a Mortgage Loan (other than a Non-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 Mortgage Loan, and all other information in its possession relevant to a Collateral Deficiency Amount determination. Upon obtaining knowledge or receipt of notice by the master servicer that a Non-Serviced Mortgage Loan has become an AB Modified Loan, the master servicer will be required to (i) promptly request from the related Non-Serviced Master Servicer, Non-Serviced Special Servicer and Non-Serviced Trustee the most recent appraisal with respect to such AB Modified Loan, in addition to all other information reasonably required by the master servicer to calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, and (ii) as of the first Determination Date following receipt by the master servicer of the appraisal and any other information set forth in the immediately preceding clause (i) that the master servicer reasonably expects to receive, calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, taking into account the most recent appraisal obtained by the Non-Serviced Special Servicer with respect to such Non-Serviced Mortgage Loan, and all other information in its possession relevant to a Collateral Deficiency Amount determination. Upon obtaining actual knowledge or receipt of notice by any other party to the PSA that a Non-Serviced Mortgage Loan has become an AB Modified Loan, such party will be required to promptly notify the master servicer thereof. None of the master servicer (with respect to Mortgage Loans other than Non-Serviced Mortgage Loans), the special servicer (with respect to Non-Serviced Mortgage Loans), the trustee, the operating advisor or the certificate administrator will calculate or verify any Collateral Deficiency Amount.
A “Cumulative Appraisal Reduction Amount” as of any date of determination and for any Mortgage Loan, is equal to the sum of (i) all Appraisal Reduction Amounts then in effect, and (ii) with respect to any AB Modified Loan, any Collateral Deficiency Amount then in effect. The master servicer and the certificate administrator will be entitled to conclusively rely on the special servicer’s calculation or determination of any Cumulative Appraisal Reduction Amount with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan). With respect to a Non-Serviced Mortgage Loan, the special servicer and the certificate administrator will be entitled to conclusively rely on the applicable Non-Serviced Special Servicer’s calculation of any Appraisal Reduction Amount with respect to
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such Mortgage Loan and on the master servicer’s calculation or determination of any Collateral Deficiency Amount with respect to such Mortgage Loan.
“AB Modified Loan” means any Corrected Loan (1) that became a Corrected Loan (which includes for purposes of this definition any Non-Serviced Mortgage Loan that became a “corrected loan” (or any term substantially similar thereto) pursuant to the related Non-Serviced PSA) due to a modification thereto that resulted in the creation of an A/B note structure (or similar structure) and as to which the new junior note(s) did not previously exist or the principal amount of the new junior note(s) was previously part of either an A note held by the issuing entity or the original unmodified Mortgage Loan and (2) as to which an Appraisal Reduction Amount is not in effect.
“Collateral Deficiency Amount” means, with respect to any AB Modified Loan as of any date of determination, the excess of (i) the Stated Principal Balance of such AB Modified Loan (taking into account the related junior note(s) and any pari passu notes included therein), over (ii) the sum of (in the case of a Whole Loan, solely to the extent allocable to the subject Mortgage Loan) (x) the most recent appraised value for the related Mortgaged Property or Mortgaged Properties, plus (y) solely to the extent not reflected or taken into account in such appraised value and to the extent on deposit with, or otherwise under the control of, 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 a Non-Serviced Mortgage Loan, the amounts set forth in this clause (y) will be taken into account solely to the extent relevant information is received by the master servicer), plus (z) any other escrows or reserves (in addition to any amounts set forth in the immediately preceding clause (y)) held by the lender in respect of such AB Modified Loan as of the date of such determination. The special servicer or the master servicer, as the case may be, the operating advisor and the certificate administrator will be entitled to conclusively rely on the master servicer’s or the special servicer’s, as the case may be, calculation or determination of any Collateral Deficiency Amount.
For purposes of determining the Controlling Class and the occurrence and continuance of a Control Termination Event, Cumulative Appraisal Reduction Amounts allocated to a related Mortgage Loan will be allocated to each class of Principal Balance Certificates in reverse sequential order to notionally reduce their Certificate Balances until the Certificate Balances of each such class is notionally reduced to zero (i.e., first, to the Class J-RR certificates, second, to the Class H-RR certificates, third, to the Class G-RR certificates, fourth, to the Class F-RR certificates, fifth, to the Class E-RR certificates, sixth, to the Class D certificates, seventh, to the Class C certificates, eighth, to the Class B certificates, ninth, to the Class A certificates, and finally, pro rata based on their respective interest entitlements, to the Senior Certificates (other than the Class X-A, Class X-B and Class X-D Certificates)).
With respect to any Appraisal Reduction Amount or Collateral Deficiency Amount calculated for purposes of determining the Controlling Class and the occurrence and continuance of a Control Termination Event, the appraised value of the related Mortgaged Property will be determined on an “as-is” basis. The special servicer (in the case of a Mortgage Loan other than a Non-Serviced Mortgage Loan) or the master servicer (in the case of a Non-Serviced Mortgage Loan) will be required to promptly notify the master servicer or the special servicer, as the case may be, and 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
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Amount and/or Cumulative Appraisal Reduction Amount, as applicable, to the certificate administrator’s website.
Any class of Control Eligible Certificates, the Certificate Balance of which (taking into account the application of any Appraisal Reduction Amounts or Collateral Deficiency Amounts to notionally reduce the Certificate Balance of such class) has been reduced to less than 25% of its initial Certificate Balance, is referred to as an “Appraised-Out Class”. Any Appraised-Out Class will no longer be the Controlling Class; provided, however, that if at any time, the Certificate Balances of the certificates other than the Control Eligible Certificates have been reduced to zero as a result of principal payments on the Mortgage Loans, then the Controlling Class will be the most subordinate class of Control Eligible Certificates that has a Certificate Balance greater than zero without regard to any Appraisal Reduction Amounts. The holders of the majority (by Certificate Balance) of an Appraised-Out Class will have the right, at their sole expense, to require the special servicer to order (or, with respect to a Non-Serviced Mortgage Loan, require the master servicer to request from the applicable Non-Serviced Special Servicer) a second appraisal of any Mortgage Loan for which an Appraisal Reduction Event has occurred or as to which there exists a Collateral Deficiency Amount (such holders, the “Requesting Holders”). With respect to any such Mortgage Loan (other than with respect to a Non-Serviced Mortgage Loan), the special servicer will use commercially reasonable efforts to cause such appraisal to be (i) delivered within 30 days from receipt of the Requesting Holders’ written request and (ii) prepared on an “as-is” basis by an MAI appraiser. With respect to any such Non-Serviced Mortgage Loan, the master servicer will be required to use commercially reasonable efforts to obtain such second appraisal from the applicable Non-Serviced Special Servicer and to forward such second appraisal to the special servicer. Upon receipt of such supplemental appraisal, the master servicer (for Collateral Deficiency Amounts on Non-Serviced Mortgage Loans), the applicable Non-Serviced Special Servicer (for Appraisal Reduction Amounts on Non-Serviced Mortgage Loans to extent provided for in the applicable Non-Serviced PSA and applicable Intercreditor Agreement) and the special servicer (for Mortgage Loans other than Non-Serviced Mortgage Loans) will be required to determine, in accordance with the Servicing Standard, whether, based on its assessment of such supplemental appraisal, any recalculation of the applicable Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, is warranted and, if so warranted, will recalculate such Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, based upon such supplemental appraisal and (in the case of a Mortgage Loan other than a Non-Serviced Mortgage Loan) receipt of information requested by the special servicer from the master servicer as described above. If required by any such recalculation, the applicable Appraised-Out Class will be reinstated as the Controlling Class and each other Appraised-Out Class will, if applicable, have its related Certificate Balance notionally restored to the extent required by such recalculation of the Appraisal Reduction Amount or Collateral Deficiency Amount, if applicable.
Any Appraised-Out Class for which the Requesting Holders are challenging the master servicer’s or special servicer’s, as applicable, Appraisal Reduction Amount or Collateral Deficiency Amount determination may not exercise any direction, control, consent and/or similar rights of the Controlling Class until such time, if any, as such class is reinstated as the Controlling Class; the rights of the Controlling Class will be exercised by the next most senior class of Control Eligible Certificates, if any, during such period.
With respect to each Non-Serviced Mortgage Loan, the related Non-Serviced Directing Certificateholder will be subject to provisions similar to those described above. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu
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Whole Loans”, “—The Non-Serviced AB Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Maintenance of Insurance
To the extent permitted by the related Mortgage Loan and required by the Servicing Standard, the master servicer (with respect to the Mortgage Loans, but excluding any Non-Serviced Mortgage Loan) will be required to use efforts consistent with the Servicing Standard to cause each borrower to maintain, and the special servicer (with respect to REO Properties other than a Mortgaged Property securing a Non-Serviced Whole Loan and subject to the conditions set forth in the following sentence) will maintain, for the related Mortgaged Property all insurance coverage required by the terms of the related Mortgage Loan documents; provided, however, that the master servicer (with respect to Mortgage Loans) will not be required to cause the borrower to maintain and the special servicer (with respect to REO Properties) will not be required to maintain terrorism insurance to the extent that the failure of the related borrower to do so is an Acceptable Insurance Default (as defined below) or if the trustee does not have an insurable interest. Insurance coverage is required to be in the amounts (which, in the case of casualty insurance, is generally equal to the lesser of the outstanding principal balance of the related Mortgage Loan and the replacement cost of the related Mortgaged Property), and from an insurer meeting the requirements, set forth in the related Mortgage Loan documents. If the borrower does not maintain such coverage, the master servicer (with respect to such Mortgage Loans) or the special servicer (with respect to REO Properties other than a Mortgaged Property securing a Non-Serviced Whole Loan), as the case may be, will be required to maintain such coverage to the extent such coverage is available at commercially reasonable rates and the trustee has an insurable interest, as determined by the master servicer (with respect to the Mortgage Loans) or the special servicer (with respect to REO Properties other than a Mortgaged Property securing a Non-Serviced Whole Loan), as applicable, in accordance with the Servicing Standard; provided that if any Mortgage Loan documents permit the holder thereof to dictate to the borrower the insurance coverage to be maintained on such Mortgaged Property, the master servicer or, with respect to REO Property, the special servicer will impose or maintain such insurance requirements as are consistent with the Servicing Standard taking into account the insurance in place at the origination of the Mortgage Loan; provided, further, that with respect to the immediately preceding proviso the master servicer will be obligated to use efforts consistent with the Servicing Standard to cause the borrower to maintain (or to itself maintain) insurance against property damage resulting from terrorist or similar acts unless the borrower’s failure is an Acceptable Insurance Default as determined by the master servicer (with respect to a non-Specially Serviced Loan) or the special servicer (with respect to a Specially Serviced Loan) with (unless a Control Termination Event has occurred and is continuing and other than with respect to an Excluded Loan) the consent of the Directing Certificateholder or after (after the occurrence and during the continuance of a Control Termination Event, but prior to the occurrence and continuance of a Consultation Termination Event, and other than with respect to any Excluded Loan) consultation with the Directing Certificateholder. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans” and “Risk Factors—Risks Relating to the Mortgage Loans—Terrorism Insurance May Not Be Available for All Mortgaged Properties”.
Notwithstanding any contrary provision above, the master servicer will not be required to maintain, and will not be in default for failing to obtain, any earthquake or environmental insurance on any Mortgaged Property unless (other than with respect to a Mortgaged Property securing a Non-Serviced Mortgage Loan) such insurance was required at the time of origination of the related Mortgage Loan, the trustee has an insurable interest
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and such insurance is currently available at commercially reasonable rates. In addition, the master servicer and special servicer will be entitled to rely on insurance consultants (at the applicable servicer’s expense) in determining whether any insurance is available at commercially reasonable rates. After the master servicer determines that a Mortgaged Property (other than a Mortgaged Property securing a Non-Serviced Mortgage Loan) is located in an area identified as a federally designated special flood hazard area (and flood insurance has been made available), the master servicer will be required to use efforts consistent with the Servicing Standard (1) to cause the borrower to maintain (to the extent required by the related Mortgage Loan documents), and (2) if the borrower does not so maintain, to itself maintain to the extent the trustee, as mortgagee, has an insurable interest in the Mortgaged Property and such insurance is available at commercially reasonable rates (as determined by the master servicer in accordance with the Servicing Standard but only to the extent that the related Mortgage Loan permits the lender to require the coverage) a flood insurance policy in an amount representing coverage not less than the lesser of (x) the outstanding principal balance of the related Mortgage Loan and (y) the maximum amount of insurance which is available under the National Flood Insurance Act of 1968, as amended, plus such additional excess flood coverage with respect to the Mortgaged Property, if any, in an amount consistent with the Servicing Standard.
Notwithstanding the foregoing, with respect to the Mortgage Loans (other than a Non-Serviced Mortgage Loan) that either (x) require the borrower to maintain “all-risk” property insurance (and do not expressly permit an exclusion for terrorism) or (y) contain provisions generally requiring the applicable borrower to maintain insurance in types and against such risks as the holder of such Mortgage Loan reasonably requires from time to time in order to protect its interests, the master servicer will be required to, consistent with the Servicing Standard, (A) monitor in accordance with the Servicing Standard whether the insurance policies for the related Mortgaged Property contain exclusions in addition to those customarily found in insurance policies for mortgaged properties similar to the Mortgaged Properties on or prior to September 11, 2001 (“Additional Exclusions”) (provided that the master servicer and the special servicer will be entitled to conclusively rely upon certificates of insurance in determining whether such policies contain Additional Exclusions), (B) request the borrower to either purchase insurance against the risks specified in the Additional Exclusions or provide an explanation as to its reasons for failing to purchase such insurance, and (C) if the related Mortgage Loan is a Specially Serviced Loan, notify the special servicer if it has knowledge that any insurance policy contains Additional Exclusions or if it has knowledge that any borrower fails to purchase the insurance requested to be purchased by the master servicer pursuant to clause (B) above. If the master servicer (with respect to a non-Specially Serviced Loan) or the special servicer (with respect to a Specially Serviced Loan) determines in accordance with the Servicing Standard that such failure is not an Acceptable Insurance Default, the special servicer will be required to notify the master servicer and the master servicer will be required to use efforts consistent with the Servicing Standard to cause such insurance to be maintained. If the master servicer (with respect to a non-Specially Serviced Loan) or the special servicer (with respect to a Specially Serviced Loan) determines that such failure is an Acceptable Insurance Default, it will be required to promptly deliver such conclusions in writing to the 17g-5 Information Provider for posting to the 17g-5 Information Provider’s website for those Mortgage Loans that (i) have one of the 10 highest outstanding principal balances of the Mortgage Loans then included in the issuing entity or (ii) comprise more than 5% of the outstanding principal balance of the Mortgage Loans then included in the issuing entity.
“Acceptable Insurance Default” means, with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan), a default under the related Mortgage Loan documents arising by reason of (i) any failure on the part of the related borrower to maintain with respect to
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the related Mortgaged Property specific insurance coverage with respect to, or an all-risk casualty insurance policy that does not specifically exclude, terrorist or similar acts, and/or (ii) any failure on the part of the related borrower to maintain with respect to the related Mortgaged Property insurance coverage with respect to damages or casualties caused by terrorist or similar acts upon terms not materially less favorable than those in place as of the Closing Date, in each case, as to which default the master servicer and the special servicer may forbear taking any enforcement action; provided that, subject to the consent or consultation rights of the Directing Certificateholder or the holder of any Companion Loan, the master servicer (with respect to a non-Specially Serviced Loan) or the special servicer (with respect to a Specially Serviced Loan) has determined in its reasonable judgment based on inquiry consistent with the Servicing Standard that either (a) such insurance is not available at commercially reasonable rates and that such hazards are not at the time commonly insured against for properties similar to the related Mortgaged Property and located in or around the region in which such related Mortgaged Property is located, or (b) such insurance is not available at any rate.
During the period that the master servicer or the special servicer is evaluating the availability of such insurance, or waiting for a response from the Directing Certificateholder or the holder of any Companion Loan, neither the master servicer nor the special servicer will be liable for any loss related to its failure to require the borrower to maintain (or its failure to maintain) such insurance and neither will be in default of its obligations as a result of such failure.
The special servicer will be required to maintain (or cause to be maintained) fire and hazard insurance on each REO Property (other than any REO Property with respect to a Non-Serviced Mortgage Loan) for which it is acting as special servicer, to the extent obtainable at commercially reasonable rates and the trustee has an insurable interest, in an amount that is at least equal to the lesser of (1) the full replacement cost of the improvements on the REO Property, and (2) the outstanding principal balance owing on the related Mortgage Loan or REO Loan, as applicable, and in any event, the amount necessary to avoid the operation of any co-insurance provisions. In addition, if the REO Property is located in an area identified as a federally designated special flood hazard area, the special servicer will be required to cause to be maintained, to the extent available at commercially reasonable rates (as determined by the special servicer in accordance with the Servicing Standard), a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration in an amount representing coverage not less than the maximum amount of insurance that is available under the National Flood Insurance Act of 1968, as amended, plus such additional excess flood insurance with respect to the Mortgaged Property, if any, in an amount consistent with the Servicing Standard.
The PSA provides that the master servicer may satisfy its obligation to cause each applicable borrower to maintain a hazard insurance policy and the master servicer or special servicer may satisfy its obligation to maintain hazard insurance by maintaining a blanket or master single interest or force-placed policy insuring against hazard losses on the applicable Mortgage Loans and REO Properties (other than a Mortgaged Property securing a Non-Serviced Whole Loan), as applicable. Any losses incurred with respect to Mortgage Loans or REO Properties due to uninsured risks (including earthquakes, mudflows and floods) or insufficient hazard insurance proceeds may adversely affect payments to Certificateholders. Any cost incurred by the master servicer or special servicer in maintaining a hazard insurance policy, if the borrower defaults on its obligation to do so, will be advanced by the master servicer as a Servicing Advance and will be charged to the related borrower. Generally, no borrower is required by the Mortgage Loan documents to maintain earthquake insurance on any Mortgaged Property and the special servicer will not be required to
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maintain earthquake insurance on any REO Properties. Any cost of maintaining that kind of required insurance or other earthquake insurance obtained by the special servicer will be paid out of the applicable REO Account or advanced by the master servicer as a Servicing Advance.
The costs of the insurance may be recovered by the master servicer or the trustee, as the case may be, from reimbursements received from the borrower or, if the borrower does not pay those amounts, as a Servicing Advance as set forth in the PSA. All costs and expenses incurred by the special servicer in maintaining the insurance described above on REO Properties will be paid out of the related REO Account or, if the amount in such account is insufficient, such costs and expenses will be advanced by the master servicer to the special servicer as a Servicing Advance to the extent that such Servicing Advance is not determined to be a Nonrecoverable Advance and otherwise will be paid to the special servicer from general collections in the Collection Account.
No pool insurance policy, special hazard insurance policy, bankruptcy bond, repurchase bond or certificate guarantee insurance will be maintained with respect to the Mortgage Loans, nor will any Mortgage Loan be subject to FHA insurance.
Modifications, Waivers and Amendments
The master servicer will be responsible for processing waivers, modifications, amendments and consents that are not Major Decisions with respect to any Mortgage Loan (other than any Non-Serviced Mortgage Loan) that is not a Specially Serviced Loan, without the consent or approval of the Directing Certificateholder (except as specified in the definition of “Master Servicer Decision”) or the consent or approval of the special servicer. The special servicer will be responsible for processing waivers, modifications, amendments and consents with respect to Specially Serviced Loans and will also be responsible for processing waivers, modifications, amendments and consents that are Major Decisions with respect to any Mortgage Loan (other than any Non-Serviced Mortgage Loan). However, except as otherwise set forth in this paragraph, neither the special servicer nor the master servicer may waive, modify or amend (or consent to waive, modify or amend) any provision of a Mortgage Loan that is not in default or as to which default is not reasonably foreseeable except for (1) the waiver of any due-on-sale clause or due-on-encumbrance clause to the extent permitted in the PSA, and (2) any waiver, modification or amendment more than 3 months after the Closing Date that would not be a “significant modification” of the Mortgage Loan within the meaning of Treasury regulations Section 1.860G-2(b) or otherwise cause any Trust REMIC to fail to qualify as a REMIC, or the Trust or any Trust REMIC to be subject to tax. Prior to the occurrence and continuance of a Control Termination Event and other than with respect to an Excluded Loan, the special servicer will only be permitted under the PSA to agree to any modifications, waivers and amendments that constitute Major Decisions with the consent of the Directing Certificateholder (which consent will be deemed given (unless earlier objected to by the Directing Certificateholder) within 10 business days of the Directing Certificateholder’s receipt from the special servicer of the special servicer’s recommendation and analysis with respect to such Major Decision); provided that after the occurrence and during the continuance of a Control Termination Event, but prior to a Consultation Termination Event, the special servicer will not be permitted to agree to any such matter without the special servicer’s consultation with the Directing Certificateholder as provided in the PSA and described in this prospectus.
Upon receiving a request for any matter described in the first paragraph of this section that constitutes a Major Decision with respect to a Mortgage Loan (other than any Non-Serviced Mortgage Loan) that is not a Specially Serviced Loan, the master servicer will be required to promptly forward such request to the special servicer and the special servicer
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will be required to process such request (including, without limitation, interfacing with the borrower) and except as provided in the next sentence, the master servicer will have no further obligation with respect to such request or the Major Decision. The master servicer will deliver any additional information in the master servicer’s possession to the special servicer requested by the special servicer relating to such Major Decision. The master servicer will not be permitted to process any Major Decision and will not be required to interface with the borrower or provide a written recommendation and/or analysis with respect to any Major Decision.
In connection with the processing by the master servicer of the matters described in the second preceding paragraph, after completion, the master servicer will deliver notice thereof to the special servicer and, prior to the occurrence and continuance of a Consultation Termination Event and other than in respect of any Excluded Loan, the Directing Certificateholder, except to the extent that the special servicer or the Directing Certificateholder, as applicable, notifies the master servicer that the special servicer or the Directing Certificateholder, as applicable, does not desire to receive notice of such items. With respect to a Mortgage Loan that is not a Specially Serviced Loan, the following actions will be performed by the master servicer (each such action, a “Master Servicer Decision”) and, in connection with each such action, the master servicer will not be required (other than as provided below in this paragraph) to seek or obtain the consent or approval of (or consult with) the Directing Certificateholder or the special servicer: (i) grant waivers of non-material covenant defaults (other than financial covenants), including late (but not waived) financial statements except that (other than with respect to any Excluded Loan, and prior to the occurrence and continuance of a Control Termination Event) the Directing Certificateholder’s consent (or deemed consent) will be required to grant waivers of more than three consecutive late deliveries of financial statements; (ii) consents to releases of non-material, non-income producing parcels of a Mortgaged Property that do not materially affect the use or value of the related Mortgaged Property or the ability of the related borrower to pay amounts due in respect of the Mortgage Loan as and when due, provided such releases are required by the related Mortgage Loan documents; (iii) approve or consent to grants of easements or rights of way (including, without limitation for utilities, access, parking, public improvements or another purpose) or subordination of the lien of the Mortgage Loan to easements, except that, prior to the occurrence and continuance of any Control Termination Event and other than in the case of any Excluded Loan, the Directing Certificateholder’s consent (or deemed consent) will be required to approve or consent to grants of easements or rights of way that materially affect the use or value of a Mortgaged Property or a borrower’s ability to make payments with respect to the related Mortgage Loan or any related Companion Loan; (iv) grant other routine approvals, including granting of subordination, non-disturbance and attornment agreements and consents involving leasing activities (other than for ground leases) (provided that, prior to the occurrence and continuance of a Control Termination Event and other than in the case of any Excluded Loan, the Directing Certificateholder’s consent (or deemed consent) will be required for leasing activities that affect an area greater than or equal to 30% of the net rentable area of the improvements at the Mortgaged Property), including approval of new leases and amendments to current leases; (v) consent to actions and releases related to condemnation of parcels of a Mortgaged Property (provided that, prior to the occurrence and continuance of a Control Termination Event and other than in the case of any Excluded Loan, the Directing Certificateholder’s consent (or deemed consent) will be required in connection with any condemnation with respect to a material parcel or a material income producing parcel or any condemnation that materially affects the use or value of the related Mortgaged Property or the ability of the related borrower to pay amounts due in respect of the related Mortgage Loan or Companion Loan when due); (vi) consent to a change in property management relating to any Mortgage Loan or any related Companion Loan if the
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replacement property manager is not a Borrower Party (provided that, prior to the occurrence and continuance of any Control Termination Event and other than in the case of any Excluded Loan, the Directing Certificateholder’s consent (or deemed consent) will be required for any Mortgage Loan (including any related Companion Loans) that has an outstanding principal balance equal to or greater than $10,000,000); (vii) approve annual operating budgets for Mortgage Loans; (viii) consent to any releases or reductions of or withdrawals from (as applicable) any letters of credit, escrow funds, reserve funds or other additional collateral with respect to any Mortgage Loan, except that (other than with respect to any Excluded Loan, and prior to the occurrence and continuance of a Control Termination Event) the Directing Certificateholder’s consent (or deemed consent) will be required for earnout, holdback or performance reserve releases specifically scheduled in the PSA for which there is lender discretion; (ix) grant any extension or enter into any forbearance with respect to the anticipated refinancing of a Mortgage Loan or sale of a Mortgaged Property after the related maturity date of such Mortgage Loan so long as (1) such extension or forbearance does not extend beyond 120 days after the related maturity date and (2) the related borrower has delivered documentation reasonably satisfactory in form and substance to the master servicer which provides that a refinancing of such Mortgage Loan or sale of the related Mortgaged Property will occur within 120 days after the date on which such balloon payment will become due; (x) any modification, amendment, consent to a modification or waiver of any term of any Intercreditor Agreement or any intercreditor, co-lender or similar agreement with any mezzanine lender or subordinate debt holder, except that (other than with respect to any Excluded Loan and other than with respect to amendments to split or resize notes consistent with the terms of such Intercreditor Agreement or such intercreditor, co-lender or similar agreement) the Directing Certificateholder’s consent (or deemed consent) will be required for any such modification, amendment, consent to a modification or waiver of any term of any Intercreditor Agreement or any intercreditor, co-lender or similar agreement with any mezzanine lender or subordinate debt holder other than during a Control Termination Event, and if any modification or amendment would adversely impact the special servicer, such modification or amendment will additionally require the consent of the special servicer as a condition to its effectiveness; (xi) any determination of Acceptable Insurance Default, except that, prior to the occurrence and continuance of any Control Termination Event and other than in the case of any Excluded Loan, the Directing Certificateholder’s consent (or deemed consent) will be required in accordance with the terms of the PSA for any such determination; (xii) approve or consent to any defeasance of the related Mortgage Loan other than agreeing to (A) a modification of the type of defeasance collateral required under the Mortgage Loan documents other than direct, non-callable obligations of the United States would be permitted or (B) a modification that would permit a principal prepayment instead of defeasance if the Mortgage Loan documents do not otherwise permit such principal prepayment; (xiii) any assumption of the Mortgage Loan or transfer of the Mortgaged Property, in each case, that the loan documents allow without the consent of the mortgagee but subject to satisfaction of conditions specified in the loan documents where no lender discretion is necessary in order to determine if such conditions are satisfied and (xiv) grant or agree to any other waiver, modification, amendment and/or consent that does not constitute a Major Decision; provided that (A) any such action would not in any way affect a payment term of the Certificates, (B) any such action would not constitute a “significant modification” of such Mortgage Loan or Companion Loan pursuant to Treasury regulations Section 1.860G-2(b) and would not otherwise cause either Trust REMIC to fail to qualify as a REMIC for federal income tax purposes (as evidenced by an opinion of counsel (at the issuing entity’s expense to the extent not reimbursed or paid by the related borrower), to the extent requesting such opinion is consistent with the Servicing Standard), (C) agreeing to such action would be consistent with the Servicing Standard, and (D) agreeing to such action would not violate the terms, provisions or limitations of the PSA or any Intercreditor
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Agreement; provided, further, that in the case of any Master Servicer Decision that requires the consent of the Directing Certificateholder, after the occurrence and during the continuance of a Control Termination Event but prior to the occurrence of a Consultation Termination Event, the Directing Certificateholder will be entitled to consult with the master servicer on a non-binding basis (provided that if the Directing Certificateholder fails to respond to a request for consultation within 10 business days after receipt of such request for consultation from the Master Servicer, the Master Servicer will have no further obligation to consult with the Directing Certificateholder with respect to such Master Servicer Decision provided, however, that the failure of the Directing Certificateholder to respond will not relieve the master servicer from its obligation to consult with the Directing Certificateholder on any future matters). In the case of any Master Servicer Decision that requires the consent of the Directing Certificateholder, such consent will be deemed given if a response to the request for consent is not provided within 10 business days after receipt of the master servicer’s written recommendation and analysis and all information reasonably requested by the Directing Certificateholder, and reasonably available to the master servicer in order to grant or withhold such consent.
If, and only if, the special servicer determines that a modification, waiver or amendment (including the forgiveness or deferral of interest or principal or the substitution or release of collateral or the pledge of additional collateral) of the terms of a Specially Serviced Loan with respect to which a payment default or other material default has occurred or a payment default or other material default is, in the special servicer’s judgment, reasonably foreseeable, is reasonably likely to produce a greater (or equivalent) recovery on a net present value basis (the relevant discounting to be performed at the related Mortgage Rate) to the issuing entity and, if applicable, the holders of any applicable Companion Loan, than liquidation of such Specially Serviced Loan, then the special servicer may, but is not required to, agree to a modification, waiver or amendment of the Specially Serviced Loan, subject to (x) the restrictions and limitations described below, (y) with respect to any Major Decision, other than with respect to any Excluded Loan, and prior to the occurrence and continuance of a Control Termination Event, the approval of the Directing Certificateholder (or after the occurrence and during the continuance of a Control Termination Event, but prior to the occurrence and continuance of a Consultation Termination Event upon consultation with the Directing Certificateholder, as provided in the PSA and described in this prospectus, and (z) with respect to a Mortgage Loan that has mezzanine debt, the rights of the mezzanine lender to consent to such modification, waiver or amendment, in each case, pursuant to the terms of the related intercreditor agreement.
In connection with (i) the release of a Mortgaged Property (other than a Mortgaged Property securing a Non-Serviced Whole Loan) or any portion of such a Mortgaged Property from the lien of the related Mortgage or (ii) the taking of a Mortgaged Property (other than a Mortgaged Property securing a Non-Serviced Whole Loan) or any portion of such a Mortgaged Property by exercise of the power of eminent domain or condemnation, if the related Mortgage Loan documents require the master servicer or special servicer, as applicable, to calculate (or to approve the calculation of the related borrower of) the loan-to-value ratio of the remaining Mortgaged Property or Mortgaged Properties or the fair market value of the real property constituting the remaining Mortgaged Property or Mortgaged Properties, for purposes of REMIC qualification of the related Mortgage Loan, then such calculation will, unless then permitted by the REMIC provisions, exclude the value of personal property and going concern value, if any, as determined by an appropriate third party.
The special servicer is required to use its reasonable efforts to the extent reasonably possible to fully amortize a modified Mortgage Loan prior to the Rated Final Distribution
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Date. The special servicer may not agree to a modification, waiver or amendment of any term of any Specially Serviced Loan if that modification, waiver or amendment would:
(1) extend the maturity date of the Specially Serviced Loan to a date occurring later than the earlier of (A) 5 years prior to the Rated Final Distribution Date and (B) if the Specially Serviced Loan is secured solely or primarily by a leasehold estate and not the related fee interest, the date occurring 20 years or, to the extent consistent with the Servicing Standard giving due consideration to the remaining term of the ground lease and, prior to the occurrence and continuance of a Control Termination Event, with the consent of the Directing Certificateholder (other than with respect to any Mortgage Loan that is an Excluded Loan), 10 years, prior to the end of the current term of the ground lease, plus any options to extend exercisable unilaterally by the borrower; or
(2) provide for the deferral of interest unless interest accrues on the Mortgage Loan, generally, at the related Mortgage Rate.
If the special servicer agrees to any modification, waiver or amendment of any term of any Mortgage Loan (other than a Non-Serviced Mortgage Loan), the special servicer will be required to notify the master servicer, the related mortgage loan seller (so long as such mortgage loan seller is not the master servicer or sub-servicer of such Mortgage Loan or the Directing Certificateholder), the operating advisor (after the occurrence and during the continuance of an Operating Advisor Consultation Event), the certificate administrator, the trustee, the Directing Certificateholder (other than with respect to any Mortgage Loan that is an Excluded Loan, and unless a Consultation Termination Event has occurred and is continuing), and the 17g-5 Information Provider, who will thereafter post any such notice to the 17g-5 Information Provider’s website. If the master servicer agrees to any modification, waiver or amendment of any term of any such Mortgage Loan or related Companion Loan, the master servicer will be required to notify the certificate administrator, the trustee, the special servicer (and, unless a Consultation Termination Event has occurred and is continuing, the special servicer will be required to forward any such notice to the Directing Certificateholder (other than with respect to an Excluded Loan as to such party)), the related mortgage loan seller (so long as such mortgage loan seller is not the master servicer or sub-servicer of such Mortgage Loan or the Directing Certificateholder), and the 17g-5 Information Provider, who will be required to thereafter post any such notice to the 17g-5 Information Provider’s website. The party providing notice will be required to deliver to the custodian for deposit in the related Mortgage File, an original counterpart of the agreement related to the modification, waiver or amendment, promptly following the execution of that agreement, all as set forth in the PSA. Copies of each agreement whereby the modification, waiver or amendment of any term of any Mortgage Loan is effected are required to be available for review during normal business hours at the offices of the custodian. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”.
The modification, waiver or amendment of a Mortgage Loan that has a related mezzanine loan will be subject to certain limitations set forth in the related intercreditor agreement. See “Risk Factors—Risks Relating to the Mortgage Loans—Other Financings or Ability to Incur Other Indebtedness Entails Risk”.
Enforcement of “Due-on-Sale” and “Due-on-Encumbrance” Provisions
Other than with respect to an action that constitutes a Master Servicer Decision pursuant to clause (xiii) of the definition thereof, the special servicer will determine, in a manner consistent with the Servicing Standard, whether (a) to exercise any right it may
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have with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan) containing a “due-on-sale” clause (1) to accelerate the payments on that Mortgage Loan and any related Companion Loan, as applicable, or (2) to withhold its consent to any sale or transfer, consistent with the Servicing Standard or (b) to waive its right to exercise such rights; provided, however, that (i) the special servicer, prior to the occurrence and continuance of a Control Termination Event and other than with respect to an Excluded Loan, has obtained the consent (or deemed consent) of the Directing Certificateholder (provided that such consent will be deemed given if a response to the request for consent is not provided within 10 business days after receipt of the special servicer’s written recommendation and analysis and all information reasonably requested by the Directing Certificateholder, and reasonably available to the special servicer in order to grant or withhold such consent) or, (y) after the occurrence and during the continuance of a Control Termination Event, but prior to the occurrence and continuance of a Consultation Termination Event and other than with respect to an Excluded Loan, the special servicer has consulted with the Directing Certificateholder and (ii) with respect to any Mortgage Loan (either alone or, if applicable, with other related Mortgage Loans) that exceeds specified size thresholds (either actual or relative), or that fails to satisfy certain other applicable conditions imposed by the Rating Agencies, in each case as set forth in the PSA, a Rating Agency Confirmation is received by the special servicer from each Rating Agency.
With respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan) with a “due-on-encumbrance” clause (other than with respect to an action that constitutes a Master Servicer Decision pursuant to clause (xiii) of the definition thereof), the special servicer will determine, in a manner consistent with the Servicing Standard, whether (a) to exercise any right it may have with respect to a Mortgage Loan containing a “due-on-encumbrance” clause (1) to accelerate the payments thereon, or (2) to withhold its consent to the creation of any additional lien or other encumbrance, consistent with the Servicing Standard or (b) to waive its right to exercise such rights, provided, however, that (i) the special servicer, prior to the occurrence and continuance of a Control Termination Event and other than with respect to an Excluded Loan and other than with respect to any waiver of a “due-on-encumbrance” clause, which such waiver constitutes a Master Servicer Decision pursuant to clause (xiii) of the definition thereof, has obtained the consent (or deemed consent) of the Directing Certificateholder (provided that such consent will be deemed given if a response to the request for consent is not provided within 10 business days after receipt of the special servicer’s written recommendation and analysis and all information reasonably requested by the Directing Certificateholder, and reasonably available to the special servicer in order to grant or withhold such consent) or, (y) after the occurrence and during the continuance of a Control Termination Event, but prior to the occurrence and continuance of a Consultation Termination Event and other than with respect to an Excluded Loan, the special servicer has consulted with the Directing Certificateholder, and (ii) with respect to any Mortgage Loan (either alone or, if applicable, with other related Mortgage Loans) that exceeds specified size thresholds (either actual or relative), or that fails to satisfy certain other applicable conditions imposed by the Rating Agencies, in each case as set forth in the PSA, the special servicer has received a Rating Agency Confirmation from each Rating Agency.
Upon receiving a request for any matter described in the first two paragraphs of this section that constitutes a consent or waiver with respect to a “due-on-sale” or “due-on-encumbrance” clause with respect to a Mortgage Loan that is not a Specially Serviced Loan and other than any transfers or assumptions provided for in clause (xiii) of the definition of “Master Servicer Decision” and other than any waiver of a “due-on-encumbrance” clause which waiver constitutes a Master Servicer Decision pursuant to clause (xiii) of the definition thereof, the master servicer will be required to promptly
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forward such request to the special servicer and the special servicer will be required to process such request (including, without limitation, interfacing with the borrower) and except as provided in the next sentence, the master servicer will have no further obligation with respect to such request or due-on-sale or due-on-encumbrance. The master servicer will continue to cooperate with the special servicer by delivering any additional information in the master servicer’s possession to the special servicer requested by the special servicer relating to such consent or waiver with respect to a “due-on-sale” or “due-on-encumbrance” clause. The master servicer will not be permitted to process any request relating to such consent or waiver with respect to a “due-on-sale” or “due-on-encumbrance” clause (other than any transfers or assumptions provided for in clause (xiii) of the definition of “Master Servicer Decision” and other than any waiver of a “due-on-encumbrance” clause which waiver constitutes a Master Servicer Decision pursuant to clause (xiii) of the definition thereof) and will not be required to interface with the borrower or provide a written recommendation and analysis with respect to any such request.
Any modification, extension, waiver or amendment of the payment terms of a Non-Serviced Whole Loan will be required to be structured so as to be consistent with the servicing standard under the related Non-Serviced PSA and the allocation and payment priorities in the related mortgage loan documents and the related Intercreditor Agreement, such that neither the issuing entity as holder of such Non-Serviced Mortgage Loan nor any holder of any related Non-Serviced Companion Loan gains a priority over the other holder that is not reflected in the related mortgage loan documents and the related Intercreditor Agreement.
Inspections
The master servicer will be required to perform (at its own expense) or cause to be performed (at its own expense) physical inspections of each Mortgaged Property relating to a Mortgage Loan (other than a Mortgaged Property securing a Non-Serviced Mortgage Loan, which is subject to inspection pursuant to the related Non-Serviced PSA, and other than a Specially Serviced Loan) with a Stated Principal Balance of (A) $2,000,000 or more at least once every 12 months and (B) less than $2,000,000 at least once every 24 months, in each case commencing in the calendar year 2019 (and each Mortgaged Property is required to be inspected on or prior to December 31, 2020) unless a physical inspection has been performed by the special servicer within the previous 12 months; provided, further, however, that if any scheduled payment becomes more than 60 days delinquent on the related Mortgage Loan, the special servicer is required to inspect or cause to be inspected the related Mortgaged Property as soon as practicable after the Mortgage Loan becomes a Specially Serviced Loan and annually thereafter for so long as the Mortgage Loan remains a Specially Serviced Loan (the cost of which inspection, to the extent not paid by the related borrower, will be reimbursed first from default interest and late charges constituting additional compensation of the special servicer on the related Mortgage Loan and then from the Collection Account as an expense of the issuing entity. The special servicer or master servicer, as applicable, will be required to prepare or cause to be prepared a written report of the inspection describing, among other things, the condition of and any damage to the Mortgaged Property to the extent evident from the inspection and specifying the existence of any vacancies at the Mortgaged Property of which the preparer of such report has knowledge and the master servicer or special servicer, as applicable, deems material, of any sale, transfer or abandonment of the Mortgaged Property of which the preparer of such report has knowledge or that is evident from the inspection, of any adverse change in the condition of the Mortgaged Property of which the preparer of such report has knowledge or that is evident from the inspection, and that the master servicer or special servicer, as
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applicable, deems material, or of any material waste committed on the Mortgaged Property to the extent evident from the inspection.
Copies of the inspection reports referred to above that are delivered to the certificate administrator will be posted to the certificate administrator’s website for review by Privileged Persons pursuant to the PSA. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”.
Collection of Operating Information
With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan), the special servicer or the master servicer, as applicable, will be required to use reasonable efforts to collect and review quarterly and annual operating statements, financial statements, budgets and rent rolls of the related Mortgaged Property commencing with the calendar quarter ending on September 30, 2018 and the calendar year ending on December 31, 2018. Most of the Mortgage Loan documents obligate the related borrower to deliver annual property operating statements. However, we cannot assure you that any operating statements required to be delivered will in fact be delivered, nor is the special servicer or the master servicer likely to have any practical means of compelling the delivery in the case of an otherwise performing Mortgage Loan. In addition, the special servicer will be required to cause quarterly and annual operating statements, budgets and rent rolls to be regularly prepared in respect of each REO Property and to collect all such items promptly following their preparation.
Special Servicing Transfer Event
The Mortgage Loans (other than a Non-Serviced Mortgage Loan), any related Companion Loan and any related REO Properties will be serviced by the special servicer under the PSA in the event that the servicing responsibilities of the master servicer are transferred to the special servicer as described below. Such Mortgage Loans and related Companion Loan (including those loans that have become REO Properties) serviced by the special servicer are referred to in this prospectus collectively as the “Specially Serviced Loans”. The master servicer will be required to transfer its servicing responsibilities to the special servicer with respect to any Mortgage Loan (including any related Companion Loan) if:
(1) the related borrower fails to make when due any balloon payment, and the borrower has not delivered to the master servicer, on or before the date on which the subject payment was due, documentation reasonably satisfactory in form and substance to the master servicer which provides that a refinancing of such Mortgage Loan or sale of the related Mortgaged Property will occur within 120 days after the date on which such balloon payment will become due (provided that if either such refinancing or sale does not occur before the expiration of the time period for refinancing or sale specified in such documentation or the master servicer is required during that time to make any P&I Advance in respect of the Mortgage Loan at any time prior to such a refinancing or sale, a special servicing transfer event will occur immediately);
(2) the related borrower fails to make when due any Periodic Payment (other than a balloon payment) or any other payment (other than a balloon payment) required under the related mortgage note or the related mortgage, which failure continues unremedied for 60 days;
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(3) the master servicer determines (in accordance with the Servicing Standard) or receives from the special servicer a written determination of the special servicer (which determination the special servicer is required to make in accordance with the Servicing Standard and (A) with the consent of the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Control Termination Event has occurred and is continuing or (B) if a Control Termination Event has occurred and is continuing, following consultation with the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Consultation Termination Event has occurred and is continuing) that a default in making any Periodic Payment (other than a balloon payment) or any other material payment (other than a balloon payment) required under the related mortgage note or the related mortgage is likely to occur in the foreseeable future, and such default is likely to remain unremedied for at least 60 days beyond the date on which the subject payment will become due; or the master servicer determines (in accordance with the Servicing Standard) or receives from the special servicer a written determination of the special servicer (which determination the special servicer is required to make in accordance with the Servicing Standard and (A) with the consent of the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Control Termination Event has occurred and is continuing or (B) if a Control Termination Event has occurred and is continuing, following consultation with the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Consultation Termination Event has occurred and is continuing) that a default in making a balloon payment is likely to occur in the foreseeable future, and such default is likely to remain unremedied for at least 60 days beyond the date on which such balloon payment will become due (or, if the borrower has delivered, on or prior to the date on which the balloon payment will become due, documentation reasonably satisfactory in form and substance to the master servicer or the special servicer (and the master servicer or the special servicer, as applicable, and the Directing Certificateholder) which provides that a refinancing of such Mortgage Loan or sale of the related Mortgaged Property will occur within 120 days after the date on which such balloon payment will become due, the master servicer determines (in accordance with the Servicing Standard) or receives from the special servicer a written determination of the special servicer (which determination the special servicer is required to make in accordance with the Servicing Standard and (A) with the consent of the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Control Termination Event has occurred and is continuing or (B) if a Control Termination Event has occurred and is continuing, following consultation with the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Consultation Termination Event has occurred and is continuing) that (a) the borrower is likely not to make one or more assumed Periodic Payments as described under “Pooling and Servicing Agreement—Advances—P&I Advances” in this prospectus prior to such a refinancing or sale or (b) such refinancing or sale is not likely to occur within 120 days following the date on which the balloon payment will become due);
(4) a default has occurred (including, in the master servicer’s or the special servicer’s judgment, the failure of the related borrower to maintain any insurance required to be maintained pursuant to the related Mortgage Loan documents, unless such default has been waived in accordance with the PSA) under the related Mortgage Loan documents, other than as described in clause (1) or (2) above, that may, in the good faith and reasonable judgment of the master servicer or the special servicer (and, in the case of the special servicer (A) with the consent of the Directing Certificateholder (other than with respect to an Excluded
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Loan), unless a Control Termination Event has occurred and is continuing or (B) if a Control Termination Event has occurred and is continuing, following consultation with the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Consultation Termination Event has occurred and is continuing), materially impair the value of the related Mortgaged Property as security for such Mortgage Loan or otherwise materially and adversely affect the interests of Certificateholders, which default has continued unremedied for the applicable cure period under the terms of such Mortgage Loan (or, if no cure period is specified, 60 days);
(5) 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, marshalling 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 undischarged or unstayed for a period of sixty (60) days;
(6) the related borrower has consented to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling 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;
(7) the related borrower has admitted in writing its inability to pay its debts generally as they become due, filed a petition to take advantage of any applicable insolvency or reorganization statute, made an assignment for the benefit of its creditors, or voluntarily suspended payment of its obligations;
(8) the master servicer or the special servicer, as applicable, receives notice of the commencement of foreclosure or similar proceedings with respect to the corresponding Mortgaged Property; or
(9) the master servicer or the special servicer (and in the case of the special servicer, with the consent of the Directing Certificateholder (other than with respect to an Excluded Loan), unless a Control Termination Event has occurred and is continuing) determines that (i) a default (including, in the master servicer’s or the special servicer’s judgment, the failure of the related borrower to maintain any insurance required to be maintained pursuant to the related Mortgage Loan documents, unless such default has been waived in accordance with the PSA) under the Mortgage Loan documents (other than as described in clause 3 above) is imminent or reasonably foreseeable, (ii) such default will materially impair the value of the corresponding Mortgaged Property as security for the Mortgage Loan (if any) or otherwise materially and adversely affect the interests of Certificateholders and (iii) the default is likely to continue unremedied for the applicable cure period under the terms of the Mortgage Loan documents, or, if no cure period is specified and the default is capable of being cured, for 60 days.
However, the master servicer will be required to continue to (x) receive payments on the Mortgage Loans (including amounts collected by the special servicer), (y) make certain calculations with respect to the Mortgage Loans and (z) make remittances and prepare certain reports to the Certificateholders with respect to the Mortgage Loans. Additionally, the master servicer will continue to receive the Servicing Fee in respect of the Mortgage Loans at the Servicing Fee Rate.
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If the related Mortgaged Property is acquired in respect of any Mortgage Loan (upon acquisition, an “REO Property”) whether through foreclosure, deed-in-lieu of foreclosure or otherwise, the special servicer will continue to be responsible for its operation and management. Neither the master servicer nor the special servicer will have any responsibility for the performance by the other party of its duties under the PSA. Any Mortgage Loan (excluding any Non-Serviced Mortgage Loan) that is or becomes a cross-collateralized Mortgage Loan and is cross-collateralized with a Specially Serviced Loan will become a Specially Serviced Loan.
If any Specially Serviced Loan, in accordance with its original terms or as modified in accordance with the PSA, becomes performing for at least 3 consecutive Periodic Payments (provided that no additional event of default is foreseeable in the reasonable judgment of the special servicer and no other event or circumstance exists that causes such Mortgage Loan or related Companion Loan to otherwise constitute a Specially Serviced Loan), the special servicer will be required to transfer servicing of such Specially Serviced Loan (a “Corrected Loan”) to the master servicer.
Asset Status Report
The special servicer will be required to prepare a report (an “Asset Status Report”) for each Mortgage Loan (other than a Non-Serviced Mortgage Loan) that becomes a Specially Serviced Loan not later than 60 days after the servicing of such Mortgage Loan is transferred to the special servicer (the “Initial Delivery Date”) and will be required to amend, update or create a new Asset Status Report to the extent that during the course of the resolution of such Specially Serviced Loan material changes in the circumstances and/or strategy reflected in any current Final Asset Status Report are necessary to reflect the then current circumstances and recommendation as to how the Specially Serviced Loan might be returned to performing status or otherwise liquidated in accordance with the Servicing Standard (each such report a “Subsequent Asset Status Report”). Each Asset Status Report will be required to be delivered in electronic form to:
| ● | the Directing Certificateholder (but only with respect to any Mortgage Loan other than an Excluded Loan and prior to the occurrence and continuance of a Consultation Termination Event); |
| ● | the operating advisor (but, other than with respect to an Excluded Loan, only after the occurrence and during the continuance of an Operating Advisor Consultation Event); |
| ● | the master servicer; and |
| ● | the 17g-5 Information Provider, which will be required to post such report to the 17g-5 Information Provider’s website. |
A summary of each Final Asset Status Report will be provided to the certificate administrator and the certificate administrator will be required to post the summary of the Final Asset Status Report to the certificate administrator’s website.
An Asset Status Report prepared for each Specially Serviced Loan will be required to include, among other things, the following information:
| ● | a summary of the status of such Specially Serviced Loan and any negotiations with the related borrower; |
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| ● | a discussion of the legal and environmental considerations reasonably known to the special servicer, consistent with the Servicing Standard, that are applicable to the exercise of remedies and to the enforcement of any related guaranties or other collateral for the related Specially Serviced Loan and whether outside legal counsel has been retained; |
| ● | the most current rent roll and income or operating statement available for the related Mortgaged Property; |
| ● | (A) the special servicer’s recommendations on how such Specially Serviced Loan might be returned to performing status (including the modification of a monetary term, and any workout, restructure or debt forgiveness) and returned to the master servicer for regular servicing or foreclosed or otherwise realized upon (including any proposed sale of a Defaulted Loan or REO Property), (B) a description of any such proposed or taken actions, and (C) the alternative courses of action that were or are being considered by the special servicer in connection with the proposed or taken actions; |
| ● | the status of any foreclosure actions or other proceedings undertaken with respect to the Specially Serviced Loan, any proposed workouts and the status of any negotiations with respect to such workouts, and an assessment of the likelihood of additional defaults under the related Mortgage Loan; |
| ● | a description of any amendment, modification or waiver of a material term of any ground lease (or any space lease or air rights lease, if applicable) or franchise agreement; |
| ● | the decision that the special servicer made, or intends or proposes to make, including a narrative analysis setting forth the special servicer’s rationale for its proposed decision, including its rejection of the alternatives; |
| ● | an analysis of whether or not taking such proposed action is reasonably likely to produce a greater recovery on a present value basis than not taking such action, setting forth (x) the basis on which the special servicer made such determination and (y) the net present value calculation and all related assumptions; |
| ● | the appraised value of the related Mortgaged Property (and a copy of the last obtained appraisal of such Mortgaged Property) together with a description of any adjustments to the valuation of such Mortgaged Property made by the special servicer together with an explanation of those adjustments; and |
| ● | such other information as the special servicer deems relevant in light of the Servicing Standard. |
With respect to any Mortgage Loan other than an Excluded Loan, if no Control Termination Event has occurred and is continuing, the Directing Certificateholder will have the right to disapprove the Asset Status Report prepared by the special servicer with respect to a Specially Serviced Loan within 10 business days after receipt of the Asset Status Report. If the Directing Certificateholder does not disapprove an Asset Status Report within 10 business days or if the special servicer makes a determination, in accordance with the Servicing Standard, that the disapproval by the Directing Certificateholder (communicated to the special servicer within 10 business days) is not in the best interest of all the Certificateholders and the holder of any related Companion Loan, as a collective whole, the
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special servicer will be required to implement the recommended action as outlined in the Asset Status Report. If the Directing Certificateholder disapproves the Asset Status Report within the 10 business day period and the special servicer has not made the affirmative determination described above, the special servicer will be required to revise the Asset Status Report as soon as practicable thereafter, but in no event later than 30 days after the disapproval. The special servicer will be required to continue to revise the Asset Status Report until the Directing Certificateholder fails to disapprove the revised Asset Status Report or until the special servicer makes a determination, in accordance with the Servicing Standard, that the disapproval is not in the best interests of the Certificateholders and the holder of any related Companion Loan, as a collective whole; provided that, if the Directing Certificateholder has not approved the Asset Status Report for a period of 60 business days following the first submission of an Asset Status Report, the special servicer may act upon the direction of the Directing Certificateholder, if consistent with the Servicing Standard; provided, however, if the Directing Certificateholder’s direction would cause the special servicer to violate the Servicing Standard, the special servicer may act upon the most recently submitted form of Asset Status Report. The procedures described in this paragraph are collectively referred to as the “Directing Certificateholder Asset Status Report Approval Process”.
A “Final Asset Status Report” means, with respect to any Specially Serviced Loan, the final iteration of the initial Asset Status Report (together with such other data or supporting information provided by the special servicer to the Directing Certificateholder that does not include any communication (other than the related Asset Status Report) between the special servicer and the Directing Certificateholder with respect to such Specially Serviced Loan) required to be delivered by the special servicer by the Initial Delivery Date and any Subsequent Asset Status Report, in each case, in the form fully approved or deemed approved, if applicable, by the Directing Certificateholder pursuant to the Directing Certificateholder Asset Status Report Approval Process or following completion of the ASR Consultation Process, as applicable. For the avoidance of doubt, the special servicer may issue more than one Final Asset Status Report with respect to any Specially Serviced Loan in accordance with the procedures described above. Each Final Asset Status Report will be labeled or otherwise communicated as being “final”.
Prior to the occurrence of an Operating Advisor Consultation Event, the special servicer will be required to deliver each Final Asset Status Report to the operating advisor following completion of the Directing Certificateholder Asset Status Report Approval Process. See “—The Directing Certificateholder—Major Decisions—Control Termination Event, Consultation Termination Event and Operating Advisor Consultation Event” below for a discussion of the operating advisor’s ability to ask the special servicer reasonable questions with respect to such Final Asset Status Report.
If an Operating Advisor Consultation Event has occurred and is continuing, the special servicer will be required to promptly deliver each Asset Status Report prepared in connection with a Specially Serviced Loan to the operating advisor (and, for so long as no Consultation Termination Event has occurred, the Directing Certificateholder (other than with respect to an Excluded Loan)). The operating advisor will be required to provide comments to the special servicer in respect of the Asset Status Report, if any, within 10 business days following the later of receipt of (i) such Asset Status Report or (ii) such related additional information reasonably requested by the operating advisor, and propose possible alternative courses of action to the extent it determines such alternatives to be in the best interest of the Certificateholders (including any Certificateholders that are holders of the Control Eligible Certificates), as a collective whole. The special servicer will be obligated to consider such alternative courses of action and any other feedback provided by
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the operating advisor (and, so long as no Consultation Termination Event has occurred, the Directing Certificateholder (other than with respect to an Excluded Loan)) in connection with the special servicer’s preparation of any Asset Status Report. The special servicer may revise the Asset Status Report as it deems necessary to take into account any input and/or comments from the operating advisor (and, so long as no Consultation Termination Event has occurred, the Directing Certificateholder (other than with respect to an Excluded Loan)), to the extent the special servicer determines that the operating advisor’s and/or Directing Certificateholder’s input and/or recommendations are consistent with the Servicing Standard and in the best interest of the Certificateholders as a collective whole.
Promptly upon determining whether or not to revise any Asset Status Report to take into account any input and/or comments from the operating advisor or the Directing Certificateholder, the special servicer will be required to revise the Asset Status Report, if applicable, and deliver to the operating advisor and the Directing Certificateholder the revised Asset Status Report (until a Final Asset Status Report is issued).
The special servicer will not be required to take or to refrain from taking any action because of an objection or comment by the operating advisor or a recommendation of the operating advisor. The procedures described in this paragraph are collectively referred to as the “ASR Consultation Process”. For additional information, see “—The Operating Advisor—Additional Duties of the Operating Advisor While an Operating Advisor Consultation Event Has Occurred and is Continuing”.
After the occurrence and during the continuance of a Control Termination Event but prior to the occurrence and continuance of a Consultation Termination Event, each of the Directing Certificateholder (other than with respect to an Excluded Loan) and the operating advisor will be entitled to consult with the special servicer and propose alternative courses of action and provide other feedback in respect of any Asset Status Report. After the occurrence and during the continuance of a Consultation Termination Event, the Directing Certificateholder will have no right to consult with the special servicer with respect to Asset Status Reports and the special servicer will only be obligated to consult with the operating advisor with respect to any Asset Status Report as described above. The special servicer may choose to revise the Asset Status Report as it deems reasonably necessary in accordance with the Servicing Standard to take into account any input and/or recommendations of the operating advisor or the Directing Certificateholder during the applicable periods described above, but is under no obligation to follow any particular recommendation of the operating advisor or the Directing Certificateholder.
With respect to each Non-Serviced Mortgage Loan, the related Non-Serviced Directing Certificateholder will have approval and consultation rights with respect to any asset status report prepared by the related Non-Serviced Special Servicer with respect to the related Non-Serviced Whole Loan that are substantially similar, but not identical, to the approval and consultation rights of the Directing Certificateholder with respect to the Mortgage Loans. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”. See also “—Servicing of the Non-Serviced Mortgage Loans” below.
Realization Upon Mortgage Loans
If a payment default or material non-monetary default on a Mortgage Loan (other than a Non-Serviced Mortgage Loan) has occurred, then, pursuant to the PSA, the special servicer, on behalf of the trustee, may, in accordance with the terms and provisions of the PSA, at any time institute foreclosure proceedings, exercise any power of sale contained in the related Mortgage, obtain a deed-in-lieu of foreclosure, or otherwise acquire title to the
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related Mortgaged Property, by operation of law or otherwise. The special servicer is not permitted, however, to cause the trustee to acquire title to any Mortgaged Property, have a receiver of rents appointed with respect to any Mortgaged Property or take any other action with respect to any Mortgaged Property that would cause the trustee, for the benefit of the Certificateholders, or any other specified person to be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or an “operator” of such Mortgaged Property within the meaning of certain federal environmental laws, unless the special servicer has determined in accordance with the Servicing Standard, based on an updated environmental assessment report prepared by a person who regularly conducts environmental audits and performed within six months prior to any such acquisition of title or other action (which report will be an expense of the issuing entity subject to the terms of the PSA) that:
(a) such Mortgaged Property is in compliance with applicable environmental laws or, if not, after consultation with an environmental consultant, that it would be in the best economic interest of the Certificateholders, as a collective whole as if such Certificateholders and, if applicable, Companion Holders constituted a single lender, to take such actions as are necessary to bring such Mortgaged Property in compliance with such laws, and
(b) there are no circumstances present at such Mortgaged Property relating to the use, management or disposal of any hazardous materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any currently effective federal, state or local law or regulation, or that, if any such hazardous materials are present for which such action could be required, after consultation with an environmental consultant, it would be in the best economic interest of the Certificateholders, as a collective whole as if such Certificateholders and, if applicable, Companion Holders constituted a single lender, to take such actions with respect to the affected Mortgaged Property.
Such requirement precludes enforcement of the security for the related Mortgage Loan until a satisfactory environmental site assessment is obtained (or until any required remedial action is taken), but will decrease the likelihood that the issuing entity will become liable for a material adverse environmental condition at the Mortgaged Property. However, we cannot assure you that the requirements of the PSA will effectively insulate the issuing entity from potential liability for a materially adverse environmental condition at any Mortgaged Property.
If title to any Mortgaged Property is acquired by the issuing entity (directly or through a single member limited liability company established for that purpose), the special servicer will be required to sell the Mortgaged Property prior to the close of the third calendar year beginning after the year of acquisition, unless (1) the IRS grants (or has not denied) a qualifying extension of time to sell the Mortgaged 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 Mortgaged Property by the Lower-Tier REMIC longer than the above-referenced 3 year period will not result in the imposition of a tax on any Trust REMIC or cause any Trust REMIC to fail to qualify as a REMIC under the Code at any time that any certificate is outstanding. Subject to the foregoing and any other tax-related limitations, pursuant to the PSA, the special servicer will generally be required to attempt to sell any Mortgaged Property so acquired in accordance with the Servicing Standard. The special servicer will also be required to cause any Mortgaged Property acquired by the issuing entity to be administered so that it constitutes “foreclosure property” within the meaning of Code Section 860G(a)(8) at all times, and that the sale of the Mortgaged Property does not result in the receipt by the issuing entity of any income from nonpermitted assets as described in Code Section 860F(a)(2)(B). If any Lower-Tier
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REMIC acquires title to any Mortgaged Property, the special servicer, on behalf of such Lower-Tier REMIC, will retain, at the expense of the issuing entity, an independent contractor to manage and operate the property. The independent contractor generally will be permitted to perform construction (including renovation) on a foreclosed property only if the construction was more than 10% completed at the time default on the related Mortgage Loan became imminent. The retention of an independent contractor, however, will not relieve the special servicer of its obligation to manage the Mortgaged Property as required under the PSA.
In general, the special servicer will be obligated to cause any Mortgaged Property acquired as an REO Property to be operated and managed in a manner that would, in its reasonable judgment and in accordance with the Servicing Standard, maximize the issuing entity’s net after-tax proceeds from such property. Generally, no 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. In addition, it is possible that none of the income with respect to a Mortgaged Property would qualify if a separate charge is not stated for non-customary services provided to tenants or if such services are not performed by an independent contractor. Rents from real property also do not include income from the operation of a trade or business on the Mortgaged Property, such as a hotel 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 a REMIC at the federal corporate rate (currently 21%) and may also be subject to state or local taxes. The PSA provides that the special servicer will be permitted to cause the Lower-Tier REMIC to earn “net income from foreclosure property” that is subject to tax if it determines that the net after-tax benefit to Certificateholders is greater than another method of operating or net leasing the Mortgaged Property. Because these sources of income, if they exist, are already in place with respect to the Mortgaged Properties, it is generally viewed as beneficial to Certificateholders to permit the issuing entity to continue to earn them if it acquires a Mortgaged Property, even at the cost of this tax. These taxes would be chargeable against the related income for purposes of determining the proceeds available for distribution to holders of certificates. See “Material Federal Income Tax Considerations—Taxes That May Be Imposed on a REMIC—Prohibited Transactions”.
Under the PSA, the special servicer is required to establish and maintain one or more REO Accounts, to be held on behalf of the trustee for the benefit of the Certificateholders, for the retention of revenues and insurance proceeds derived from each REO Property. The special servicer is required to use the funds in the applicable REO Account to pay for the proper operation, management, maintenance and disposition of any REO Property for which
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it is acting as special servicer, but only to the extent that amounts on deposit in the applicable REO Account relate to such REO Property. To the extent that amounts in the applicable REO Account in respect of any REO Property are insufficient to make such payments, the master servicer is required to make a Servicing Advance, unless it determines such Servicing Advance would be nonrecoverable. On the later of (x) the date that is on or prior to each Determination Date or (y) two (2) business days after such amounts are received and properly identified and determined to be available, the special servicer is required to deposit (or remit to the master servicer for it to deposit) all amounts received in respect of each REO Property during the most recently ended Collection Period, net of any amounts withdrawn to make any permitted disbursements, into the Collection Account; provided that the special servicer may retain in the applicable REO Account permitted reserves.
Sale of Defaulted Loans and REO Properties
If the special servicer determines in accordance with the Servicing Standard that no satisfactory arrangements (including by way of discounted payoff) can be made for collection of delinquent payments on a Defaulted Loan (as defined below) and a sale of such Defaulted Loan would be in the best economic interests of the Certificateholders or, in the case of any Companion Holder (as a collective whole as if such Certificateholders and Companion Holder constituted a single lender) and the special servicer attempts to sell such Defaulted Loan and any related Serviced Pari Passu Companion Loan as described below, the special servicer will be required to use reasonable efforts to solicit offers for such Defaulted Loan on behalf of the Certificateholders in such manner as will be reasonably likely to maximize the value of the Defaulted Loan on a net present value basis. In the event that any Non-Serviced Special Servicer fails to comply with the terms of the related Intercreditor Agreement requiring the sale of the related Non-Serviced Mortgage Loan with each related Companion Loan, as a collective whole, under certain limited circumstances to the extent permitted under the related Intercreditor Agreement, the special servicer will be entitled to sell (with respect to any Mortgage Loan other than an Excluded Loan, with the consent of the Directing Certificateholder if no Control Termination Event has occurred and is continuing) such Non-Serviced Mortgage Loan if it determines in accordance with the Servicing Standard that such action would be in the best interests of the Certificateholders and, subject to the terms of the related Intercreditor Agreement (and provided that the related Non-Serviced Special Servicer will not be entitled to a liquidation fee with respect to liquidation of such Non-Serviced Mortgage Loan), the special servicer will be entitled to the liquidation fee that the related Non-Serviced Special Servicer would have otherwise been entitled to in connection with the sale of such Non-Serviced Mortgage Loan. In the absence of a cash offer at least equal to its outstanding principal balance plus all accrued and unpaid interest and outstanding costs and expenses and certain other amounts under the PSA (a “Par Purchase Price”), the special servicer may purchase the Defaulted Loan for the Par Purchase Price or may accept the first cash offer received from any person that constitutes a fair price for the Defaulted Loan. If multiple offers are received during the period designated by the special servicer for receipt of offers, the special servicer is generally required to select the highest offer. The special servicer is required to give the trustee, the certificate administrator, the master servicer, the operating advisor and (other than in respect of any Excluded Loan) the Directing Certificateholder not less than 10 business days’ prior written notice of its intention to sell any such Defaulted Loan. Neither the trustee nor any of its affiliates may make an offer for or purchase any Defaulted Loan. “Defaulted Loan” means a Mortgage Loan (other than a Non-Serviced Mortgage Loan) (i) that is delinquent at least 60 days in respect of its Periodic Payments (other than a balloon payment) or delinquent in respect of its balloon payment, if any; provided that in respect of a balloon payment, if the related borrower has provided documentation
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reasonably satisfactory in form and substance to the master servicer or special servicer, as applicable (and the master servicer or special servicer, as applicable, will be required to promptly forward such documentation to the Directing Certificateholder), which provides that a refinancing of such Mortgage Loan or sale of the related Mortgaged Property will occur within 120 days after the date on which such balloon payment will become due, then such Mortgage Loan will not be considered a Defaulted Loan unless and until such balloon payment is delinquent at least one hundred twenty (120) days; and, in any case, such delinquency is 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 special servicer has, by written notice to the related borrower, accelerated the maturity of the indebtedness evidenced by the related Mortgage Note.
The special servicer will be required to determine whether any cash offer constitutes a fair price for any Defaulted Loan if the highest offeror is a person other than an Interested Person. In determining whether any offer from a person other than an Interested Person constitutes a fair price for any Defaulted Loan, the special servicer will be required to take into account (in addition to the results of any appraisal, updated appraisal or narrative appraisal that it may have obtained pursuant to the PSA within the prior 9 months), among other factors, the period and amount of the occupancy level and physical condition of the related Mortgaged Property and the state of the local economy.
If the offeror is an Interested Person (provided that the trustee may not be a offeror), then the trustee will be required to determine whether the cash offer constitutes a fair price unless (i) the offer is equal to or greater than the applicable Par Purchase Price and (ii) the offer is the highest offer received. Absent an offer at least equal to the Par Purchase Price, no offer from an Interested Person will constitute a fair price unless (A) it is the highest offer received and (B) at least two other offers are received from independent third parties. In determining whether any offer received from an Interested Person represents a fair price for any such Defaulted Loan, the trustee will be supplied with and will be required to rely on the most recent appraisal or updated appraisal conducted in accordance with the PSA within the preceding 9-month period or, in the absence of any such appraisal, on a new appraisal. Except as provided in the following paragraph, the cost of any appraisal will be covered by, and will be reimbursable as, a Servicing Advance by the master servicer.
Notwithstanding anything contained in the preceding paragraph to the contrary, if the trustee is required to determine whether a cash offer by an Interested Person constitutes a fair price, the trustee 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 5 years’ experience in valuing loans similar to the subject Mortgage Loan, that has been selected with reasonable care by the trustee to determine if such cash offer constitutes a fair price for such Mortgage Loan. If the trustee designates such a third party to make such determination, the trustee will be entitled to rely conclusively upon such third party’s determination. The reasonable fees of, and the 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, and to the extent not collected from such Interested Person within 30 days of request therefor, by the master servicer as a Servicing Advance; provided that the trustee will not engage a third party expert whose fees exceed a commercially reasonable amount as determined by the trustee.
The special servicer is required to use reasonable efforts to solicit offers for each REO Property on behalf of the Certificateholders and the related Companion Holder(s) (if
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applicable) and to sell each REO Property in the same manner as with respect to a Defaulted Loan.
Notwithstanding any of the foregoing paragraphs, the special servicer will not be required to accept the highest cash offer for a Defaulted Loan or REO Property if the special servicer determines in consultation with the Directing Certificateholder (unless a Consultation Termination Event has occurred and is continuing and other than with respect to any Excluded Loan), in accordance with the Servicing Standard (and subject to the requirements of any related Intercreditor Agreement), that rejection of such offer would be in the best interests of the Certificateholders. In addition, the special servicer may accept a lower offer (from any person other than itself or an affiliate) if it determines, in its reasonable judgment consistent with the Servicing Standard, that acceptance of such offer would be in the best interests of the Certificateholders. The special servicer will be required to use reasonable efforts to sell all Defaulted Loans prior to the Rated Final Distribution Date.
An “Interested Person”, as of the date of any determination, is the depositor, the master servicer, the special servicer, the operating advisor, the asset representations reviewer, the certificate administrator, the trustee, the Directing Certificateholder, any sponsor, any Borrower Party, any independent contractor engaged by the special servicer or any known affiliate of any of the preceding entities, and, with respect to a Whole Loan if it is a Defaulted Loan, the depositor, the master servicer, the special servicer (or any independent contractor engaged by the special servicer), or the trustee for the securitization of a Companion Loan, and each related Companion Holder or its representative, any holder of a related mezzanine loan, or any known affiliate of any such party described above.
In addition, with respect to each Non-Serviced Mortgage Loan, if such Mortgage Loan has become a defaulted loan under the related Non-Serviced PSA, and the related Non-Serviced Special Servicer decides to sell the related Companion Loan contributed to the non-serviced securitization trust, such Non-Serviced Special Servicer will generally be required to sell such Mortgage Loan together with the related Companion Loan(s) as notes evidencing one whole loan. The issuing entity, as the holder of such Non-Serviced Mortgage Loan, will have the right to consent to such sale, provided that the Non-Serviced Special Servicer may sell the related Non-Serviced Whole Loan without such consent if the required notices and information regarding such sale are provided to the issuing entity in accordance with the related Intercreditor Agreement. The Directing Certificateholder will be entitled to exercise such consent right so long as no Control Termination Event has occurred and is continuing, and if a Control Termination Event has occurred and is continuing, the operating advisor will be entitled to exercise such consent rights. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
To the extent that Liquidation Proceeds collected with respect to any Mortgage Loan are less than the sum of (1) the outstanding principal balance of the Mortgage Loan, (2) interest accrued on the Mortgage Loan and (3) the aggregate amount of outstanding reimbursable expenses (including any (i) unpaid servicing compensation, (ii) unreimbursed Servicing Advances, (iii) accrued and unpaid interest on all Advances and (iv) additional expenses of the issuing entity) incurred with respect to the Mortgage Loan, the issuing entity will realize a loss in the amount of the shortfall. The trustee, the master servicer and/or the special servicer will be entitled to reimbursement out of the Liquidation Proceeds recovered on any Mortgage Loan, prior to the distribution of those Liquidation Proceeds to Certificateholders, of any and all amounts that represent unpaid servicing compensation in respect of the related Mortgage Loan, certain unreimbursed expenses incurred with respect to the Mortgage Loan and any unreimbursed Advances (including interest on Advances)
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made with respect to the Mortgage Loan. In addition, amounts otherwise distributable on the certificates will be further reduced by interest payable to the master servicer, the special servicer or trustee on these Advances.
The Directing Certificateholder
General
Subject to the rights of the holder of any related Companion Loan under the related Intercreditor Agreements as described under “—Rights of the Directing Certificateholder with respect to Non-Serviced Mortgage Loans” below, for so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder will be entitled to advise (1) the special servicer, with respect to all Major Decisions for Specially Serviced Loans (other than any Excluded Loan), and will have the right to replace the special servicer with or without cause and have certain other rights under the PSA, each as described below, (2) the special servicer, with respect to all non-Specially Serviced Loans (other than any Excluded Loan), as to all Major Decisions and (3) the master servicer to the extent the Directing Certificateholder’s consent is required by the definition of “Master Servicer Decision”. With respect to any Mortgage Loan other than an Excluded Loan, upon the occurrence and during the continuance of a Control Termination Event, the Directing Certificateholder will have certain consultation rights only, and upon the occurrence and during the continuance of a Consultation Termination Event, the Directing Certificateholders will not have any consent or consultation rights, as further described below.
The “Directing Certificateholder” will be with respect to each Mortgage Loan (other than any Excluded Loan), the Controlling Class Certificateholder (or its representative) selected by more than 50% of the Controlling Class Certificateholders, by Certificate Balance, as determined by the certificate registrar from time to time; provided, however, that (1) absent that selection, or (2) until a Directing Certificateholder is so selected, or (3) upon receipt of a notice from a majority of the Controlling Class Certificateholders, by Certificate Balance, that a Directing Certificateholder is no longer designated, the Controlling Class Certificateholder that owns the largest aggregate Certificate Balance of the Controlling Class (or its representative) will be the Directing Certificateholder, provided, however, that (i) in the case of this clause (3), in the event no one holder owns the largest aggregate Certificate Balance of the Controlling Class, then there will be no Directing Certificateholder until appointed in accordance with the terms of the PSA, and (ii) the certificate administrator and the other parties to the PSA will be entitled to assume that the identity of the Directing Certificateholder has not changed until such parties receive written notice of a replacement of the Directing Certificateholder from a party holding the requisite interest in the Controlling Class (as confirmed by the certificate registrar), or the resignation of the then-current Directing Certificateholder.
The initial Directing Certificateholder with respect to each Mortgage Loan is expected to be Prime Finance Long Duration (B-Piece) II Holdco I, L.P. or an affiliate thereof.
A “Controlling Class Certificateholder” is each holder (or Certificate Owner, if applicable) of a certificate of the Controlling Class as determined by the certificate registrar from time to time, upon request by any party to the PSA.
The “Controlling Class” will be, as of any time of determination, the most subordinate class of Control Eligible Certificates then outstanding that has an aggregate Certificate Balance (as notionally reduced by any Cumulative Appraisal Reduction Amounts allocable to such class) at least equal to 25% of the initial Certificate Balance of that class; provided, however, that if at any time the Certificate Balances of the certificates other than the
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Control Eligible Certificates have been reduced to zero as a result of principal payments on the Mortgage Loans, then the Controlling Class will be the most subordinate class of Control Eligible Certificates that has a Certificate Balance greater than zero without regard to any Cumulative Appraisal Reduction Amounts. The Controlling Class as of the Closing Date will be the Class J-RR certificates.
The “Control Eligible Certificates” will be any of the Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates.
The master servicer, the special servicer, the operating advisor, the certificate administrator, the trustee or any certificateholder may request that the certificate registrar determine which class of certificates is the then-current Controlling Class and the certificate registrar must thereafter provide such information to the requesting party. The depositor, the trustee, the master servicer, the special servicer, the operating advisor and, for so long as no Consultation Termination Event has occurred and is continuing, the Directing Certificateholder, may request that the certificate administrator provide, and the certificate administrator must so provide, a list of the holders (or Certificate Owners, if applicable) of the Controlling Class at the expense of the issuing entity. The trustee, the certificate administrator, the master servicer, the special servicer and the operating advisor may each rely on any such list so provided.
In the event that no Directing Certificateholder has been appointed or identified to the master servicer or special servicer, as applicable, and the master servicer or special servicer, as applicable, has attempted to obtain such information from the certificate administrator and no such entity has been identified to the master servicer or special servicer, as applicable, then until such time as the new Directing Certificateholder is identified to the master servicer and special servicer, the master servicer or special servicer, as applicable, will have no duty to consult with, provide notice to, or seek the approval or consent of any such Directing Certificateholder as the case may be.
Major Decisions
Except as otherwise described under “—Control Termination Event, Operating Advisor Consultation Event and Consultation Termination Event” and “—Servicing Override” below and subject to the rights of the holder of the related Companion Loan under the related Intercreditor Agreement as described under “—Rights of the Directing Certificateholder with respect to Non-Serviced Mortgage Loans” below, prior to the occurrence and continuance of a Control Termination Event, the special servicer will only be permitted to take any of the following actions as to which the Directing Certificateholder has consented in writing within 10 business days after receipt of the special servicer’s written recommendation, which may be in the form of an Asset Status Report, and analysis and all information reasonably requested by the Directing Certificateholder, and reasonably available to the special servicer in order to grant or withhold such consent (the “Major Decision Reporting Package”), provided that if such written consent has not been received by the special servicer within such 10 business day period, the Directing Certificateholder will be deemed to have approved such action); provided that the foregoing consent rights of the Directing Certificateholder will not apply to any Excluded Loan.
Each of the following is a “Major Decision”:
(i) any proposed or actual foreclosure upon or comparable conversion (which may include acquisition of an REO Property) of the ownership of properties securing any Mortgage Loan (other than a Non-Serviced Mortgage Loan) that comes into and continues in default;
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(ii) any modification, consent to a modification or waiver of any monetary term (other than late fees and default interest) or material non-monetary term (including, without limitation, the timing of payments and acceptance of discounted payoffs) of a Mortgage Loan (other than any Non-Serviced Mortgage Loan) or any extension of the maturity date of such Mortgage Loan other than in connection with a maturity default if a refinancing or sale is expected within 120 days as provided in clause (ix) of the definition of Master Servicer Decision;
(iii) following a default or an event of default with respect to a Mortgage Loan, any exercise of remedies, including the acceleration of the Mortgage Loan or initiation of any proceedings, judicial or otherwise, under the related Mortgage Loan documents;
(iv) any sale of a Defaulted Loan and any related defaulted Companion Loan, or any REO Property (other than in connection with the termination of the issuing entity as described under “—Termination; Retirement of Certificates”), in each case, for less than the applicable Purchase Price;
(v) any determination to bring a Mortgaged Property or an REO Property into compliance with applicable environmental laws or to otherwise address hazardous material located at a Mortgaged Property or an REO Property;
(vi) any release of collateral or any acceptance of substitute or additional collateral for a Mortgage Loan (other than any Non-Serviced Mortgage Loan) or any consent to either of the foregoing, other than if (i) required pursuant to the specific terms of the related Mortgage Loan documents or (ii) a release of a non-material, non-income producing parcel as described under clause (ii) or clause (v) of the definition of “Master Servicer Decision”;
(vii) any waiver of a “due-on-sale” or “due-on-encumbrance” clause with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or 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 described under clause (xiii) of the definition of “Master Servicer Decision” or, solely with regard to Specially Serviced Loans, as may be effected (I) without the consent of the lender under the related loan agreement, (II) pursuant to the specific terms of such Mortgage Loan and (III) for which there is no lender discretion;
(viii) any consent to a property management company change with respect to a Mortgage Loan for which the proposed replacement property manager is a Borrower Party, including, without limitation, approval of the termination of a manager and appointment of a new property manager;
(ix) any franchise changes with respect to a Mortgage Loan for which the lender is required to consent or approve such changes under the related Mortgage Loan documents;
(x) other than in the case of any non-Specially Serviced Loan, releases of any material amounts from any escrow accounts, reserve funds or letters of credit, in each case, held as performance escrows or reserves, other than those required pursuant to the specific terms of the related Mortgage Loan documents and for which there is no lender discretion;
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(xi) any acceptance of an assumption agreement or any other agreement permitting a transfer of interests in a borrower or guarantor releasing a borrower or guarantor from liability under a Mortgage Loan (other than a Non-Serviced Mortgage Loan) other than pursuant to the specific terms of such Mortgage Loan and for which there is no lender discretion;
(xii) other than in the case of a Non-Specially Serviced Loan, any modification, amendment, consent to a modification or waiver of any material term of any intercreditor, co-lender or similar agreement with any mezzanine lender, subordinate debt holder or Pari Passu Companion Loan holder related to a Mortgage Loan or Whole Loan (except any modification, amendment, consent to a modification or waiver of any term of any Intercreditor Agreement or any intercreditor, co-lender or similar agreement with any mezzanine lender or subordinate debt holder to split or resize notes consistent with the terms of such Intercreditor Agreement or such intercreditor, co-lender or similar agreement), or any action to enforce rights (or decision not to enforce rights) with respect thereto; provided, however, that any such modification or amendment that would adversely impact the master servicer will additionally require the consent of the master servicer as a condition to its effectiveness;
(xiii) any consent to incurrence of additional debt by a borrower or mezzanine debt by a direct or indirect parent of a borrower;
(xiv) agreeing to any modification, waiver, consent or amendment of the related Mortgage Loan in connection with a defeasance if such proposed modification, waiver, consent or amendment is with respect to (A) 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 (B) a modification that would permit a principal prepayment instead of defeasance if the applicable loan documents do not otherwise permit such principal prepayment;
(xv) determining whether to cure any default by a borrower under a ground lease or permit any ground lease modification, waiver, amendment or subordination, non-disturbance and attornment agreement or entry into a new ground lease;
(xvi) other than in the case of any non-Specially Serviced Loan, and other than with respect to a ground lease (addressed in clause (xv) above), any modification, waiver or amendment of any lease, the execution of a new lease or the granting of a subordination, non-disturbance and attornment agreement in connection with any lease at a Mortgaged Property or REO Property, if the lease affects an area greater than or equal to 30% of the net rentable area of the improvements at the Mortgaged Property;
(xvii) other than in the case of any Non-Specially Serviced Loan, approval of any waiver regarding the receipt of financial statements (other than immaterial timing waivers including late financial statements which in no event relieve any borrower of the obligation to provide financial statements on at least a quarterly basis) following three consecutive late deliveries of financial statements;
(xviii) other than in the case of a Non-Specially Serviced Loan, any approval of or consent to a grant of an easement or right of way that materially affects the use or value of a Mortgaged Property or a borrower’s ability to make payments with
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respect to the related Mortgage Loan or any related Companion Loan or subordination of the lien of the Mortgage Loan to such easement or right of way; and
(xix) other than in the case of any non-Specially Serviced Loan, any determination of an Acceptable Insurance Default.
Subject to the terms and conditions of this section, the special servicer will be required to process all requests for any matter that constitutes a “Major Decision” with respect to all Mortgage Loans (other than any Non-Serviced Mortgage Loans). Further, upon receiving a request for any matter described in this section that constitutes a Major Decision with respect to a Mortgage Loan (other than any Non-Serviced Mortgage Loan) that is not a Specially Serviced Loan, the master servicer will be required to promptly forward such request to the special servicer and the special servicer will be required to process such request (including, without limitation, interfacing with the borrower) and except as provided in the next sentence, the master servicer will have no further obligation with respect to such request or the Major Decision. With respect to such request, the master servicer will continue to cooperate with the special servicer by delivering any additional information in the master servicer’s possession to the special servicer requested by the special servicer relating to such Major Decision. The master servicer will not be permitted to process any Major Decision and will not be required to interface with the borrower or provide a written recommendation and analysis with respect to any Major Decision.
Asset Status Report
With respect to any Mortgage Loan other than an Excluded Loan, so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder will have the right to disapprove the Asset Status Report prepared by the special servicer with respect to a Specially Serviced Loan. If a Consultation Termination Event has occurred and is continuing, the Directing Certificateholder will have no right to consult with the special servicer with respect to the Asset Status Reports. See “—Asset Status Report” above.
Replacement of the Special Servicer
With respect to any Mortgage Loan other than an Excluded Loan, so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder will have the right to replace the special servicer with or without cause as described under “—Replacement of the Special Servicer Without Cause” and “—Termination of the Master Servicer or Special Servicer for Cause—Servicer Termination Events” below.
Control Termination Event, Operating Advisor Consultation Event and Consultation Termination Event
With respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan or an Excluded Loan), if a Control Termination Event has occurred and is continuing, but for so long as no Consultation Termination Event has occurred and is continuing, the special servicer will not be required to obtain the consent of the Directing Certificateholder with respect to any of the Major Decisions or Asset Status Reports, but will be required to consult with the Directing Certificateholder in connection with any Major Decision or Asset Status Report (or any other matter for which the consent of the Directing Certificateholder would have been required or for which the Directing Certificateholder would have the right to direct the special servicer if no Control Termination Event had occurred and was continuing) and to consider alternative actions recommended by the Directing Certificateholder in respect of such Major Decision or Asset Status Report (or such other matter). Such
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consultation will not be binding on the special servicer. In the event the special servicer receives no response from the Directing Certificateholder within 10 business days following its written request for input on any required consultation, the special servicer will not be obligated to consult with the Directing Certificateholder on the specific matter; provided, however, that the failure of the Directing Certificateholder to respond will not relieve the special servicer from consulting with the Directing Certificateholder on any future matters with respect to the related Mortgage Loan (other than a Non-Serviced Mortgage Loan or an Excluded Loan). The special servicer will be required to provide each Major Decision Reporting Package to the operating advisor (a) prior to the occurrence of an Operating Advisor Consultation Event, promptly after the special servicer receives the Directing Certificateholder’s approval or deemed approval with respect to such Major Decision or (b) following the occurrence and during the continuance of an Operating Advisor Consultation Event, simultaneously upon providing such Major Decision Reporting Package to the Directing Certificateholder; provided, however, that with respect to any non-Specially Serviced Loan no Major Decision Reporting Package will be required to be delivered prior to the occurrence and continuance of an Operating Advisor Consultation Event. With respect to any particular Major Decision and/or related Major Decision Reporting Package or any Asset Status Report required to be delivered by the special servicer to the operating advisor, the special servicer will be required to make available to the operating advisor a servicing officer with the relevant knowledge regarding any Mortgage Loan and such Major Decision and/or Asset Status Report in order to address reasonable questions that the operating advisor may have relating to, among other things, such Major Decision and/or Asset Status Report and potential conflicts of interest with respect to such Major Decision and/or Asset Status Report.
In addition, if an Operating Advisor Consultation Event has occurred and is continuing, the special servicer will also be required to deliver a Major Decision Reporting Package to the operating advisor and consult with the operating advisor in connection with any Major Decision (and such other matters that are subject to consultation rights of the operating advisor pursuant to the PSA) and to consider alternative actions recommended by the operating advisor in respect of such Major Decision; provided that such consultation is on a non-binding basis. In the event the special servicer receives no response from the operating advisor within 10 business days following the later of (i) its written request for input (which request is required to include the related Major Decision Reporting Package) on any required consultation and (ii) delivery of all such additional information reasonably requested by the operating advisor related to the subject matter of such consultation, the special servicer will not be obligated to consult with the operating advisor on the specific matter; provided, however, that the failure of the operating advisor to respond will not relieve the special servicer from consulting with the operating advisor on any future matters with respect to the related Mortgage Loan or any other Mortgage Loan. Notwithstanding anything to the contrary contained in this prospectus, with respect to any Excluded Loan (regardless of whether an Operating Advisor Consultation Event has occurred and is continuing), the special servicer or the related Excluded Special Servicer, as applicable, will be required to consult with the operating advisor, on a non-binding basis, in connection with the related transactions involving proposed Major Decisions and consider alternative actions recommended by the operating advisor, in respect thereof, in accordance with the procedures set forth in the PSA for consulting with the operating advisor.
With respect to any Excluded Special Servicer Loan (that is not also an Excluded Loan), if any, the Directing Certificateholder (prior to the occurrence and continuance of a Control Termination Event) will be required to select an Excluded Special Servicer with respect to such Excluded Special Servicer Loan. After the occurrence and during the continuance of a Control Termination Event or if at any time the applicable Excluded Special Servicer Loan is
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also an Excluded Loan, the resigning special servicer will be required to use reasonable efforts to select the related Excluded Special Servicer. The resigning special servicer will not have any liability with respect to the actions or inactions of the applicable Excluded Special Servicer or with respect to the identity of the applicable Excluded Special Servicer.
If a Consultation Termination Event has occurred and is continuing, no class of certificates will act as the Controlling Class, and the Directing Certificateholder will not have any consultation or consent rights under the PSA or any right to receive any notices, reports or information (other than notices, reports or information required to be delivered to all Certificateholders) or any other rights as Directing Certificateholder under the PSA. The special servicer will nonetheless be required to consult with only the operating advisor in connection with Major Decisions, asset status reports and other material special servicing actions to the extent set forth in the PSA, and no Controlling Class Certificateholder will be recognized or have any right to approve or be consulted with respect to asset status reports or material special servicer actions.
A “Control Termination Event” will occur when the Class E-RR certificates have a Certificate Balance (taking into account the application of any Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balance of such class) of less than 25% of the initial Certificate Balance of that class; provided that no Control Termination Event may occur with respect to the Loan-Specific Directing Certificateholder, and the term “Control Termination Event” will not be applicable to the Loan-Specific Directing Certificateholder; provided, however, that a Control Termination Event will not be deemed continuing in the event that the Certificate Balances of the certificates other than the Control Eligible Certificates have been reduced to zero as a result of principal payments on the Mortgage Loans.
A “Consultation Termination Event” will occur when there is no class of Control Eligible Certificates that has a then-outstanding Certificate Balance at least equal to 25% of the initial Certificate Balance of that class, in each case, without regard to the application of any Cumulative Appraisal Reduction Amounts; provided that no Consultation Termination Event may occur with respect to the Loan-Specific Directing Certificateholder and the term “Consultation Termination Event” will not be applicable to the Loan-Specific Directing Certificateholder; provided, however, that a Consultation Termination Event will not be deemed continuing in the event that the Certificate Balances of the certificates other than the Control Eligible Certificates have been reduced to zero as a result of principal payments on the Mortgage Loans.
With respect to any Excluded Loan or the holder of the majority of the Controlling Class, none of the Directing Certificateholder or any Controlling Class Certificateholder will have any consent or consultation rights with respect to the servicing of such Excluded Loan and a Control Termination Event and Consultation Termination Event will be deemed to have occurred with respect to an Excluded Loan.
For a description of certain restrictions on any modification, waiver or amendment to the Mortgage Loan documents, see “—Modifications, Waivers and Amendments” above.
Servicing Override
In the event that the master servicer or the special servicer, as applicable, determines that immediate action with respect to any Major Decision or Master Servicer Decision (or any other matter requiring consent of the Directing Certificateholder with respect to any Mortgage Loan other than an Excluded Loan, prior to the occurrence and continuance of a Control Termination Event in the PSA (or any matter requiring consultation
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with the Directing Certificateholder or the operating advisor)) is necessary to protect the interests of the Certificateholders, as a collective whole, the master servicer or special servicer, as the case may be, may take any such action without waiting for the Directing Certificateholder’s response (or without waiting to consult with the Directing Certificateholder or the operating advisor, as the case may be); provided that the special servicer or master servicer, as applicable, provides the Directing Certificateholder (or the operating advisor, if applicable) with prompt written notice following such action including a reasonably detailed explanation of the basis for such action.
In addition, neither the master servicer nor the special servicer (i) will be required to take or refrain from taking any action pursuant to instructions or objections from the Directing Certificateholder or (ii) may follow any advice or consultation provided by the Directing Certificateholder (or its representative) that would (1) cause it to violate any applicable law, the related Mortgage Loan documents, any related Intercreditor Agreement, the PSA, including the Servicing Standard, or the REMIC provisions, (2) expose the master servicer, the special servicer, the certificate administrator, the operating advisor, the asset representations reviewer, the issuing entity or the trustee to liability, (3) materially expand the scope of responsibilities of the master servicer or special servicer, as applicable, under the PSA or (4) cause the master servicer or special servicer, as applicable, to act, or fail to act, in a manner which in the reasonable judgment of the master servicer or special servicer, as applicable, is not in the best interests of the Certificateholders.
Rights of the Directing Certificateholder with respect to Non-Serviced Mortgage Loans
With respect to any Non-Serviced Whole Loan, the Directing Certificateholder for this securitization will not be entitled to exercise the rights described above, but such rights, or rights substantially similar to those rights, will be exercisable by the related Non-Serviced Directing Certificateholder. The issuing entity, as the holder of the Non-Serviced Mortgage Loans, has consultation rights with respect to certain major decisions relating to the related Non-Serviced Whole, and, other than in respect of an Excluded Loan, so long as no Consultation Termination Event has occurred and is continuing, the Directing Certificateholder will be entitled to exercise such consultation rights of the issuing entity pursuant to the terms of the related Intercreditor Agreement. In addition, other than in respect of an Excluded Loan, so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder may have certain consent rights in connection with a sale of a Non-Serviced Whole Loan that has become a defaulted loan under the PSA or the related Non-Serviced PSA, as applicable. See also “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Limitation on Liability of Directing Certificateholder
The Directing Certificateholder will not be liable to the issuing entity or the Certificateholders for any action taken, or for refraining from the taking of any action, or for errors in judgment. However, the Directing Certificateholder will not be protected against any liability to the Controlling Class Certificateholders that would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations or duties owed to the Controlling Class Certificateholders.
Each Certificateholder will acknowledge and agree, by its acceptance of its certificates, that the Directing Certificateholder:
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(a) may have special relationships and interests that conflict with those of holders of one or more classes of certificates;
(b) may act solely in the interests of the holders of the Controlling Class;
(c) does not have any liability or duties to the holders of any class of certificates other than the Controlling Class;
(d) may take actions that favor the interests of the holders of one or more classes including the Controlling Class over the interests of the holders of one or more other classes of certificates; and
(e) will have no liability whatsoever (other than to a Controlling Class Certificateholder) for having so acted as set forth in (a) – (d) above, and no Certificateholder may take any action whatsoever against the Directing Certificateholder or any director, officer, employee, agent or principal of the Directing Certificateholder for having so acted.
The taking of, or refraining from taking, any action by the master servicer or the special servicer in accordance with the direction of or approval of the Directing Certificateholder, which does not violate the terms of any Mortgage Loan, any law, the Servicing Standard or the provisions of the PSA or the related Intercreditor Agreement, will not result in any liability on the part of the master servicer or special servicer.
Each Certificateholder will acknowledge and agree, by its acceptance of its certificates, that the holders of any Non-Serviced Companion Loan or their respective designees (e.g., the related Non-Serviced Directing Certificateholder) will have limitations on liability with respect to actions taken in connection with the related Mortgage Loan similar to the limitations of the Directing Certificateholder described above pursuant to the terms of the related Intercreditor Agreement and the related Non-Serviced PSA. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
The Operating Advisor
General
The operating advisor will act solely as a contracting party to the extent set forth in the PSA, and in accordance with the Operating Advisor Standard, and will have no fiduciary duty to any party. The operating advisor’s duties will be limited to its specific duties under the PSA, and the operating advisor will have no duty or liability to any particular class of certificates or any Certificateholder. The operating advisor is not the special servicer or a sub-servicer and will not be charged with changing the outcome on any particular Specially Serviced Loan. By purchasing a certificate, potential investors acknowledge and agree that there could be multiple strategies to resolve any Specially Serviced Loan and that the goal of the operating advisor’s participation is to provide additional input relating to the special servicer’s compliance with the Servicing Standard in making its determinations as to which strategy to execute.
Potential investors should note that the operating advisor is not an “advisor” for any purpose other than as specifically set forth in the PSA and is not an advisor to any person, including without limitation any Certificateholder. For the avoidance of doubt, the operating advisor is not an “investment adviser” within the meaning of the Investment Advisers Act of 1940, as amended. See “Risk Factors—Other Risks Relating to the Certificates—Your Lack of Control Over the Issuing Entity and the Mortgage Loans Can Impact Your Investment”.
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Notwithstanding the foregoing, the operating advisor will generally have no obligations or consultation rights as operating advisor under the PSA for this transaction with respect to any Non-Serviced Whole Loan (each of which will be serviced pursuant to the related Non-Serviced PSA) or any related REO Properties. In addition, the operating advisors or equivalent parties under the Non-Serviced PSAs have certain obligations and consultation rights with respect to the related Non-Serviced Whole Loan, which are substantially similar to those of the operating advisor under the PSA for this transaction.
Furthermore, the operating advisor will have no obligation or responsibility at any time to review the actions of the master servicer for compliance with the Servicing Standard. Except with respect to a waiver of the Operating Advisor Consulting Fee by the master servicer, the operating advisor will have no obligation or responsibility at any time to consult with the master servicer.
Duties of Operating Advisor At All Times
With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan), the operating advisor’s obligations will generally consist of the following:
(a) reviewing the actions of the special servicer with respect to any Specially Serviced Loan to the extent described in this prospectus and required under the PSA;
(b) reviewing (i) all reports by the special servicer made available to Privileged Persons that are posted on the certificate administrator’s website that are relevant to the operating advisor’s obligations under the PSA and (ii) each Asset Status Report (after the occurrence and during the continuance of an Operating Advisor Consultation Event) and Final Asset Status Report;
(c) recalculating and verifying the accuracy of the mathematical calculations and the corresponding application of the non-discretionary portion of the applicable formulas required to be utilized in connection with Appraisal Reduction Amounts, Collateral Deficiency Amounts and net present value calculations used in the special servicer’s determination of what course of action to take in connection with the workout or liquidation of a Specially Serviced Loan, as described below; and
(d) preparing an annual report (if any Mortgage Loan (other than a Non-Serviced Mortgage Loan) was a Specially Serviced Loan at any time during the prior calendar year or if an Operating Advisor Consultation Event occurred during the prior calendar year) generally in the form attached to this prospectus as Annex C, to be provided to the certificate administrator (and made available through the certificate administrator’s website) and the 17g-5 Information Provider (and made available through the 17g-5 Information Provider’s website), as described below under “—Annual Report”.
In connection with the performance of the duties described in clause (c) above:
(1) after the calculation has been finalized (and, if an Operating Advisor Consultation Event has occurred and is continuing, prior to the utilization by the special servicer), the special servicer will be required to deliver the foregoing calculations together with information and support materials (including such additional information reasonably requested by the operating advisor to confirm the mathematical accuracy of such calculations, but not including any Privileged Information) to the operating advisor;
(2) if the operating advisor does not agree with the mathematical calculations or the application of the applicable non-discretionary portions of the
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formula required to be utilized for such calculation, the operating advisor and the special servicer will be required to consult with each other in order to resolve any material inaccuracy in the mathematical calculations or the application of the non-discretionary portions of the related formula in arriving at those mathematical calculations or any disagreement; and
(3) if the operating advisor and the special servicer are not able to resolve such matters, the operating advisor will be required to promptly notify the certificate administrator and the certificate administrator will be required to examine the calculations and supporting materials provided by the special servicer and the operating advisor and determine which calculation is to apply and will provide such parties prompt written notice of its determination.
Prior to the occurrence and continuance of an Operating Advisor Consultation Event, the operating advisor’s review will be limited to an after-the-action review of the reports, calculations and materials described above (together with any additional information and material reviewed by the operating advisor), and, therefore, it will have no involvement with respect to the determination and execution of Major Decisions and other similar actions that the special servicer may perform under the PSA and will have no obligations at any time with respect to any Non-Serviced Mortgage Loan. In addition, with respect to the operating advisor’s review of net present value calculations as described above, the operating advisor’s recalculation will not take into account the reasonableness of special servicer’s property and borrower performance assumptions or other similar discretionary portions of the net present value calculation.
The “Operating Advisor Standard” means the requirement that the operating advisor must act solely on behalf of the issuing entity and in the best interest of, and for the benefit of, the Certificateholders (as a collective whole as if such Certificateholders constituted a single lender), and not in the best interest of nor for the benefit of holders of any particular class of certificates (as determined by the operating advisor in the exercise of its good faith and reasonable judgment), but without regard to any conflict of interest arising from any relationship that the operating advisor or any of its affiliates may have with any of the underlying borrowers, any sponsor, any mortgage loan seller, the depositor, the master servicer, the special servicer, the asset representations reviewer, the Directing Certificateholder or any Certificateholder or any of their affiliates. The operating advisor will perform its duties under the PSA in accordance with the Operating Advisor Standard.
Annual Report
Based on the operating advisor’s review of (i) any Assessment of Compliance report, any Attestation Report and other information delivered to the operating advisor by the special servicer or made available to Privileged Persons that are posted on the certificate administrator’s website during the prior calendar year, (ii) prior to the occurrence and continuance of an Operating Advisor Consultation Event, with respect to any Specially Serviced Loan, any related Final Asset Status Report or Major Decision Reporting Package delivered to the operating advisor and (iii) after the occurrence and continuance of an Operating Advisor Consultation Event, any Asset Status Report and any Major Decision Reporting Package provided to the operating advisor with respect to any Mortgage Loan, the operating advisor will (to the extent required to be delivered for a particular calendar year as described above) prepare an annual report generally in the form attached to this prospectus as Annex C (the “Operating Advisor Annual Report”) to be provided to the 17g-5 Information Provider (and made available through the 17g-5 Information Provider’s website) and the certificate administrator for the benefit of the Certificateholders (and made available through the certificate administrator’s website) within 120 days of the end of the
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prior calendar year that (a) sets forth whether the operating advisor believes, in its sole discretion exercised in good faith, that the special servicer is operating in compliance with the Servicing Standard with respect to its performance of its duties under the PSA with respect to Specially Serviced Loans (and, after the occurrence and continuance of an Operating Advisor Consultation Event, also with respect to Major Decisions on non-Specially Serviced Loans) during the prior calendar year on a “asset-level basis” and (b) identifies (1) which, if any, standards the operating advisor believes, in its sole discretion exercised in good faith, the special servicer has failed to comply with and (2) any material deviations from the special servicer’s obligations under the PSA with respect to the resolution or liquidation of any Specially Serviced Loan or REO Property (other than with respect to any REO Property related to any Non-Serviced Mortgage Loan); provided, however, that in the event the special servicer is replaced, the operating advisor’s annual report will only relate to the entity that was acting as special servicer as of December 31 in the prior calendar year and is continuing in such capacity through the date of such annual report. In addition, in preparing any Operating Advisor Annual Report, the operating advisor will not be required to report on instances of non-compliance with, or deviations from, the Servicing Standard or the special servicer’s obligations under the PSA that the operating advisor determines, in its sole discretion exercised in good faith, to be immaterial.
Only as used in connection with the operating advisor’s annual report, the term “asset-level basis” refers to the special servicer’s performance of its duties with respect to the pool of Specially Serviced Loans (and, after the occurrence and continuance of an Operating Advisor Consultation Event, with respect to Major Decisions on non-Specially Serviced Loans) under the PSA, taking into account the special servicer’s specific duties under the PSA as well as the extent to which those duties were performed in accordance with the Servicing Standard, with reasonable consideration by the operating advisor of any Assessment of Compliance report, Attestation Report, Major Decision Reporting Package, Asset Status Report, Final Asset Status Report and any other information delivered to the operating advisor by the special servicer (other than any communications between the Directing Certificateholder and the special servicer that would be Privileged Information) pursuant to the PSA.
The special servicer must be given an opportunity to review any annual report produced by the operating advisor at least 5 business days prior to its delivery to the certificate administrator and the 17g-5 Information Provider; provided that the operating advisor will have no obligation to adopt any comments to such annual report that are provided by the special servicer.
In each annual report, the operating advisor will identify any material deviations (i) from the Servicing Standard and (ii) from the special servicer’s obligations under the PSA with respect to the resolution or liquidation of Specially Serviced Loans or REO Properties that the special servicer is responsible for servicing under the PSA (other than with respect to any REO Property related to any Non-Serviced Mortgage Loan) based on the limited review required in the PSA. Each annual report will be required to comply with the confidentiality requirements, subject to certain exceptions, each as described in this prospectus and as provided in the PSA regarding Privileged Information.
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 prepared or made available by others 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 or prohibit the operating advisor from performing its duties under the PSA, in which case any annual report will describe any resulting limitations, and
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the operating advisor will not be subject to any liability arising from such limitations or prohibitions. The operating advisor will be entitled to conclusively rely on the accuracy and completeness of any information it is provided without liability for any such reliance thereunder.
Additional Duties of the Operating Advisor While an Operating Advisor Consultation Event Has Occurred and is Continuing
With respect to each Mortgage Loan (other than any Non-Serviced Mortgage Loan), after the operating advisor has received notice that an Operating Advisor Consultation Event has occurred and is continuing, in addition to the duties described above, the operating advisor will be required to perform the following additional duties:
| ● | to consult (on a non-binding basis) with the special servicer (telephonically or electronically) in respect of the Asset Status Reports, as described under “—Asset Status Report”; and |
| ● | to consult (on a non-binding basis) with the special servicer to the extent it has received a Major Decision Reporting Package (telephonically or electronically) with respect to Major Decisions processed by the special servicer as described under “—The Directing Certificateholder—Major Decisions”. |
To facilitate the consultation above, the Special Servicer will be required to send to the Operating Advisor an Asset Status Report or Major Decision Reporting Package, as applicable, before the action is implemented.
Recommendation of the Replacement of the Special Servicer
If at any time the operating advisor determines, in its sole discretion exercised in good faith, that (1) the special servicer is not performing its duties as required under the PSA or is otherwise not acting in accordance with the Servicing Standard, and (2) the replacement of the special servicer would be in the best interest of the Certificateholders as a collective whole, then the operating advisor may recommend the replacement of the special servicer and deliver a report supporting such recommendation in the manner described in “—Replacement of Special Servicer After Operating Advisor Recommendation and Certificateholder Vote”.
Eligibility of Operating Advisor
The operating advisor will be required to be an Eligible Operating Advisor at all times during the term of the PSA. “Eligible Operating Advisor” means an institution:
(1) that is the special servicer or operating advisor on a commercial mortgage-backed securities transaction rated by the Rating Agencies (including, in the case of the operating advisor, this transaction) but has not been the special servicer or operating advisor on a transaction for which any Rating Agency has qualified, downgraded or withdrawn its rating or ratings of one or more classes of certificates for such transaction citing servicing or other relevant concerns with the operating advisor in its capacity as the special servicer or operating advisor, as applicable, as the sole or a material factor in such rating action;
(2) that can and will make the representations and warranties of the operating advisor set forth in the PSA;
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(3) that is not (and is not Risk Retention Affiliated with) the depositor, the trustee, the certificate administrator, the master servicer, the special servicer, a mortgage loan seller, the Directing Certificateholder, the Third-Party Purchaser, or a depositor, a trustee, a certificate administrator, the master servicer or the special servicer with respect to the securitization of a Companion Loan, or any of their Risk Retention Affiliates;
(4) that has not been paid by the special servicer or successor special servicer any fees, compensation or other remuneration (x) in respect of its obligations under the PSA or (y) for the appointment or recommendation for replacement of a successor special servicer to become the special servicer;
(5) that (x) has been regularly engaged in the business of analyzing and advising clients in commercial mortgage-backed securities matters and has at least five years of experience in collateral analysis and loss projections, and (y) has at least five years of experience in commercial real estate asset management and experience in the workout and management of distressed commercial real estate assets; and
(6) that does not directly or indirectly, through one or more affiliates or otherwise, own or have derivative exposure in any interest in any certificates, any Mortgage Loan, any Companion Loan or securities backed by a Companion Loan or otherwise have any financial interest in the securitization transaction to which the PSA relates, other than in fees from its role as operating advisor and asset representations reviewer (to the extent it also acts as the asset representations reviewer).
“Risk Retention Affiliate” or “Risk Retention Affiliated” means “affiliate of” or “affiliated with”, as such terms are defined in 12 C.F.R. 244.2 of the Credit Risk Retention Rules.
Other Obligations of Operating Advisor
At all times, subject to the Privileged Information Exception, the operating advisor and its affiliates will be obligated to keep confidential any information appropriately labeled “Privileged Information” received from the special servicer or the Directing Certificateholder in connection with the Directing Certificateholder’s exercise of any rights under the PSA (including, without limitation, in connection with any Asset Status Report) or otherwise in connection with the transaction, except under the circumstances described below. As used in this prospectus, “Privileged Information” means (i) any correspondence between the Directing Certificateholder and the special servicer related to any Specially Serviced Loan (in each case, other than with respect to an Excluded Loan) or the exercise of the Directing Certificateholder’s consent or consultation rights under the PSA, (ii) any strategically sensitive information (including any such information contained within any Asset Status Report) 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) information subject to attorney-client privilege.
The operating advisor is required to keep all such labeled Privileged Information confidential and may not disclose such labeled Privileged Information to any person (including Certificateholders other than the Directing Certificateholder), other than (1) to the extent expressly required by the PSA, to the other parties to the PSA with a notice indicating that such information is Privileged Information, (2) pursuant to a Privileged Information Exception or (3) where necessary to support specific findings or conclusions
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concerning allegations of deviations from the Servicing Standard (i) in the Operating Advisor Annual Report or (ii) in connection with a recommendation by the operating advisor to replace the special servicer. Each party to the PSA that receives Privileged Information from the operating advisor with a notice stating that such information is Privileged Information may not disclose such Privileged Information to any person without the prior written consent of the special servicer and, unless a Control Termination Event has occurred, the Directing Certificateholder (with respect to any Mortgage Loan other than a Non-Serviced Whole Loan and other than any Excluded Loan) other than pursuant to a Privileged Information Exception.
“Privileged Information Exception” means, with respect to any Privileged Information, at any time (a) such Privileged Information becomes generally available 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 required by law, rule, regulation, order, judgment or decree to disclose such information.
Neither the operating advisor nor any of its affiliates may make any investment in any class of certificates; provided, however, that such prohibition will not apply to (i) riskless principal transactions effected by a broker dealer affiliate of the operating advisor or (ii) investments by an affiliate of the operating advisor if the operating advisor and such affiliate maintain policies and procedures that (A) segregate personnel involved in the activities of the operating advisor under the PSA from personnel involved in such affiliate’s investment activities and (B) prevent such affiliate and its personnel from gaining access to information regarding the issuing entity and the operating advisor and its personnel from gaining access to such affiliate’s information regarding its investment activities.
Delegation of Operating Advisor’s Duties
The operating advisor may delegate its duties to agents or subcontractors in accordance with the PSA; however, the operating advisor will remain obligated and primarily liable for any actions required to be performed by it under the PSA without diminution of such obligation or liability or related 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 operating advisor alone were performing its obligations under the PSA.
Termination of the Operating Advisor With Cause
The following constitute operating advisor termination events under the PSA (each, an “Operating Advisor Termination Event”), whether any such event is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
(a) any failure by the operating advisor to observe or perform in any material respect any of its covenants or agreements or the material breach of any of its representations or warranties under the PSA, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, is given to the operating advisor by any party to the PSA or to the operating advisor, the certificate administrator and the trustee by the holders of certificates having greater than 25% of the aggregate Voting Rights; provided that with
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respect to any such failure that is not curable within such 30 day period, the operating advisor will have an additional cure period of 30 days to effect such cure so long as it has commenced to cure such failure within the initial 30 day period and has provided the trustee and the certificate administrator with an officer’s certificate certifying that it has diligently pursued, and is continuing to pursue, such cure;
(b) any failure by the operating advisor to perform in accordance with the Operating Advisor Standard which failure continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, is given to the operating advisor by any party to the PSA;
(c) any failure by the operating advisor to be an Eligible Operating Advisor, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, is given to the operating advisor by any party to the PSA;
(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, was entered against the operating advisor, and such decree or order remained in force undischarged or unstayed for a period of 60 days;
(e) the operating advisor consents to the appointment of a conservator or receiver or liquidator or liquidation committee in any insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation, or similar proceedings of or relating to the operating advisor or of or relating to all or substantially all of its property; or
(f) the operating advisor admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations.
Upon receipt by the certificate administrator of notice of the occurrence of any Operating Advisor Termination Event, the certificate administrator will be required to promptly provide written notice to all Certificateholders electronically by posting such notice on its internet website and by mail, unless the certificate administrator has received notice that such Operating Advisor Termination Event has been remedied.
Rights Upon Operating Advisor Termination Event
After the occurrence of an Operating Advisor Termination Event, the trustee may, and upon the written direction of Certificateholders representing at least 25% of the Voting Rights (taking into account the application of any Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balance of the classes of certificates), the trustee will, promptly terminate the operating advisor for cause and appoint a replacement operating advisor that is an Eligible Operating Advisor; provided that no such termination will be effective until a successor operating advisor has been appointed and has assumed all of the obligations of the operating advisor under the PSA. The trustee may rely on a certification by the replacement operating advisor that it is an Eligible Operating Advisor. If the trustee is unable to find a replacement operating advisor that is an Eligible Operating Advisor within
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30 days of the termination of the operating advisor, the depositor will be permitted to find a replacement.
Upon any termination of the operating advisor and appointment of a successor operating advisor, the trustee will, as soon as possible, be required to give written notice of the termination and appointment to the special servicer, the master servicer, the certificate administrator, the depositor, the Directing Certificateholder (for any Mortgage Loan other than an Excluded Loan and only for so long as no Consultation Termination Event has occurred), any Companion Holder, the Certificateholders and the 17g-5 Information Provider (and made available through the 17g-5 Information Provider’s website).
Waiver of Operating Advisor Termination Event
The holders of certificates representing at least 25% of the Voting Rights affected by any Operating Advisor Termination Event may waive such Operating Advisor Termination Event within 20 days of the receipt of notice from the trustee of the occurrence of such Operating Advisor Termination Event. Upon any such waiver of an Operating Advisor Termination Event, such Operating Advisor Termination Event will cease to exist and will be deemed to have been remedied. Upon any such waiver of an Operating Advisor Termination Event by Certificateholders, the trustee and the certificate administrator will be entitled to recover all costs and expenses incurred by it in connection with enforcement action taken with respect to such Operating Advisor Termination Event prior to such waiver from the issuing entity.
Termination of the Operating Advisor Without Cause
After the occurrence and during the continuance of a Consultation Termination Event, the operating advisor may be removed upon (i) the written direction of Certificateholders evidencing not less than 25% of the Voting Rights (taking into account the application of Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balances of classes to which such Cumulative Appraisal Reduction Amounts are allocable) requesting a vote to replace the operating advisor with a replacement operating advisor that is an Eligible Operating Advisor selected by such Certificateholders, (ii) payment by such requesting holders to the certificate administrator of all reasonable fees and expenses to be incurred by the certificate administrator in connection with administering such vote and (iii) receipt by the trustee of the Rating Agency Confirmation with respect to such removal.
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 mail, and conduct the solicitation of votes of all certificates in such regard.
Upon the vote or written direction of holders of at least 75% of the Voting Rights (taking into account the application of Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balances of classes to which such Cumulative Appraisal Reduction Amounts are allocable), the trustee will immediately replace the operating advisor with the replacement operating advisor.
Resignation of the Operating Advisor
The operating advisor may resign upon 30 days’ prior written notice to the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the asset representations reviewer and the Directing Certificateholder if the operating advisor has secured a replacement operating advisor that is an Eligible Operating Advisor and such replacement operating advisor has accepted its appointment as the replacement operating advisor and receipt by the trustee of a Rating Agency Confirmation from each Rating
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Agency. If no successor operating advisor has been so appointed and accepted the appointment within 30 days after the notice of resignation, the resigning operating advisor may petition any court of competent jurisdiction for the appointment of a successor operating advisor that is an Eligible Operating Advisor. The resigning operating advisor must pay all costs and expenses associated with the transfer of its duties.
Operating Advisor Compensation
Certain fees will be payable to the operating advisor, and the operating advisor will be entitled to be reimbursed for certain expenses, as described under “Transaction Parties—The Operating Advisor and Asset Representations Reviewer”.
In the event the operating advisor resigns or is terminated for any reason it will remain entitled to any accrued and unpaid fees and reimbursement of Operating Advisor Expenses and any rights to indemnification provided under the PSA with respect to the period for which it acted as operating advisor.
The operating advisor will be entitled to reimbursement of certain expenses incurred by the operating advisor in the event that the operating advisor is terminated without cause. See “—Termination of the Operating Advisor Without Cause” above.
The Asset Representations Reviewer
Asset Review
Asset Review Trigger
On or prior to each Distribution Date, based on 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. 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 and to provide notice to all Certificateholders by posting a notice of its determination on its internet website and by mailing such notice to the Certificateholders’ addresses appearing in the certificate register. On each Distribution Date after providing such notice to the Certificateholders, the certificate administrator, based on information provided to it by the master servicer or the special servicer, will be required to determine whether (1) any additional Mortgage Loan has become a Delinquent Loan, (2) any Mortgage Loan has ceased to be a Delinquent Loan and (3) an Asset Review Trigger has ceased to exist, and, if there is an occurrence of any of the events or circumstances identified in clauses (1), (2) and/or (3), deliver such information in a written notice (which may be via email) within 2 business days to the master servicer, the special servicer, the operating advisor and the asset representations reviewer. An “Asset Review Trigger” will occur when either (1) Mortgage Loans with an aggregate outstanding principal balance of 25.0% or more of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Loans (or a portion of any REO Loan in the case of a Whole Loan)) held by the issuing entity as of the end of the applicable Collection Period are Delinquent Loans or (2) at least 15 Mortgage Loans are Delinquent Loans as of the end of the applicable Collection Period and the outstanding principal balance of such Delinquent Loans in the aggregate constitutes at least 20.0% of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Loans (or a portion of any REO Loan in the case of a Whole Loan)) held by the issuing entity as of the end of the applicable Collection Period. The PSA will require that the certificate administrator include in the Distribution Report on
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Form 10-D relating to the distribution period in which the Asset Review Trigger occurred a description of the events that caused the Asset Review Trigger to occur.
We believe this Asset Review Trigger is appropriate considering the unique characteristics of pools of Mortgage Loans underlying CMBS. See “Risk Factors—Risks Relating to the Mortgage Loans—Static Pool Data Would Not Be Indicative of the Performance of this Pool”. In general, upon a Delinquent Loan becoming a Specially Serviced Loan, as part of the special servicer’s initial investigation into the circumstances that caused the Mortgage Loan to become delinquent and be transferred to the special servicer, the special servicer will typically conduct a review of the Delinquent Loan for possible breaches of representations and warranties. Given that the special servicer will commonly have already conducted such a review and discussed any findings with the Directing Certificateholder (prior to the occurrence and continuance of a Control Termination Event) prior to the occurrence of an Asset Review Trigger, to avoid additional fees, costs and expenses to the issuing entity, we set the Delinquent Loan percentage based on an outstanding principal balance in clause (1) of the definition of Asset Review Trigger to exceed a delinquency rate that would result in estimated losses that exceed the subordination provided by the Control Eligible Certificates. For purpose of this calculation, we assumed an average loss severity of 40%, however, we cannot assure you that any actual loss severity will equal that assumed percentage. 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 also indicate an issue with the quality of the Mortgage Pool. As a result, we believe it would be appropriate to have an alternative test as set forth in clause (2) of the definition of Asset Review Trigger, namely to have the Asset Review Trigger be met if Mortgage Loans representing 15 of the Mortgage Loans (by loan count) are Delinquent Loans so long as those Mortgage Loans represent at least 20% of the aggregate outstanding principal balance of the Mortgage Loans. With respect to the 77 prior pools of commercial mortgage loans for which Wells Fargo Bank (or its predecessors) was sponsor in a public offering of CMBS with a securitization closing date on or after January 1, 2008 (excluding zero of such 77 pools with an outstanding balance that is equal to or less than 20% of the Initial Pool Balance), 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, 2012 and March 31, 2018, was 4.0%; however, the average of the highest delinquency percentages based on the aggregate outstanding principal balance of delinquent mortgage loans in the reviewed transactions was 0.6%; and the highest percentage of delinquent mortgage loans, based upon the number of mortgage loans in the reviewed transactions was 3.6% and the average of the highest delinquency percentages based on the number of mortgage loans in the reviewed transactions was 0.8%.
“Delinquent Loan” means a Mortgage Loan that is delinquent at least 60 days in respect of its Periodic Payments or balloon payment, if any, in either case such delinquency to be determined without giving effect to any grace period.
Asset Review Vote
If Certificateholders evidencing not less than 5.0% of the Voting Rights deliver to the certificate administrator, within 90 days after the filing of the Form 10-D reporting the occurrence of an Asset Review Trigger, a written direction requesting a vote to commence an Asset Review (an “Asset Review Vote Election”), the certificate administrator will promptly provide written notice of such direction to all Certificateholders (with a copy to the asset representations reviewer), and to conduct a solicitation of votes of Certificateholders
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to authorize an Asset Review. Upon the affirmative vote to authorize an Asset Review by Certificateholders evidencing at least (i) a majority of those Certificateholders who cast votes and (ii) 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 promptly provide written notice of such Affirmative Asset Review Vote to all parties to the PSA, the underwriters, the mortgage loan sellers, the Directing Certificateholder and the Certificateholders. In the event an Affirmative Asset Review Vote has not occurred within such 150-day period following the receipt of the Asset Review Vote Election, no Certificateholder may request a vote or cast a vote for an Asset Review and the asset representations reviewer will not be required to review any Delinquent Loan unless and until, as applicable, (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 timely received an Asset Review Vote Election after the occurrence of the events described in clauses (A) and (B) above and (D) an Affirmative Asset Review Vote has occurred within 150 days after the Asset Review Vote Election described in clause (C) above. After the occurrence of any Asset Review Vote Election or an Affirmative Asset Review Vote, no Certificateholder may make any additional Asset Review Vote Election except as described in the immediately preceding sentence. Any reasonable out-of-pocket expenses incurred by the certificate administrator in connection with administering such vote will be paid as an expense of the issuing entity from the Collection Account.
An “Asset Review Quorum” means, in connection with any solicitation of votes to authorize an Asset Review as described above, the holders of certificates evidencing at least 5.0% 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”), the custodian (with respect to clauses (i) – (v) for all Mortgage Loans), the master servicer (with respect to clause (vi) for non-Specially Serviced Loans) and the special servicer (with respect to clause (vi) for Specially Serviced Loans), in each case, to the extent in such party’s possession, will be required to promptly, but in no event later than within 10 business days, provide the following materials in electronic format to the extent in their possession to the asset representations reviewer (collectively, with the Diligence Files posted to the secure data room by the certificate administrator, a copy of the prospectus, a copy of each related MLPA and a copy of the PSA, the “Review Materials”):
(i) a copy of an assignment of the Mortgage in favor of the 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;
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(iv) copies 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) copies of any other related documents that were entered into or delivered in connection with the origination of such Mortgage Loan that the asset representations reviewer has determined are necessary in connection with its completion of any Asset Review and that are requested by the asset representations reviewer, in the time frames and as otherwise described below.
In the event that, as part of an Asset Review of a Mortgage Loan, the asset representations reviewer determines that it is missing any document that is required to be part of the Review Materials for such Mortgage Loan and that is necessary in connection with its completion of the Asset Review, the asset representations reviewer will promptly, but in no event later than 10 business days after receipt of the Review Materials, notify 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 document(s), and request the master servicer or 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 document(s) to the extent in its possession. In the event any missing documents are not provided by the master servicer or special servicer, as applicable, within such 10 business day period, the asset representations reviewer will request such documents from the related mortgage loan seller. The mortgage loan seller will be required under the related MLPA to deliver such additional documents only to the extent such documents are in the possession of such party but in any event excluding any documents that contain information that is proprietary to the related originator or mortgage loan seller or any draft documents or privileged or internal communications.
The asset representations reviewer may, but is under no obligation to, consider and rely upon information furnished to it by a person that is not a party to the PSA or the related mortgage loan seller, and will do so only if such information can be independently verified (without unreasonable effort or expense to the asset representations reviewer) and is determined by the asset representations reviewer in its good faith and sole discretion to be relevant to the Asset Review (any such information, “Unsolicited Information”), as described below.
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
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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 PSA in good faith subject to the express terms of the PSA. All determinations or assumptions made by the asset representations reviewer in connection with an Asset Review are required to be made in the asset representations reviewer’s good faith discretion and judgment based on the facts and circumstances known to it at the time of such determination or assumption.
No Certificateholder will have the right to change the scope of the asset representations reviewer’s review, and the asset representations reviewer will not be required to review any information other than (i) the Review Materials 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.
The asset representations reviewer must prepare a preliminary report with respect to each delinquent loan within 56 days after the date on which access to the secure data room is provided by the certificate administrator. In the event that the asset representations reviewer determines that the Review Materials are insufficient to complete a Test and such missing documentation is not delivered to the asset representations reviewer by the master servicer (with respect to non-Specially Serviced Loans), the special servicer (with respect to Specially Serviced Loans) to the extent in the possession of the master servicer or special servicer, as applicable, or from the related mortgage loan seller within 10 business days following the request by the asset representations reviewer to the master servicer, the special servicer or the related mortgage loan seller, as the case may be, as described above, the asset representations reviewer will list such missing documents in a preliminary report setting forth the preliminary results of the application of the Tests and the reasons why such missing documents are necessary to complete a Test and (if the asset representations reviewer has so concluded) that the absence of such documents will be deemed to be a failure of such Test. The asset representations reviewer will be required to provide such preliminary report to the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans), and the related mortgage loan seller. If the preliminary report indicates that any of the representations and warranties fails or is deemed to fail any Test, the mortgage loan seller will have 90 days (the “Cure/Contest Period”) to remedy or otherwise refute the failure. Any documents or explanations to support the related mortgage loan seller’s claim that the representation and warranty has not failed a Test or that any missing documents in the Review Materials are not required to complete a Test will be sent by the related mortgage loan seller to the asset representations reviewer. For the avoidance of doubt, the asset representations reviewer will not be required to prepare a preliminary report in the event the asset representations reviewer determines that there is no Test failure with respect to the related Delinquent Loan.
The asset representations reviewer will be required, within 60 days after the date on which access to the secure data room is provided to the asset representations reviewer by the certificate administrator or within 10 days after the expiration of the Cure/Contest Period (whichever is later), 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
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Test based on the Asset Review and a statement that the asset representations reviewer’s findings and conclusions set forth in such report were not influenced by any third party (an “Asset Review Report”) to each party to the PSA, the related mortgage loan seller for each Delinquent Loan and the Directing Certificateholder, and (ii) a summary of the asset representations reviewer’s conclusions included in such Asset Review Report (an “Asset Review Report Summary”) to the trustee, the special servicer, the master servicer and the 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 PSA and the related mortgage loan seller, if the asset representations reviewer determines pursuant to the Asset Review Standard that such additional time is required due to the characteristics of the Mortgage Loans and/or the Mortgaged Property or Mortgaged Properties. In no event will the asset representations reviewer be required to determine whether any Test failure constitutes a Material Defect, or whether the issuing entity should enforce any rights it may have against the related mortgage loan seller which, in each such case, will be the responsibility of the Enforcing Servicer. See “—Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA” below. In addition, in the event that the asset representations reviewer does not receive any documentation that it requested from the master servicer (with respect to non-Specially Serviced Loans), the special servicer (with respect to Specially Serviced Loans) or the related mortgage loan seller in sufficient time to allow the asset representations reviewer to complete its Asset Review and deliver an Asset Review Report, the asset representations reviewer will be required to prepare the Asset Review Report solely based on the documentation received by the asset representations reviewer with respect to the related Delinquent Loan, and the asset representations reviewer will have no responsibility to independently obtain any such documentation from any party to the PSA or otherwise. The PSA will require that the certificate administrator (i) include the Asset Review Report Summary in the Distribution Report on Form 10–D relating to the distribution period in which 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.
Eligibility of Asset Representations Reviewer
The asset representations reviewer will be required to represent and warrant in the PSA that it is an Eligible Asset Representations Reviewer. The asset representations reviewer is required to 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 master servicer, the special servicer, the trustee, the operating advisor, the certificate administrator and the Directing Certificateholder of such disqualification and immediately resign under the PSA as described under the “—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 DBRS, Inc. (“DBRS”), Fitch, Kroll Bond Rating Agency, Inc. (“KBRA”), Moody’s, Morningstar or S&P and that has not been the special servicer, operating advisor or asset representations reviewer on a transaction for which DBRS, Fitch, KBRA, Moody’s, Morningstar or S&P has qualified, downgraded or withdrawn its rating or ratings of one or more classes of certificates for such transaction citing servicing or other relevant concerns with the special servicer, 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 PSA,
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(iii) is not (and is not affiliated (including Risk Retention Affiliated) with) any sponsor, any mortgage loan seller, any originator, the master servicer, the special servicer, the depositor, the certificate administrator, the trustee, the Directing Certificateholder, the Third-Party Purchaser or any of their respective affiliates (including Risk Retention 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, the Third-Party Purchaser, any party to the PSA, the Directing Certificateholder or any of their respective affiliates, or have been paid any fees, compensation or other remuneration by any of them in connection with any such services and (v) 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 PSA relates, other than in fees from its role as asset representations reviewer (or as operating advisor, if applicable) and except as otherwise set forth in the PSA.
Other Obligations of Asset Representations Reviewer
The asset representations reviewer and its affiliates are required to keep confidential any information appropriately labeled as “Privileged Information” received from any party to the PSA or any sponsor under the PSA (including, without limitation, in connection with the review of the Mortgage Loans) and not disclose such Privileged Information to any person (including Certificateholders), other than (1) to the extent expressly required by the PSA in an Asset Review Report or otherwise, to the other parties to the PSA with a notice indicating that such information is Privileged Information or (2) pursuant to a Privileged Information Exception. Each party to the PSA that receives 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 PSA from personnel involved in such affiliate’s investment activities and (B) prevent such affiliate and its personnel from gaining access to information regarding the issuing entity and the asset representations reviewer and its personnel from gaining access to such affiliate’s information regarding its investment activities.
Delegation of Asset Representations Reviewer’s Duties
The asset representations reviewer may delegate its duties to agents or subcontractors in accordance with the PSA, however, the asset representations reviewer will remain obligated and primarily liable for any Asset Review required in accordance with the provisions of the PSA without diminution of such obligation or liability by virtue of such delegation or arrangements or by virtue of indemnification from any person acting as its agents or subcontractor to the same extent and under the same terms and conditions as if the asset representations reviewer alone were performing its obligations under the PSA.
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Asset Representations Reviewer Termination Events
The following constitute asset representations reviewer termination events under the PSA (each, an “Asset Representations Reviewer Termination Event”) whether any such event is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
(i) any failure by the asset representations reviewer to observe or perform in any material respect any of its covenants or agreements or the material breach of any of its representations or warranties under the PSA, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, 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 greater than 25% of the Voting Rights; provided that with respect to any such failure that is not curable within such 30-day period, the asset representations reviewer 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;
(ii) any failure by the asset representations reviewer to perform its obligations set forth in the PSA in accordance with the Asset Review Standard in any material respect, which failure continues unremedied for a period of 30 days after the date written notice of such failure, requiring the same to be remedied, is given to the asset representations reviewer by any party to the PSA;
(iii) any failure by the asset representations reviewer to be an Eligible Asset Representations Reviewer, which failure continues unremedied for a period of 30 days after the date written notice of such failure, requiring the same to be remedied, is given to the asset representations reviewer by any party to the PSA;
(iv) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, has been entered against the asset representations reviewer, and such decree or order has remained in force undischarged or unstayed for a period of 60 days;
(v) the asset representations reviewer consents to the appointment of a conservator or receiver or liquidator or liquidation committee in any insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation, or similar proceedings of or relating to the asset representations reviewer or of or relating to all or substantially all of its property; or
(vi) the asset representations reviewer admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations.
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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 (which is required to be simultaneously delivered to the asset representations reviewer) 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 Cumulative Appraisal Reduction Amounts) will be required to, terminate all of the rights and obligations of the asset representations reviewer under the PSA, other than rights and obligations accrued prior to such termination and other than indemnification rights (arising out of events occurring prior to such termination), by written notice to the asset representations reviewer. The asset representations reviewer is required to bear all reasonable costs and expenses of each other party to the PSA in connection with its termination for cause.
Termination of the Asset Representations Reviewer Without Cause
Upon (i) the written direction of Certificateholders evidencing not less than 25% of the Voting Rights (without regard to the application of any Cumulative 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 to all Certificateholders and the asset representations reviewer of such request by posting such notice on its internet website, and by mailing to all Certificateholders and the asset representations reviewer. Upon the written direction of Certificateholders evidencing at least 75% of a Certificateholder Quorum (without regard to the application of any Cumulative Appraisal Reduction Amounts), the trustee will terminate all of the rights and obligations of the asset representations reviewer under the PSA (other than any rights or obligations that accrued prior to the date of such termination and other than indemnification rights (arising out of events occurring prior to such termination)) by written notice to the asset representations reviewer, and the proposed successor asset representations reviewer will be appointed.
In the event that holders of the certificates evidencing at least 75% of the Voting Rights 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 PSA. In addition, the asset representations reviewer will at all times be, and will be required to resign if it fails to be, an Eligible Asset Representations Reviewer by giving written notice to the other parties. Upon such notice of resignation, the depositor will be required to promptly appoint a successor asset representations reviewer
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that is an Eligible Asset Representations Reviewer. No resignation of the asset representations reviewer will be effective until a successor asset representations reviewer that is an Eligible Asset Representations Reviewer has been appointed and accepted the appointment. If no successor asset representations reviewer has been so appointed and accepted the appointment within 30 days after the notice of resignation, the resigning asset representations reviewer may petition any court of competent jurisdiction for the appointment of a successor asset representations reviewer that is an Eligible Asset Representations Reviewer. The resigning asset representations reviewer must pay all costs and expenses associated with the transfer of its duties.
Asset Representations Reviewer Compensation
Certain fees will be payable to the asset representations reviewer, and the asset representations reviewer will be entitled to be reimbursed for certain expenses, as described under “—Servicing and Other Compensation and Payment of Expenses”.
Replacement of the Special Servicer Without Cause
Except as limited by certain conditions described in this prospectus and subject to the rights of any related Companion Holder under a related Intercreditor Agreement, the special servicer may generally be replaced, prior to the occurrence and continuance of a Control Termination Event, at any time and without cause, by the Directing Certificateholder so long as, among other things, the Directing Certificateholder appoints a replacement special servicer that meets the requirements of the PSA, including that the trustee and the certificate administrator receive a Rating Agency Confirmation from each Rating Agency and that such replacement special servicer may not be the asset representations reviewer or any of its affiliates. The reasonable fees and out-of-pocket expenses of any such termination incurred by the Directing Certificateholder without cause (including the costs of obtaining a Rating Agency Confirmation) will be paid by the holders of the Controlling Class.
After the occurrence and during the continuance of a Control Termination Event, upon (i) the written direction of holders of Principal Balance Certificates evidencing not less than 25% of the Voting Rights (taking into account the application of any Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balances) of the Principal Balance Certificates requesting a vote to replace the special servicer with a new special servicer, (ii) payment by such holders to the certificate administrator of the reasonable fees and expenses (including any legal fees and any Rating Agency fees and expenses) to be incurred by the certificate administrator in connection with administering such vote (which fees and expenses will not be additional trust fund expenses), and (iii) delivery by such holders to the certificate administrator and the trustee of Rating Agency Confirmation from each Rating Agency (such Rating Agency Confirmation will be obtained at the expense of those holders of certificates requesting such vote), the certificate administrator will be required to post notice of the same on the certificate administrator’s website and concurrently by mail and conduct the solicitation of votes of all certificates in such regard, which requisite affirmative votes must be received within 180 days of the posting of such notice. Upon the written direction of holders of Principal Balance Certificates evidencing at least 66-2/3% of a Certificateholder Quorum, the trustee will be required to terminate all of the rights and obligations of the special servicer under the PSA and appoint the successor special servicer (which must be a Qualified Replacement Special Servicer) designated by such Certificateholders, subject to indemnification, right to outstanding fees, reimbursement of Advances and other rights set forth in the PSA, which survive such termination. The certificate administrator will include on each Distribution Date Statement a statement that each Certificateholder may access such notices via the certificate administrator’s website
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and that each Certificateholder may register to receive electronic mail notifications when such notices are posted thereon.
A “Certificateholder Quorum” means, in connection with any solicitation of votes in connection with the replacement of the special servicer or asset representations reviewer described above, the holders of certificates evidencing at least 50% of the aggregate Voting Rights (taking into account the application of Realized Losses and, other than with respect to the termination of the asset representations reviewer, the application of any Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balance of the certificates) of all Principal Balance Certificates on an aggregate basis.
Notwithstanding the foregoing, if the special servicer obtains knowledge that it has become a Borrower Party with respect to any Mortgage Loan (any such Mortgage Loan, an “Excluded Special Servicer Loan”), the special servicer will be required to resign as special servicer of that Excluded Special Servicer Loan. Prior to the occurrence and continuance of a Control Termination Event, if the applicable Excluded Special Servicer Loan is not also an Excluded Loan, the Directing Certificateholder will be required to select a successor special servicer that is not a Borrower Party in accordance with the terms of the PSA (the “Excluded Special Servicer”) for the related Excluded Special Servicer Loan. After the occurrence and during the continuance of a Control Termination Event or if at any time the applicable Excluded Special Servicer Loan is also an Excluded Loan, the resigning special servicer will be required to use commercially reasonable efforts to appoint the Excluded Special Servicer. The special servicer will not have any liability with respect to the actions or inactions of the applicable Excluded Special Servicer or with respect to the identity of the applicable Excluded Special Servicer. It will be a condition to any such appointment that (i) the Rating Agencies confirm that the appointment would not result in a qualification, downgrade or withdrawal of any of their then-current ratings of the certificates, (ii) the applicable Excluded Special Servicer is a Qualified Replacement Special Servicer and (iii) the applicable Excluded Special Servicer delivers to the depositor and the certificate administrator, the information, if any, required pursuant to Item 6.02 of the Form 8-K regarding itself in its role as Excluded Special Servicer.
If at any time the special servicer is no longer a Borrower Party with respect to an Excluded Special Servicer Loan (including, without limitation, as a result of the related Mortgaged Property becoming REO Property), (1) the related Excluded Special Servicer will be required to resign, (2) the related Mortgage Loan will no longer be an Excluded Special Servicer Loan, (3) the special servicer will become the special servicer again for such related Mortgage Loan and (4) the special servicer will be entitled to all special servicing compensation with respect to such Mortgage Loan earned during such time on and after such Mortgage Loan is no longer an Excluded Special Servicer Loan.
The applicable Excluded Special Servicer will be required to perform all of the obligations of the special servicer for the related Excluded Special Servicer Loan and will be entitled to all special servicing compensation with respect to such Excluded Special Servicer Loan earned during such time as the related Mortgage Loan is an Excluded Special Servicer Loan (provided that the special servicer will remain entitled to all other special servicing compensation with respect to all Mortgage Loans that are not Excluded Special Servicer Loans during such time).
A “Qualified Replacement Special Servicer” is a replacement special servicer that (i) satisfies all of the eligibility requirements applicable to the special servicer in the PSA, (ii) is not the operating advisor, the asset representations reviewer or an affiliate of the operating advisor or the asset representations reviewer (and, if appointed by the Directing Certificateholder or with the approval of the requisite vote of certificateholders following the
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operating advisor’s recommendation to replace the special servicer as described in “—Replacement of Special Servicer After Operating Advisor Recommendation and Certificateholder Vote” below, is not the originally replaced special servicer or its affiliate), (iii) is not obligated to pay the operating advisor (x) any fees or otherwise compensate the operating advisor in respect of its obligations under the PSA, or (y) for the appointment of the successor special servicer or the recommendation by the operating advisor for the replacement special servicer to become the special servicer, (iv) is not entitled to receive any compensation from the operating advisor other than compensation that is not material and is unrelated to the operating advisor’s recommendation that such party be appointed as the replacement special servicer, (v) is not entitled to receive any fee from the operating advisor for its appointment as successor special servicer, in each case, unless expressly approved by 100% of the Certificateholders, (vi) currently has a special servicer rating of at least “CSS3” from Fitch, (vii) is currently acting as a special servicer in a commercial mortgage-backed securities transaction rated by Moody’s on a transaction-level basis (as to which a commercial mortgage-backed securities transaction there are outstanding a commercial mortgage-backed securities rated by Moody’s), and has not been publicly cited by Moody’s as having servicing concerns as the sole or a material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a rating downgrade or withdrawal) of securities in a transaction serviced by the applicable servicer prior to the time of determination and (viii) is currently acting as a special servicer in a transaction rated by DBRS and has not been publicly cited by DBRS as having servicing concerns as the sole or a material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a rating downgrade or withdrawal) of securities in a transaction serviced by the applicable servicer prior to the time of determination.
Replacement of the Special Servicer After Operating Advisor Recommendation and Certificateholder Vote
If the operating advisor determines, in its sole discretion exercised in good faith, that (i) the special servicer is not performing its duties as required under the PSA or is otherwise not acting in accordance with the Servicing Standard and (ii) the replacement of the special servicer would be in the best interest of the certificateholders as a collective whole, then then the operating advisor will have the right to recommend the replacement of the special servicer. In such event, the operating advisor will be required to deliver to the trustee and the certificate administrator, with a copy to the special servicer, a written report detailing the reasons supporting its recommendation (along with relevant information justifying its recommendation) and recommending a suggested replacement special servicer (which must be a Qualified Replacement Special Servicer). The certificate administrator will be required to notify each Certificateholder of the recommendation and post it on the certificate administrator’s internet website, and to conduct the solicitation of votes with respect to such recommendation. Approval by the Certificateholders of such Qualified Replacement Special Servicer will not preclude the Directing Certificateholder from appointing a replacement, so long as such replacement is a Qualified Replacement Special Servicer and is not the originally replaced special servicer or its affiliate.
The operating advisor’s recommendation to replace the special servicer must be confirmed by an affirmative vote of holders of Certificates evidencing at least a majority of a quorum of Certificateholders (which, for this purpose, is the holders of Certificates that (i) evidence at least 20% of the Voting Rights (taking into account the application of any Appraisal Reduction Amounts to notionally reduce the respective Certificate Balances) of all Principal Balance Certificates on an aggregate basis, and (ii) consist of at least three Certificateholders or Certificate Owners that are not affiliated with each other). In the event
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the holders of Principal Balance Certificates, evidencing at least a majority of a quorum of Certificateholders, elect to remove and replace the special servicer (which requisite affirmative votes must be received within 180 days of the posting of the notice of the operating advisor’s recommendation to replace the special servicer to the certificate administrator’s website), the certificate administrator will be required to receive a Rating Agency Confirmation from each of the Rating Agencies at that time. In the event the certificate administrator receives a Rating Agency Confirmation from each of the Rating Agencies (and the successor special servicer agrees to be bound by the terms of the PSA), the trustee will then be required to terminate all of the rights and obligations of the special servicer under the PSA and to appoint the successor special servicer approved by the holders of Certificates evidencing at least a majority of a quorum of Certificateholders, provided such successor special servicer is a Qualified Replacement Special Servicer, subject to the terminated special servicer’s rights to indemnification, payment of outstanding fees, reimbursement of Advances and other rights set forth in the PSA that survive termination. The reasonable out-of-pocket costs and expenses (including reasonable legal fees and expenses of outside counsel) associated with obtaining such Rating Agency Confirmations and administering the vote of the applicable holders of the Certificates and the operating advisor’s identification of a Qualified Replacement Special Servicer will be an additional trust fund expense.
In any case, the trustee will notify the outgoing special servicer promptly of the effective date of its termination. Any replacement special servicer recommended by the operating advisor must be a Qualified Replacement Special Servicer.
In the event the special servicer is terminated as a result of the recommendation of the operating advisor described in this “—Replacement of the Special Servicer After Operating Advisor Recommendation and Certificateholder Vote”, the Directing Holder may not subsequently reappoint as special servicer such terminated special servicer or any Risk Retention Affiliate of such terminated special servicer.
No appointment of a special servicer will be effective until the depositor or the depositor for the securitization of a Companion Loan has filed any required Exchange Act filings related to the removal and replacement of the special servicer.
With respect to any Non-Serviced Whole Loans, the related Non-Serviced Special Servicer may be removed, and a successor special servicer appointed at any time by the related Non-Serviced Directing Certificateholder (and not by the Directing Certificateholder for this transaction) to the extent set forth in the related Non-Serviced PSA and the related Intercreditor Agreement for such Non-Serviced Whole Loan. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans”, “—The Non-Serviced AB Whole Loan” and “—Servicing of the Non-Serviced Mortgage Loans” below.
Resignation of Master Servicer, Trustee, Certificate Administrator, Operating Advisor or Asset Representations Reviewer Upon Prohibited Risk Retention Affiliation
Upon the occurrence of (i) a servicing officer of the master servicer or a responsible officer of the certificate administrator or the trustee, as applicable, obtaining actual knowledge that the master servicer, the certificate administrator or the trustee, as applicable, is or has become Risk Retention Affiliated with or a Risk Retention Affiliate of the Third-Party Purchaser (in such case, an “Impermissible RP Affiliate”), or (ii) the operating advisor or the asset representations reviewer becoming Risk Retention Affiliated with or a Risk Retention Affiliate of the Third-Party Purchaser or any other party to the PSA (other than the operating advisor and asset representations reviewer) (such operating advisor or
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asset representations reviewer together with an Impermissible RP Affiliate, an “Impermissible Risk Retention Affiliate”), then, in each case, such Impermissible Risk Retention Affiliate is required to promptly notify the Sponsors and the other parties to the PSA and resign in accordance with the terms of the PSA. The resigning Impermissible Risk Retention Affiliate will be required to bear all reasonable out-of-pocket costs and expenses of each other party to the PSA, the issuing entity and each Rating Agency in connection with such resignation as and to the extent required under the PSA, provided however, if the affiliation causing an Impermissible Risk Retention Affiliate is the result of the Third-Party Purchaser acquiring an interest in such Impermissible Risk Retention Affiliate or an affiliate of such Impermissible Risk Retention Affiliate, then such costs and expenses will be an expense of the issuing entity.
Termination of the Master Servicer or Special Servicer for Cause
Servicer Termination Events
A “Servicer Termination Event” under the PSA with respect to the master servicer or the special servicer, as the case may be, will include, without limitation:
(a) (i) any failure by the master servicer to make a deposit required to be made by the master servicer to the Collection Account on the day and by the time such deposit was first required to be made, which failure is not remedied within one business day, or (ii) any failure by the master servicer to deposit into, or remit to the 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 the applicable REO Account within one business day 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 other account required under the PSA, any such deposit or remittance required to be made by the special servicer pursuant to, and at the time specified by, the PSA;
(c) any failure by the master servicer or the special servicer, as the case may be, duly to observe or perform in any material respect any of its other covenants or obligations under the PSA, which failure continues unremedied for 30 days (or (i) with respect to any year that a report on Form 10-K is required to be filed, 5 business days in the case of the master servicer’s or special servicer’s obligations, as the case may be, under the PSA in respect of Exchange Act reporting items (after any applicable grace periods), (ii) 15 days in the case of the master servicer’s failure to make a Servicing Advance or (iii) 15 days in the case of a failure to pay the premium for any property insurance policy required to be maintained under the PSA) after written notice of the failure has been given (A) to the master servicer or special servicer, as the case may be, by any other party to the PSA, or (B) to the master servicer or special servicer, as the case may be, with a copy to each other party to the related PSA, by Certificateholders evidencing not less than 25% of all Voting Rights; provided, however, that if that failure is capable of being cured and the master servicer or the special servicer, as the case may be, is diligently pursuing that cure, such period will be extended an additional 30 days; provided, further, however, that such extended period will not apply to the obligations regarding Exchange Act reporting;
(d) any breach on the part of the master servicer or special servicer, as the case may be, of any representation or warranty in the PSA that materially and adversely affects the interests of any class of Certificateholders and that continues unremedied for a period of 30 days after the date on which notice of that breach, requiring the same to be remedied,
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will have been given to the master servicer or 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 Certificateholders evidencing not less than 25% of Voting Rights; provided, however, that if that breach is capable of being cured and the master servicer or special servicer, as the case may be, is diligently pursuing that cure, that 30-day period will be extended an additional 30 days;
(e) certain events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings in respect of or relating to the master servicer or special servicer, and certain actions by or on behalf of the master servicer or special servicer indicating its insolvency or inability to pay its obligations;
(f) either Moody’s or DBRS (i) has qualified, downgraded or withdrawn its rating or ratings of one or more classes of certificates, or (ii) has placed one or more classes of certificates on “watch status” in contemplation of a ratings downgrade or withdrawal (and in the case of clause (i) or (ii), such action has not been withdrawn by Moody’s or DBRS, as applicable, within 60 days of such rating action) and, in the case of either of clauses (i) or (ii), such Rating Agency publicly cited servicing concerns with the master servicer or the special servicer, as the case may be, as the sole or a material factor in such rating action; or
(g) the master servicer or the special servicer, as the case may be, is no longer rated at least “CMS3” or “CSS3”, respectively, by Fitch and such master servicer or special servicer is not reinstated to at least that rating within 60 days of the delisting.
Rights Upon Servicer Termination Event
If a Servicer Termination Event occurs with respect to the master servicer or the special servicer under the PSA, then, so long as the Servicer Termination Event remains unremedied, the depositor or the trustee will be authorized, and at the written direction of Certificateholders entitled to more than 25% of the Voting Rights or, for so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder (solely with respect to the special servicer and other than with respect to an Excluded Loan), the trustee will be required to terminate all of the rights and obligations of the defaulting party as master servicer or special servicer, as the case may be (other than certain rights in respect of indemnification and certain items of servicing compensation), under the PSA. The trustee will then succeed to all of the responsibilities, duties and liabilities of the defaulting party as master servicer or special servicer, as the case may be, under the PSA and will be entitled to similar compensation arrangements. If the trustee is unwilling or unable to so act, it may (or, at the written request of Certificateholders entitled to a majority of the Voting Rights, or, for so long as no Control Termination Event has occurred and is continuing and other than in respect of an Excluded Loan, the Directing Certificateholder, it will be required to) appoint, or petition a court of competent jurisdiction to appoint, a mortgage loan servicing institution, subject to the trustee’s receipt of a Rating Agency Confirmation from each of the Rating Agencies and, with respect to a successor special servicer, for so long as no Control Termination Event has occurred and is continuing, that has been approved by the Directing Certificateholder, which approval may not be unreasonably withheld. In addition, none of the asset representations reviewer, the operating advisor and their respective affiliates may be appointed as a successor master servicer or special servicer.
Notwithstanding anything to the contrary contained in the section above, if a servicer termination event on the part of a Non-Serviced Special Servicer remains unremedied and
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affects the issuing entity, and such Non-Serviced Special Servicer has not otherwise been terminated, the trustee, acting at the direction of the Directing Certificateholder, will generally be entitled to direct the related Non-Serviced Trustee to terminate such Non-Serviced Special Servicer, solely with respect to the related Non-Serviced Whole Loan(s), and a successor will be appointed in accordance with the related Non-Serviced PSA.
In addition, notwithstanding anything to the contrary contained in the section described above, if the master servicer receives notice of termination solely due to a Servicer Termination Event described in clause (f) or (g) under “—Termination of the Master Servicer or Special Servicer for Cause—Servicer Termination Events” above, and prior to being replaced as described in the third preceding paragraph, the master servicer will have 45 days after receipt of the notice of termination to find, and sell its rights and obligations to, a successor master servicer that meets the requirements of the master servicer under the PSA; provided that the Rating Agencies have each provided a Rating Agency Confirmation. The termination of the master servicer will be effective when such successor master servicer has succeeded the terminated master servicer, as successor master servicer and such successor master servicer has assumed the terminated master servicer’s servicing obligations and responsibilities under the PSA. If a successor has not entered into the PSA as successor master servicer within 45 days after notice of the termination of the master servicer, the master servicer will be replaced by the trustee as described above.
Further, if replaced as a result of a Servicer Termination Event, the master servicer or special servicer, as the case may be, will be responsible for the costs and expenses associated with the transfer of its duties.
Waiver of Servicer Termination Event
The Certificateholders representing at least 66-2/3% of the Voting Rights allocated to certificates affected by any Servicer Termination Event may waive such Servicer Termination Event; provided, however, that a Servicer Termination Event under clause (a), (b) or (f) of the definition of “Servicer Termination Event” may be waived only with the consent of all of the Certificateholders of the affected classes and a Servicer Termination Event under clause (c) of the definition of “Servicer Termination Event” relating to Exchange Act reporting may be waived only with the consent of the depositor. Upon any such waiver of a Servicer Termination Event, such Servicer Termination Event will cease to exist and will be deemed to have been remedied. Upon any such waiver of a Servicer Termination Event by Certificateholders, the trustee and the certificate administrator will be entitled to recover all costs and expenses incurred by it in connection with enforcement actions taken with respect to such Servicer Termination Event prior to such waiver from the issuing entity.
Resignation of the Master Servicer or Special Servicer
The PSA permits the master servicer and the special servicer to resign from their respective obligations only upon (a) the appointment of, and the acceptance of the appointment by, a successor (which may be appointed by the resigning master servicer or special servicer, as applicable) and receipt by the certificate administrator and the trustee of a Rating Agency Confirmation from each of the Rating Agencies; and, as to the special servicer only, for so long as no Control Termination Event has occurred and is continuing, the approval of such successor by the Directing Certificateholder, which approval will not be unreasonably withheld or (b) a determination that their respective obligations are no longer permissible with respect to the master servicer or the special servicer, as the case may be, under applicable law. In the event that the master servicer or special servicer resigns as a result of the determination that their respective obligations are no longer permissible under applicable law, the trustee will then succeed to all of the responsibilities, duties and
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liabilities of the defaulting party as master servicer or special servicer, as the case may be, under the PSA and will be entitled to similar compensation arrangements. If the trustee is unwilling or unable to so act, it may appoint, or petition a court of competent jurisdiction to appoint, a mortgage loan servicing institution, subject to the trustee’s receipt of a Rating Agency Confirmation from each of the Rating Agencies and, with respect to a successor special servicer, for so long as no Control Termination Event has occurred and is continuing, which has been approved by the Directing Certificateholder, which approval may not be unreasonably withheld.
No resignation will become effective until the trustee or other successor has assumed the obligations and duties of the resigning master servicer or special servicer, as the case may be, under the PSA. Further, the resigning master servicer or special servicer, as the case may be, must pay all reasonable out-of-pocket costs and expenses associated with the transfer of its duties. Other than as described under “—Termination of the Master Servicer or Special Servicer for Cause—Servicer Termination Events” above, in no event will the master servicer or the special servicer have the right to appoint any successor master servicer or special servicer if the master servicer or special servicer, as applicable, is terminated or removed pursuant to the PSA. In addition, the PSA will prohibit the appointment of the asset representations reviewer, the operating advisor or one of their respective affiliates as successor to the master servicer or special servicer.
Limitation on Liability; Indemnification
The PSA will provide that none of the master servicer (including in any capacity as the paying agent for any Companion Loan), the special servicer, the depositor, the operating advisor, the asset representations reviewer or any partner, shareholder, member, manager, director, officer, employee or agent of any of them will be under any liability to the issuing entity, Certificateholders or holders of the related Companion Loan, as applicable, for any action taken, or not taken, in good faith pursuant to the PSA or for errors in judgment; provided, however, that none of the master servicer, the special servicer, the depositor, the operating advisor, the asset representations reviewer or similar person will be protected against any breach of a representation or warranty made by such party, as applicable, in the PSA or any liability that would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of such party’s obligations or duties under the PSA or by reason of negligent disregard of such obligations and duties. For the purposes of indemnification of the master servicer or the special servicer and limitation of liability, the master servicer or special servicer will be deemed not to have engaged in willful misconduct or committed bad faith or negligence in the performance of its respective obligations and duties under the PSA or acted in negligent disregard of such obligations and duties if the master servicer or special servicer, as applicable, fails to follow the terms of the Mortgage Loan documents because the master servicer or special servicer, as applicable, in accordance with the Servicing Standard, determines that compliance with any Mortgage Loan documents would or potentially would (i) cause any Trust REMIC to fail to qualify as a REMIC, (ii) cause the Grantor Trust to fail to qualify as a grantor trust under the relevant provisions of the Code or (iii) cause a tax to be imposed on the trust or any Trust REMIC under the relevant provisions of the Code (for any such determination in clauses (i), (ii) or (iii), the master servicer and special servicer will be entitled to rely on advice of counsel, the cost of which will be reimbursed as an additional trust fund expense). The PSA will also provide that the master servicer, the special servicer, the depositor, the operating advisor, the asset representations reviewer and their respective affiliates and any partner, shareholder, member, manager, director, officer, employee or agent of any of them will be entitled to indemnification by the issuing entity against any claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and other costs, liabilities,
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fees and expenses (including, without limitation, costs and expenses of litigation and of enforcement of this indemnity, and of investigation, counsel fees, damages, judgments and amounts paid in settlement) incurred in connection with any actual or threatened legal or administrative action or claim that relates to the PSA, the Mortgage Loans, the issuing entity or the certificates; provided, however, that the indemnification will not extend to any loss, liability or expense specifically required to be borne by such party pursuant to the terms the PSA, incurred in connection with any breach of a representation or warranty made by such party, as applicable, in the PSA or incurred by reason of willful misconduct, bad faith or negligence in the performance of such party’s obligations or duties under the PSA, by reason of negligent disregard of such party’s obligations or duties, or in the case of the depositor and any of its partners, shareholders, directors, officers, members, managers, employees and agents, any violation by any of them of any state or federal securities law. In addition, absent actual fraud (as determined by a final non-appealable court order), neither the trustee nor the certificate administrator (including its capacity as custodian) will be liable for special, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the trustee or the certificate administrator has been advised of the likelihood of such loss or damage and regardless of the form of action.
The PSA will also provide that any master servicer, depositor, special servicer, operating advisor (or the equivalent), asset representations reviewer, paying agent, certificate administrator or trustee under any Non-Serviced PSA with respect to a Non-Serviced Mortgage Loan and any partner, director, officer, shareholder, member, manager, employee or agent of any of them will be entitled to indemnification by the issuing entity and held harmless against the issuing entity’s pro rata share (subject to the applicable Intercreditor Agreement) of any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, liabilities, fees and expenses incurred in connection with servicing and administration of such Non-Serviced Mortgage Loan and the related Mortgaged Property (as and to the same extent the securitization trust formed under the related Non-Serviced PSA is required to indemnify such parties in respect of other mortgage loans in the securitization trust formed under the related Non-Serviced PSA pursuant to the terms of such Non-Serviced PSA).
In addition, the PSA will provide that none of the master servicer (including in any capacity as the paying agent for any Companion Loan), the special servicer, the depositor, operating advisor or asset representations reviewer will be under any obligation to appear in, prosecute or defend any legal or administrative action, proceeding, hearing or examination that is not incidental to its respective responsibilities under the PSA or that in its opinion may involve it in any expense or liability not recoverable from the issuing entity. However, each of the master servicer, the special servicer, the depositor, the operating advisor and the asset representations reviewer will be permitted, in the exercise of its discretion, to undertake any action, proceeding, hearing or examination that it may deem necessary or desirable with respect to the enforcement and/or protection of the rights and duties of the parties to the PSA and the interests of the Certificateholders under the PSA. If any such expenses, costs or liabilities relate to a Mortgage Loan or Companion Loan, then any subsequent recovery on that Mortgage Loan or Companion Loan, as applicable, will be used to reimburse the issuing entity for any amounts advanced for the payment of such expenses, costs or liabilities. In that event, the legal expenses and costs of the action, proceeding, hearing or examination and any liability resulting therefrom, will be expenses, costs and liabilities of the issuing entity, and the master servicer (including in its capacity as the paying agent for any Companion Loan), the special servicer, the depositor, the asset representations reviewer or the operating advisor, as the case may be, will be entitled to be reimbursed out of the Collection Account for the expenses.
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Pursuant to the PSA, the master servicer and the special servicer will each be required to maintain a fidelity bond and errors and omissions policy or their equivalent with a qualified insurer that provides coverage against losses that may be sustained as a result of an officer’s or employee’s misappropriation of funds or errors and omissions, subject to certain limitations as to amount of coverage, deductible amounts, conditions, exclusions and exceptions permitted by the PSA. Notwithstanding the foregoing, the master servicer and special servicer will be allowed to self-insure with respect to an errors and omissions policy and a fidelity bond so long as certain conditions set forth in the PSA are met.
Any person into which the master servicer, the special servicer, the depositor, operating advisor, or asset representations reviewer may be merged or consolidated, or any person resulting from any merger or consolidation to which the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer is a party, or any person succeeding to the business of the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer, will be the successor of the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer, as the case may be, under the PSA, subject to certain conditions set forth in the PSA. The master servicer, the special servicer, the operating advisor and the asset representations reviewer may have other normal business relationships with the depositor or the depositor’s affiliates.
The trustee and the certificate administrator make no representations as to the validity or sufficiency of the PSA (other than as to it being a valid obligation of the trustee and the certificate administrator), the certificates, the Mortgage Loans, this prospectus (other than as to the accuracy of the information provided by the trustee and the certificate administrator as set forth above) or any related documents and will not be accountable for the use or application by the depositor of any of the certificates issued to it or of the proceeds of such certificates, or for the use or application of any funds paid to the depositor in respect of the assignment of the Mortgage Loans to the issuing entity, or any funds deposited in or withdrawn from the Collection Account or any other account by or on behalf of the depositor, the master servicer, the special servicer or, in the case of the trustee, the certificate administrator. The PSA provides that no provision of such agreement will be construed to relieve the trustee and the certificate administrator from liability for their own negligent action, their own negligent failure to act or their own willful misconduct or bad faith.
The PSA provides that neither the trustee nor the certificate administrator, as applicable, will be liable for an error of judgment made in good faith by a responsible officer of the trustee or the certificate administrator, unless it is proven that the trustee or the certificate administrator, as applicable, was negligent in ascertaining the pertinent facts. In addition, neither the trustee nor the certificate administrator, as applicable, will be liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of holders of certificates entitled to greater than 25% of the percentage interest of each affected class, or of the aggregate Voting Rights of the certificates, relating to the time, method and place of conducting any proceeding for any remedy available to the trustee and the certificate administrator, or exercising any trust or power conferred upon the trustee and the certificate administrator, under the PSA (unless a higher percentage of Voting Rights is required for such action).
The trustee and the certificate administrator and any director, officer, employee, representative or agent of the trustee and the certificate administrator, will be entitled to indemnification by the issuing entity, to the extent of amounts held in the Collection Account or the Lower-Tier REMIC Distribution Account from time to time, for any loss, liability, damages, claims or unanticipated expenses (including reasonable attorneys’ fees,
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costs of enforcement and expenses) arising out of or incurred by the trustee or the certificate administrator in connection with their participation in the transaction and any act or omission of the trustee or the certificate administrator relating to the exercise and performance of any of the powers and duties of the trustee and the certificate administrator (including in any capacities in which they serve, e.g., paying agent, REMIC administrator, authenticating agent, custodian, certificate registrar and 17g-5 Information Provider) under the PSA. However, the indemnification will not extend to any loss, liability or expense that constitutes a specific liability imposed on the trustee or the certificate administrator pursuant to the PSA, or to any loss, liability or expense incurred by reason of willful misconduct, bad faith or negligence on the part of the trustee or the certificate administrator in the performance of their obligations and duties under the PSA, or by reason of their negligent disregard of those obligations or duties, or as may arise from a breach of any representation or warranty of the trustee or the certificate administrator made in the PSA.
The rights and protections afforded to the trustee and the certificate administrator as set forth above and under the PSA will also apply in addition to each other capacity in which it serves under the PSA.
Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA
In the event any party to the PSA receives a request or demand from a Requesting Certificateholder to the effect that a Mortgage Loan should be repurchased or replaced due to a Material Defect, or if such party to the PSA determines that a Mortgage Loan should be repurchased or replaced due to a Material Defect, that party to the PSA will be required to promptly forward such request or demand to the master servicer and the special servicer, and the master servicer or the special servicer, as applicable, will be required to promptly forward it to the related mortgage loan seller. The Enforcing Servicer will be required to enforce the obligations of the mortgage loan sellers under the MLPAs pursuant to the terms of the PSA and the MLPAs. These obligations include obligations resulting from a Material Defect. Subject to the provisions of the applicable MLPA relating to the dispute resolutions as described under “Description of the Mortgage Loan Purchase Agreements—Dispute Resolution Provisions”, such enforcement, including, without limitation, the legal prosecution of claims, if any, will be required to be carried out in accordance with the Servicing Standard.
Within 45 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 MLPA with respect to such Material Defect as discussed in the preceding paragraph. See “—The Asset Representations Reviewer—Asset Review” above.
Any costs incurred by the master servicer or the special servicer, as applicable, with respect to the enforcement of the obligations of a mortgage loan seller under the applicable MLPA will be deemed to be Servicing Advances, to the extent not recovered from the mortgage loan seller or the Requesting Certificateholder. See “Description of the Mortgage Loan Purchase Agreements—Dispute Resolution Provisions”.
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Dispute Resolution Provisions
Certificateholder’s Rights When a Repurchase Request Is Initially Delivered by a Certificateholder
In the event an Initial Requesting Certificateholder delivers a written request to a party to the PSA that a Mortgage Loan be repurchased by the applicable mortgage loan seller alleging the existence of a Material Defect with respect to such Mortgage Loan and setting forth the basis for such allegation (a “Certificateholder Repurchase Request”), the receiving party will be required to promptly forward that Certificateholder Repurchase Request to the master servicer and the special servicer. The Enforcing Servicer will then be required to promptly forward it to the applicable mortgage loan seller and each other party to the PSA. An “Initial Requesting Certificateholder” is the first Certificateholder or Certificate Owner to deliver a Certificateholder Repurchase Request as described above with respect to a Mortgage Loan, and there may not be more than one Initial Requesting Certificateholder with respect to any Mortgage Loan. Subject to the provisions described below under this heading “—Dispute Resolution Provisions”, the Enforcing Servicer will be the Enforcing Party with respect to the Certificateholder Repurchase Request.
The “Enforcing Servicer” will be (a) with respect to a Specially Serviced Loan, the special servicer, and (b) with respect to a non-Specially Serviced Loan, (i) in the case of a Repurchase Request made by special servicer, the Directing Certificateholder or a Controlling Class Certificateholder, the master servicer, and (ii) in the case of a Repurchase Request made by any person other than the special servicer, the Directing Certificateholder or a Controlling Class Certificateholder, (A) prior to the Resolution Failure relating to such non-Specially Serviced Loan, the master servicer, and (B) from and after a Resolution Failure relating to such non-Specially Serviced Loan, the special servicer.
An “Enforcing Party” is the person obligated to, or that elects pursuant to the terms of the PSA to, enforce the rights of the issuing entity against the related mortgage loan seller with respect to a Repurchase Request.
Repurchase Request Delivered by a Party to the PSA
In the event that the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the operating advisor (solely in its capacity as operating advisor) or the Directing Certificateholder for this securitization has knowledge of a Material Defect with respect to a Mortgage Loan, that party will be required to deliver prompt written notice of such Material Defect to each other party to the PSA and the applicable mortgage loan seller, identifying the applicable Mortgage Loan and setting forth the basis for such allegation (a “PSA Party Repurchase Request” and, each of a Certificateholder Repurchase Request or a PSA Party Repurchase Request, a “Repurchase Request”), and the Enforcing Servicer will be required to promptly send the PSA Party Repurchase Request to the related mortgage loan seller. The Enforcing Servicer will be required to act as the Enforcing Party and enforce the rights of the issuing entity against the related mortgage loan seller with respect to the PSA Party Repurchase Request. However, if a Resolution Failure occurs with respect to the PSA Party Repurchase Request, the provisions described below under “—Resolution of a Repurchase Request” will apply.
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 under “—Resolution of a Repurchase Request” 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. A Resolved Repurchase Request will not
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preclude the master servicer (in the case of non-Specially Serviced Loans) or the special servicer (in the case of Specially Serviced Loans) from exercising any of their respective rights related to a Material Defect in the manner and timing otherwise set forth in the PSA, in the related MLPA or as provided by law. “Resolved” means, with respect to a Repurchase Request, (i) that the related Material Defect has been cured, (ii) the related Mortgage Loan has been repurchased in accordance with the related MLPA, (iii) a mortgage loan has been substituted for the related Mortgage Loan in accordance with the related MLPA, (iv) the applicable mortgage loan seller makes a Loss of Value Payment, (v) a contractually binding agreement is entered into between the Enforcing Servicer, on behalf of the issuing entity, and the related mortgage loan seller that settles the related mortgage loan seller’s obligations under the related MLPA or (vi) the related Mortgage Loan is no longer property of the issuing entity as a result of a sale or other disposition in accordance with the PSA.
Resolution of a Repurchase Request
Within 2 business days after a Resolution Failure occurs with respect to a Repurchase Request made by any person other than the special servicer, the Directing Certificateholder or a Controlling Class Certificateholder relating to a related non-Specially Serviced Loan, the master servicer will be required to send a written notice (a “Master Servicer Proposed Course of Action Notice”) to the special servicer, indicating such master servicer’s analysis and recommended course of action with respect to such Repurchase Request. The master servicer will also be required to deliver to the special servicer the servicing file and all information, documents and records (including records stored electronically on computer tapes, magnetic discs and the like) relating to such non-Specially Serviced Loan, either in such master servicer’s possession or otherwise reasonably available to the such master servicer, and reasonably requested by the special servicer to enable it to assume its duties under the PSA to the extent set forth in the PSA for such non-Specially Serviced Loan. Upon receipt of such Master Servicer Proposed Course of Action Notice and such servicing file and other material, the special servicer will become the Enforcing Servicer with respect to such Repurchase Request.
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, a party to the PSA or the Directing Certificateholder), and, if applicable, after the master servicer sends the Master Servicer Proposed Course of Action Notice (as defined below), the Enforcing Servicer will be required to send a notice (a “Proposed Course of Action Notice”) to the Initial Requesting Certificateholder, if any, at the address specified in the Initial Requesting Certificateholder’s Repurchase Request, and to the certificate administrator, indicating the Enforcing Servicer’s intended course of action with respect to the Repurchase Request (a “Proposed Course of Action”). The certificate administrator will be required to make the Proposed Course of Action Notice available to all other Certificateholders and Certificate Owners (by posting such notice on the certificate administrator’s website). The Proposed Course of Action Notice will be required to include (a) a request to Certificateholders to indicate their agreement with or dissent from such Proposed Course of Action, by clearly marking “agree” or “disagree” to the Proposed Course of Action on such notice within 30 days after the date of such notice and a disclaimer that responses received after such 30-day period will not be taken into consideration, (b) a statement that if any Certificateholder disagrees with the Proposed Course of Action, the Enforcing Servicer will be compelled to follow (either as the Enforcing Party or as the Enforcing Servicer in circumstances where a Certificateholder is acting as the Enforcing Party) the course of action agreed to and/or proposed by the majority of the responding Certificateholders that involves referring the matter to mediation or arbitration, as the case may be, in accordance with the procedures described below relating to the delivery of
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Preliminary Dispute Resolution Election Notices and Final Dispute Resolution Election Notices, (c) a statement that the responding Certificateholders will be required to certify their holdings in connection with such response, (d) a statement that only responses clearly marked “agree” or “disagree” with such Proposed Course of Action will be taken into consideration and (e) instructions for the responding Certificateholders to send their responses to the Enforcing Servicer and the certificate administrator.
Within 15 business days after the expiration of the 30-day response period, the certificate administrator will be required to tabulate the responses received from the Certificateholders and share the results with the Enforcing Servicer. The certificate administrator will only count responses timely received and clearly indicating agreement or dissent with the related Proposed Course of Action and additional verbiage or qualifying language will not be taken into consideration for purposes of determining whether the related Certificateholder agrees or disagrees with the Proposed Course of Action. The certificate administrator will be under no obligation to answer any questions from the Certificateholders regarding such Proposed Course of Action. For the avoidance of doubt, the certificate administrator’s obligations in connection with this heading “—Resolution of a Repurchase Request” will be limited solely to tabulating the Certificateholders’ responses of “agree” or “disagree” to the Proposed Course of Action, and such obligation will not be construed to impose any enforcement obligation on the certificate administrator. The Enforcing Servicer may conclusively rely (without investigation) on the certificate administrator’s tabulation of the responses of the responding Certificateholders. If (a) the Enforcing Servicer’s intended course of action with respect to the Repurchase Request does not involve pursuing further action to exercise rights against the related mortgage loan seller with respect to the Repurchase Request and the Initial Requesting Certificateholder, if any, or any other Certificateholder or Certificate Owner wishes to exercise its right to refer the matter to mediation (including nonbinding arbitration) or arbitration, as discussed below under “—Mediation and Arbitration Provisions”, or (b) the Enforcing Servicer’s intended course of action is to pursue further action to exercise rights against the related mortgage loan seller with respect to the Repurchase Request but the Initial Requesting Certificateholder, if any, or any other Certificateholder or Certificate Owner does not agree with the dispute resolution method selected by the Enforcing Servicer, then the Initial Requesting Certificateholder, if any, or such other Certificateholder or Certificate Owner may deliver to the Enforcing Servicer a written notice (a “Preliminary Dispute Resolution Election Notice”) within 30 days after the date the Proposed Course of Action Notice is posted on the certificate administrator’s website (the “Dispute Resolution Cut-off Date”) indicating its intent to exercise its right to refer the matter to either mediation (including nonbinding arbitration) or arbitration. In the event that (a) the Enforcing Servicer’s initial Proposed Course of Action indicated a recommendation to undertake mediation (including nonbinding arbitration) or arbitration, (b) any Certificateholder or Certificate Owner delivers a Preliminary Dispute Resolution Election Notice and (c) the Enforcing Servicer also received responses from other Certificateholders or Certificate Owners supporting the Enforcing Servicer’s initial Proposed Course of Action indicating a recommendation to undertake mediation or arbitration, such additional responses from other Certificateholders or Certificate Owners will also be considered Preliminary Dispute Resolution Election Notices supporting such Proposed Course of Action for purposes of determining the course of action approved by the majority of responding Certificateholders.
If neither the Initial Requesting Certificateholder, if any, nor any other Certificateholder or Certificate Owner delivers a Preliminary Dispute Resolution Election Notice prior to the Dispute Resolution Cut-off Date, no Certificateholder or Certificate Owner will have the right to refer the Repurchase Request to mediation or arbitration, and the Enforcing Servicer, as the Enforcing Party, will be the sole party entitled to determine a course of action, including,
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but not limited to, enforcing the issuing entity’s rights against the related mortgage loan seller, subject to any consent or consultation rights of the Directing Certificateholder.
Promptly and in any event within 10 business days following receipt of a Preliminary Dispute Resolution Election Notice from (i) the Initial Requesting Certificateholder, if any, or (ii) any other Certificateholder or Certificate Owner (each of clauses (i) and (ii), a “Requesting Certificateholder”), the Enforcing Servicer will be required to consult with each Requesting Certificateholder regarding such Requesting Certificateholder’s intention to elect either mediation (including nonbinding arbitration) or arbitration as the dispute resolution method with respect to the Repurchase Request (the “Dispute Resolution Consultation”) so that such Requesting Certificateholder may consider the views of the Enforcing Servicer as to the claims underlying the Repurchase Request and possible dispute resolution methods, such discussions to occur and be completed no later than 10 business days following the Dispute Resolution Cut-off Date. The Enforcing Servicer will be entitled to establish procedures the Enforcing Servicer deems in good faith to be in accordance with the Servicing Standard relating to the timing and extent of such consultations. No later than 5 business days after completion of the Dispute Resolution Consultation, a Requesting Certificateholder may provide a final notice to the Enforcing Servicer indicating its decision to exercise its right to refer the matter to either mediation or arbitration (“Final Dispute Resolution Election Notice”).
If, following the Dispute Resolution Consultation, no Requesting Certificateholder timely delivers a Final Dispute Resolution Election Notice to the Enforcing Servicer, then the Enforcing Servicer will continue to act as the Enforcing Party and remain obligated under the PSA to determine a course of action, including, but not limited to, enforcing the rights of the issuing entity with respect to the Repurchase Request and no Certificateholder or Certificate Owner will have any further right to elect to refer the matter to mediation or arbitration.
If a Requesting Certificateholder timely delivers a Final Dispute Resolution Election Notice to the Enforcing Servicer, then such Requesting Certificateholder will become the Enforcing Party and must promptly submit the matter to mediation (including nonbinding arbitration) or arbitration. If there is more than one Requesting Certificateholder that timely deliver 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 nonbinding arbitration) or arbitration. If, however, no Requesting Certificateholder commences arbitration or mediation pursuant to the terms of the PSA within 30 days after delivery of its Final Dispute Resolution Election Notice to the Enforcing Servicer, then (i) the rights of a Requesting Certificateholder to act as the Enforcing Party will terminate and no Certificateholder or Certificate Owner will have any further right to elect to refer the matter to mediation or arbitration, (ii) if the Proposed Course of Action Notice indicated that the Enforcing Servicer will take no further action with respect to the Repurchase Request, then the related Material Defect will be deemed waived for all purposes under the PSA and related MLPA; provided, however, that such Material Defect will not be deemed waived with respect to a Requesting Certificateholder, any other Certificateholder or Certificate Owner or the Enforcing Servicer to the extent there is a material change in the facts and circumstances known to such party at the time when the Proposed Course of Action Notice was delivered to the Enforcing Servicer and (iii) if the Proposed Course of Action Notice had indicated a course of action other than the course of action under clause (ii), then the Enforcing Servicer will again become the Enforcing Party and, as such, will be the sole party entitled to enforce the issuing entity’s rights against the related mortgage loan seller.
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Notwithstanding the foregoing, the dispute resolution provisions described under this heading “—Resolution of a Repurchase Request” will not apply, and the Enforcing Servicer will remain the Enforcing Party, if the Enforcing Servicer has commenced litigation with respect to the Repurchase Request, or determines in accordance with the Servicing Standard that it is in the best interest of Certificateholders to commence litigation with respect to the Repurchase Request to avoid the running of any applicable statute of limitations.
In the event a Requesting Certificateholder becomes the Enforcing Party, the Enforcing Servicer, on behalf of the issuing entity, will remain a party to any proceedings against the related mortgage loan seller as further described below. For the avoidance of doubt, none of the depositor, the mortgage loan seller(s) with respect to the subject mortgage loan or any of their respective affiliates (other than the special servicer or a Controlling Class Certificateholder) will be entitled to be an Initial Requesting Certificateholder or a Requesting Certificateholder or to act as a Certificateholder for purposes of delivering any Preliminary Dispute Resolution Election Notice or Final Dispute Resolution Election Notice or otherwise to vote Certificates owned by it or such affiliate(s) with respect to a course of action proposed or undertaken pursuant to the procedures described under this “—Dispute Resolution Provisions” heading.
Subject to the other provisions of this section, the Requesting Certificateholder is entitled to elect either mediation or arbitration in its sole discretion; however, the Requesting Certificateholder may not elect to then utilize the alternative method in the event that the initial method is unsuccessful.
Mediation and Arbitration Provisions
If the Enforcing Party elects mediation (including nonbinding arbitration) or arbitration, the mediation or arbitration will be administered by a nationally recognized arbitration or mediation organization selected by the related mortgage loan seller within thirty (30) days of written notice of the Enforcing Party’s selection of mediation or arbitration, as applicable. 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 MLPA and PSA, and may not modify or change those agreements in any way or award remedies not consistent with those agreements. The arbitrator will not have the power to award punitive or consequential damages. In its final determination, the arbitrator will determine and award the costs of the arbitration to the parties to the arbitration in its reasonable discretion. In the event a Requesting Certificateholder is the Enforcing Party, the Requesting Certificateholder will be required to pay any expenses allocated to the Enforcing Party in the arbitration proceedings or any expenses that the Enforcing Party agrees to bear in the mediation proceedings.
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
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may be entered and enforced in any court with jurisdiction over the parties and the matter. By selecting arbitration, the Enforcing Party would be waiving its right to sue in court, including the right to a trial by jury.
In the event a Requesting Certificateholder is the Enforcing Party, the agreement with the arbitrator or mediator, as the case may be, will be required under the PSA to contain an acknowledgment that the issuing entity, or the Enforcing Servicer on its behalf, will be a party to any arbitration or mediation proceedings solely for the purpose of being the beneficiary of any award in favor of the Enforcing Party; provided that the degree and extent to which the Enforcing Servicer actively prepares for and participates in such proceeding will be determined by such Enforcing Servicer in consultation with the Directing Certificateholder (provided that no Consultation Termination Event has occurred and is continuing and subject to the time periods for such consultation set forth in the PSA), 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 the 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, that the Certificateholders will be permitted to communicate prior to the commencement of any such proceedings to the extent described under “Description of the Certificates—Certificateholder Communication”.
For avoidance of doubt, in no event will the exercise of any right of a Requesting Certificateholder to refer a Repurchase Request to mediation or arbitration or participation in such mediation or arbitration affect in any manner the ability of the Enforcing Servicer to perform its obligations with respect to a Mortgage 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 Certificateholder.
Any out-of-pocket expenses required to be borne by or allocated to the Enforcing Servicer in a mediation or arbitration or related responsibilities under the PSA will be reimbursable as trust fund expenses.
Servicing of the Non-Serviced Mortgage Loans
The master servicer, the special servicer, the certificate administrator and the trustee under the PSA have no obligation or authority to (a) supervise any related Non-Serviced Master Servicer, Non-Serviced Special Servicer, Non-Serviced Certificate Administrator or Non-Serviced Trustee or (b) make servicing advances with respect to any Non-Serviced Whole Loan. The obligation of the master servicer to provide information and collections and make P&I Advances to the certificate administrator for the benefit of the Certificateholders with respect to each Non-Serviced Mortgage Loan is dependent on its receipt of the corresponding information and/or collections from the applicable Non-Serviced Master Servicer or Non-Serviced Special Servicer.
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General
Each Non-Serviced Mortgage Loan will be serviced pursuant to the related Non-Serviced PSA and the related Intercreditor Agreement. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “—The Non-Serviced AB Whole Loan”.
The servicing terms of each such Non-Serviced PSA as it relates to the servicing of the Non-Serviced Whole Loans will be similar in all material respects to the servicing terms of the PSA applicable to the Mortgage Loans; however, the servicing arrangements under such agreements will differ in certain respects. For example:
| ● | Each Non-Serviced Master Servicer and Non-Serviced Special Servicer will be required to service the related Non-Serviced Mortgage Loan pursuant to a servicing standard set forth in the related Non-Serviced PSA that is substantially similar to, but may not be identical to, the Servicing Standard. |
| ● | Any party to the related Non-Serviced PSA that makes a property protection advance with respect to the related Non-Serviced Mortgage Loan will be entitled to reimbursement for that advance, with interest at the prime rate, in a manner substantially similar to the reimbursement of Servicing Advances under the PSA. The Trust, as holder of the related Non-Serviced Mortgage Loan, will be responsible for its pro rata share of any such advance reimbursement amounts (including out of general collections on the WFCM 2018-C45 mortgage pool, if necessary). |
| ● | Pursuant to the related Non-Serviced PSA, the liquidation fee, the special servicing fee and the workout fee with respect to the related Non-Serviced Mortgage Loan are similar to the corresponding fees payable under the PSA. |
| ● | The extent to which modification fees or other fee items with respect to the related Whole Loan may be applied to offset interest on advances, servicer expenses and servicing compensation will, in certain circumstances, be less than is the case under the PSA. |
| ● | Items with respect to the related Non-Serviced Whole Loan that are the equivalent of assumption application fees, defeasance fees, assumption, waiver, consent and earnout fees, late payment charges, default interest and/or modification fees and that constitute additional servicing compensation under the related Non-Serviced PSA will not be payable to master servicer or special servicer under the PSA and one or more of such items will be allocated between the related Non-Serviced Master Servicer and the related Non-Serviced Special Servicer under the related Non-Serviced PSA in proportions that may be different than the allocation of similar fees under the PSA between the master servicer and special servicer for this transaction. |
| ● | The Non-Serviced Directing Certificateholder under the related Non-Serviced PSA will have rights substantially similar to the Directing Certificateholder under the PSA with respect to the servicing and administration of the related Non-Serviced Whole Loan, including consenting to the substantial equivalent of Major Decisions under such Non-Serviced PSA proposed by the related Non-Serviced Special Servicer and reviewing and consenting to asset status reports prepared by such Non-Serviced Special Servicer in respect of the related Non-Serviced Whole Loan. “Major Decisions” under the related |
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| Non-Serviced PSA will differ in certain respects from those actions that constitute Major Decisions under the PSA, and therefore the specific types of servicer actions with respect to which the applicable Non-Serviced Directing Certificateholder will be permitted to consent will correspondingly differ. The related Non-Serviced PSA also provides for the removal of the Non-Serviced Special Servicer by the related Non-Serviced Directing Certificateholder under such Non-Serviced PSA under certain conditions that are similar to the conditions under which the Directing Certificateholder is permitted to replace the special servicer under the PSA. |
| ● | The termination events that will result in the termination of the related Non-Serviced Master Servicer or Non-Serviced Special Servicer are substantially similar to, but not identical to, the Servicer Termination Events under the PSA applicable to the master servicers and special servicers, as applicable. |
| ● | Servicing transfer events under the related Non-Serviced PSA that would cause the related Non-Serviced Whole Loan to become specially serviced will be substantially similar to, but not identical to, the corresponding provisions under the PSA. |
| ● | The servicing decisions which the related Non-Serviced Master Servicer will perform, and in certain cases for which the related Non-Serviced Master Servicer must obtain the related Non-Serviced Directing Certificateholder’s or Non-Serviced Special Servicer’s consent, differ in certain respects from those decisions that constitute Master Servicer Decisions under the PSA. |
| ● | The related Non-Serviced Special Servicer is required to take actions with respect to the related Non-Serviced Whole Loan if it becomes the equivalent of a defaulted mortgage loan, which actions are substantially similar, but not necessarily identical, to the actions described under “—Sale of Defaulted Loans and REO Properties”. |
| ● | Appraisal reduction amounts in respect of the related Non-Serviced Mortgage Loan will be calculated by the related Non-Serviced Special Servicer under the related Non-Serviced PSA in a manner substantially similar to, but not necessarily identical to, calculations of such amounts by the special servicer under the PSA in respect of Mortgage Loans. |
| ● | The requirement of the related Non-Serviced Master Servicer to make compensating interest payments in respect of the related Non-Serviced Mortgage Loan is similar, but not necessarily identical, to the requirement of the master servicer to make Compensating Interest Payments in respect of the Mortgage Loans under the PSA. |
| ● | The servicing provisions under the related Non-Serviced PSA relating to performing inspections and collecting operating information are substantially similar but not necessarily identical to those of the PSA. |
| ● | While the special servicers under the PSA and the Non-Serviced Special Servicer under the related Non-Serviced PSA must each resign as special servicer with respect to a mortgage loan if it becomes affiliated with the related borrower under such mortgage loan, the particular types of affiliations that trigger such resignation obligation, as well as the parties that are entitled |
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| to appoint a successor special servicer, may differ as between the PSA and the related Non-Serviced PSA. |
| ● | The parties to the related Non-Serviced PSA (and their related directors, officers and other agents) will be entitled to reimbursement and/or indemnification for losses, liabilities, costs and expenses associated with the servicing of the related Non-Serviced Whole Loan under such Non-Serviced PSA to the same extent that parties to the PSA performing similar functions (and their related directors, officers and other agents) are entitled to reimbursement and/or indemnification for losses, liabilities, costs and expenses associated with their obligations under the PSA. The Trust, as holder of the related Non-Serviced Mortgage Loan, will be responsible for its pro rata share of any such indemnification amounts (including out of general collections on the WFCM 2018-C45 mortgage pool, if necessary). |
| ● | The matters as to which notice to, or rating agency confirmation from, the rating agencies under the related Non-Serviced PSA are required are similar, but not identical to, matters with respect to which the Rating Agencies under the PSA are entitled to notice or confirmation (and such agreements may differ as to whether it is notice or rating agency confirmation that is required and as to whether a notice to, or a confirmation from, the rating agencies under the related Non-Serviced PSA in connection with an action involving the subject Non-Serviced Whole Loan would also be required to be made to or obtained from the Rating Agencies under the PSA). |
| ● | With respect to non-specially serviced mortgage loans, the related Non-Serviced PSA may differ with respect to whether the related Non-Serviced Master Servicer or related Non-Serviced Special Servicer will be responsible for conducting or managing certain litigation related to such mortgage loans. |
| ● | Each of the related Non-Serviced Master Servicer and related Non-Serviced Special Servicer will be liable in accordance with the related Non-Serviced PSA only to the extent of its obligations specifically imposed by that agreement. Accordingly, in general, each of the related Non-Serviced Master Servicer and related Non-Serviced Special Servicer will not be liable for any action taken, or for refraining from the taking of any action, in good faith pursuant to the related Non-Serviced PSA or for errors in judgment; provided that neither such party will be protected against any breach of representations or warranties made by it in the related Non-Serviced PSA or against any liability which would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of duties or by reason of negligent disregard of obligations and duties under the related Non-Serviced PSA. |
| ● | With respect to each Non-Serviced Mortgage Loan as to which the related lead securitization that includes the Control Note involves the issuance of “eligible vertical interests” (as defined in the Credit Risk Retention Rules), the related Non-Serviced PSA may provide for one or more “risk retention consultation parties” with certain consultation rights. |
| ● | The provisions of the related Non-Serviced PSA will also vary from the PSA with respect 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 |
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| voting or consent thresholds, master servicer and special servicer termination events, rating requirements for accounts and permitted investments, eligibility requirements applicable to servicers and other service providers, and the circumstances under which approvals, consents, consultation, notices or rating agency confirmations may be required. |
The master servicers, the special servicers, the certificate administrator and the trustee under the PSA have no obligation or authority to (a) supervise any related Non-Serviced Master Servicer, Non-Serviced Special Servicer, Non-Serviced Certificate Administrator or Non-Serviced Trustee or (b) make servicing advances with respect to any Non-Serviced Whole Loan. The obligation of the master servicer to provide information and collections and make P&I Advances to the certificate administrator for the benefit of the Certificateholders with respect to each Non-Serviced Mortgage Loan is dependent on its receipt of the corresponding information and/or collections from the applicable Non-Serviced Master Servicer or Non-Serviced Special Servicer.
Prospective investors are encouraged to review the full provisions of each of the Non-Serviced PSAs, which, if available, can be viewed online at www.sec.gov or by requesting copies from the underwriters.
Servicing of the Village at Leesburg Mortgage Loan
The Village at Leesburg Mortgage Loan is serviced pursuant to the WFCM 2018-C44 PSA. The servicing terms of the WFCM 2018-C44 PSA are substantially similar to the servicing terms of the PSA applicable to the Mortgage Loans; however, the servicing arrangements under such agreements will differ in certain respects, including the items set forth above under “—General” (unless otherwise addressed below) and the following:
| ● | The master servicer under the WFCM 2018-C44 PSA earns a servicing fee with respect to the Village at Leesburg Mortgage Loan that is to be calculated at 0.00250% per annum. |
| ● | Upon the Village at Leesburg Whole Loan becoming a specially serviced loan under the WFCM 2018-C44 PSA, the related special servicer thereunder will earn a special servicing fee payable monthly with respect to the Village at Leesburg Mortgage Loan accruing at a rate equal to (a) 0.25% per annum or (b) if the rate in clause (a) would result in a special servicing fee that would be less than $3,500 in any given month, such higher per annum rate as would result in a special servicing fee equal to $3,500 for such month. Such fee will be payable until such time as the Village at Leesburg Whole Loan is no longer specially serviced. |
| ● | The special servicer under the WFCM 2018-C44 PSA will be entitled to a workout fee equal to 1.00% of each payment of principal and interest (other than default interest) made by the related borrower after any workout of the Village at Leesburg Whole Loan. The workout fee is subject to a $25,000 minimum. |
| ● | The special servicer under the WFCM 2018-C44 PSA will be entitled to a workout fee equal to 1.00% of net liquidation proceeds received in connection with the liquidation of the Village at Leesburg Whole Loan or the related Mortgaged Property. If such rate results in a liquidation fee of less than $25,000 then such rate will be equal to the lesser of (i) 3.0% and (ii) such lower rate as would result in an aggregate liquidation fee equal to $25,000. |
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Prospective investors are encouraged to review the full provisions of the WFCM 2018-C44 PSA, which is available by requesting a copy from the underwriters.
See also “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” in this prospectus.
Servicing of the 181 Fremont Street Mortgage Loan
The 181 Fremont Street Mortgage Loan is currently serviced pursuant to the WFCM 2018-C44 PSA, but will shift to the related pooling and servicing agreement that governs the securitization of the related Control Note (the “Servicing Shift PSA”). The servicing terms of each Non-Serviced PSA (including the Servicing Shift PSA) that will govern the servicing and administration of the 181 Fremont Street Whole Loan are and are expected to be similar in all material respects to the servicing terms of the PSA applicable to the Mortgage Loans serviced under the PSA; however, the servicing arrangements under such agreements differ in certain respects, including the items set forth above under “—General” and the following:
| ● | The related Non-Serviced Master Servicer will earn a servicing fee with respect to the 181 Fremont Street Mortgage Loan that is to be calculated at 0.00250% per annum. |
| ● | Upon the 181 Fremont Street Whole Loan becoming a specially serviced loan under the WFCM 2018-C44 PSA, the related Non-Serviced Special Servicer will earn a special servicing fee payable monthly with respect to the 181 Fremont Street Mortgage Loan accruing at a rate equal to the greater of a per annum rate of 0.25% and the per annum rate that would result in a special servicing fee for the related month of $3,500, but, upon the securitization of the related Control Note, may be subject to other market minimums and fee offsets pursuant to the terms of the related Non-Serviced PSA. |
| ● | The related Non-Serviced Special Servicer will be entitled to a workout fee equal to 1.00% of each payment of principal and interest (other than default interest) made by the related borrower after any workout of the 181 Fremont Street Whole Loan. The workout fee is subject to a minimum fee equal to $25,000 under the WFCM 2018-C44 PSA, but, upon the securitization of the related Control Note, may be subject to other market minimums and fee offsets pursuant to the terms of the related Non-Serviced PSA. |
| ● | The related Non-Serviced Special Servicer will be entitled to a liquidation fee equal to 1.00% of net liquidation proceeds received in connection with the liquidation of the 181 Fremont Street Whole Loan or the related Mortgaged Property. The liquidation fee is subject to a minimum fee equal to the lesser of (i) $25,000 and (ii) 3.00% of net liquidation proceeds received in connection with the liquidation of the 181 Fremont Street Whole Loan or the related Mortgaged Property, but, upon the securitization of the related Control Note, may be subject to other market minimums and fee offsets pursuant to the terms of the related Non-Serviced PSA. |
Prospectus investors are encouraged to review the full provisions of the WFCM 2018-C44 PSA, which is available by requesting a copy from the underwriters.
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See also “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” in this prospectus.
Servicing of the CoolSprings Galleria Mortgage Loan
The CoolSprings Galleria Mortgage Loan is serviced pursuant to the BANK 2018-BNK12 PSA. The servicing terms of the BANK 2018-BNK12 PSA are substantially similar to the servicing terms of the PSA applicable to the Mortgage Loans; however, the servicing arrangements under such agreements will differ in certain respects, including the items set forth above under “—General” (unless otherwise addressed below) and the following:
| ● | The master servicer under the BANK 2018-BNK12 PSA earns a servicing fee with respect to the CoolSprings Galleria Mortgage Loan that is to be calculated at 0.00250% per annum. |
| ● | Upon the CoolSprings Galleria Whole Loan becoming a specially serviced loan under the BANK 2018-BNK12 PSA, the related special servicer thereunder will earn a special servicing fee payable monthly with respect to the CoolSprings Galleria Mortgage Loan accruing at a rate equal accruing at a rate equal to 0.25% per annum. Such fee will be payable until such time as the CoolSprings Galleria Whole Loan is no longer specially serviced. |
| ● | The related special servicer under the BANK 2018-BNK12 PSA will be entitled to a workout fee equal to 1.00% of each payment of principal and interest (other than default interest) made by the related borrower after any workout of the CoolSprings Galleria Whole Loan. The workout fee is subject to a $25,000 minimum. |
| ● | The related special servicer under the BANK 2018-BNK12 PSA will be entitled to a liquidation fee equal to 1.00% of net liquidation proceeds received in connection with the liquidation of the CoolSprings Galleria Whole Loan or the related Mortgaged Property. The liquidation fee is subject to a $25,000 minimum. |
| ● | The operating advisor under the BANK 2018-BNK12 PSA will be entitled to consult with the related special servicer under the BANK 2018-BNK12 PSA under different circumstances than those under which the operating advisor under the PSA is entitled to consult with the special servicer under the PSA. In particular, the operating advisor under the BANK 2018-BNK12 PSA will be entitled to consult on major decisions and asset status reports only when the principal balance of the senior-most class of control eligible certificates is less than 25% of the initial balance thereof (taking into account cumulative appraisal reduction amounts). In addition, the operating advisor under the BANK 2018-BNK12 PSA will be entitled to recommend the termination of the special servicer thereunder only (i) after the principal balance of the senior-most class of control eligible certificates is less than 25% of the initial balance thereof (without regard to cumulative appraisal reduction amounts) or (ii) if the majority controlling class certificateholder of the senior-most class of control eligible certificates has irrevocably waived its right, in writing, to exercise any of the rights of the controlling class certificateholder and such rights have not been reinstated to a successor controlling class certificateholder, and, in each case, the operating advisor has determined that such special servicer is not performing its duties as required under the |
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| BANK 2018-BNK12 PSA or is otherwise not acting in accordance with the servicing standard. |
Prospective investors are encouraged to review the full provisions of the BANK 2018-BNK12 PSA, which is available by requesting a copy from the underwriters.
See also “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” in this prospectus.
Servicing of the Flats at East Bank Mortgage Loan
The Flats at East Bank Mortgage Loan is expected to be serviced pursuant to the CGCMT 2018-C5 PSA. The servicing terms of the CGCMT 2018-C5 PSA will be substantially similar to the servicing terms of the PSA applicable to the Mortgage Loans; however, the servicing arrangements under such agreements will differ in certain respects, including the items set forth above under “—General” (unless otherwise addressed below) and the following:
| ● | The Flats at East Bank Master Servicer earns a primary servicing fee with respect to the Flats at East Bank Mortgage Loan that is to be calculated at 0.00500% per annum. |
| ● | Upon the Flats at East Bank AB Whole Loan becoming a specially serviced loan under the CGCMT 2018-C5 PSA, the Flats at East Bank Special Servicer will earn a special servicing fee payable monthly with respect to the Flats at East Bank Mortgage Loan accruing at a rate equal to 0.2500% per annum, until such time as the Flats at East Bank AB Whole Loan is no longer specially serviced. The special servicing fee is subject to minimum fee of $3,500. |
| ● | The Flats at East Bank Special Servicer will be entitled to a workout fee equal to the lesser of (a) 1.00% 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) made by the related borrower after any workout of the Flats at East Bank AB Whole Loan. |
| ● | The Flats at East Bank Special Servicer will be entitled to a liquidation fee equal to the lesser of (a) such rate as would result in a liquidation fee of $1,000,000 and (b) 1.0%; provided, however, that except as contemplated in the definition of “Liquidation Fee” in the CGCMT 2018-C5 PSA, no liquidation fee will be less than $25,000. |
Prospective investors are encouraged to review the full provisions of the CGCMT 2018-C5 PSA, which is available by requesting a copy from the underwriters.
Rating Agency Confirmations
The PSA will provide that, notwithstanding the terms of the related Mortgage Loan documents or other provisions of the PSA, if any action under such Mortgage Loan documents or the PSA requires a Rating Agency Confirmation from each of the Rating Agencies as a condition precedent to such action, if the party (the “Requesting Party”) attempting and/or required to obtain such Rating Agency Confirmations has made a request to any Rating Agency for such Rating Agency Confirmation and, within 10 business days of such request being posted to the 17g-5 Information Provider’s website, such Rating Agency has not replied to such request or has responded in a manner that indicates that such Rating Agency is neither reviewing such request nor waiving the requirement for Rating
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Agency Confirmation, then such Requesting Party will be required to confirm (through direct communication and not by posting any confirmation on the 17g-5 Information Provider’s website) that the applicable Rating Agency has received the Rating Agency Confirmation request, and, if it has not, promptly request the related Rating Agency Confirmation again (which may be through direct communication). The circumstances described in the preceding sentence are referred to in this prospectus as a “RAC No-Response Scenario”.
If there is no response to either such Rating Agency Confirmation request within 5 business days of such second request in a RAC No-Response Scenario or if such Rating Agency has responded in a manner that indicates such Rating Agency is neither reviewing such request nor waiving the requirement for Rating Agency Confirmation, then (x) with respect to any condition in any Mortgage Loan document requiring such Rating Agency Confirmation, or with respect to any other matter under the PSA relating to the servicing of the Mortgage Loans (other than as set forth in clause (y) below), the requirement to obtain a Rating Agency Confirmation will be deemed not to apply (as if such requirement did not exist) with respect to such Rating Agency, and the master servicer or the special servicer, as the case may be, may then take such action if the master servicer or the special servicer, as applicable, confirms its original determination (made prior to making such request) that taking the action with respect to which it requested the Rating Agency Confirmation would still be consistent with the Servicing Standard, and (y) with respect to a replacement of the master servicer or special servicer, such condition will be deemed not to apply (as if such requirement did not exist) if (i) the replacement master servicer or replacement special servicer has been appointed and currently serves as the master servicer or special servicer, as applicable, on a transaction-level basis on a transaction currently rated by Moody’s that currently has securities outstanding and for which Moody’s has not cited servicing concerns with respect to such replacement as the sole or a material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in a commercial mortgage-backed securitization transaction serviced by the applicable replacement master servicer or special servicer prior to the time of determination, if Moody’s is the non-responding Rating Agency, (ii) the applicable replacement master servicer or special servicer is rated at least “CMS3” (in the case of the master servicer) or “CSS3” (in the case of the special servicer), if Fitch is the non-responding Rating Agency or (iii) DBRS has not publicly cited servicing concerns with respect to the applicable replacement master servicer or special servicer as the sole or a material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in any other commercial mortgage-backed securitization transaction serviced by such master servicer or special servicer prior to the time of determination, if DBRS is the non-responding Rating Agency. Promptly following the master servicer’s or special servicer’s determination to take any action discussed above following any requirement to obtain Rating Agency Confirmation being deemed not to apply (as if such requirement did not exist) as described in clause (x) above, the master servicer or special servicer will be required to provide electronic written notice to the 17g-5 Information Provider, who will promptly post such notice to the 17g-5 Information Provider’s website pursuant to the PSA, of the action taken.
For all other matters or actions not specifically discussed above as to which a Rating Agency Confirmation is required, 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.
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As used above, “Rating Agency Confirmation” means, with respect to any matter, confirmation in writing (which may be in electronic form) by each applicable Rating Agency that a proposed action, failure to act or other event specified in this prospectus will not, in and of itself, result in the downgrade, withdrawal or qualification of the then-current rating assigned to any class of certificates (if then rated by the Rating Agency); provided that a written waiver or acknowledgment from the Rating Agency indicating its decision not to review the matter for which the Rating Agency Confirmation is sought will be deemed to satisfy the requirement for the Rating Agency Confirmation from the Rating Agency with respect to such matter. The “Rating Agencies” mean DBRS, Inc. (“DBRS), Fitch Ratings, Inc. (“Fitch”) and Moody’s Investors Service, Inc. (“Moody’s”).
Any Rating Agency Confirmation requests made by the master servicer, the special servicer, the certificate administrator, or the trustee, as applicable, pursuant to the PSA, will be required to be made in writing, which writing must contain a cover page indicating the nature of the Rating Agency Confirmation request, and must contain all back-up material necessary for the Rating Agency to process such request. Such written Rating Agency Confirmation requests must be provided in electronic format to the 17g-5 Information Provider (who will be required to post such request on the 17g-5 Information Provider’s website in accordance with the PSA).
The master servicer, the special servicer, the certificate administrator and the trustee will be permitted (but not obligated) to orally communicate with the Rating Agencies regarding any of the Mortgage Loan documents or any matter related to the Mortgage Loans, the related Mortgaged Properties, the related borrowers or any other matters relating to the PSA or any related Intercreditor Agreement; provided that such party summarizes the information provided to the Rating Agencies in such communication in writing and provides the 17g-5 Information Provider with such written summary the same day such communication takes place; provided, further, that the summary of such oral communications will not identify with which Rating Agency the communication was. The 17g-5 Information Provider will be required to post such written summary on the 17g-5 Information Provider’s website in accordance with the provisions of the PSA. All other information required to be delivered to the Rating Agencies pursuant to the PSA or requested by the Rating Agencies, will first be provided in electronic format to the 17g-5 Information Provider, who will be required to post such information to the 17g-5 Information Provider’s website in accordance with the PSA.
The PSA will provide that the PSA may be amended to change the procedures regarding compliance with Rule 17g-5 without any Certificateholder consent; provided that notice of any such amendment must be provided to the 17g-5 Information Provider (who will post such notice to the 17g-5 Information Provider’s website) and to the certificate administrator (which will post such report to the certificate administrator’s website).
Evidence as to Compliance
The master servicer, the special servicer (regardless of whether the special servicer has commenced special servicing of a Mortgage Loan), the custodian, the trustee (provided, however, that the trustee will not be required to deliver an assessment of compliance with respect to any period during which there was no relevant servicing criteria applicable to it) and the certificate administrator will be required to furnish (and each such party will be required, with respect to each servicing function participant with which it has entered into a servicing relationship with respect to the Mortgage Loans, to cause (or, in the case of a sub-servicer that is also a servicing function participant that a mortgage loan seller requires the master servicer to retain, to use commercially reasonable efforts to cause) such servicing function participant to furnish), to the depositor, the certificate administrator, the trustee
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and the 17g-5 Information Provider, an officer’s certificate of the officer responsible for the servicing activities of such party stating, among other things, that (i) a review of that party’s activities during the preceding calendar year or portion of that year and of performance under the PSA or any sub-servicing agreement in the case of an additional master servicer or special servicer, as applicable, has been made under such officer’s supervision and (ii) to the best of such officer’s knowledge, based on the review, such party has fulfilled all of its obligations under the PSA or the sub-servicing agreement in the case of an additional master servicer or special servicer, as applicable, in all material respects throughout the preceding calendar year or portion of such year, or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure known to such officer and the nature and status of the failure.
In addition, the master servicer, the special servicer (regardless of whether the special servicer has commenced special servicing of any Mortgage Loan), the trustee (but only if an advance was made by the trustee in the calendar year), the custodian, the certificate administrator and the operating advisor, each at its own expense, will be required to furnish (and each such party will be required, with respect to each servicing function participant with which it has entered into a servicing relationship with respect to the Mortgage Loans, to cause (or, in the case of a sub-servicer that is also a servicing function participant that a mortgage loan seller requires the master servicer to retain, to use commercially reasonable efforts to cause) such servicing function participant to furnish) to the trustee, the certificate administrator, the 17g-5 Information Provider and the depositor (and, with respect to the special servicer, also to the operating advisor) a report (an “Assessment of Compliance”) assessing compliance by that party with the servicing criteria set forth in Item 1122(d) of Regulation AB (as described below) under the Securities Act of 1933, as amended (the “Securities Act”) that contains the following:
| ● | a statement of the party’s responsibility for assessing compliance with the servicing criteria set forth in Item 1122 of Regulation AB applicable to it; |
| ● | a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria; |
| ● | the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the fiscal year, covered by the Form 10-K required to be filed pursuant to the PSA setting forth any material instance of noncompliance identified by the party, a discussion of each such failure and the nature and status of such failure; and |
| ● | a statement that a registered public accounting firm has issued an attestation report (an “Attestation Report”) on the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the prior fiscal year. |
Each party that is required to deliver an Assessment of Compliance will also be required to simultaneously deliver an Attestation Report of a registered public accounting firm, prepared in accordance with the standards for attestation engagements issued or adopted by the public company accounting oversight board, that expresses an opinion, or states that an opinion cannot be expressed (and the reasons for this), concerning the party’s assessment of compliance with the applicable servicing criteria set forth in Item 1122(d) of Regulation AB.
With respect to each Non-Serviced Whole Loan, each of the Non-Serviced Master Servicer, the Non-Serviced Special Servicer, the Non-Serviced Trustee and the Non-
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Serviced Certificate Administrator will have obligations under the related Non-Serviced PSA similar to those described above.
“Regulation AB” means subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§ 229.1100–229.1125, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the SEC or by the staff of the SEC, or as may be provided by the SEC or its staff from time to time.
Limitation on Rights of Certificateholders to Institute a Proceeding
Other than with respect to any rights to deliver a Certificateholder Repurchase Request and exercise the rights described under “—Dispute Resolution Provisions”, no Certificateholder will have any right under the PSA to institute any proceeding with respect to the PSA or with respect to the certificates, unless the holder previously has given to the trustee and the certificate administrator written notice of default and the continuance of the default and unless (except in the case of a default by the trustee) the holders of certificates of any class evidencing not less than 25% of the aggregate Percentage Interests constituting the class have made written request upon the trustee to institute a proceeding in its own name (as trustee) and have offered to the trustee reasonable indemnity satisfactory to it, and the trustee for 60 days after receipt of the request and indemnity has neglected or refused to institute the proceeding. However, the trustee will be under no obligation to exercise any of the trusts or powers vested in it by the PSA or the certificates or to institute, conduct or defend any related litigation at the request, order or direction of any of the Certificateholders, unless the Certificateholders have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred as a result.
Each Certificateholder will be deemed under the PSA to have expressly covenanted with every other Certificateholder and the trustee, that no one or more Certificateholders will have any right in any manner whatsoever by virtue of any provision of the PSA or the certificates to affect, disturb or prejudice the rights of the holders of any other certificates, or to obtain or seek to obtain priority over or preference to any other Certificateholder, or to enforce any right under the PSA or the certificates, except in the manner provided in the PSA or the certificates and for the equal, ratable and common benefit of all Certificateholders.
Termination; Retirement of Certificates
The obligations created by the PSA will terminate upon payment (or provision for payment) to all Certificateholders of all amounts held by the certificate administrator on behalf of the trustee and required to be paid on the Distribution Date following the earlier of (1) the final payment (or related Advance) or other liquidation of the last Mortgage Loan and REO Property (as applicable) subject to the PSA, (2) the voluntary exchange of all the then-outstanding certificates (other than the Class V and Class R certificates) for the Mortgage Loans and REO Properties remaining in the issuing entity (provided, however, that (a) the aggregate certificate balance of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D certificates is reduced to zero, (b) there is only one holder (or multiple holders acting unanimously) of the then-outstanding Certificates (other than the Class V and Class R certificates) and (c) the master servicer consents to the exchange) or (3) the purchase or other liquidation of all of the assets of the issuing entity as described below by the holders of the Controlling Class, the special servicer, the master servicer or the holders of the Class R certificates, in that order of priority. Written notice of termination of the PSA will be given by the certificate administrator to each Certificateholder and the 17g-5 Information Provider (who will
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promptly post such notice to the 17g-5 Information Provider’s website). The final distribution will be made only upon surrender and cancellation of the certificates at the office of the certificate registrar or other location specified in the notice of termination.
The holders of the Controlling Class, the special servicer, the master servicer and the holders of the Class R certificates (in that order) will have the right to purchase all of the assets of the issuing entity. This purchase of all the Mortgage Loans and other assets in the issuing entity is required to be made at a price equal to (a) the Termination Purchase Amount, plus (b) the reasonable out-of-pocket expenses of the master servicer and the special servicer related to such purchase, unless the master servicer or the special servicer, as applicable, is the purchaser less (c) solely in the case where the master servicer is exercising such purchase right, the aggregate amount of unreimbursed Advances and unpaid Servicing Fees remaining outstanding and payable solely to the master servicer (which items will be deemed to have been paid or reimbursed to the master servicer in connection with such purchase). This purchase will effect early retirement of the then-outstanding certificates, but the rights of the holders of the Controlling Class, the special servicer, the master servicer or the holders of the Class R certificates to effect the termination is subject to the requirements that the then aggregate Stated Principal Balance of the pool of Mortgage Loans be less than 1.0% of the Initial Pool Balance. The voluntary exchange of certificates (other than the Class V and Class R certificates), for the remaining Mortgage Loans is not subject to the above described percentage limits but is limited to each such class of outstanding certificates being held by one Certificateholder (or group of Certificateholders acting unanimously) who must voluntarily participate.
The “Termination Purchase Amount” will equal the sum of (1) the aggregate Purchase Price of all the Mortgage Loans (exclusive of REO Loans) then included in the issuing entity, (2) the Appraised Value of the issuing entity’s portion of each REO Property, if any, then included in the issuing entity (such appraisals in clause (2) to be conducted by an independent MAI-designated appraiser selected by the special servicer and approved by the master servicer and the Controlling Class) (prior to the occurrence and continuance of a Control Termination Event, with respect to the Controlling Class approval) and (3) if a Mortgaged Property secures a Non-Serviced Mortgage Loan and is an “REO property” under the terms of the related Non-Serviced PSA, the pro rata portion of the fair market value of the related Mortgaged Property, as determined by the related Non-Serviced Master Servicer in accordance with clauses (2) and (3) above.
On the applicable Distribution Date, the aggregate amount paid by the holders of the Controlling Class, the special servicer, the master servicer or the holders of the Class R certificates, as the case may be, for the Mortgage Loans and other applicable assets in the issuing entity, together with all other amounts on deposit in the Collection Account and not otherwise payable to a person other than the Certificateholders, will be applied generally as described above under “Description of the Certificates—Distributions—Priority of Distributions”.
Amendment
The PSA may be amended by the parties to the PSA, without the consent of any of the holders of certificates or holders of any Companion Loan:
(a) to correct any defect or ambiguity in the PSA;
(b) to cause the provisions in the PSA to conform or be consistent with or in furtherance of the statements made in the prospectus (or in an offering document for any related non-offered certificates) with respect to the certificates, the issuing entity or
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the PSA or to correct or supplement any of its provisions which may be defective or inconsistent with any other provisions in the PSA or to correct any error;
(c) to change the timing and/or nature of deposits in the Collection Account, the Distribution Accounts or any REO Account, provided that (A) the P&I Advance Date will in no event be later than the business day prior to the related Distribution Date and (B) the change would not adversely affect in any material respect the interests of any Certificateholder, as evidenced in writing by an opinion of counsel at the expense of the party requesting such amendment or as evidenced by a Rating Agency Confirmation from each of the Rating Agencies with respect to such amendment;
(d) to modify, eliminate or add to any of its provisions to the extent as will be necessary to maintain the qualification of any Trust REMIC as a REMIC or the Grantor Trust as a grantor trust under the relevant provisions of the Code at all times that any certificate is outstanding, or to avoid or minimize the risk of imposition of any tax on the issuing entity, any Trust REMIC or the Grantor Trust; provided that the trustee and the certificate administrator have received an opinion of counsel (at the expense of the party requesting the amendment) to the effect that (1) the action is necessary or desirable to maintain such qualification or to avoid or minimize the risk of imposition of any such tax and (2) the action will not adversely affect in any material respect the interests of any Certificateholder or holder of a Companion Loan;
(e) to modify, eliminate or add to any of its provisions to restrict (or to remove any existing restrictions with respect to) the transfer of the Residual Certificates; provided that the depositor has determined that the amendment will not, as evidenced by an opinion of counsel, give rise to any tax with respect to the transfer of the Residual Certificates to a non-permitted transferee;
(f) to revise or add any other provisions with respect to matters or questions arising under the PSA or any other change, provided that the required action will not adversely affect in any material respect the interests of any Certificateholder as evidenced in writing by an opinion of counsel at the expense of the party requesting such amendment or as evidenced by a Rating Agency Confirmation from each of the Rating Agencies with respect to such amendment or supplement and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus);
(g) to amend or supplement any provision of the PSA to the extent necessary to maintain the then-current ratings assigned to each class of Offered Certificates by each Rating Agency, as evidenced by a Rating Agency Confirmation from each of the Rating Agencies and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus); provided that such amendment or supplement would not adversely affect in any material respect the interests of any Certificateholder not consenting to such amendment or supplement, as evidenced by an opinion of counsel;
(h) to modify the provisions of the PSA with respect to reimbursement of Nonrecoverable Advances and Workout-Delayed Reimbursement Amounts if (a) the
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depositor, the master servicer, the trustee and, (with respect to any Mortgage Loan other than an Excluded Loan and for so long as no Control Termination Event has occurred and is continuing) the Directing Certificateholder, determine that the commercial mortgage-backed securities industry standard for such provisions has changed, in order to conform to such industry standard, (b) such modification does not adversely affect the status of any Trust REMIC as a REMIC or the Grantor Trust as a grantor trust under the relevant provisions of the Code, as evidenced by an opinion of counsel and (c) a Rating Agency Confirmation from each Rating Agency;
(i) to modify the procedures set forth in the PSA relating to compliance with Rule 17g-5, provided that the change would not adversely affect in any material respect the interests of any Certificateholder, as evidenced by (A) an opinion of counsel or (B) if any certificate is then rated, receipt of Rating Agency Confirmation from each Rating Agency rating such certificates; and provided, further, that the certificate administrator must give notice of any such amendment to the 17g-5 Information Provider for posting on the 17g-5 Information Provider’s website and the certificate administration must post such notice to its website;
(j) to modify, eliminate or add to any of its provisions to such extent as will be necessary to comply with the requirements for use of Form SF-3 in registered offerings to the extent provided in 17 C.F.R. § 239.45(b)(1)(ii), (iii) or (iv); or
(k) to modify, eliminate or add to any of its provisions in the event the Credit Risk Retention Rules or any other regulations applicable to the risk retention requirements for this securitization transaction are amended or repealed, to the extent required to comply with any such amendment or to modify or eliminate the provision related to the risk retention requirements in the event of such repeal.
The PSA may also be amended by the parties to the PSA with the consent of the holders of certificates of each class affected by such amendment evidencing, in each case, a majority of the aggregate Percentage Interests constituting the class for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the PSA or of modifying in any manner the rights of the holders of the certificates, except that the amendment may not directly (1) reduce in any manner the amount of, or delay the timing of, payments received on the Mortgage Loans or Whole Loans that are required to be distributed on a certificate of any class without the consent of the holder of such certificate or which are required to be distributed to a holder of a Companion Loan without the consent of such holder, (2) reduce the aforesaid percentage of certificates of any class the holders of which are required to consent to the amendment or remove the requirement to obtain consent of any holder of a Companion Loan, without the consent of the holders of all certificates of that class then-outstanding or such holder of the related Companion Loan, (3) adversely affect the Voting Rights of any class of certificates, without the consent of the holders of all certificates of that class then-outstanding, (4) change in any manner any defined term used in any MLPA or the obligations or rights of any mortgage loan seller under any MLPA or change any rights of any mortgage loan seller as a third-party beneficiary under the PSA without the consent of the related mortgage loan seller, or (5) amend the Servicing Standard without the consent of 100% of the holders of certificates or a Rating Agency Confirmation by each Rating Agency and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus).
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Notwithstanding the foregoing, no amendment to the PSA may be made that changes in any manner the obligations or rights of any mortgage loan seller under any MLPA or the rights of any mortgage loan seller, including as a third-party beneficiary, under the PSA, without the consent of such mortgage loan seller. In addition, no amendment to the PSA may be made that changes any provisions specifically required to be included in the PSA by the related Intercreditor Agreement or that otherwise materially and adversely affects the holder of a Companion Loan without the consent of the holder of the related Companion Loan.
Also, notwithstanding the foregoing, no party will be required to consent to any amendment to the PSA without the trustee, the certificate administrator, the master servicer, the special servicer, the asset representations reviewer and the operating advisor having first received an opinion of counsel (at the issuing entity’s expense) to the effect that the amendment does not conflict with the terms of the PSA, and that the amendment or the exercise of any power granted to the master servicer, the special servicer, the depositor, the certificate administrator, the trustee, the operating advisor, the asset representations reviewer or any other specified person in accordance with the amendment will not result in the imposition of a tax on any portion of the issuing entity or cause any Trust REMIC to fail to qualify as a REMIC or cause the Grantor Trust to fail to qualify as a grantor trust under the relevant provisions of the Code.
Resignation and Removal of the Trustee and the Certificate Administrator
Each of the trustee and the certificate administrator will at all times be, and will be required to resign if it fails to be, (i) a corporation, national bank, national banking association or a trust company, organized and doing business under the laws of any state or the United States of America, authorized under such laws to exercise corporate trust powers and to accept the trust conferred under the PSA, having a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal or state authority and, in the case of the trustee, will not be an affiliate of the master servicer or special servicer (except during any period when the trustee is acting as, or has become successor to, the master servicer or special servicer, as the case may be), (ii) an institution insured by the Federal Deposit Insurance Corporation, (iii) an institution whose long-term senior unsecured debt is rated at least “A2” by Moody’s, “A-” by Fitch and, if rated by DBRS, “A” by DBRS; provided that the trustee will not become ineligible to serve based on a failure to satisfy such rating requirements as long as (a) it maintains a long-term unsecured debt rating of no less than “Baa2” by Moody’s, “A-” by Fitch and “A(low)” by DBRS, (b) its short-term debt obligations have a short-term rating of not less than “P-2” from Moody’s, “F1” by Fitch and “R-1(low)” by DBRS and (c) the master servicer maintains a long-term unsecured debt rating of at least “A2” by Moody’s, “A+” by Fitch and “A” by DBRS (provided that nothing in this proviso will impose on the master servicer any obligation to maintain such rating or any other rating); provided, further, that if any such institution is not rated by DBRS, it maintains an equivalent (or higher) rating by any two other NRSROs (which may include Moody’s and/or Fitch), or such other rating with respect to which the Rating Agencies have provided a Rating Agency Confirmation, and (iv) an entity that is not on the depositor’s “prohibited party” list.
The trustee and the certificate administrator will be also permitted at any time to resign from their obligations and duties under the PSA by giving written notice (which notice will be posted to the certificate administrator’s website pursuant to the PSA) to the depositor, the master servicer, the special servicer, the trustee or the certificate administrator, as applicable, all Certificateholders, the operating advisor, the asset representations reviewer and the 17g-5 Information Provider (who will promptly post such notice to the 17g-5 Information Provider’s website). Upon receiving this notice of resignation, the depositor will
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be required to use its reasonable best efforts to promptly appoint a successor trustee or certificate administrator acceptable to the master servicer and, prior to the occurrence and continuance of a Control Termination Event, the Directing Certificateholder. If no successor trustee or certificate administrator has accepted an appointment within 90 days after the giving of notice of resignation, the resigning trustee or certificate administrator, as applicable, may petition any court of competent jurisdiction to appoint a successor trustee or certificate administrator, as applicable, and such petition will be an expense of the issuing entity.
If at any time the trustee or certificate administrator ceases to be eligible to continue as trustee or certificate administrator, as applicable, under the PSA, and fails to resign after written request therefor by the depositor or the master servicer, or if at any time the trustee or certificate administrator becomes incapable of acting, or if certain events of, or proceedings in respect of, bankruptcy or insolvency occur with respect to the trustee or certificate administrator, or if the trustee or certificate administrator fails to timely publish any report to be delivered, published, or otherwise made available by the certificate administrator pursuant to the PSA, and such failure continues unremedied for a period of 5 days, or if the certificate administrator fails to make distributions required pursuant to the PSA, the depositor will be authorized to remove the trustee or certificate administrator, as applicable, and appoint a successor trustee or certificate administrator acceptable to the master servicer. If no successor trustee or certificate administrator has accepted an appointment within 90 days after the giving of notice of removal, the removed trustee or certificate administrator, as applicable, may petition any court of competent jurisdiction to appoint a successor trustee or certificate administrator, as applicable, and such petition will be an expense of the issuing entity.
In addition, holders of the certificates entitled to at least 75% of the Voting Rights may upon 30 days prior written notice, with or without cause, remove the trustee or certificate administrator under the PSA and appoint a successor trustee or certificate administrator. In the event that holders of the certificates entitled to at least 75% of the Voting Rights elect to remove the trustee or certificate administrator without cause and appoint a successor, the successor trustee or certificate administrator, as applicable, will be responsible for all expenses necessary to effect the transfer of responsibilities from its predecessor.
Any resignation or removal of the trustee or certificate administrator and appointment of a successor trustee or certificate administrator will not become effective until (i) acceptance of appointment by the successor trustee or certificate administrator, as applicable, and (ii) the certificate administrator files any required Form 8-K. Further, the resigning trustee or certificate administrator, as the case may be, must pay all costs and expenses associated with the transfer of its duties.
The PSA will prohibit the appointment of the asset representations reviewer or one of its affiliates as successor to the trustee or certificate administrator.
Governing Law; Waiver of Jury Trial; and Consent to Jurisdiction
The PSA will be governed by the laws of the State of New York. Each party to the PSA will waive its respective right to a jury trial for any claim or cause of action based upon or arising out of or related to the PSA or certificates. Additionally, each party to the PSA will consent to the jurisdiction of any New York State and Federal courts sitting in New York City with respect to matters arising out of or related to the PSA.
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Certain Legal Aspects of Mortgage Loans
The following discussion contains general summaries of certain legal aspects of mortgage loans secured by commercial and multifamily residential properties. Because such legal aspects are governed by applicable local law (which laws may differ substantially), the summaries do not purport to be complete, to reflect the laws of any particular jurisdiction, or to encompass the laws of all jurisdictions in which the security for the mortgage loans is situated.
California
Mortgage loans in California are generally secured by deeds of trust on the related real estate. Foreclosure of a deed of trust in California may be accomplished by a non-judicial trustee’s sale (so long as it is permitted under a specific provision in the deed of trust) or by judicial foreclosure, in each case subject to and in accordance with the applicable procedures and requirements of California law. Public notice of either the trustee’s sale or the judgment of foreclosure is given for a statutory period of time after which the mortgaged real estate may be sold by the trustee, if foreclosed pursuant to the trustee’s power of sale, or by court appointed sheriff under a judicial foreclosure. Following a judicial foreclosure sale, the borrower or its successor-in-interest may, for a period of up to one year, redeem the property; however, there is no redemption following a trustee’s power of sale. California’s “security first” and “one action” rules require the lender to complete foreclosure of all real estate provided as security under the deed of trust in a single action in an attempt to satisfy the full debt before bringing a personal action (if otherwise permitted) against the borrower for recovery of the debt, except in certain cases involving environmentally impaired real property where foreclosure of the real property is not required before making a claim under the indemnity. This restriction may apply to property which is not located in California if a single promissory note is secured by property located in California and other jurisdictions. California case law has held that acts such as (but not limited to) an offset of an unpledged account constitute violations of such statutes. Violations of such statutes may result in the loss of some or all of the security under the mortgage loan and a loss of the ability to sue for the debt. A sale by the trustee under the deed of trust does not constitute an “action” for purposes of the “one action rule”. Other statutory provisions in California limit any deficiency judgment (if otherwise permitted) against the borrower following a judicial foreclosure to the amount by which the indebtedness exceeds the fair value at the time of the public sale and in no event greater than the difference between the foreclosure sale price and the amount of the indebtedness. Further, under California law, once a property has been sold pursuant to a power of sale clause contained in a deed of trust (and in the case of certain types of purchase money acquisition financings, under all circumstances), the lender is precluded from seeking a deficiency judgment from the borrower or, under certain circumstances, guarantors.
Texas
Commercial mortgage loans in Texas are generally secured by deeds of trust on the related real estate. Foreclosure of a deed of trust in Texas may be accomplished by either a non-judicial trustee’s sale under a specific power-of-sale provision set forth in the deed of trust or by judicial foreclosure. Due to the relatively short period of time involved in a non-judicial foreclosure, the judicial foreclosure process is rarely used in Texas. A judicial foreclosure action must be initiated, and a non-judicial foreclosure must be completed, within four years from the date the cause of action accrues. The cause of action for the unpaid balance of the indebtedness accrues upon the maturity of the indebtedness (by acceleration or otherwise).
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Unless expressly waived in the deed of trust, the lender must provide the debtor with a written demand for payment, a notice of intent to accelerate the indebtedness, and a notice of acceleration prior to commencing any foreclosure action. It is customary practice in Texas for the demand for payment to be combined with the notice of intent to accelerate the indebtedness. In addition, with respect to a non-judicial foreclosure sale and notwithstanding any waiver by debtor to the contrary, the lender is statutorily required to (i) provide each debtor obligated to pay the indebtedness a notice of foreclosure sale via certified mail, postage prepaid and addressed to each debtor at such debtor’s last known address at least 21 days before the date of the foreclosure sale; (ii) post a notice of foreclosure sale at the courthouse of each county in which the property is located; and (iii) file a notice of foreclosure sale with the county clerk of each county in which the property is located. Such 21 day period includes the entire calendar day on which the notice is deposited with the United States mail and excludes the entire calendar day of the foreclosure sale. The statutory foreclosure notice may be combined with the notice of acceleration of the indebtedness and must contain the location of the foreclosure sale and a statement of the earliest time at which the foreclosure sale will begin. To the extent the note or deed of trust contains additional notice requirements, the lender must comply with such requirements in addition to the statutory requirements set forth above.
The trustee’s sale must be performed pursuant to the terms of the deed of trust and statutory law and must take place between the hours of 10 a.m. and 4 p.m. on the first Tuesday of the month, in the area designated for such sales by the county commissioners’ court of the county in which the property is located, and must begin at the time set forth in the notice of foreclosure sale or not later than three hours after that time. If the property is located in multiple counties, the sale may occur in any county in which a portion of the property is located. Under Texas law applicable to the subject property, the debtor does not have the right to redeem the property after foreclosure. Any action for deficiency must be brought within two years of the foreclosure sale. If the foreclosure sale price is less than the fair market value of the property, the debtor or any obligor (including any guarantor) may be entitled to an offset against the deficiency in the amount by which the fair market value of the property, less the amount of any claim, indebtedness, or obligation of any kind that is secured by a lien or encumbrance on the real property that was not extinguished by the foreclosure, exceeds the foreclosure sale price.
Virginia
Foreclosure of the lien of a deed of trust in Virginia typically and most efficiently is accomplished by a non-judicial trustee’s sale under a power of sale provision in the deed of trust. Judicial foreclosure also can be, but seldom is, used. In a non-judicial foreclosure, written notice to the borrower and other lienholders of record and newspaper advertisement of the trustee’s sale, containing certain information, must be given for the time period prescribed in the deed of trust, but subject to statutory minimums. After such notice, the trustee may sell the real estate at public auction. Although rarely used in Virginia, in a judicial foreclosure, after notice to all interested parties, a full hearing and judgment in favor of the lienholder, the court orders a foreclosure sale to be conducted by a court-appointed commissioner in chancery or other officer. In either type of foreclosure sale, upon consummation of the foreclosure, the borrower has no right to redeem the property. A deficiency judgment for a recourse loan may be obtained. Further, under Virginia law, under certain circumstances and for certain time periods, a lienholder may petition the court for the appointment of a receiver to collect, protect and disburse the real property’s rents and revenues, and otherwise to maintain and preserve the real property, pursuant to the court’s instructions. The decision to appoint a receiver is solely within the court’s discretion, regardless of what the deed of trust provides.
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General
Each mortgage loan will be evidenced by a promissory note and secured by an instrument granting a security interest in real property, which may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state in which the related mortgaged property is located. Mortgages, deeds of trust and deeds to secure debt are in this prospectus collectively referred to as “mortgages”. A mortgage creates a lien upon, or grants a title interest in, the real property covered thereby, and represents the security for the repayment of the indebtedness customarily evidenced by a promissory note. The priority of the lien created or interest granted will depend on the terms of the mortgage and, in some cases, on the terms of separate subordination agreements or intercreditor agreements with others that hold interests in the real property, the knowledge of the parties to the mortgage and, generally, the order of recordation of the mortgage in the appropriate public recording office. However, the lien of a recorded mortgage will generally be subordinate to later-arising liens for real estate taxes and assessments and other charges imposed under governmental police powers.
Types of Mortgage Instruments
There are two parties to a mortgage: a mortgagor (the borrower and usually the owner of the applicable property) and a mortgagee (the lender). In contrast, a deed of trust is a three-party instrument, among a trustor (the equivalent of a borrower), a trustee to whom the real property is conveyed, and a beneficiary (the lender) for whose benefit the conveyance is made. Under a deed of trust, the trustor grants the property, irrevocably until the debt is paid, in trust and generally with a power of sale, to the trustee to secure repayment of the indebtedness evidenced by the related note. A deed to secure debt typically has two parties, pursuant to which the borrower, or grantor, conveys title to the real property to the grantee, or lender generally with a power of sale, until such time as the debt is repaid. In a case where the borrower is a land trust, there would be an additional party because legal title to the property is held by a land trustee under a land trust agreement for the benefit of the borrower. At origination of a mortgage loan involving a land trust, the borrower may execute a separate undertaking to make payments on the promissory note. The land trustee would not be personally liable for the promissory note obligation. The mortgagee’s authority under a mortgage, the trustee’s authority under a deed of trust and the grantee’s authority under a deed to secure debt are governed by the express provisions of the related instrument, the law of the state in which the real property is located, certain federal laws and, in some deed of trust transactions, the directions of the beneficiary.
Leases and Rents
Mortgages that encumber income-producing property often contain an assignment of rents and leases, and/or may be accompanied by a separate assignment of rents and leases, pursuant to which the borrower assigns to the lender the borrower’s right, title and interest as landlord under each lease and the income derived from the lease, while (unless rents are to be paid directly to the lender) retaining a revocable license to collect the rents for so long as there is no default. If the borrower defaults, the license terminates and the lender is entitled to collect the rents. Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents.
In most states, hotel property and motel room rates are considered accounts receivable under the Uniform Commercial Code (“UCC”). In cases where hotel properties or motels constitute loan security, the revenues are generally pledged by the borrower as additional
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security for the loan. In general, the lender must file financing statements in order to perfect its security interest in the room revenues and must file continuation statements, generally every 5 years, to maintain perfection of such security interest. In certain cases, mortgage loans secured by hotel properties or motels may be included in the issuing entity even if the security interest in the room revenues was not perfected. Even if the lender’s security interest in room revenues is perfected under applicable nonbankruptcy law, it will generally be required to commence a foreclosure action or otherwise take possession of the property in order to enforce its rights to collect the room revenues following a default. In the bankruptcy setting, however, the lender will be stayed from enforcing its rights to collect room revenues, but those room revenues constitute “cash collateral” and therefore generally cannot be used by the bankruptcy debtor without a hearing or lender’s consent or unless the lender’s interest in the room revenues is given adequate protection (e.g., cash payment for otherwise encumbered funds or a replacement lien on unencumbered property, in either case in value equivalent to the amount of room revenues that the debtor proposes to use, or other similar relief). See “—Foreclosure—Bankruptcy Laws” below.
Personalty
In the case of certain types of mortgaged properties, such as hotel properties, motels, nursing homes and manufactured housing, personal property (to the extent owned by the borrower and not previously pledged) may constitute a significant portion of the property’s value as security. The creation and enforcement of liens on personal property are governed by the UCC. Accordingly, if a borrower pledges personal property as security for a mortgage loan, the lender generally must file UCC financing statements in order to perfect its security interest in that personal property, and must file continuation statements, generally every five years, to maintain that perfection. Certain mortgage loans secured in part by personal property may be included in the issuing entity even if the security interest in such personal property was not perfected.
Foreclosure
General
Foreclosure is a legal procedure that allows the lender to recover its mortgage debt by enforcing its rights and available legal remedies under the mortgage. If the borrower defaults in payment or performance of its obligations under the promissory note or mortgage, the lender has the right to institute foreclosure proceedings to sell the real property at public auction to satisfy the indebtedness.
Foreclosure Procedures Vary from State to State
Two primary methods of foreclosing a mortgage are judicial foreclosure, involving court proceedings, and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage instrument. Other foreclosure procedures are available in some states, but they are either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are interposed, and sometimes requires several years to complete.
See also “Risk Factors—Risks Relating to the Mortgage Loans—Risks Associated with One Action Rules”.
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Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having jurisdiction over the mortgaged property. Generally, the action is initiated by the service of legal pleadings upon all parties having a subordinate interest of record in the real property and all parties in possession of the property, under leases or otherwise, whose interests are subordinate to the mortgage. Delays in completion of the foreclosure may occasionally result from difficulties in locating defendants. When the lender’s right to foreclose is contested, the legal proceedings can be time-consuming. Upon successful completion of a judicial foreclosure proceeding, the court generally issues a judgment of foreclosure and appoints a referee or other officer to conduct a public sale of the mortgaged property, the proceeds of which are used to satisfy the judgment. Such sales are made in accordance with procedures that vary from state to state.
Equitable and Other Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions. These principles are generally designed to relieve borrowers from the effects of mortgage defaults perceived as harsh or unfair. Relying on such principles, a court may alter the specific terms of a loan to the extent it considers necessary to prevent or remedy an injustice, undue oppression or overreaching, or may require the lender to undertake affirmative actions to determine the cause of the borrower’s default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender’s and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from a temporary financial disability. In other cases, courts have limited the right of the lender to foreclose in the case of a nonmonetary default, such as a failure to adequately maintain the mortgaged property or an impermissible further encumbrance of the mortgaged property. Finally, some courts have addressed the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that a borrower receive notice in addition to statutorily-prescribed minimum notice. For the most part, these cases have upheld the reasonableness of the notice provisions or have found that a public sale under a mortgage providing for a power of sale does not involve sufficient state action to trigger constitutional protections.
In addition, some states may have statutory protection such as the right of the borrower to reinstate a mortgage loan after commencement of foreclosure proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale
In states permitting nonjudicial foreclosure proceedings, foreclosure of a deed of trust is generally accomplished by a nonjudicial trustee’s sale pursuant to a power of sale typically granted in the deed of trust. A power of sale may also be contained in any other type of mortgage instrument if applicable law so permits. A power of sale under a deed of trust allows a nonjudicial public sale to be conducted generally following a request from the beneficiary/lender to the trustee to sell the property upon default by the borrower and after notice of sale is given in accordance with the terms of the deed of trust and applicable state law. In some states, prior to such sale, the trustee under the deed of trust must record a notice of default and notice of sale and send a copy to the borrower and to any other party who has recorded a request for a copy of a notice of default and notice of sale. In addition, in some states the trustee must provide notice to any other party having an interest of record in the real property, including junior lienholders. A notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more
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newspapers. The borrower or junior lienholder may then have the right, during a reinstatement period required in some states, to cure the default by paying the entire actual amount in arrears (without regard to the acceleration of the indebtedness), plus the lender’s expenses incurred in enforcing the obligation. In other states, the borrower or the junior lienholder is not provided a period to reinstate the loan, but has only the right to pay off the entire debt to prevent the foreclosure sale. Generally, state law governs the procedure for public sale, the parties entitled to notice, the method of giving notice and the applicable time periods.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a public sale because of the difficulty in determining the exact status of title to the property (due to, among other things, redemption rights that may exist) and because of the possibility that physical deterioration of the mortgaged property may have occurred during the foreclosure proceedings. Potential buyers may also be reluctant to purchase mortgaged property at a foreclosure sale as a result of the 1980 decision of the United States Court of Appeals for the Fifth Circuit in Durrett v. Washington National Insurance Co., 621 F.2d 2001 (5th Cir. 1980) and other decisions that have followed its reasoning. The court in Durrett 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 of Durrett in respect of the Bankruptcy Code was rejected by the United States Supreme Court in BFP 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 in Durrett. Therefore, it is common for the lender to purchase the mortgaged property for an amount equal to the secured indebtedness and accrued and unpaid interest plus the expenses of foreclosure, in which event the borrower’s debt will be extinguished, or for a lesser amount in order to preserve its right to seek a deficiency judgment if such is available under state law and under the terms of the mortgage loan documents. Thereafter, subject to the borrower’s right in some states to remain in possession during a redemption period, the lender will become the owner of the property and have both the benefits and burdens of ownership, including the obligation to pay debt service on any senior mortgages, to pay taxes, to obtain casualty insurance and to make such repairs as are necessary to render the property suitable for sale. Frequently, the lender employs a third-party management company to manage and operate the property. The costs of operating and maintaining a property may be significant and may be greater than the income derived from that property. The costs of management and operation of those mortgaged properties which are hotels, motels, restaurants, nursing or convalescent homes, hospitals or casinos may be particularly significant because of the expertise, knowledge and, with respect to certain property types, regulatory compliance, required to run those operations and the effect which foreclosure and a change in ownership may have on the public’s and the industry’s, including franchisors’, perception of the quality of those operations. The lender also will commonly obtain the services of a real estate broker and pay the broker’s commission in connection with the sale or lease of the property. Depending upon market conditions, the ultimate proceeds of the sale of a property may not equal the lender’s investment in the property. Moreover, a lender commonly incurs substantial legal fees and court costs in acquiring a mortgaged property through contested foreclosure and/or bankruptcy proceedings. Because of the expenses associated with acquiring, owning and selling a mortgaged property, a lender could realize an overall loss on a mortgage loan even if the
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mortgaged property is sold at foreclosure, or resold after it is acquired through foreclosure, for an amount equal to the full outstanding principal amount of the loan plus accrued interest.
Furthermore, an increasing number of states require that any environmental contamination at certain types of properties be cleaned up before a property may be resold. In addition, a lender may be responsible under federal or state law for the cost of cleaning up a mortgaged property that is environmentally contaminated. See “—Environmental Considerations” below.
The holder of a junior mortgage that forecloses on a mortgaged property does so subject to senior mortgages and any other prior liens, and may be obliged to keep senior mortgage loans current in order to avoid foreclosure of its interest in the property. In addition, if the foreclosure of a junior mortgage triggers the enforcement of a “due-on-sale” clause contained in a senior mortgage, the junior mortgagee could be required to pay the full amount of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption
The purposes of a foreclosure action are to enable the lender to realize upon its security and to bar the borrower, and all persons who have interests in the property that are subordinate to that of the foreclosing lender, from exercise of their “equity of redemption”. The doctrine of equity of redemption provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may redeem the property by paying the entire debt with interest. Those having an equity of redemption must generally be made parties and joined in the foreclosure proceeding in order for their equity of redemption to be terminated.
The equity of redemption is a common-law (nonstatutory) right which should be distinguished from post-sale statutory rights of redemption. In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property. In some states, statutory redemption may occur only upon payment of the foreclosure sale price. In other states, redemption may be permitted if the former borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property because the exercise of a right of redemption would defeat the title of any purchaser through a foreclosure. Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired. In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee’s sale under a deed of trust.
Anti-Deficiency Legislation
Some or all of the mortgage loans are nonrecourse loans, as to which recourse in the case of default will be limited to the mortgaged property and such other assets, if any, that were pledged to secure the mortgage loan. However, even if a mortgage loan by its terms provides for recourse to the borrower’s other assets, a lender’s ability to realize upon those assets may be limited by state law. For example, in some states a lender cannot obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust.
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A deficiency judgment is a personal judgment against the former borrower equal to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. Other statutes may require the lender to exhaust the security afforded under a mortgage before bringing a personal action against the borrower. In certain other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting that security; however, in some of those states, the lender, following judgment on that personal action, may be deemed to have elected a remedy and thus may be precluded from foreclosing upon the security. Consequently, lenders in those states where such an election of remedy provision exists will usually proceed first against the security. Finally, other statutory provisions, designed to protect borrowers from exposure to large deficiency judgments that might result from bidding at below-market values at the foreclosure sale, limit any deficiency judgment to the excess of the outstanding debt over the fair market value of the property at the time of the sale.
Leasehold Considerations
Mortgage loans may be secured by a mortgage on the borrower’s leasehold interest in a ground lease. Leasehold mortgage loans are subject to certain risks not associated with mortgage loans secured by a lien on the fee estate of the borrower. The most significant of these risks is that if the borrower’s leasehold were to be terminated upon a lease default, the leasehold mortgagee would lose its security. This risk may be lessened if the ground lease requires the lessor to give the leasehold mortgagee notices of lessee defaults and an opportunity to cure them, permits the leasehold estate to be assigned to and by the leasehold mortgagee or the purchaser at a foreclosure sale, and contains certain other protective provisions typically included in a “mortgageable” ground lease. Certain mortgage loans, however, may be secured by ground leases which do not contain these provisions.
In addition, where a lender has as its security both the fee and leasehold interest in the same property, the grant of a mortgage lien on its fee interest by the land owner/ground lessor to secure the debt of a borrower/ground lessee may be subject to challenge as a fraudulent conveyance. Among other things, a legal challenge to the granting of the liens may focus on the benefits realized by the land owner/ground lessor from the loan. If a court concluded that the granting of the mortgage lien was an avoidable fraudulent conveyance, it might take actions detrimental to the holders of the offered certificates, including, under certain circumstances, invalidating the mortgage lien on the fee interest of the land owner/ground lessor.
Cooperative Shares
Mortgage loans may be secured by a security interest on the borrower’s ownership interest in shares, and the related proprietary leases, allocable to cooperative dwelling units that may be vacant or occupied by non-owner tenants. Such loans are subject to certain risks not associated with mortgage loans secured by a lien on the fee estate of a borrower in real property. Such a loan typically is subordinate to the mortgage, if any, on the cooperative’s building which, if foreclosed, could extinguish the equity in the building and the proprietary leases of the dwelling units derived from ownership of the shares of the cooperative. Further, transfer of shares in a cooperative are subject to various regulations as well as to restrictions under the governing documents of the cooperative, and the shares may be cancelled in the event that associated maintenance charges due under the related proprietary leases are not paid. Typically, a recognition agreement between the lender and the cooperative provides, among other things, the lender with an opportunity to cure a default under a proprietary lease.
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Under the laws applicable in many states, “foreclosure” on cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the UCC and the security agreement relating to the shares. Article 9 of the UCC requires that a sale be conducted in a “commercially reasonable” manner, which may be dependent upon, among other things, the notice given the debtor and the method, manner, time, place and terms of the sale. Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender’s security interest. A recognition agreement, however, generally provides that the lender’s right to reimbursement is subject to the right of the cooperative to receive sums due under the proprietary leases.
Bankruptcy Laws
Operation of the federal Bankruptcy Code in Title 11 of the United States Code, as amended from time to time (“Bankruptcy Code”) and related state laws may interfere with or affect the ability of a lender to obtain payment of a loan, realize upon collateral and/or to enforce a deficiency judgment. For example, under the Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of the bankruptcy petition, and, usually, no interest or principal payments are made during the course of the bankruptcy case. The delay and the consequences of a delay caused by an automatic stay can be significant. For example, the filing of a petition in bankruptcy by or on behalf of a junior mortgage lien holder may stay the senior lender from taking action to foreclose out such junior lien. At a minimum, the senior lender would suffer delay due to its need to seek bankruptcy court approval before taking any foreclosure or other action that could be deemed in violation of the automatic stay under the Bankruptcy Code.
Under the Bankruptcy Code, a bankruptcy trustee, or a borrower as debtor-in-possession, may under certain circumstances sell the related mortgaged property or other collateral free and clear of all liens, claims, encumbrances and interests, which liens would then attach to the proceeds of such sale, despite the provisions of the related mortgage or other security agreement to the contrary. Such a sale may be approved by a bankruptcy court even if the proceeds are insufficient to pay the secured debt in full.
Under the Bankruptcy Code, provided certain substantive and procedural safeguards for a lender are met, the amount and terms of a mortgage or other security agreement secured by property of a debtor may be modified under certain circumstances. Pursuant to a confirmed plan of reorganization, lien avoidance or claim objection proceeding, the secured claim arising from a loan secured by real property or other collateral may be reduced to the then-current value of the property (with a corresponding partial reduction of the amount of lender’s security interest), thus leaving the lender a secured creditor to the extent of the then current value of the property and a general unsecured creditor for the difference between such value and the outstanding balance of the loan. Such general unsecured claims may be paid less than 100% of the amount of the debt or not at all, depending upon the circumstances. Other modifications may include the reduction in the amount of each scheduled payment, which reduction may result from a reduction in the rate of interest and/or the alteration of the repayment schedule (with or without affecting the unpaid principal balance of the loan), and/or an extension (or reduction) of the final maturity date. Some courts have approved bankruptcy plans, based on the particular facts of the reorganization case, that effected the curing of a mortgage loan default by paying arrearages over a number of years. Also, under the Bankruptcy Code, a bankruptcy court may permit a debtor through its plan of reorganization to reinstate the loan even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided that no sale of the property had yet occurred) prior to the filing of the
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debtor’s petition. This may be done even if the plan of reorganization does not provide for payment of the full amount due under the original loan. Thus, the full amount due under the original loan may never be repaid. Other types of significant modifications to the terms of mortgage loan may be acceptable to the bankruptcy court, such as making distributions to the mortgage holder of property other than cash, or the substitution of collateral which is the “indubitable equivalent” of the real property subject to the mortgage, or the subordination of the mortgage to liens securing new debt (provided that the lender’s secured claim is “adequately protected” as such term is defined and interpreted under the Bankruptcy Code), often depending on the particular facts and circumstances of the specific case.
Federal bankruptcy law may also interfere with or otherwise adversely affect the ability of a secured mortgage lender to enforce an assignment by a borrower of rents and leases (which “rents” may include revenues from hotels and other lodging facilities specified in the Bankruptcy Code) related to a mortgaged property if the related borrower is in a bankruptcy proceeding. Under the Bankruptcy Code, a lender may be stayed from enforcing the assignment, and the legal proceedings necessary to resolve the issue can be time consuming and may result in significant delays in the receipt of the rents. Rents (including applicable hotel and other lodging revenues) and leases may also escape such an assignment, among other things, (i) if the assignment is not fully perfected under state law prior to commencement of the bankruptcy proceeding, (ii) to the extent such rents and leases are used by the borrower to maintain the mortgaged property, or for other court authorized expenses, (iii) to the extent other collateral may be substituted for the rents and leases, (iv) to the extent the bankruptcy court determines that the lender is adequately protected, or (v) to the extent the court determines based on the equities of the case that the post-petition rents are not subject to the lender’s pre-petition security interest.
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 provides that a lender’s perfected pre-petition security interest in leases, rents and hotel revenues continues in the post-petition leases, rents and hotel revenues, unless a bankruptcy court orders to the contrary “based on the equities of the case”. The equities of a particular case may permit the discontinuance of security interests in pre-petition leases and rents. Thus, unless a court orders otherwise, revenues from a mortgaged property generated after the date the bankruptcy petition is filed will constitute “cash collateral” under the Bankruptcy Code. Debtors may only use cash collateral upon obtaining the lender’s consent or a prior court order finding that the lender’s interest in the mortgaged hotel, motel or other lodging property and the cash collateral is “adequately protected” as the term is defined and interpreted under the Bankruptcy Code. In addition to post-petition rents, any cash held by a lender in a lockbox or reserve account generally would also constitute “cash collateral” under the 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
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rents, or other forms of personalty necessary for a security interest to attach to such revenues.
The Bankruptcy Code provides generally that rights and obligations under an unexpired lease of the debtor/lessee may not be terminated or modified at any time after the commencement of a case under the Bankruptcy Code solely because of a provision in the lease to that effect or because of certain other similar events. This prohibition on so-called “ipso facto” clauses could limit the ability of a lender to exercise certain contractual remedies with respect to the leases on any mortgaged property. In addition, section 362 of the Bankruptcy Code operates as an automatic stay of, among other things, any act to obtain possession of property from a debtor’s estate, which may delay a lender’s exercise of those remedies, including foreclosure, in the event that a lessee becomes the subject of a proceeding under the Bankruptcy Code. Thus, the filing of a petition in bankruptcy by or on behalf of a lessee of a mortgaged property would result in a stay against the commencement or continuation of any state court proceeding for past due rent, for accelerated rent, for damages or for a summary eviction order with respect to a default under the related lease that occurred prior to the filing of the lessee’s petition. While relief from the automatic stay to enforce remedies may be requested, it can be denied for a number of reasons, including where the collateral is “necessary to an effective reorganization” for the debtor, and if a debtor’s case has been administratively consolidated with those of its affiliates, the court may also consider whether the property is “necessary to an effective reorganization” of the debtor and its affiliates, taken as a whole.
The Bankruptcy Code generally provides that a trustee in bankruptcy or debtor-in-possession may, with respect to an unexpired lease of non-residential real property, before the earlier of (i) 120 days after the filing of a bankruptcy case or (ii) the entry of an order confirming a plan, subject to approval of the court, (a) assume the lease and retain it or assign it to a third party or (b) reject the lease. If the trustee or debtor-in-possession fails to assume or reject the lease within the time specified in the preceding sentence, subject to any extensions by the bankruptcy court, the lease will be deemed rejected and the property will be surrendered to the lessor. The bankruptcy court may for cause shown extend the 120-day period up to 90 days for a total of 210 days. If the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the lessee as debtor-in-possession, or the assignee, if applicable, must cure any defaults under the lease, compensate the lessor for its losses and provide the lessor with “adequate assurance” of future performance. These remedies may be insufficient, however, as the lessor may be forced to continue under the lease with a lessee that is a poor credit risk or an unfamiliar tenant (if the lease was assigned), and any assurances provided to the lessor may, in fact, be inadequate. If the lease is rejected, the rejection generally constitutes a breach of the executory contract or unexpired lease as of the date immediately preceding the filing date of the bankruptcy petition. As a consequence, the other party or parties to the lease, such as the borrower, as lessor under a lease, generally would have only an unsecured claim against the debtor, as lessee, for damages resulting from the breach, which could adversely affect the security for the related mortgage loan. In addition, under the Bankruptcy Code, a lease rejection damages claim is limited to the “(a) rent reserved by the lease, without acceleration, for the greater of one year, or 15 percent, not to exceed 3 years, of the remaining term of such lease, following the earlier of the date of the bankruptcy petition and the date on which the lessor regained possession of the real property, (b) plus any unpaid rent due under such lease, without acceleration, on the earlier of such dates”.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as debtor-in-possession, rejects an unexpired lease of real property, the lessee may treat the lease as terminated by the rejection or, in the alternative, the lessee may remain in possession of the leasehold for
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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 to remain in possession after a rejection of a lease, the lessee may offset against rents reserved under the lease for the balance of the term after the date of rejection of the lease, and the related renewal or extension of the lease, any damages occurring after that date caused by the nonperformance of any obligation of the lessor under the lease after that date.
Similarly, bankruptcy risk is associated with an insolvency proceeding under the 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 be unable to enforce both the bankrupt lessee/borrower’s pre-petition agreement to refuse to treat a ground lease rejected by a bankrupt lessor as terminated and any agreement by the ground lessor to grant the lender a new lease upon such termination. In such circumstances, a lease could be terminated notwithstanding lender protection provisions contained in that lease or in the mortgage. A
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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.
In a bankruptcy or similar proceeding involving a borrower, action may be taken seeking the recovery as a preferential transfer of any payments made by such borrower, or made directly by the related lessee, under the related mortgage loan to the issuing entity. Payments on long term debt may be protected from recovery as preferences if they qualify for the “ordinary course” exception under the Bankruptcy Code or if certain 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 or an affiliate, an action may be taken to avoid the transaction (or any component of the transaction, such as joint and several liability on the related mortgage loan) as an actual or constructive fraudulent conveyance under state or federal law. Any payment by a borrower in excess of its allocated share of the loan could be challenged as a fraudulent conveyance by creditors of that borrower in an action outside a bankruptcy case or by the representative of the borrower’s bankruptcy estate in a bankruptcy case. Generally, under federal and most state fraudulent conveyance statutes, the incurrence of an obligation or the transfer of property by a person will be subject to avoidance under certain circumstances if the person transferred such property with the intent to hinder, delay or defraud its creditors or the person did not receive fair consideration or reasonably equivalent value in exchange for such obligation or transfer and (i) was insolvent or was rendered insolvent by such obligation or transfer, (ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the person constituted unreasonably small capital, or (iii) intended to, or believed that it would, incur debts that would be beyond the person’s ability to pay as such debts matured. The measure of insolvency will vary depending on the law of the applicable jurisdiction. However, an entity will generally be considered insolvent if the present fair salable value of its assets is less
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than (x) the sum of its debts or (y) the amount that would be required to pay its probable liabilities on its existing debts as they become absolute and matured. Accordingly, a lien granted by a borrower to secure repayment of the loan in excess of its allocated share could be avoided if a court were to determine that (i) such borrower was insolvent at the time of granting the lien, was rendered insolvent by the granting of the lien, was left with inadequate capital, or was not able to pay its debts as they matured and (ii) the borrower did not, when it allowed its property to be encumbered by a lien securing the entire indebtedness represented by the loan, receive fair consideration or reasonably equivalent value for pledging such property for the equal benefit of each other borrower.
A bankruptcy court may, under certain circumstances, authorize a debtor to obtain credit after the commencement of a bankruptcy case, secured among other things, by senior, equal or junior liens on property that is already subject to a lien. In the bankruptcy case of General Growth Properties filed on April 16, 2009, the debtors initially sought approval of a debtor-in-possession loan to the corporate parent entities guaranteed by the property-level single-purpose entities and secured by second liens on their properties. Although the debtor-in-possession loan subsequently was modified to eliminate the subsidiary guarantees and second liens, we cannot assure you that, in the event of a bankruptcy of the borrower sponsor, the borrower sponsor would not seek approval of a similar debtor-in-possession loan, or that a bankruptcy court would not approve a debtor-in-possession loan that included such subsidiary guarantees and second liens on such subsidiaries’ properties.
Certain of the borrowers may be partnerships. The laws governing limited partnerships in certain states provide that the commencement of a case under the 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, which may reduce the yield on the Offered Certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general or limited partner of a borrower that is a partnership, or the bankruptcy of a member of a borrower that is a limited liability company
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or the bankruptcy of a shareholder of a borrower that is a corporation may provide the opportunity in the bankruptcy case of the partner, member or shareholder to obtain an order from a court consolidating the assets and liabilities of the partner, member or shareholder with those of the mortgagor pursuant to the doctrines of substantive consolidation or piercing the corporate veil. In such a case, the respective mortgaged property, for example, would become property of the estate of the bankrupt partner, member or shareholder. Not only would the mortgaged property be available to satisfy the claims of creditors of the partner, member or shareholder, but an automatic stay would apply to any attempt by the trustee to exercise remedies with respect to the mortgaged property. However, such an occurrence should not affect a lender’s status as a secured creditor with respect to the mortgagor or its security interest in the mortgaged property.
A borrower that is a limited partnership, in many cases, may be required by the loan documents to have a single-purpose entity as its sole general partner, and a borrower that is a general partnership, in many cases, may be required by the loan documents to have as its general partners only entities that are single-purpose entities. A borrower that is a limited liability company may be required by the loan documents to have a single-purpose member or a springing member. All borrowers that are tenants-in-common may be required by the loan documents to be single-purpose entities. These provisions are designed to mitigate the risk of the dissolution or bankruptcy of the borrower partnership or its general partner, a borrower limited liability company or its member (if applicable), or a borrower that is a tenant-in-common. However, we cannot assure you that any borrower partnership or its general partner, or any borrower limited liability company or its member (if applicable), or a borrower that is a tenant-in-common, will not dissolve or become a debtor under the Bankruptcy Code.
Environmental Considerations
General
A lender may be subject to environmental risks when taking a security interest in real property. Of particular concern may be properties that are or have been used for industrial, manufacturing, military or disposal activity. Such environmental risks include the possible diminution of the value of a contaminated property or, as discussed below, potential liability for clean-up costs or other remedial actions that could exceed the value of the property or the amount of the lender’s loan. In certain circumstances, a lender may decide to abandon a contaminated mortgaged property as collateral for its loan rather than foreclose and risk liability for clean-up costs.
Superlien Laws
Under the laws of many states, contamination on a property may give rise to a lien on the property for clean-up costs. In several states, such a lien has priority over all existing liens, including those of existing mortgages. In these states, the lien of a mortgage may lose its priority to such a “superlien”.
CERCLA
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), imposes strict liability on present and past “owners” and “operators” of contaminated real property for the costs of clean-up. A secured lender may be liable as an “owner” or “operator” of a contaminated mortgaged property if agents or employees of the lender have participated in the management or operation of such mortgaged property. Such liability may exist even if the lender did not cause or contribute
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to the contamination and regardless of whether the lender has actually taken possession of a mortgaged property through foreclosure, deed-in-lieu of foreclosure or otherwise. Moreover, such liability is not limited to the original or unamortized principal balance of a loan or to the value of the property securing a loan. Excluded from CERCLA’s definition of “owner” or “operator,” however, is a person “who, without participating in the management of the facility, holds indicia of ownership primarily to protect his security interest”. This is the so called “secured creditor exemption”.
The Asset Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the “1996 Act”) amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption. The 1996 Act offers protection to lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption. In order for a lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower. The 1996 Act provides that “merely having the capacity to influence, or unexercised right to control” operations does not constitute participation in management. A lender will lose the protection of the secured creditor exemption if it exercises decision-making control over the borrower’s environmental compliance and hazardous substance handling or disposal practices, or assumes day-to-day management of environmental or substantially all other operational functions of the mortgaged property. The 1996 Act also provides that a lender will continue to have the benefit of the secured creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosure, provided that the lender seeks to sell the mortgaged property at the earliest practicable commercially reasonable time on commercially reasonable terms.
Certain Other Federal and State Laws
Many states have statutes similar to CERCLA, and not all of those statutes provide for a secured creditor exemption. In addition, under federal law, there is potential liability relating to hazardous wastes and underground storage tanks under the federal Resource Conservation and Recovery Act.
Some federal, state and local laws, regulations and ordinances govern the management, removal, encapsulation or disturbance of asbestos-containing materials. These laws, as well as common law standards, may impose liability for releases of or exposure to asbestos-containing materials, and provide for third parties to seek recovery from owners or operators of real properties for personal injuries associated with those releases.
Federal legislation requires owners of residential housing constructed prior to 1978 to disclose to potential residents or purchasers any known lead-based paint hazards and will impose treble damages for any failure to disclose. In addition, the ingestion of lead-based paint chips or dust particles by children can result in lead poisoning. If lead-based paint hazards exist at a property, then the owner of that property may be held liable for injuries and for the costs of removal or encapsulation of the lead-based paint.
In a few states, transfers of some types of properties are conditioned upon clean-up of contamination prior to transfer. In these cases, a lender that becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure or otherwise, may be required to clean up the contamination before selling or otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes of action (for example, actions based on nuisance or on toxic tort resulting in death, personal injury or damage to property) related to hazardous environmental conditions on a property. While
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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.
Additional Considerations
The cost of remediating hazardous substance contamination at a property can be substantial. If a lender becomes liable, it can bring an action for contribution against the owner or operator who created the environmental hazard, but that individual or entity may be without substantial assets. Accordingly, it is possible that such costs could become a liability of the issuing entity and occasion a loss to the certificateholders.
If a lender forecloses on a mortgage secured by a property, the operations on which are subject to environmental laws and regulations, the lender will be required to operate the property in accordance with those laws and regulations. Such compliance may entail substantial expense, especially in the case of industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental conditions on a property to government entities and/or to prospective buyers (including prospective buyers at a foreclosure sale or following foreclosure). Such disclosure may decrease the amount that prospective buyers are willing to pay for the affected property, sometimes substantially, and thereby decrease the ability of the lender to recover its investment in a loan upon foreclosure.
Due-on-Sale and Due-on-Encumbrance Provisions
Certain of the mortgage loans may contain “due-on-sale” and “due-on-encumbrance” clauses that purport to permit the lender to accelerate the maturity of the loan if the borrower transfers or encumbers the related mortgaged property. The Garn-St Germain Depository Institutions Act of 1982 (the “Garn Act”) generally preempts state laws that prohibit the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to certain limitations as set forth in the Garn Act and related regulations. Accordingly, a lender may nevertheless have the right to accelerate the maturity of a mortgage loan that contains a “due-on-sale” provision upon transfer of an interest in the property, without regard to the lender’s ability to demonstrate that a sale threatens its legitimate security interest.
Subordinate Financing
The terms of certain of the mortgage loans may not restrict the ability of the borrower to use the mortgaged property as security for one or more additional loans, or such restrictions may be unenforceable. Where a borrower encumbers a mortgaged property with one or more junior liens, the senior lender is subjected to additional risk. First, the borrower may have difficulty servicing and repaying multiple loans. Moreover, if the subordinate financing permits recourse to the borrower (as-is frequently the case) and the senior loan does not, a borrower may have more incentive to repay sums due on the subordinate loan. Second, acts of the senior lender that prejudice the junior lender or impair the junior lender’s security may create a superior equity in favor of the junior lender. For example, if the borrower and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the borrower is additionally burdened. Third, if the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the
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senior lender. Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender.
Default Interest and Limitations on Prepayments
Promissory notes and mortgages may contain provisions that obligate the borrower to pay a late charge or additional interest if payments are not timely made, and in some circumstances, may prohibit prepayments for a specified period and/or condition prepayments upon the borrower’s payment of prepayment fees or yield maintenance penalties. In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a borrower for delinquent payments. Certain states also limit the amounts that a lender may collect from a borrower as an additional charge if the loan is prepaid. In addition, the enforceability of provisions that provide for prepayment fees or penalties upon an involuntary prepayment is unclear under the laws of many states.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“Title V”) provides that state usury limitations will not apply to certain types of residential (including multifamily) first mortgage loans originated by certain lenders after March 31, 1980. Title V authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Certain states have taken action to reimpose interest rate limits and/or to limit discount points or other charges.
Statutes differ in their provisions as to the consequences of a usurious loan. One group of statutes requires the lender to forfeit the interest due above the applicable limit or impose a specified penalty. Under this statutory scheme, the borrower may cancel the recorded mortgage or deed of trust upon paying its debt with lawful interest, and the lender may foreclose, but only for the debt plus lawful interest. A second group of statutes is more severe. A violation of this type of usury law results in the invalidation of the transaction, thereby permitting the borrower to cancel the recorded mortgage or deed of trust without any payment or prohibiting the lender from foreclosing.
Americans with Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and related regulations (collectively, the “ADA”), in order to protect individuals with disabilities, public accommodations (such as hotel properties, restaurants, shopping centers, hospitals, schools and social service center establishments) must remove architectural and communication barriers which are structural in nature from existing places of public accommodation to the extent “readily achievable”. In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals. The “readily achievable” standard takes into account, among other factors, the financial resources of the affected site, owner, landlord or other applicable person. In addition to imposing a possible financial burden on the borrower in its capacity as owner or landlord, the ADA may also impose such requirements on a foreclosing lender who succeeds to the interest of the borrower as owner or landlord. Furthermore, since the “readily achievable” standard may vary depending on the financial condition of the owner or landlord, a foreclosing lender who is financially more capable than the borrower of complying with the
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requirements of the ADA may be subject to more stringent requirements than those to which the borrower is subject.
Servicemembers Civil Relief Act
Under the terms of the Servicemembers Civil Relief Act as amended (the “Relief Act”), a borrower who enters military service after the origination of such borrower’s mortgage loan (including a borrower who was in reserve status and is called to active duty after origination of the mortgage loan), upon notification by such borrower, will not be charged interest, including fees and charges, in excess of 6% per annum during the period of such borrower’s active duty status. In addition to adjusting the interest, the lender must forgive any such interest in excess of 6% unless a court or administrative agency orders otherwise upon application of the lender. The Relief Act applies to individuals who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service or the National Oceanic and Atmospheric Administration assigned to duty with the military. Because the Relief Act applies to individuals who enter military service (including reservists who are called to active duty) after origination of the related mortgage loan, no information can be provided as to the number of loans with individuals as borrowers that may be affected by the Relief Act. Application of the Relief Act would adversely affect, for an indeterminate period of time, the ability of the master servicer or special servicer to collect full amounts of interest on certain of the mortgage loans. Any shortfalls in interest collections resulting from the application of the Relief Act would result in a reduction of the amounts distributable to the holders of certificates, and would not be covered by advances or, any form of credit support provided in connection with the certificates. In addition, the Relief Act imposes limitations that would impair the ability of a lender to foreclose on an affected mortgage loan during the borrower’s period of active duty status, and, under certain circumstances, during an additional three-month period thereafter.
Anti-Money Laundering, Economic Sanctions and Bribery
Many jurisdictions have adopted wide-ranging anti-money laundering, economic and trade sanctions, and anti-corruption and anti-bribery laws, and regulations (collectively, the “Requirements”). Any of the depositor, the issuing entity, the underwriters or other party to the PSA could be requested or required to obtain certain assurances from prospective investors intending to purchase certificates and to retain such information or to disclose information pertaining to them to governmental, regulatory or other authorities or to financial intermediaries or engage in due diligence or take other related actions in the future. Failure to honor any request by the depositor, the issuing entity, the underwriters or other party to the PSA to provide requested information or take such other actions as may be necessary or advisable for the depositor, the issuing entity, the underwriters or other party to the PSA to comply with any Requirements, related legal process or appropriate requests (whether formal or informal) may result in, among other things, a forced sale to another investor of such investor’s certificates. In addition, it is expected that each of the depositor, the issuing entity, the underwriters and the other parties to the PSA will comply with the U.S. Bank Secrecy Act, U.S. Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (also known as the “Patriot Act”) and any other anti-money laundering and anti-terrorism, economic and trade sanctions, and anti-corruption or anti-bribery laws, and regulations of the United States and other countries, and will disclose any information required or requested by authorities in connection with such compliance.
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Potential Forfeiture of Assets
Federal law provides that assets (including property purchased or improved with assets) derived from criminal activity or otherwise tainted, or used in the commission of certain offenses, is subject to the blocking requirements of economic sanctions laws and regulations, and can be blocked and/or seized and ordered forfeited to the United States of America. The offenses that can trigger such a blocking and/or seizure and forfeiture include, among others, violations of the Racketeer Influenced and Corrupt Organizations Act, the U.S. Bank Secrecy Act, the anti-money laundering, anti-terrorism, economic sanctions, and anti-bribery laws and regulations, including the Patriot Act and the regulations issued pursuant to that act, as well as the narcotic drug laws. In many instances, the United States may seize the property even before a conviction occurs.
In the event of a forfeiture proceeding, a lender may be able to establish its interest in the property by proving that (a) its mortgage was executed and recorded before the commission of the illegal conduct from which the assets used to purchase or improve the property were derived or before the commission of any other crime upon which the forfeiture is based, or (b) the lender, at the time of the execution of the mortgage, “did not know or was reasonably without cause to believe that the property was subject to forfeiture”. However, there is no assurance that such a defense will be successful.
Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties
Wells Fargo Bank and its affiliates are playing several roles in this transaction. Wells Fargo Bank, a sponsor, an originator, a mortgage loan seller and the holder of one of the CoolSprings Galleria Companion Loans and one of the 181 Fremont Street Companion Loans, is also the master servicer, the certificate administrator and the custodian under this securitization and is an affiliate of Wells Fargo Commercial Mortgage Securities, Inc., the depositor, and of Wells Fargo Securities, LLC, one of the underwriters. In addition, Wells Fargo Bank is (i) the master servicer, the certificate administrator and the custodian under the WFCM 2018-C44 PSA, which governs the servicing and administration of the Village at Leesburg Whole Loan and the 181 Fremont Street Whole Loan (prior to the securitization of the related Control Note), and (ii) the master servicer, the certificate administrator and the custodian under the BANK 2018-BNK12 PSA, which governs the servicing and administration of the CoolSprings Galleria Whole Loan.
In addition, Wells Fargo Bank is the purchaser under separate repurchase agreements with each of Rialto Mortgage and C-III CM or, in each case, with a wholly-owned subsidiary or other affiliate thereof, for the purpose of providing short-term warehousing of mortgage loans originated or acquired by Rialto Mortgage or C-III CM, as applicable, or in any such case by its affiliates.
In the case of the repurchase facility provided by Wells Fargo Bank to Rialto Mortgage, Wells Fargo Bank has agreed to purchase mortgage loans from Rialto Mortgage on a revolving basis. The aggregate Cut-off Date Balance of the Rialto Mortgage Loans that are (or, as of the Closing Date, are expected to be) subject to that repurchase facility is projected to equal approximately $70,600,000. Proceeds received by Rialto Mortgage in connection with this securitization transaction will be used, in part, to repurchase from Wells Fargo Bank the Rialto Mortgage Loans subject to that repurchase facility, which Mortgage Loans will be transferred to the depositor free and clear of any liens.
In the case of the repurchase facility provided to C-III CM, for which C-III CM’s wholly-owned special purpose subsidiary is the primary obligor, Wells Fargo Bank has agreed to
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purchase mortgage loans from such subsidiary on a revolving basis. C-III CM guarantees the performance by its wholly-owned subsidiary of certain obligations under the repurchase facility. The aggregate Cut-off Date Balance of the C-III CM Mortgage Loans that are (or, as of the Closing Date, are expected to be) subject to that repurchase facility is projected to equal approximately $98,982,798. Proceeds received by C-III CM in connection with this securitization transaction will be used, in part, to repurchase, through its subsidiary, from Wells Fargo Bank, each of the C-III CM Mortgage Loans subject to such repurchase facility, which Mortgage Loans will be transferred to the depositor free and clear of any liens.
In addition, Wells Fargo Central Pacific Holdings, Inc., an affiliate of Wells Fargo Bank, Wells Fargo Commercial Mortgage Securities, Inc. and Wells Fargo Securities, LLC, holds a less than 10% indirect equity interest in C-III CM, which is a sponsor and mortgage loan seller.
Additionally, C-III CM or a wholly-owned subsidiary or other affiliate of C-III CM, is party to an interest rate hedging arrangement with Wells Fargo Bank with respect to some or all of the Mortgage Loans that C-III CM will transfer to the depositor. This hedging arrangement will terminate in connection with the contribution of those Mortgage Loans to this securitization transaction.
As a result of the matters discussed above, this securitization transaction will reduce the economic exposure of Wells Fargo Bank to the Mortgage Loans that are to be transferred by Rialto Mortgage and C-III CM, respectively, to the depositor.
Wells Fargo Bank is (or, as of the Closing Date, is expected to be) the interim custodian of the loan files for some or all of the Barclays Mortgage Loans, the Rialto Mortgage Loans and the C-III CM Mortgage Loans.
While Wells Fargo Bank may have undertaken some evaluation of the Mortgage Loans originated or acquired by such mortgage loan sellers, any such review was undertaken by it solely for the purpose of determining whether such Mortgage Loans were eligible for financing under the terms of the related warehouse financing and was unrelated to this offering. In addition, we cannot assure you that such review was undertaken and, if undertaken, any such review was limited in scope to that specific purpose. The related mortgage loan sellers are solely responsible for the underwriting of their Mortgage Loans as well as the Mortgage Loan representations and warranties related thereto.
Pursuant to certain interim servicing agreements between Wells Fargo Bank, on the one hand, and Barclays, each a sponsor, an originator and a mortgage loan seller, and certain affiliates of Barclays, on the other hand, Wells Fargo Bank acts, from time to time, as primary servicer with respect to certain mortgage loans owned by Barclays and/or such affiliates of Barclays, including, prior to their inclusion in the issuing entity, some or all of the Barclays Mortgage Loans.
Pursuant to certain interim servicing agreements between Wells Fargo Bank and Rialto Mortgage, each a sponsor, an originator and a mortgage loan seller, or certain affiliates of Rialto Mortgage, Wells Fargo Bank acts, from time to time, as primary servicer with respect to certain mortgage loans owned by Rialto Mortgage or such affiliates of Rialto Mortgage (subject, in some cases, to the repurchase facility described above), including, prior to their inclusion in the issuing entity, some or all of the Rialto Mortgage Loans.
Wells Fargo Bank acts as primary servicer with respect to certain mortgage loans it owns, which may include, prior to their inclusion in the issuing entity, some or all of the Wells Fargo Bank Mortgage Loans.
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Wells Fargo Bank is expected to enter into one or more agreements with the other sponsors to purchase the master 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 to purchase the primary servicing rights to certain of the Mortgage Loans.
LNR Partners assisted Prime Finance Long Duration (B-Piece) II Holdco I, L.P. (or its affiliate), which is expected to purchase the Class E-RR, Class F-RR, Class G-RR, Class H-RR, Class J-RR and Class V certificates and is expected to be appointed as the initial directing certificateholder, with due diligence relating to the mortgage loans to be included in the mortgage pool.
Barclays, a sponsor, an originator and a mortgage loan seller is an affiliate of Barclays Capital Inc., one of the underwriters.
In the case of certain Mortgage Loans, a mezzanine loan secured by equity interests in the related borrower may be held by the related mortgage loan seller or one of its affiliates. In the case of the Parkway Center Mortgage Loan, an affiliate of C-III CM is the external manager of the indirect parent of the lender on a $4,700,000 mezzanine loan secured by direct or indirect equity interests in the related borrower.
Wilmington Trust, National Association, the trustee, is also the trustee under (i) the WFCM 2018-C44 PSA, which governs the servicing of the Village at Leesburg Whole Loan and the CoolSprings Galleria Whole Loan, (ii) the BANK 2018-BNK12 PSA, which governs the servicing of the 181 Fremont Street Whole Loan, and (ii) the CGCMT 2018-C5 PSA, which is expected to govern the servicing of the Flats at East Bank Whole Loan (prior to the securitization of the related Control Note).
Rialto Mortgage, a sponsor, mortgage loan seller and originator, is an affiliate of Rialto, the entity that is the special servicer under the WFCM 2018-C44 PSA, which governs the servicing of the Village at Leesburg Whole Loan and the 181 Fremont Street Whole Loan (prior to the securitization of the related Control Note). Rialto and Rialto Mortgage are also affiliates of the entity that is the initial directing certificateholder under the WFCM 2018-C44 PSA.
Park Bridge Lender Services, the operating advisor and asset representations reviewer, is also the operating advisor and asset representations reviewer under the BANK 2018-BNK12 PSA, which governs the servicing of the CoolSprings Galleria Whole Loan.
See “Risk Factors—Risks Related to Conflicts of Interest—Potential Conflicts of Interest of the Master Servicer and the Special Servicer”, “—Potential Conflicts of Interest of the Asset Representations Reviewer”, “—Potential Conflicts of Interest of the Directing Certificateholder and the Companion Holders” and “—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks”. For a description of certain other affiliations, relationships and related transactions, to the extent known and material, among the transaction parties, see the individual descriptions of the transaction parties under “Transaction Parties”.
Pending Legal Proceedings Involving Transaction Parties
While the sponsors have been involved in, and are currently involved in, certain litigation or potential litigation, including actions relating to repurchase claims, there are no legal
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proceedings pending, or any proceedings known to be contemplated by any governmental authorities, against the sponsors that are material to Certificateholders.
For a description of certain other material legal proceedings pending against the transaction parties, see the individual descriptions of the transaction parties under “Transaction Parties”.
Use of Proceeds
Certain of the net proceeds from the sale of the Offered Certificates, together with the net proceeds from the sale of the other certificates not being offered by this prospectus, will be used by the depositor to purchase the mortgage loans from the mortgage loan sellers and to pay certain expenses in connection with the issuance of the certificates.
Yield and Maturity Considerations
Yield Considerations
General
The yield to maturity on the Offered Certificates will depend upon the price paid by the investors, the rate and timing of the distributions in reduction of the Certificate Balance or Notional Amount of the applicable class of Offered Certificates, the extent to which Yield Maintenance Charges and Prepayment Premiums allocated to the class of Offered Certificates are collected, and the rate, timing and severity of losses on the Mortgage Loans and the extent to which such losses are allocable in reduction of the Certificate Balance or Notional Amount of the class of Offered Certificates, as well as prevailing interest rates at the time of payment or loss realization.
Rate and Timing of Principal Payments
The rate and amount of distributions in reduction of the Certificate Balance of any class of Offered Certificates that are also Principal Balance Certificates and the yield to maturity of any class of Offered Certificates will be directly related to the rate of payments of principal (both scheduled and unscheduled) on the Mortgage Loans, as well as borrower defaults and the severity of losses occurring upon a default and the resulting rate and timing of collections made in connection with liquidations of Mortgage Loans due to these defaults. Principal payments on the Mortgage Loans will be affected by their amortization schedules, lockout periods, defeasance provisions, provisions relating to the release and/or application of earnout reserves, provisions requiring prepayments in connection with the release of real property collateral, requirements to pay Yield Maintenance Charges or Prepayment Premiums in connection with principal payments, the dates on which balloon payments are due, incentives for a borrower to repay an ARD Loan by the related Anticipated Repayment Date, property release provisions, provisions relating to the application or release of earnout reserves, and any extensions of maturity dates by the master servicer or special servicer. While voluntary prepayments of some Mortgage Loans are generally prohibited during applicable prepayment lockout periods, effective prepayments may occur if a sufficiently significant portion of a mortgaged property is lost due to casualty or condemnation. In addition, such distributions in reduction of Certificate Balances of the respective classes of Offered Certificates that are also Principal Balance Certificates may result from repurchases of, or substitutions for, Mortgage Loans made by the sponsors due to missing or defective documentation or breaches of representations and warranties with respect to the Mortgage Loans as described under “Description of the Mortgage Loan Purchase Agreements” or purchases of the Mortgage Loans in the manner described under “Pooling and Servicing
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Agreement—Termination; Retirement of Certificates”, and the exercise of purchase options by the holder of a mezzanine loan, if any. Additionally, in some cases, a borrower is required to apply a holdback reserve to prepayment of the related Mortgage Loan if certain release conditions are not satisfied. See “Description of the Mortgage Loan—Certain Terms of the Mortgage Loans—Escrows”. To the extent a Mortgage Loan requires payment of a Yield Maintenance Charge or Prepayment Premium in connection with a voluntary prepayment, any such Yield Maintenance Charge or Prepayment Premium generally is not due in connection with a prepayment due to casualty or condemnation, is not included in the purchase price of a Mortgage Loan purchased or repurchased due to a breach of a representation or warranty or otherwise, and may not be enforceable or collectible upon a default.
Because the certificates with Notional Amounts are not entitled to distributions of principal, the yield on such certificates will be extremely sensitive to prepayments received in respect of the Mortgage Loans allocated to the certificates to the extent distributed to reduce the related Notional Amount of the applicable class of certificates. In addition, although the borrower under an ARD Loan may have certain incentives to prepay such ARD Loan on its Anticipated Repayment Date, we cannot assure you that the borrower will be able to prepay such ARD Loan on its related Anticipated Repayment Date. The failure of the borrower to prepay an ARD Loan on its Anticipated Repayment Date will not be an event of default under the terms of such ARD Loan, and pursuant to the terms of the PSA, neither the master servicer nor the special servicer will be permitted to take any enforcement action with respect to the borrower’s failure to pay Excess Interest until the scheduled maturity of such ARD Loan; provided that the master servicer or special servicer, as the case may be, may take action to enforce the issuing entity’s right to apply excess cash flow to principal in accordance with the terms of the respective ARD Loan documents. Moreover, with respect to the Class A-SB certificates, the extent to which the planned balances are achieved and the sensitivity of the Class A-SB certificates to principal prepayments on the mortgage loans allocated to the certificates will depend in part on the period of time during which the Class A-1, Class A-2, Class A-3 and Class A-4 certificates remain outstanding. As such, the Class A-SB certificates will become more sensitive to the rate of prepayments on the mortgage loans allocated to the certificates than they were when the Class A-1, Class A-2, Class A-3 and Class A-4 certificates were outstanding.
The extent to which the yield to maturity of any class of Offered Certificates may vary from the anticipated yield will depend upon the degree to which the certificates are purchased at a discount or premium and when, and to what degree, payments of principal on the Mortgage Loans are in turn distributed on the certificates or, in the case of the Class X-A or Class X-B certificates with a Notional Amount, applied to reduce their Notional Amounts. An investor should consider, in the case of any certificate (other than a certificate with a Notional Amount) purchased at a discount, the risk that a slower than anticipated rate of principal payments on the Mortgage Loans allocated to the certificates could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of any certificate purchased at a premium (including certificates with Notional Amounts), the risk that a faster than anticipated rate of principal payments could result in an actual yield to such investor that is lower than the anticipated yield. In general, the earlier a payment of principal on the Mortgage Loans is distributed or otherwise results in reduction of the Certificate Balance of a certificate purchased at a discount or premium, the greater will be the effect on an investor’s yield to maturity. As a result, the effect on an investor’s yield of principal payments distributed on an investor’s certificates occurring at a rate higher (or lower) than the rate anticipated by the investor during any particular period would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments.
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The yield on each of the classes of certificates that have a Pass-Through Rate equal to, limited by, or based on, the WAC Rate could (or in the case of any class of certificates with a Pass-Through Rate equal to, or based on, the WAC Rate, would) be adversely affected if Mortgage Loans with higher Mortgage Rates prepay faster than Mortgage Loans with lower Mortgage Rates. The Pass-Through Rates on these classes of certificates may be adversely affected by a decrease in the WAC Rate even if principal prepayments do not occur.
Losses and Shortfalls
The Certificate Balance or Notional Amount of any class of Offered Certificates may be reduced without distributions of principal as a result of the occurrence and allocation of Realized Losses, reducing the maximum amount distributable in respect of principal on the Offered Certificates that are Principal Balance Certificates as well as the amount of interest that would have otherwise been payable on the Offered Certificates in the absence of such reduction. In general, a Realized Loss occurs when the principal balance of a Mortgage Loan is reduced without an equal distribution to applicable Certificateholders in reduction of the Certificate Balances of the certificates. Realized Losses may occur in connection with a default on a Mortgage Loan, acceptance of a discounted pay-off, the liquidation of the related Mortgaged Properties, a reduction in the principal balance of a Mortgage Loan by a bankruptcy court or pursuant to a modification, a recovery by the master servicer or trustee of a Nonrecoverable Advance on a Distribution Date or the incurrence of certain unanticipated or default-related costs and expenses (such as interest on Advances, Workout Fees, Liquidation Fees and Special Servicing Fees). Any reduction of the Certificate Balances of the classes of certificates indicated in the table below as a result of the application of Realized Losses will also reduce the Notional Amount of the related certificates.
Interest-Only | Class Notional Amount | Underlying Classes |
| Class X-A | $ 461,135,000 | Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates |
| Class X-B | $ 110,344,000 | Class A-S, Class B and Class C certificates |
Certificateholders are not entitled to receive distributions of Periodic Payments when due except to the extent they are either covered by a P&I Advance or actually received. Consequently, any defaulted Periodic Payment for which no such P&I Advance is made will tend to extend the weighted average lives of the Offered Certificates, whether or not a permitted extension of the due date of the related Mortgage Loan has been completed.
Certain Relevant Factors Affecting Loan Payments and Defaults
The rate and timing of principal payments and defaults and the severity of losses on the Mortgage Loans may be affected by a number of factors, including, without limitation, the availability of credit for commercial or multifamily real estate, prevailing interest rates, the terms of the Mortgage Loans (for example, due-on-sale clauses, lockout periods or Yield Maintenance Charges, release of property provisions, amortization terms that require balloon payments, performance reserves being applied to repay a mortgage loan if certain criteria are not timely satisfied and incentives for a borrower to repay its mortgage loan by an anticipated repayment date), the demographics and relative economic vitality of the areas in which the Mortgaged Properties are located and the general supply and demand for rental properties in those areas, the quality of management of the Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in tax laws and other opportunities for investment. See “Risk Factors” and “Description of the Mortgage Pool”.
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The rate of prepayment on the pool of Mortgage Loans is likely to be affected by prevailing market interest rates for Mortgage Loans of a comparable type, term and risk level as the Mortgage Loans. When the prevailing market interest rate is below a mortgage interest rate, a borrower may have an increased incentive to refinance its Mortgage Loan. Although the Mortgage Loans contain provisions designed to mitigate the likelihood of an early loan repayment, we cannot assure you that the related borrowers will refrain from prepaying their Mortgage Loans due to the existence of these provisions, or that involuntary prepayments will not occur. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”.
With respect to certain Mortgage Loans, the related Mortgage Loan documents allow for the sale of individual properties and the severance of the related debt and the assumption by the transferee of such portion of the Mortgage Loan as-is allocable to the individual property acquired by that transferee, subject to the satisfaction of certain conditions. In addition, with respect to certain Mortgage Loans, the related Mortgage Loan documents allow for partial releases of individual Mortgaged Properties during a lockout period or during such time as a Yield Maintenance Charge would otherwise be payable, which could result in a prepayment of a portion of the initial principal balance of the related Mortgage Loan without payment of a Yield Maintenance Charge or Prepayment Premium. Additionally, in the case of a partial release of an individual Mortgaged Property, the related release amount in many cases is greater than the allocated loan amount for the Mortgaged Property being released, which would result in a greater than proportionate paydown of the Mortgage Loan. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Releases; Partial Releases”.
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell Mortgaged Properties in order to realize their equity in the Mortgaged Property, to meet cash flow needs or to make other investments. In addition, some borrowers may be motivated by federal and state tax laws (which are subject to change) to sell Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
We make no representation as to the particular factors that will affect the rate and timing of prepayments and defaults on the Mortgage Loans, as to the relative importance of those factors, as to the percentage of the principal balance of the Mortgage Loans that will be prepaid or as to which a default will have occurred as of any date or as to the overall rate of prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions
Because each monthly distribution is made on each Distribution Date, which is at least 15 days after the end of the related Interest Accrual Period for the certificates, the effective yield to the holders of such certificates will be lower than the yield that would otherwise be produced by the applicable Pass-Through Rates and purchase prices (assuming the prices did not account for the delay).
Yield on the Certificates with Notional Amounts
The yield to maturity of the certificates with Notional Amounts will be highly sensitive to the rate and timing of reductions made to the Certificate Balances of the classes of certificates indicated in the table below, including by reason of prepayments and principal losses on the Mortgage Loans allocated to the certificates and other factors described above.
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Interest-Only | Class Notional Amount | Underlying Classes |
| Class X-A | $ 461,135,000 | Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates |
| Class X-B | $ 110,344,000 | Class A-S, Class B and Class C certificates |
Any optional termination by the holders of the Controlling Class, the special servicer, the master servicer or the holders of the Class R certificates would result in prepayment in full of the Offered Certificates and would have an adverse effect on the yield of a class of the certificates with a Notional Amount because a termination would have an effect similar to a principal prepayment in full of the Mortgage Loans and, as a result, investors in these certificates and any other Offered Certificates purchased at premium might not fully recoup their initial investment. See “Pooling and Servicing Agreement—Termination; Retirement of Certificates”.
Investors in the certificates with a Notional Amount should fully consider the associated risks, including the risk that an extremely rapid rate of prepayment or other liquidation of the Mortgage Loans could result in the failure of such investors to recoup fully their initial investments.
Weighted Average Life
The weighted average life of a Principal Balance Certificate refers to the average amount of time that will elapse from the date of its issuance until each dollar to be applied in reduction of the aggregate certificate balance of those certificates is paid to the related investor. The weighted average life of a Principal Balance Certificate will be influenced by, among other things, the rate at which principal on the Mortgage Loans is paid or otherwise received, which may be in the form of scheduled amortization, voluntary prepayments, Insurance and Condemnation Proceeds and Liquidation Proceeds. Distributions among the various classes of certificates will be made as set forth under “Description of the Certificates—Distributions—Priority of Distributions”.
Prepayments on Mortgage Loans may be measured by a prepayment standard or model. The “Constant Prepayment Rate” or “CPR” model represents an assumed constant annual rate of prepayment each month, expressed as a per annum percentage of the then-scheduled principal balance of the pool of Mortgage Loans. The “CPY” model represents an assumed CPR prepayment rate after any applicable lockout period, any applicable period in which defeasance is permitted and any applicable yield maintenance period. The depositor also may utilize the “CPP” model, which represents an assumed CPR prepayment rate after any applicable lockout period, any applicable period in which defeasance is permitted, any applicable yield maintenance period and after any fixed penalty period. The model used in this prospectus is the CPP model. As used in each of the following tables, the column headed “0% CPP” assumes that none of the Mortgage Loans is prepaid before its maturity date or Anticipated Repayment Date, as the case may be. The columns headed “25% CPP”, “50% CPP”, “75% CPP” and “100% CPP” assume that prepayments on the Mortgage Loans are made at those levels of CPP. We cannot assure you, however, that prepayments of the Mortgage Loans will conform to any level of CPP, and we make no representation that the Mortgage Loans will prepay at the levels of CPP shown or at any other prepayment rate.
The following tables indicate the percentage of the initial Certificate Balance of each class of Offered Certificates that are also Principal Balance Certificates that would be outstanding after each of the dates shown at various CPPs and the corresponding weighted average life of each such class of Offered Certificates. The tables have been prepared on the basis of the following assumptions (the “Structuring Assumptions”), among others:
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| ● | except as otherwise set forth below, the Mortgage Loans have the characteristics set forth on Annex A-1 to this prospectus and the aggregate Cut-off Date Balance of the Mortgage Loans is as described in this prospectus; |
| ● | the initial aggregate certificate balance or notional amount, as the case may be, of each interest-bearing class of certificates is as described in this prospectus; |
| ● | the pass-through rate for each interest-bearing class of certificates is as described in this prospectus; |
| ● | no delinquencies, defaults or losses occur with respect to any of the Mortgage Loans; |
| ● | no additional trust fund expenses (including Operating Advisor Expenses) arise, no Servicing Advances are made under the PSA and the only expenses of the issuing entity consist of the Certificate Administrator/Trustee Fees, the Servicing Fees, the CREFC® Intellectual Property Royalty License Fees, the Asset Representations Reviewer Fees and the Operating Advisor fees, each as set forth on Annex A-1; |
| ● | there are no modifications, extensions, waivers or amendments affecting the monthly debt service payments by borrowers on the Mortgage Loans; |
| ● | the Debt Yield Condition in relation to the Mission Center Mortgage Loan is not satisfied and the interest-only period in relation to such Mortgage Loan remains at 60 months in total; |
| ● | each of the Mortgage Loans provides for monthly debt service payments to be due on the first day of each month, regardless of the actual day of the month on which those payments are otherwise due and regardless of whether the subject date is a business day or not; |
| ● | all monthly debt service or balloon payments on the Mortgage Loans are timely received by the master servicer on behalf of the issuing entity on the day on which they are assumed to be due or paid as described in the immediately preceding bullet; |
| ● | each ARD Loan in the trust fund is paid in full on its Anticipated Repayment Date; |
| ● | no involuntary prepayments are received as to any Mortgage Loan at any time (including, without limitation, as a result of any application of escrows, reserve or holdback amounts if performance criteria are not satisfied); |
| ● | except as described in the next two succeeding bullets, no voluntary prepayments are received as to any Mortgage Loan during that Mortgage Loan’s prepayment lockout period, any period when defeasance is permitted, or during any period when principal prepayments on that Mortgage Loan are required to be accompanied by a Prepayment Premium or Yield Maintenance Charge; |
| ● | except as otherwise assumed in the immediately preceding two bullets, prepayments are made on each of the Mortgage Loans at the indicated CPPs set forth in the subject tables or other relevant part of this prospectus, without regard to any limitations in those Mortgage Loans on partial voluntary principal prepayments; |
| ● | all prepayments on the Mortgage Loans are assumed to be accompanied by a full month’s interest and no Prepayment Interest Shortfalls occur; |
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| ● | no Yield Maintenance Charges or Prepayment Premiums are collected; |
| ● | no person or entity entitled thereto exercises its right of optional termination as described in this prospectus; |
| ● | no Mortgage Loan is required to be repurchased, and none of the holders of the Controlling Class (or any other Certificateholder), the special servicer, the master servicer or the holders of the Class R certificates will exercise its option to purchase all the Mortgage Loans and thereby cause an early termination of the issuing entity and no holder of any mezzanine debt or other indebtedness will exercise its option to purchase the related Mortgage Loan; |
| ● | distributions on the Offered Certificates are made on the 15th day of each month, commencing in August 2018; and |
| ● | the Offered Certificates are settled with investors on July 17, 2018. |
To the extent that the Mortgage Loans have characteristics that differ from those assumed in preparing the tables set forth below, a class of Principal Balance Certificates may mature earlier or later than indicated by the tables. The tables set forth below are for illustrative purposes only and it is highly unlikely that the Mortgage Loans will actually prepay at any constant rate until maturity or that all the Mortgage Loans will prepay at the same rate. In addition, variations in the actual prepayment experience and the balance of the Mortgage Loans that prepay may increase or decrease the percentages of initial Certificate Balances (and weighted average lives) shown in the following tables. These variations may occur even if the average prepayment experience of the Mortgage Loans were to equal any of the specified CPP percentages. Investors should not rely on the prepayment assumptions set forth in this prospectus and are urged to conduct their own analyses of the rates at which the Mortgage Loans may be expected to prepay, based on their own assumptions. Based on the foregoing assumptions, the following tables indicate the resulting weighted average lives of each class of Offered Certificates and set forth the percentage of the initial Certificate Balance of the class of the certificate that would be outstanding after each of the dates shown at the indicated CPPs.
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Percent of the Initial Certificate Balance
of the Class A-1 Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 88% | 88% | 88% | 88% | 88% |
| July 2020 | 75% | 75% | 75% | 75% | 75% |
| July 2021 | 52% | 52% | 52% | 52% | 52% |
| July 2022 | 20% | 20% | 20% | 20% | 20% |
| July 2023 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 2.87 | 2.87 | 2.87 | 2.86 | 2.86 |
Percent of the Initial Certificate Balance
of the Class A-2 Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 4.66 | 4.66 | 4.65 | 4.63 | 4.45 |
Percent of the Initial Certificate Balance
of the Class A-SB Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 95% | 95% | 95% | 95% | 95% |
| July 2024 | 76% | 76% | 76% | 76% | 76% |
| July 2025 | 55% | 55% | 55% | 55% | 55% |
| July 2026 | 32% | 32% | 32% | 32% | 32% |
| July 2027 | 8% | 8% | 8% | 8% | 8% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 7.20 | 7.20 | 7.20 | 7.20 | 7.20 |
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Percent of the Initial Certificate Balance ($150,000,000)(1)
of the Class A-3 Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.74 | 9.71 | 9.68 | 9.63 | 9.45 |
| (1) | The exact initial Certificate Balance of the Class A-3 Certificates is unknown and will be determined based on final pricing of that Class. The information in the chart above is based on the minimum potential initial Certificate Balance of the Class A-3 Certificates, however, the actual Certificate Balance may be greater than the minimum shown, in which case the Weighted Average Lives may be different than those shown above. |
Percent of the Initial Certificate Balance ($200,000,000)(1)
of the Class A-3 Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.76 | 9.74 | 9.70 | 9.66 | 9.48 |
| (1) | The exact initial Certificate Balance of the Class A-3 Certificates is unknown and will be determined based on final pricing of that Class. The information in the chart above is based on the maximum potential initial Certificate Balance of the Class A-3 Certificates, however, the actual Certificate Balance may be less than the maximum shown, in which case the Weighted Average Lives may be different than those shown above. |
500
Percent of the Initial Certificate Balance ($203,783,000)(1)
of the Class A-4 Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.88 | 9.88 | 9.86 | 9.83 | 9.64 |
| (1) | The exact initial Certificate Balance of the Class A-4 Certificates is unknown and will be determined based on final pricing of that Class. The information in the chart above is based on the minimum potential initial Certificate Balance of the Class A-4 Certificates, however, the actual Certificate Balance may be greater than the minimum shown, in which case the Weighted Average Lives may be different than those shown above. |
Percent of the Initial Certificate Balance ($253,783,000)(1)
of the Class A-4 Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.87 | 9.86 | 9.84 | 9.82 | 9.62 |
| (1) | The exact initial Certificate Balance of the Class A-4 Certificates is unknown and will be determined based on final pricing of that Class. The information in the chart above is based on the maximum potential initial Certificate Balance of the Class A-4 Certificates, however, the actual Certificate Balance may be less than the maximum shown, in which case the Weighted Average Lives may be different than those shown above. |
Percent of the Initial Certificate Balance
of the Class A-S Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.91 | 9.91 | 9.91 | 9.91 | 9.66 |
501
Percent of the Initial Certificate Balance
of the Class B Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.91 | 9.91 | 9.91 | 9.91 | 9.66 |
Percent of the Initial Certificate Balance
of the Class C Certificates at the Respective CPPs
Set Forth Below:
Distribution Date | 0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP |
| Closing Date | 100% | 100% | 100% | 100% | 100% |
| July 2019 | 100% | 100% | 100% | 100% | 100% |
| July 2020 | 100% | 100% | 100% | 100% | 100% |
| July 2021 | 100% | 100% | 100% | 100% | 100% |
| July 2022 | 100% | 100% | 100% | 100% | 100% |
| July 2023 | 100% | 100% | 100% | 100% | 100% |
| July 2024 | 100% | 100% | 100% | 100% | 100% |
| July 2025 | 100% | 100% | 100% | 100% | 100% |
| July 2026 | 100% | 100% | 100% | 100% | 100% |
| July 2027 | 100% | 100% | 100% | 100% | 100% |
| July 2028 and thereafter | 0% | 0% | 0% | 0% | 0% |
| Weighted Average Life (years) | 9.91 | 9.91 | 9.91 | 9.91 | 9.73 |
Pre-Tax Yield to Maturity Tables
The following tables indicate the approximate pre-tax yield to maturity on a corporate bond equivalent basis on the Offered Certificates for the specified CPPs based on the assumptions set forth under “—Weighted Average Life” above. It was further assumed that the purchase price of the Offered Certificates is as specified in the tables below, expressed as a percentage of the initial Certificate Balance or Notional Amount, as applicable, plus accrued interest from July 1, 2018 to the Closing Date.
The yields set forth in the following tables were calculated by determining the monthly discount rates that, when applied to the assumed streams of cash flows to be paid on the applicable class of Offered Certificates, would cause the discounted present value of such assumed stream of cash flows to equal the assumed purchase price of such class plus accrued interest, and by converting such monthly rates to semi-annual corporate bond equivalent rates. Such calculations do not take into account shortfalls in collection of interest due to prepayments (or other liquidations) of the Mortgage Loans or the interest rates at which investors may be able to reinvest funds received by them as distributions on the applicable class of certificates (and, accordingly, do not purport to reflect the return on any investment in the applicable class of Offered Certificates when such reinvestment rates are considered).
The characteristics of the Mortgage Loans may differ from those assumed in preparing the tables below. In addition, we cannot assure you that the Mortgage Loans will prepay in
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accordance with the above assumptions at any of the rates shown in the tables or at any other particular rate, that the cash flows on the applicable class of Offered Certificates will correspond to the cash flows shown in this prospectus or that the aggregate purchase price of such class of Offered Certificates will be as assumed. In addition, it is unlikely that the Mortgage Loans will prepay in accordance with the above assumptions at any of the specified CPPs until maturity or that all the Mortgage Loans will so prepay at the same rate. Timing of changes in the rate of prepayments may significantly affect the actual yield to maturity to investors, even if the average rate of principal prepayments is consistent with the expectations of investors. Investors must make their own decisions as to the appropriate prepayment assumption to be used in deciding whether to purchase any class of Offered Certificates.
For purposes of this prospectus, prepayment assumptions with respect to the Mortgage Loans are presented in terms of the CPP model described under “—Weighted Average Life” above.
Pre-Tax Yield to Maturity for the Class A-1 Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class A-1 certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class A-2 Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class A-2 certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class A-SB Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class A-SB certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
503
Pre-Tax Yield to Maturity for the Class A-3 Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class A-3 certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class A-4 Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class A-4 certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class X-A Certificates
Assumed Purchase Price (% of Initial Notional Amount of Class X-A certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class X-B Certificates
Assumed Purchase Price (% of Initial Notional Amount of Class X-B certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
504
Pre-Tax Yield to Maturity for the Class A-S Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class A-S certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class B Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class B certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
Pre-Tax Yield to Maturity for the Class C Certificates
Assumed Purchase Price (% of Initial Certificate Balance of Class C certificates (in 32nds, excluding accrued interest)) | Prepayment Assumption (CPP) | ||||
0% CPP | 25% CPP | 50% CPP | 75% CPP | 100% CPP | |
505
Material Federal Income Tax Considerations
General
The following is a general discussion of the anticipated material federal income tax consequences of the purchase, ownership and disposition of the certificates. The discussion below does not purport to address all federal income tax consequences that may be applicable to particular categories of investors (such as banks, insurance companies, securities dealers, foreign persons, investors whose functional currency is not the U.S. dollar, and investors that hold the certificates as part of a “straddle” or “conversion transaction”), some of which may be subject to special rules. The authorities on which this discussion is based are subject to change or differing interpretations, and any such change or interpretation could apply retroactively. This discussion reflects the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), as well as regulations (the “Income Tax Regulations”) promulgated by the U.S. Department of the Treasury and the IRS. Investors are encouraged to consult their tax advisors in determining the federal, state, local or any other tax consequences to them of the purchase, ownership and disposition of the certificates.
Two separate real estate mortgage investment conduit (“REMIC”) elections will be made with respect to designated portions of the issuing entity (the “Lower-Tier REMIC” and the “Upper-Tier REMIC”, and, together, the “Trust REMICs”). The Lower-Tier REMIC will hold the Mortgage Loans (excluding Excess Interest) and certain other assets and will issue (i) certain classes of regular interests (the “Lower-Tier Regular Interests”) to the Upper-Tier REMIC and (ii) an uncertificated interest represented by the Class R certificates as the sole class of “residual interests” in the Lower-Tier REMIC.
The Upper-Tier REMIC will hold the Lower-Tier Regular Interests and will issue (i) the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class A-S, Class B, Class C, Class D, Class E-RR, Class F-RR, Class G-RR, Class H-RR and Class J-RR certificates (the “Regular Interests”), each representing a regular interest in the Upper-Tier REMIC and (ii) an uncertificated interest represented by the Class R certificates as the sole class of “residual interests” in the Upper-Tier REMIC.
Qualification as a REMIC requires ongoing compliance with certain conditions. Assuming (i) the making of appropriate elections, (ii) compliance with the PSA and the Intercreditor Agreements, (iii) compliance with the provisions of any Non-Serviced PSA and any amendments thereto and the continued qualification of the REMICs formed under any Non-Serviced PSA and (iv) compliance with any changes in the law, including any amendments to the Code or applicable Treasury regulations thereunder, in the opinion of Sidley Austin LLP, special tax counsel to the depositor, (a) each Trust REMIC will qualify as a REMIC, (b) each of the Lower-Tier Regular Interests will constitute a “regular interest” in the Lower-Tier REMIC, (c) each of the Regular Interests will constitute a “regular interest” in the Upper-Tier REMIC and (d) the Class R certificates will evidence the sole class of “residual interests” in each Trust REMIC.
In addition, in the opinion of Sidley Austin LLP, special tax counsel to the depositor, the entitlement to Excess Interest and the related distribution account will be treated as held by an arrangement classified as a trust under Section 301.7701-4(c) of the Income Tax Regulations (the “Grantor Trust”).
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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 a de 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 Income Tax Regulations provide a safe harbor pursuant to which the de 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 agents and must furnish applicable tax information to transferors or agents that violate this restriction. The PSA will provide that no legal or beneficial interest in the Class R certificates may be transferred or registered unless certain conditions, designed to prevent violation of this restriction, are met. It is expected that each Trust REMIC will qualify as a REMIC at all times that any of its regular interests are outstanding.
A qualified mortgage is any obligation that is principally secured by an interest in real property and that is either transferred to a REMIC on the Startup Day or is purchased by a REMIC within a 3 month period thereafter pursuant to a fixed price contract in effect on the Startup Day. Qualified mortgages include (i) whole mortgage loans or split-note interests in such 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 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, that such
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a default had occurred or would occur. Foreclosure property may generally not be held after the close of the third calendar year beginning after the date the issuing entity acquires such property, with one extension that may be granted by the IRS.
A mortgage loan held by a REMIC will fail to be a qualified mortgage if it is “significantly modified” unless default is “reasonably foreseeable” or where the servicer believes there is a “significant risk of default” upon maturity of the mortgage loan or at an earlier date, and that by making such modification the risk of default is substantially reduced. A mortgage loan held by a REMIC will not be considered to have been “significantly modified” following the release of the lien on a portion of the real property collateral if (a) the release is pursuant to a defeasance permitted under the mortgage loan documents that occurs more than two years after the startup day of the REMIC or (b) following the release the loan-to-value ratio for the mortgage loan is not more than 125% with respect to the real property security. Furthermore, if the release is not pursuant to a defeasance and following the release the loan-to-value ratio for the mortgage loan is greater than 125%, the mortgage loan will continue to be a qualified mortgage if the release is part of a “qualified paydown transaction” in accordance with Revenue Procedure 2010-30.
In addition to the foregoing requirements, the various interests in a REMIC also must meet certain requirements. All of the interests in a REMIC must be either of the following: (i) one or more classes of regular interests or (ii) a single class of residual interests on which distributions, if any, are made pro rata. A regular interest is an interest in a REMIC that is issued on the Startup Day with fixed terms, is designated as a regular interest, and unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and provides that interest payments (or other similar amounts), if any, at or before maturity either are payable based on a fixed rate or a qualified variable rate, or consist of a specified, nonvarying portion of the interest payments on the qualified mortgages. The rate on the specified portion may be a fixed rate, a variable rate, or the difference between one fixed or qualified variable rate and another fixed or qualified variable rate. The specified principal amount of a regular interest that provides for interest payments consisting of a specified, nonvarying portion of interest payments on qualified mortgages may be zero. An interest in a REMIC may be treated as a regular interest even if payments of principal with respect to such interest are subordinated to payments on other regular interests or the residual interest in the REMIC, and are dependent on the absence of defaults or delinquencies on qualified mortgages or permitted investments, lower than reasonably expected returns on permitted investments, expenses incurred by 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 Startup Day that is designated as a residual interest. 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 such an 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
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may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of a REMIC’s income for the period of time in which the requirements for REMIC status are not satisfied.
Status of Offered Certificates
Offered Certificates held by a real estate investment trust will constitute “real estate assets” within the meaning of Code Section 856(c)(5)(B), and interest (including original issue discount) on the Offered Certificates will be considered “interest on obligations secured by mortgages on real property or on interests in real property” within the meaning of Code Section 856(c)(3)(B) in the same proportion that, for both purposes, the assets of the issuing entity would be so treated. For purposes of Code Section 856(c)(5)(B), payments of principal and interest on the Mortgage Loans that are reinvested pending distribution to holders of Offered Certificates qualify for such treatment. Offered Certificates held by a domestic building and loan association will be treated as “loans . . . secured by an interest in real property which is . . . residential real property” within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section 7701(a)(19)(C) only to the extent the Mortgage Loans are secured by residential real property. As of the Cut-off Date, three (3) of the Mortgaged Properties securing three (3) Mortgage Loans representing approximately 10.2% of the Initial Pool Balance, are multifamily properties. Holders of Offered Certificates should consult their tax advisors whether the foregoing percentage or some other percentage applies to their Offered Certificates. If at all times 95% or more of the assets of the issuing entity qualify for each of the foregoing treatments, the Offered Certificates will qualify for the corresponding status in their entirety. For the purposes of the foregoing determinations, the Trust REMICs will be treated as a single REMIC. In addition, Mortgage Loans that have been defeased with government securities will not qualify for such treatment. Offered Certificates will be “qualified mortgages” within the meaning of Code Section 860G(a)(3) for another REMIC if transferred to that REMIC within a prescribed time period in exchange for regular or residual interests in that REMIC. Moreover, Offered Certificates held by certain financial institutions will constitute an “evidence of indebtedness” within the meaning of Code Section 582(c)(1).
Taxation of Regular Interests
General
Each class of Regular Interests (whether held directly or indirectly) represents a regular interest in the Upper-Tier REMIC. The Regular Interests will represent newly originated debt instruments for federal income tax purposes. In general, interest, original issue discount and market discount on a Regular Interest will be treated as ordinary income to the holder of a Regular Interest (a “Regular Interestholder”), and principal payments on a 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.
Notwithstanding the following, under new legislation enacted on December 22, 2017 (the “Tax Cuts and Jobs Act”), for tax years beginning after December 31, 2017, Regular Interestholders may be required to accrue amounts of market discount and other amounts no later than the year they included such amounts as revenue on their applicable financial statements. In addition, income from a debt instrument having original issue discount will be subject to this rule for tax years beginning after December 31, 2018. Prospective investors are urged to consult their tax counsel regarding the potential application of the Tax Cuts and Jobs Act to their particular situation.
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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 on temporary and final Treasury regulations (the “OID Regulations”) under Code Sections 1271 through 1273 and 1275 and on the provisions of 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 be provided that the IRS will not take a different position as to those matters not currently addressed by the OID Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing the IRS to apply or depart from the OID Regulations if necessary or appropriate to ensure a reasonable tax result in light of the applicable statutory provisions. A tax result will not be considered unreasonable under the anti-abuse rule, however, in the absence of a substantial effect on the present value of a taxpayer’s tax liability. Investors are advised to consult their own tax advisors as to the discussion in this prospectus and the appropriate method for reporting interest and original issue discount with respect to the Regular Interests.
Each Regular Interest will be treated as 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 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 provided by the debt instrument other than any qualified stated interest payments. Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate or a qualified variable rate; provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the obligation. Because there is no penalty or default remedy in the case of nonpayment of interest with respect to a Regular Interest, it is possible that no interest on any class of Regular Interests will be treated as qualified stated interest. However, because the Mortgage Loans provide for remedies in the event of default, the certificate administrator will treat all payments of stated interest on the Regular Interests (other than the Class X Certificates) as qualified stated interest (other than accrued interest distributed on the first Distribution Date for the number of days that exceed the interval between the Closing Date and the first Distribution Date). Based upon the anticipated issue price of each such class and a stated redemption price equal to the par amount of each such class (plus such excess interest accrued thereon), it is anticipated that the Class [__] certificates 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. Such classes will be considered to be issued with original issue discount in an amount equal to the excess of all distributions of
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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.
Under a de minimis rule, original issue discount on a Regular Interest will be considered to be zero if such original issue discount is less than 0.25% of the stated redemption price at maturity of the Regular Interest multiplied by the weighted average maturity of the Regular Interest. For this purpose, the weighted average maturity of the Regular Interest is computed as the sum of the amounts determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each distribution included in the stated redemption price at maturity of the Regular Interest and the denominator of which is the stated redemption price at maturity 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, namely, 0% CPR; provided that it is assumed that any ARD Loan prepays on its anticipated repayment date (the “Prepayment Assumption”). See “Yield and Maturity Considerations—Weighted Average Life” above. Holders generally must report de minimis original issue discount pro 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 all de minimis original issue discount, as well as market discount and premium, under the constant yield method. See “—Election To Treat All Interest Under the Constant Yield Method” below. Based on the foregoing, it is anticipated that the Class [__] certificates will be issued with de minimis original issue discount for federal income tax purposes.
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
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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 price greater than its adjusted issue price and less than its remaining stated redemption price at maturity will be required to include in gross income the daily portions of the original issue discount on the Regular Interest reduced pro rata by a fraction, the numerator of which is the excess of its purchase price over such adjusted issue price and the denominator of which is the excess of the remaining stated redemption price at maturity over the adjusted issue price. Alternatively, such a purchaser may elect to treat all such acquisition premium under the constant yield method, as described under “—Election To Treat All Interest Under the Constant Yield Method” below.
Market Discount
A purchaser of a Regular Interest also may be subject to the market discount rules of Code Sections 1276 through 1278. Under these Code sections and the principles applied by the OID Regulations in the context of original issue discount, “market discount” is the amount by which the purchaser’s original basis in the Regular Interest (i) is exceeded by the remaining outstanding principal payments and non-qualified stated interest payments due on the Regular Interest, or (ii) in the case of a Regular Interest having original issue discount, is exceeded by the adjusted issue price of such Regular Interest at the time of purchase. Such purchaser generally will be required to recognize ordinary income to the extent of accrued market discount on such Regular Interest as distributions includible in its stated redemption price at maturity are received, in an amount not exceeding any such distribution. Such market discount would accrue in a manner to be provided in Treasury regulations and should take into account the Prepayment Assumption. The Conference Committee Report to the 1986 Act provides that until such regulations are issued, such market discount would accrue, at the election of the holder, either (i) on the basis of a constant interest rate or (ii) in the ratio of interest accrued for the relevant period to the sum of the interest accrued for such period plus the remaining interest after the end of such period, or, in the case of classes issued with original issue discount, in the ratio of original issue discount accrued for the relevant period to the sum of the original issue discount accrued for such period plus the remaining original issue discount after the end of such period. Such purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Interest as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial distributions in reduction of the stated redemption price at maturity were received. Such purchaser will be required to defer deduction of a portion of the excess of the interest paid or accrued on indebtedness incurred to purchase or carry the Regular Interest over the interest (including
512
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, in which case the interest deferral rule will not apply. Such election, if made, will apply to all market discount bonds acquired by the Regular Interestholder as of the first day of the taxable year for which the election is made and to all market discount bonds acquired thereafter. The election may be revoked only with the consent of the IRS. See “—Election To Treat All Interest Under the Constant Yield Method” below regarding making the election under Code Section 171 and an alternative manner in which such election may be deemed to be made.
Market discount with respect to a Regular Interest will be considered to be zero if such market discount is less than 0.25% of the remaining stated redemption price at maturity of such Regular Interest multiplied by the weighted average maturity of the Regular Interest remaining after the date of purchase. For this purpose, the weighted average maturity is determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each such distribution included in the stated redemption price at maturity of the Regular Interest and the denominator of which is the total stated redemption price at maturity of the Regular Interest. It appears that de minimis market discount would be reported pro rata as principal payments are received. Treasury regulations implementing the market discount rules have not yet been proposed, and investors should therefore consult their own tax advisors regarding the application of these rules as well as the advisability of making any of the elections with respect to such rules. Investors should also consult Revenue Procedure 92-67 concerning the elections to include market discount in income currently and to accrue market discount on the basis of the constant yield method.
Premium
A Regular Interest purchased upon initial issuance or in the secondary market at a cost greater than its remaining stated redemption price at maturity generally is considered to be purchased at a premium. If the Regular 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. Such election, if made, will apply to all premium debt instruments (the interest on which is not excludable from gross income) held by the Regular Interestholder as of the first day of the taxable year for which the election is made and to all premium debt instruments acquired thereafter. The election may be revoked only with the consent of the IRS. See “—Election To Treat All Interest Under the Constant Yield Method” below regarding making the election under Code Section 171 and an alternative manner in which the Code Section 171 election may be deemed to be made. Final Treasury regulations under Code Section 171 do not, by their terms, apply to prepayable obligations such as the Regular Interests. The Conference Committee Report to the 1986 Act indicates a Congressional intent that the same rules that will apply to the accrual of market discount on installment obligations will also apply to amortizing bond premium under Code Section 171 on installment obligations such as the Regular Interests, although it is unclear whether the alternatives to the constant interest method described above under “—Market Discount” are available. Amortizable bond premium will be treated as an offset to interest income on a Regular Interest rather
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than as a separate deduction item. It is anticipated that the Class [__] certificates will be issued at a premium for federal income tax purposes.
Election To Treat All Interest Under the Constant Yield Method
A holder of a debt instrument such as a Regular Interest may elect to treat all interest that accrues on the instrument using the constant yield method, with none of the interest being treated as qualified stated interest. For purposes of applying the constant yield method to a debt instrument subject to such an election, (i) “interest” includes stated interest, original issue discount, de minimis original issue discount, market discount and de 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. 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 the holders of Regular Interests that are corporations or that otherwise hold the Regular Interests in connection with a trade or business should in general be allowed to deduct as an ordinary loss any such loss sustained (and not previously deducted) during the taxable year on account of any such Regular Interests becoming wholly or partially worthless, and that, in general, the Regular Interestholders that are not corporations and do not hold the Regular Interests in connection with a trade or business will be allowed to deduct as a short term capital loss any loss with respect to principal sustained during the taxable year on account of a portion of any class of such Regular Interests becoming wholly worthless. Although the matter is not free from doubt, such non-corporate holders of Regular Interests should be allowed a bad debt deduction at such time as the certificate balance of any class of such Regular Interests is reduced to reflect losses on the Mortgage Loans below such holder’s basis in the Regular Interests. The IRS, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect such losses only after the
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classes of Regular Interests have been otherwise retired. The IRS could also assert that losses on a class of Regular Interests are deductible based on some other method that may defer such deductions for all holders, such as reducing future cash flow for purposes of computing original issue discount. This may have the effect of creating “negative” original issue discount that, with the possible exception of the method discussed in the following sentence, would be deductible only against future positive original issue discount or otherwise upon termination of the applicable class. Although not free from doubt, a holder of Regular Interests with negative original issue discount may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such holder was entitled, assuming no further prepayments. No bad debt losses will be allowed with respect to the Class X Certificates. Regular Interestholders are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained with respect to such Regular Interests. Special loss rules are applicable to banks and thrift institutions, including rules regarding reserves for bad debts. Such taxpayers are advised to consult their tax advisors regarding the treatment of losses on the Regular Interests.
Yield Maintenance Charges and Prepayment Premiums
Yield Maintenance Charges and Prepayment Premiums actually collected on the Mortgage Loans will be distributed as described in “Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums”. It is not entirely clear under the Code when the amount of Yield Maintenance Charges and Prepayment Premiums so allocated should be taxed to the holders of such classes of certificates, but it is not expected, for federal income tax reporting purposes, that Yield Maintenance Charges and Prepayment Premiums will be treated as giving rise to any income to the holder of such class of certificates prior to the certificate administrator’s actual receipt of Yield Maintenance Charges and Prepayment Premiums. Yield Maintenance Charges and Prepayment Premiums, if any, may be treated as paid upon the retirement or partial retirement of such classes of certificates. The IRS may disagree with these positions. Certificateholders should consult their own tax advisors concerning the treatment of Yield Maintenance Charges and Prepayment Premiums.
Sale or Exchange of Regular Interests
If a Regular 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.
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
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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.
Taxes That May Be Imposed on a REMIC
Prohibited Transactions
Income from certain transactions by either Trust REMIC, called prohibited transactions, will not be part of the calculation of income or loss includible in the federal income tax returns of holders of the Class R certificates, but rather will be taxed directly to 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 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 3 months of the Startup Day, (b) foreclosure, default or imminent default of a qualified mortgage, (c) bankruptcy or insolvency of the REMIC, or (d) a qualified (complete) liquidation, (ii) the receipt of income from assets that are not the type of mortgages or investments that the REMIC is 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 Income Tax 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 the Startup Day. Exceptions are provided for cash contributions to the REMIC (i) during the 3 months following the 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 corporate rate on “net income from foreclosure property”, determined by reference to the rules applicable to real
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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 an 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 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
The Bipartisan Budget Act of 2015 (the “2015 Budget Act”), which was enacted on November 2, 2015, 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 also apply to REMICs, the holders of their residual interests and the trustees authorized to represent REMICs in IRS audits and related procedures (“partnership representatives” or “TMPs”). These new audit rules are effective for taxable years beginning with 2018 and 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, are binding on residual interest holders more so than a partnership representative’s actions under the prior 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.
The certificate administrator has the authority to utilize, and is directed to utilize, any exceptions available under the new provisions (including any changes) and IRS regulations so that holders of the Class R certificates, to the fullest extent possible, rather than either Trust REMIC itself, will be liable for any taxes arising from audit adjustments to either 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. Investors should discuss with their own tax advisors the possible effect of the new rules on them.
Taxation of Certain Foreign Investors
Interest, including original issue discount, distributable to the Regular Interestholders that are nonresident aliens, foreign corporations or other Non-U.S. Persons will be
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considered “portfolio interest” and, therefore, generally will not be subject to a 30% United States withholding tax; provided that such Non-U.S. Person (i) is not a “10 percent shareholder” within the meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation described in Code Section 881(c)(3)(C) with respect to the Trust REMICs and (ii) provides the certificate administrator, or the person that would otherwise be required to withhold tax from such distributions under Code Section 1441 or 1442, with an appropriate statement, signed under penalties of perjury, identifying the beneficial owner and stating, among other things, that the beneficial owner of the Regular Interest is a Non-U.S. Person. The appropriate documentation includes IRS Form W-8BEN-E or W-8BEN, if the Non-U.S. Person is an entity (such as a corporation) or individual, respectively, eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; IRS Form W-8ECI if the Non-U.S. Person is eligible for an exemption on the basis of its income from the Regular Interest being effectively connected to a United States trade or business; IRS Form W-8BEN-E or W-8IMY if the Non-U.S. Person is a trust, depending on whether such trust is classified as the beneficial owner of the Regular Interest; and Form W-8IMY, with supporting documentation as specified in the Treasury regulations, required to substantiate exemptions from withholding on behalf of its partners, if the Non-U.S. Person is a partnership. With respect to IRS Forms W-8BEN, W-8BEN-E, W-8IMY and W-8ECI, each (other than IRS Form W-8IMY) expires after 3 full calendar years or as otherwise provided by applicable law. An intermediary (other than a partnership) must provide IRS Form W-8IMY, revealing all required information, including its name, address, taxpayer identification number, the country under the laws of which it is created, and certification that it is not acting for its own account. A “qualified intermediary” must certify that it has provided, or will provide, a withholding statement as required under Treasury Regulations Section 1.1441-1(e)(5)(v), but need not disclose the identity of its account holders on its IRS Form W-8IMY, and may certify its account holders’ status without including each beneficial owner’s certification. A “non-qualified intermediary” must additionally certify that it has provided, or will provide, a withholding statement that is associated with the appropriate IRS Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its beneficial owners. The term “intermediary” means a person acting as a custodian, a broker, nominee or otherwise as an agent for the beneficial owner of a Regular Interest. A “qualified intermediary” is generally a foreign financial institution or clearing organization or a non-U.S. branch or office of a U.S. financial institution or clearing organization that is a party to a withholding agreement with the IRS.
If such statement, or any other required statement, is not provided, 30% withholding will apply unless reduced or eliminated pursuant to an applicable tax treaty or unless the interest on the Regular Interest is effectively connected with the conduct of a trade or business within the United States by such Non-U.S. Person. In the latter case, such Non-U.S. Person will be subject to United States federal income tax at regular rates. Investors that are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Regular Interest.
A “U.S. Person” is 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. 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
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treated as U.S. Persons). The term “Non-U.S. Person” means a person other than a U.S. Person.
FATCA
Under the “Foreign Account Tax Compliance Act” (“FATCA”) provisions of the Hiring Incentives to Restore Employment Act, a 30% withholding tax is generally imposed on certain payments, including U.S.-source interest and, beginning on January 1, 2019, gross proceeds from the sale, exchange, redemption, receipt of principal on or other 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 at the rate of 24% on “reportable payments” (including interest distributions, original issue discount and, under certain circumstances, principal distributions) unless the Certificateholder is a U.S. Person and provides IRS Form W-9 with the correct taxpayer identification number; in the case of the Regular Interests, is a Non-U.S. Person and provides IRS Form W-8BEN or W-8BEN-E, as applicable, identifying the Non-U.S. Person and stating that the beneficial owner is not a U.S. Person; or can be treated as an exempt recipient within the meaning of Treasury Regulations Section 1.6049-4(c)(1)(ii). Any amounts to be withheld from distribution on the certificates would be refunded by the IRS or allowed as a credit against the Certificateholder’s federal income tax liability. Information reporting requirements may also apply regardless of whether withholding is required. Holders are urged to contact their own tax advisors regarding the application to them of backup withholding and information reporting.
Information Reporting
Holders who are individuals (and certain domestic entities that are formed or availed of for purposes of holding, directly or indirectly, “specified foreign financial assets”) may be subject to certain foreign financial asset reporting obligations with respect to their certificates held through a financial account maintained by a foreign financial institution if the aggregate value of their certificates and their other “specified foreign financial assets” exceeds $50,000. Significant penalties can apply if a holder fails to disclose its specified foreign financial assets. We urge you to consult your tax advisor with respect to this and other reporting obligations with respect to your certificates.
3.8% Medicare Tax on “Net Investment Income”
Certain non-corporate U.S. holders will be subject to an additional 3.8% tax on all or a portion of their “net investment income”, which may include the interest payments and any gain realized with respect to the certificates, to the extent of their net investment income that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married individual filing a separate return. The 3.8% Medicare tax is determined in a different manner than the regular income tax. U.S. holders should
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consult their tax advisors with respect to their consequences with respect to the 3.8% Medicare tax.
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 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.
These regulations also require that the certificate administrator 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 regulations and (ii) Certificateholders who do not hold their certificates through a middleman. The information must be provided to parties specified in clause (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 in clause (ii) on or before March 15 of the calendar year for which the statement is being furnished.
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE MANNER OF THEIR APPLICATION TO THE ISSUING ENTITY AND CERTIFICATEHOLDERS, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
Certain State and Local Tax Considerations
In addition to the federal income tax consequences described in “Material Federal Income Tax Considerations” above, purchasers of Offered Certificates should consider the state and local income tax consequences of the acquisition, ownership, and disposition of the Offered Certificates. State and local income tax law may differ substantially from the corresponding federal law, and this discussion does not purport to describe any aspect of the income tax laws of any state or locality.
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It is possible that one or more jurisdictions may attempt to tax nonresident holders of offered certificates solely by reason of the location in that jurisdiction of the depositor, the trustee, the certificate administrator, the sponsors, a related borrower or a mortgaged property or on some other basis, may require nonresident holders of certificates to file returns in such jurisdiction or may attempt to impose penalties for failure to file such returns; and it is possible that any such jurisdiction will ultimately succeed in collecting such taxes or penalties from nonresident holders of offered certificates. We cannot assure you that holders of offered certificates will not be subject to tax in any particular state, local or other taxing jurisdiction.
You should consult with your tax advisor with respect to the various state and local, and any other, tax consequences of an investment in the Offered Certificates.
Method of Distribution (Underwriter)
Subject to the terms and conditions set forth in an underwriting agreement (the “Underwriting Agreement”), among the depositor and the underwriters, the depositor has agreed to sell to the underwriters, and the underwriters have severally, but not jointly, agreed to purchase from the depositor the respective Certificate Balance or the Notional Amount, as applicable, of each class of Offered Certificates set forth below subject in each case to a variance of 5%.
Underwriter | Class A-1 | Class A-2 | Class A-SB | Class A-3 |
| Wells Fargo Securities, LLC | $ [_] | $ [_] | $ [_] | $ [_] |
| Barclays Capital Inc. | $ [_] | $ [_] | $ [_] | $ [_] |
| Academy Securities, Inc. | $ [_] | $ ] | $ [_] | $ [_] |
| Total | $ [_] | $ [_] | $ [_] | $ [_] |
Underwriter | Class A-4 | Class X-A | Class X-B | Class A-S |
| Wells Fargo Securities, LLC | $ [_] | $ [_] | $ [_] | $ [_] |
| Barclays Capital Inc. | $ [_] | $ [_] | $ [_] | $ [_] |
| Academy Securities, Inc. | $ [_] | $ [_] | $ [_] | $ [_] |
| Total | $ [_] | $ [_] | $ [_] | $ [_] |
Underwriter | Class B | Class C | ||
| Wells Fargo Securities, LLC | $ [_] | $ [_] | ||
| Barclays Capital Inc. | $ [_] | $ [_] | ||
| Academy Securities, Inc. | $ [_] | $ [_] | ||
| Total | $ [_] | $ [_] | ||
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.
Additionally, the parties to the PSA have severally agreed to indemnify the underwriters, and the underwriters have agreed to indemnify the depositor and controlling persons of the depositor, against certain liabilities, including liabilities under the Securities Act, and have agreed, if required, 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
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depositor from the sale of Offered Certificates will be approximately [__]% of the initial aggregate Certificate Balance of the Offered Certificates, plus accrued interest on the Offered Certificates from July 1, 2018, before deducting expenses payable by the depositor (such expenses estimated at $[__], excluding underwriting discounts and commissions). The underwriters may effect the transactions by selling the Offered Certificates to or through dealers, and the dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the underwriters. In connection with the purchase and sale of the Offered Certificates offered by this prospectus, the underwriters may be deemed to have received compensation from the depositor in the form of underwriting discounts.
We anticipate that the Offered Certificates will be sold primarily to institutional investors. Purchasers of Offered Certificates, including dealers, may, depending on the facts and circumstances of those purchases, be deemed to be “underwriters” within the meaning of the Securities Act in connection with reoffers and resales by them of Offered Certificates. If you purchase Offered Certificates, you should consult with your legal advisors in this regard prior to any reoffer or resale. The underwriters expect to make, but are not obligated to make, a secondary market in the Offered Certificates. See “Risk Factors—Other Risks Relating to the Certificates—The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline”.
Pursuant to Rule 15c6-1 under the Exchange Act as in effect on the date of this prospectus, trades in the secondary market generally are required to settle in three (3) business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Offered Certificates in the secondary market prior to such delivery should specify a longer settlement cycle, or should refrain from specifying a shorter settlement cycle, to the extent that failing to do so would result in a settlement date that is earlier than the date of delivery of such Offered Certificates.
The primary source of ongoing information available to investors concerning the Offered Certificates will be the monthly statements discussed under “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. We cannot assure you that any additional information regarding the Offered Certificates will be available through any other source. In addition, we are not aware of any source through which price information about the Offered Certificates will be generally available on an ongoing basis. The limited nature of that information regarding the Offered Certificates may adversely affect the liquidity of the Offered Certificates, even if a secondary market for the Offered Certificates becomes available.
Wells Fargo Securities, LLC, one of the underwriters, is an affiliate of Wells Fargo Bank, which is a sponsor, a mortgage loan seller, the holder of one of the 181 Fremont Street Companion Loans and one of the CoolSprings Galleria Companion Loans, the master servicer, the certificate administrator, the custodian and the certificate registrar under this securitization. Barclays Capital Inc., one of the underwriters, is an affiliate of Barclays, which is a sponsor and mortgage loan seller.
A 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 Wells Fargo Securities, LLC, which is one of the underwriters, a co-lead manager and joint bookrunner for this offering, and affiliates of Barclays Capital Inc., which is one of the underwriters, a co-lead manager and joint bookrunner. That direction will occur by means of the collective effect of the payment by the underwriters to the depositor, an affiliate of Wells Fargo Securities, LLC, of the purchase price for the Offered Certificates and the following payments:
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(1) the payment by the depositor to Wells Fargo Bank, an affiliate of Wells Fargo Securities, LLC, in that affiliate’s capacity as a mortgage loan seller, of the purchase price for the Mortgage Loans to be sold to the depositor by Wells Fargo Bank;
(2) the payment by the depositor to Barclays, an affiliate of Barclays Capital Inc., in that affiliate’s capacity as a mortgage loan seller, of the purchase price for the Mortgage Loans to be sold to the depositor by Barclays; and
(3) the payment by each of Rialto Mortgage and C-III CM or, in each case, an affiliate thereof, to Wells Fargo Bank, an affiliate of Wells Fargo Securities, LLC, in Wells Fargo Bank’s capacity as the purchaser under a repurchase agreement with the subject mortgage loan seller or an affiliate thereof, of the repurchase price for the Mortgage Loans to be repurchased by the subject mortgage loan seller, or an affiliate thereof, under that facility prior to or simultaneously with their sale to the depositor, which payment will be made using a portion of the purchase price to be paid by the depositor to the subject mortgage loan seller in connection with the sale of those Mortgage Loans to the depositor by the subject mortgage loan seller.
As a result of the circumstances described above in this paragraph and the prior paragraph, Wells Fargo Securities, LLC has a “conflict of interest” within the meaning of Rule 5121 of the consolidated rules of The Financial Industry Regulatory Authority, Inc. In addition, other circumstances exist that result in the underwriters or their affiliates having conflicts of interest, notwithstanding that such circumstances may not constitute a “conflict of interest” within the meaning of such Rule 5121. See “Risk Factors—Risks Related to Conflicts of Interest—Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests” and “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of the New York Stock Exchange, the Financial Industry Regulatory Authority (“FINRA”), the National Futures Association (“NFA”) and the Securities Investor Protection Corporation (“SIPC”), Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts.
Each underwriter has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any offered certificates to any retail investor in the EEA. For the purposes of this provision:
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A. The expression “retail investor” means a person who is one (or more) of the following:
a. A retail client as defined in point (11) of article 4(1) of MiFID II;
b. A customer within the meaning of the Insurance Mediation Directive, where that customer would not qualify as a professional client as defined in point (10) of article 4(1) of MiFID II; or
c. Not a qualified investor as defined in the Prospectus Directive.
B. The expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the offered certificates to be offered so as to enable an investor to decide to purchase or subscribe to the offered certificates.
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Each underwriter has represented and agreed that:
A. it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the 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 issuing entity or the depositor; and
B. it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the offered certificates in, from or otherwise involving the United Kingdom.
Incorporation of Certain Information by Reference
The disclosures filed as exhibits to the most recent Form ABS-EE filed on or prior to the date of the filing of this prospectus by or on behalf of the Depositor with respect to the Issuing Entity (file number 333-206677-25)—in accordance with Item 601(b)(102) and Item 601(b)(103) of Regulation S-K (17 C.F.R. §§ 601(b)(102) and 601(b)(103))—are hereby incorporated by reference into this prospectus.
All reports filed or caused to be filed by the depositor with respect to the issuing entity before the termination of this offering pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended, that relate to the Offered Certificates (other than Annual Reports on Form 10-K) will be deemed to be incorporated by reference into this prospectus, except that if a Non-Serviced PSA is entered into after termination of this offering, any Current Report on Form 8-K filed after termination of this offering that includes as an exhibit such Non-Serviced PSA will be deemed to be incorporated by reference into this prospectus.
The depositor will provide or cause to be provided without charge to each person to whom this prospectus is delivered in connection with this offering (including beneficial owners of the Offered Certificates), upon written or oral request of that person, a copy of any or all documents or reports incorporated in this prospectus by reference, in each case to the extent the documents or reports relate to the Offered Certificates, other than the exhibits to those documents (unless the exhibits are specifically incorporated by reference in those documents). Requests to the depositor should be directed in writing to its principal executive offices at 301 South College Street, Charlotte, North Carolina 28208, or by telephone at (704) 374-6161.
Where You Can Find More Information
The depositor has filed a Registration Statement on Form SF-3 (SEC File No. 333-206677) (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, Form ABS-EE and any amendments to these reports may be read and copied at the Public Reference Section of the SEC, 100 F Street N.W., Washington, D.C. 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site at “http://www.sec.gov” at which you can view and download copies of reports, proxy and information statements and other information filed or furnished electronically through the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The SEC maintains
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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 engaged in any business activities or have any assets or obligations prior to the issuance of the Offered Certificates. Accordingly, no financial statements with respect to the issuing entity are included in this prospectus.
The depositor has determined that its financial statements will not be material to the offering of the Offered Certificates.
Certain ERISA Considerations
General
The Employee Retirement Income Security Act of 1974, as amended, or ERISA, and Code Section 4975 impose certain requirements on retirement plans, and on certain other employee benefit plans and arrangements, including individual retirement accounts and annuities, Keogh plans, collective investment funds, insurance company separate accounts and some insurance company general accounts in which those plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA or Code Section 4975 (all of which are referred to as “Plans”), and on persons who are fiduciaries with respect to Plans, in connection with the investment of Plan assets. Certain employee benefit plans, such as governmental plans (as defined in ERISA Section 3(32)), and, if no election has been made under Code Section 410(d), church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements. However, those plans may be subject to the provisions of other applicable federal, state or local law (“Similar Law”) materially similar to the foregoing provisions of ERISA or the Code. Moreover, those plans, if qualified and exempt from taxation under Code Sections 401(a) and 501(a), are subject to the prohibited transaction rules set forth in Code Section 503.
ERISA generally imposes on Plan fiduciaries certain general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan’s investments be made in accordance with the documents governing the Plan. In addition, ERISA and the Code prohibit a broad range of transactions involving assets of a Plan and persons (“Parties in Interest”) who have certain specified relationships to the Plan, unless a statutory, regulatory or administrative exemption is available. Certain Parties in Interest that participate in a prohibited transaction may be subject to an excise tax imposed pursuant to Code Section 4975, unless a statutory, regulatory or administrative exemption is available. These prohibited transactions generally are set forth in Section 406 of ERISA and Code Section 4975. Special caution should be exercised before the assets of a Plan are used to purchase an Offered Certificate if, with respect to those assets, the depositor, any servicer or the trustee or any of their affiliates, either: (a) has investment discretion with respect to the investment of those assets of that Plan; or (b) has authority or responsibility
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to give, or regularly gives, investment advice with respect to those assets for a fee and pursuant to an agreement or understanding that the advice will serve as a primary basis for investment decisions with respect to those assets and that the advice will be based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to the Plan.
Before purchasing any Offered Certificates with Plan assets, a Plan fiduciary should consult with its counsel and determine whether there exists any prohibition to that purchase under the requirements of ERISA or Code Section 4975, whether any prohibited transaction class exemption or any individual administrative prohibited transaction exemption (as described below) applies, including whether the appropriate conditions set forth in those exemptions would be met, or whether any statutory prohibited transaction exemption is applicable. Fiduciaries of plans subject to a Similar Law should consider the need for, and the availability of, an exemption under such applicable Similar Law.
Persons who have an ongoing relationship with Teachers’ Retirement System of the State of Illinois, which is a governmental plan, should note that such plan owns an equity interest in the borrower under the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Westport Self Storage Portfolio, representing approximately 7.3% of the Initial Pool Balance. Such persons should consult with counsel regarding whether this relationship would affect their ability to purchase or hold Offered Certificates
Plan Asset Regulations
A Plan’s investment in Offered Certificates may cause the assets of the issuing entity to be deemed Plan assets. Section 2510.3-101 of the regulations of the United States Department of Labor (“DOL”), as modified by Section 3(42) of ERISA, provides that when a Plan acquires an equity interest in an entity, the Plan’s assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless certain exceptions not applicable to this discussion apply, or unless the equity participation in the entity by “benefit plan investors” (that is, Plans and entities whose underlying assets include plan assets) is not “significant”. For this purpose, in general, equity participation in an entity will be “significant” on any date if, immediately after the most recent acquisition of any certificate, 25% or more of any class of certificates is held by benefit plan investors.
In general, any person who has discretionary authority or control respecting the management or disposition of Plan assets, and any person who provides investment advice with respect to those assets for a fee, is a fiduciary of the investing Plan. If the assets of the issuing entity constitute Plan assets, then any party exercising management or discretionary control regarding those assets, such as the master servicer, the special servicer or any sub-servicer, may be deemed to be a Plan “fiduciary” with respect to the investing Plan, and thus subject to the fiduciary responsibility provisions and prohibited transaction provisions of ERISA and Code Section 4975. In addition, if the assets of the issuing entity constitute Plan assets, the purchase of Offered Certificates by a Plan, as well as the operation of the issuing entity, may constitute or involve a prohibited transaction under ERISA or the Code.
Administrative Exemptions
The U.S. Department of Labor has issued to the predecessor of Wells Fargo Securities, LLC an individual prohibited transaction exemption, PTE 96-22, 61 Fed. Reg. 14,828 (April 3, 1996), as amended by PTE 97-34, 62 Fed. Reg. 39,021 (July 21, 1997), PTE 2000-58, 65 Fed. Reg. 67,765 (November 13, 2000), PTE 2002-41, 67 Fed. Reg. 54,487
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(August 22, 2002), PTE 2007-05, 72 Fed. Reg. 13,130 (March 20, 2007) and PTE 2013-08, 78 Fed. Reg. 41,090 (July 9, 2013) (the “Exemption”). The Exemption generally exempts from the application of the prohibited transaction provisions of Sections 406 and 407 of ERISA, and the excise taxes imposed on prohibited transactions pursuant to Code Sections 4975(a) and (b), certain transactions, among others, relating to the servicing and operation of pools of mortgage loans, such as the pool of mortgage loans held by the issuing entity, and the purchase, sale and holding of mortgage pass-through certificates, such as the Offered Certificates, underwritten by Wells Fargo Securities, LLC, provided that certain conditions set forth in the Exemption are satisfied. The depositor expects that the Exemption generally will apply to the Offered Certificates.
The Exemption sets forth five general conditions that must be satisfied for a transaction involving the purchase, sale and holding of the Offered Certificates to be eligible for exemptive relief. First, the acquisition of the Offered Certificates by a Plan must be on terms (including the price paid for the Offered Certificates) that are at least as favorable to the Plan as they would be in an arm’s-length transaction with an unrelated party. Second, the Offered Certificates at the time of acquisition by the Plan must be rated in one of the four highest generic rating categories by at least one NRSRO that meets the requirements of the Exemption (an “Exemption Rating Agency”). Third, the trustee cannot be an affiliate of any other member of the Restricted Group other than an underwriter. The “Restricted Group” consists of any underwriter, the depositor, the trustee, the master servicer, the special servicer, any sub-servicer, any entity that provides insurance or other credit support to the issuing entity and any borrower with respect to mortgage loans constituting more than 5% of the aggregate unamortized principal balance of the mortgage loans as of the date of initial issuance of the Offered Certificates, and any affiliate of any of the foregoing entities. Fourth, the sum of all payments made to and retained by the underwriters must represent not more than reasonable compensation for underwriting the Offered Certificates, the sum of all payments made to and retained by the depositor pursuant to the assignment of the mortgage loans to the issuing entity must represent not more than the fair market value of the mortgage loans and the sum of all payments made to and retained by the master servicer, the special servicer and any sub-servicer must represent not more than reasonable compensation for that person’s services under the PSA and reimbursement of the person’s reasonable expenses in connection therewith. Fifth, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D under the Securities Act.
It is a condition of the issuance of the Offered Certificates that they have the ratings described above required by the Exemption and the depositor believes that each of the Rating Agencies qualifies as an Exemption Rating Agency. Consequently, the second general condition set forth above will be satisfied with respect to the Offered Certificates as of the Closing Date. As of the Closing Date, the third general condition set forth above will be satisfied with respect to the Offered Certificates. In addition, the depositor believes that the fourth general condition set forth above will be satisfied with respect to the Offered Certificates. A fiduciary of a Plan contemplating purchasing an Offered Certificate in the secondary market must make its own determination that, at the time of purchase, the Offered Certificates continue to satisfy the second general condition set forth above. A fiduciary of a Plan contemplating purchasing an Offered Certificate, whether in the initial issuance of the Offered Certificates or in the secondary market, must make its own determination that the first and fifth general conditions set forth above will be satisfied with respect to the related Offered Certificate.
The Exemption also requires that the issuing entity meet the following requirements: (1) the issuing entity must consist solely of assets of the type that have been included in other investment pools; (2) certificates in those other investment pools must have been
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rated in one of the four highest categories by at least one of the Exemption Rating Agencies for at least one year prior to the Plan’s acquisition of Offered Certificates; and (3) certificates in those other investment pools must have been purchased by investors other than Plans for at least one year prior to any Plan’s acquisition of Offered Certificates.
The depositor believes that the conditions to the applicability of the Exemption will generally be met with respect to the Offered Certificates, other than those conditions which are dependent on facts unknown to the depositor or which it cannot control, such as those relating to the circumstances of the Plan purchaser or the Plan fiduciary making the decision to purchase any such Offered Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Code Sections 4975(a) and (b) by reason of Code Sections 4975(c)(1)(A) through (D)) in connection with (1) the direct or indirect sale, exchange or transfer of Offered Certificates in the initial issuance of certificates between the depositor or the underwriters and a Plan when the depositor, any of the underwriters, the trustee, the master servicer, the special servicer, a sub-servicer or a borrower is a party in interest with respect to the investing Plan, (2) the direct or indirect acquisition or disposition in the secondary market of the Offered Certificates by a Plan and (3) the holding of Offered Certificates by a Plan. However, no exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of an Offered Certificate on behalf of an “Excluded Plan” by any person who has discretionary authority or renders investment advice with respect to the assets of the Excluded Plan. For purposes of this prospectus, an “Excluded Plan” is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Code Section 4975(c)(1)(E) in connection with (1) the direct or indirect sale, exchange or transfer of Offered Certificates in the initial issuance of certificates between the depositor or the underwriters and a Plan when the person who has discretionary authority or renders investment advice with respect to the investment of Plan assets in those certificates is (a) a borrower with respect to 5% or less of the fair market value of the mortgage loans or (b) an affiliate of that person, (2) the direct or indirect acquisition or disposition in the secondary market of Offered Certificates by a Plan and (3) the holding of Offered Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Code Sections 4975(a) and (b) by reason of Code Section 4975(c) for transactions in connection with the servicing, management and operation of the pool of mortgage loans.
A fiduciary of a Plan should consult with its counsel with respect to the applicability of the Exemption. The fiduciary of a plan not subject to ERISA or Code Section 4975, such as a governmental plan, should determine the need for and availability of exemptive relief under applicable Similar Law. A purchaser of an Offered Certificate should be aware, however, that even if the conditions specified in one or more exemptions are satisfied, the scope of relief provided by an exemption may not cover all acts which might be construed as prohibited transactions.
In addition, each beneficial owner of an Offered Certificate or any interest therein that is a Plan, including any fiduciary purchasing Offered Certificates on behalf of a Plan
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(“Plan Fiduciary”), will be deemed to have represented by its acquisition of such Offered Certificates that:
(1) none of the depositor, any of the underwriters, the trustee, the master servicer, the special servicer, the certificate administrator, the operating advisor or the asset representations reviewer, or any of their respective affiliated entities (the “Transaction Parties”), has provided or will provide advice with respect to the acquisition of Offered Certificates by the Plan, other than to the Plan Fiduciary which is independent of the Transaction Parties, and the Plan Fiduciary either: (a) is a bank as defined in Section 202 of the Investment Advisers Act of 1940 (the “Advisers Act”), or similar institution that is regulated and supervised and subject to periodic examination by a State or Federal agency; (b) is an insurance carrier which is qualified under the laws of more than one state to perform the services of managing, acquiring or disposing of assets of a Plan; (c) is an investment adviser registered under the Advisers Act, or, if not registered an as investment adviser under the Advisers Act by reason of paragraph (1) of Section 203A of the Advisers Act, is registered as an investment adviser under the laws of the state in which it maintains its principal office and place of business; (d) is a broker-dealer registered under the Securities Exchange Act of 1934, as amended; or (e) has, and at all times that the Plan is invested in the Offered Certificates will have, total assets of at least U.S. $50,000,000 under its management or control (provided that this clause (e) will not be satisfied if the Plan Fiduciary is either (i) the owner or a relative of the owner of an investing individual retirement account or (ii) a participant or beneficiary of the Plan investing in the Offered Certificates in such capacity);
(2) the Plan Fiduciary is capable of evaluating investment risks independently, both in general and with respect to particular transactions and investment strategies, including the acquisition by the Plan of Offered Certificates;
(3) the Plan Fiduciary is a “fiduciary” with respect to the Plan within the meaning of Section 3(21) of ERISA, Section 4975 of the Code, or both, and is responsible for exercising independent judgment in evaluating the Plan’s acquisition of the Offered Certificates;
(4) none of the Transaction Parties has exercised any authority to cause the Plan to invest in the Offered Certificates or to negotiate the terms of the Plan’s investment in the Offered Certificates or receives a fee or other compensation from the Plan or Plan Fiduciary for the provision of investment advice in connection with the acquisition by the Plan of the Offered Certificates; and
(5) the Plan Fiduciary has been informed: (a) that none of the Transaction Parties is undertaking to provide impartial investment advice or to give advice in a fiduciary capacity, and that no such entity has given investment advice or otherwise made a recommendation, in connection with the Plan’s acquisition of the Offered Certificates; and (b) of the existence and nature of the Transaction Parties financial interests in the Plan’s acquisition of the Offered Certificates as described in this prospectus.
The above representations in this paragraph are intended to comply with the DOL’s Reg. Sections 29 C.F.R. 2510.3-21(a) and (c)(1) as promulgated on April 8, 2016 (81 Fed. Reg. 20,997). If these regulations are revoked, repealed or no longer effective, these representations will be deemed to be no longer in effect.
None of the Transaction Parties is undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with the acquisition of any Offered Certificates by any Plan.
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Insurance Company General Accounts
Sections I and III of Prohibited Transaction Class Exemption (“PTCE”) 95-60 exempt from the application of the prohibited transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and Code Section 4975 transactions in connection with the acquisition of a security (such as a certificate issued by the issuing entity) as well as the servicing, management and operation of a trust (such as the issuing entity) in which an insurance company general account has an interest as a result of its acquisition of certificates issued by the issuing entity, provided that certain conditions are satisfied. If these conditions are met, insurance company general accounts investing assets that are treated as assets of Plans would be allowed to purchase certain classes of certificates which do not meet the ratings requirements of the Exemption. All other conditions of the Exemption would have to be satisfied in order for PTCE 95-60 to be available. Before purchasing any class of Offered Certificates, an insurance company general account seeking to rely on Sections I and III of PTCE 95-60 should itself confirm that all applicable conditions and other requirements have been satisfied.
Section 401(c) of ERISA provides certain exemptive relief from the provisions of Part 4 of Title I of ERISA and Code Section 4975, including the prohibited transaction restrictions imposed by ERISA and the related excise taxes imposed by the Code, for transactions involving an insurance company general account. Pursuant to Section 401(c) of ERISA, the DOL issued regulations (“401(c) Regulations”), generally effective July 5, 2001, to provide guidance for the purpose of determining, in cases where insurance policies supported by an insurance company’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets constitute Plan assets. Any assets of an insurance company general account which support insurance policies issued to a Plan after December 31, 1998 or issued to Plans on or before December 31, 1998 for which the insurance company does not comply with the 401(c) Regulations may be treated as Plan assets. In addition, because Section 401(c) of ERISA does not relate to insurance company separate accounts, separate account assets are still generally treated as Plan assets of any Plan invested in that separate account. Insurance companies contemplating the investment of general account assets in the Offered Certificates should consult with their counsel with respect to the applicability of Section 401(c) of ERISA.
Due to the complexity of these rules and the penalties imposed upon persons involved in prohibited transactions, it is particularly important that potential investors who are Plan fiduciaries or who are investing Plan assets consult with their counsel regarding the consequences under ERISA and the Code of their acquisition and ownership of certificates.
THE SALE OF OFFERED CERTIFICATES TO A PLAN IS IN NO RESPECT A REPRESENTATION BY THE DEPOSITOR OR ANY OF THE UNDERWRITERS THAT THIS INVESTMENT MEETS ANY RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN.
Legal Investment
None of the classes of Offered Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”). Generally, the only classes of Offered Certificates which will qualify as “mortgage related securities” will be those that (1) are rated in one of the two highest rating categories by at least one NRSRO; and (2) are part of a series evidencing interests in
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a trust consisting of loans originated by certain types of originators specified in SMMEA and secured by first liens on real estate.
Although Section 939(e) of the Dodd-Frank Act amended SMMEA, effective July 21, 2012, so as to require the SEC to establish creditworthiness standards by that date in substitution for the foregoing ratings test, the SEC has neither proposed nor adopted a rule establishing new creditworthiness standards for purposes of SMMEA as of the date of this prospectus. However, the SEC has issued a transitional interpretation (Release No. 34-67448 (effective July 20, 2012)), which provides that, until such time as final rules establishing new standards of creditworthiness become effective, the standard of creditworthiness for purposes of the definition of the term “mortgage related security” is a security that is rated in one of the two highest rating categories by at least one NRSRO. Depending on the standards of creditworthiness that are ultimately established by the SEC, it is possible that certain classes of Offered Certificates specified to be “mortgage related securities” for purposes of SMMEA may no longer qualify as such as of the time such new standards are effective.
The appropriate characterization of the Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to those restrictions to purchase the Offered Certificates, are subject to significant interpretive uncertainties. We make no representation as to the proper characterization of the Offered Certificates for legal investment, financial institution regulatory, or other purposes, or as to the ability of particular investors to purchase any Offered Certificates under applicable legal investment restrictions. Further, any ratings downgrade of a class of Offered Certificates by an NRSRO to less than an “investment grade” rating (i.e., lower than the top four rating categories) may adversely affect the ability of an investor to purchase or retain, or otherwise impact the regulatory characteristics of, that class. The uncertainties described above (and any unfavorable future determinations concerning the legal investment or financial institution regulatory characteristics of the Offered Certificates) may adversely affect the liquidity and market value of the Offered Certificates.
Accordingly, if your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, you should consult with your own legal advisors in determining whether and to what extent the Offered Certificates constitute legal investments or are subject to investment, capital, or other regulatory restrictions.
The issuing entity will not be registered under the Investment Company Act of 1940, as amended. The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended contained in Section 3(c)(5) of the Investment Company Act of 1940, as amended, or Rule 3a-7 under the Investment Company Act of 1940, as amended, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act.
Legal Matters
The validity of the Offered Certificates and certain federal income tax matters will be passed upon for the depositor by Sidley Austin llp, New York, New York, and certain other legal matters will be passed upon for the underwriters by Cadwalader, Wickersham & Taft LLP, Charlotte, North Carolina.
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Ratings
It is a condition to their issuance that the Offered Certificates (other than the Class X-B, Class B and Class C certificates) receive investment grade credit ratings from the three (3) Rating Agencies engaged by the depositor to rate the Offered Certificates, and it is a condition to their issuance that the Class X-B, Class B and Class C certificates receive investment grade credit ratings from the two (2) of the Rating Agencies engaged by the depositor to rate such Offered Certificates.
We are not obligated to maintain any particular rating with respect to any class of Offered Certificates. Changes affecting the Mortgaged Properties, the parties to the PSA or another person may have an adverse effect on the ratings of the Offered Certificates, and thus on the liquidity, market value and regulatory characteristics of the Offered Certificates, although such adverse changes would not necessarily be an event of default under the related Mortgage Loan.
The ratings address the likelihood of full and timely receipt by the Certificateholders of all distributions of interest at the applicable Pass-Through Rate on the Offered Certificates to which they are entitled on each Distribution Date and the ultimate payment in full of the Certificate Balance of each class of Offered Certificates on a date that it not later than the Rated Final Distribution Date with respect to such class of certificates. The Rated Final Distribution Date will be the Distribution Date in June 2051. See “Yield and Maturity Considerations” and “Pooling and Servicing Agreement—Advances”. Any ratings of each Offered Certificates should be evaluated independently from similar ratings on other types of securities.
The ratings are not a recommendation to buy, sell or hold securities, a measure of asset value or an indication of the suitability of an investment, and may be subject to revision or withdrawal at any time by any Rating Agency. In addition, these ratings do not address: (a) the likelihood, timing, or frequency of prepayments (both voluntary and involuntary) and their impact on interest payments or the degree to which such prepayments might differ from those originally anticipated, (b) the possibility that a Certificateholder might suffer a lower than anticipated yield, (c) the likelihood of receipt of Yield Maintenance Charges, prepayment charges, Prepayment Premiums, prepayment fees or penalties, default interest or post-anticipated repayment date additional interest, (d) the likelihood of experiencing any Prepayment Interest Shortfalls, an assessment of whether or to what extent the interest payable on any class of Offered Certificates may be reduced in connection with any Prepayment Interest Shortfalls, or of receiving Compensating Interest Payments, (e) the tax treatment of the Offered Certificates or effect of taxes on the payments received, (f) the likelihood or willingness of the parties to the respective documents to meet their contractual obligations or the likelihood or willingness of any party or court to enforce, or hold enforceable, the documents in whole or in part, (g) an assessment of the yield to maturity that investors may experience, (h) the likelihood, timing or receipt of any payments of interest to the holders of the Offered Certificates resulting from an increase in the interest rate on any Mortgage Loan in connection with a Mortgage Loan modification, waiver or amendment, (i) Excess Interest, or (j) other non-credit risks, including, without limitation, market risks or liquidity.
The ratings take into consideration the credit quality of the underlying Mortgaged Properties and the Mortgage Loans, structural and legal aspects associated with the Offered Certificates, and the extent to which the payment stream of the Mortgage Loans is adequate to make payments required under the Offered Certificates. However, as noted above, the ratings do not represent an assessment of the likelihood, timing or frequency of principal prepayments (both voluntary and involuntary) by the borrowers, or the degree to which
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such prepayments might differ from those originally anticipated. In general, the ratings address credit risk and not prepayment risk. Ratings are forward-looking opinions about credit risk and express an agency’s opinion about the ability and willingness of an issuer of securities to meet its financial obligations in full and on time. Ratings are not indications of investment merit. In addition, the ratings do not represent an assessment of the yield to maturity that investors may experience or the possibility that investors might not fully recover their initial investment in the event of delinquencies or defaults or rapid prepayments on the Mortgage Loans (including both voluntary and involuntary prepayments) or the application of any Realized Losses. In the event that holders of such certificates do not fully recover their investment as a result of rapid principal prepayments on the Mortgage Loans, all amounts “due” to such holders will nevertheless have been paid, and such result is consistent with the ratings assigned to such certificates. As indicated in this prospectus, holders of the certificates with Notional Amounts are entitled only to payments of interest on the related Mortgage Loans. If the Mortgage Loans were to prepay in the initial month, with the result that the holders of the certificates with Notional Amounts receive only a single month’s interest and therefore, suffer a nearly complete loss of their investment, all amounts “due” to such holders will nevertheless have been paid, and such result is consistent with the rating received on those certificates. The Notional Amounts of the certificates with Notional Amounts on which interest is calculated may be reduced by the allocation of Realized Losses and prepayments, whether voluntary or involuntary. The ratings do not address the timing or magnitude of reductions of such Notional Amount, but only the obligation to pay interest timely on the Notional Amount, as so reduced from time to time. Therefore, the ratings of the certificates with Notional Amounts should be evaluated independently from similar ratings on other types of securities. See “Risk Factors—Other Risks Relating to the Certificates—Your Yield May Be Affected by Defaults, Prepayments and Other Factors” and “Yield and Maturity Considerations”.
Although the depositor will prepay fees for ongoing rating surveillance by certain of the Rating Agencies, the depositor has no obligation or ability to ensure that any Rating Agency performs ratings surveillance. In addition, a Rating Agency may cease ratings surveillance if the information furnished to that Rating Agency is insufficient to allow it to perform surveillance.
Any of the three NRSROs that we hired may issue unsolicited credit ratings on one or more classes of certificates that we did not hire it to rate. Additionally, other NRSROs that we have not engaged 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 those ratings assigned by the Rating Agencies. The issuance of unsolicited ratings of 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 six NRSROs. Based on preliminary feedback from those six NRSROs at that time, the depositor hired the Rating Agencies to rate the Offered Certificates and not the other three NRSROs due, in part, to those NRSROs’ initial subordination levels for the various classes of Offered Certificates. Had the depositor selected such other NRSROs to rate the Offered Certificates, we cannot assure you as to the ratings that such other NRSROs would ultimately have assigned to the Certificates. In the case of one NRSRO hired by the depositor, the depositor only requested ratings for certain classes of rated Offered Certificates, due in part to the final subordination levels provided by that NRSRO for the classes of Offered Certificates. If the depositor had selected that NRSRO to rate those other classes of Offered Certificates not rated by it, its ratings of those
533
other Offered Certificates may have been different, and potentially lower, than those ratings ultimately assigned to those certificates by the other two NRSROs hired by the depositor. 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.
534
Index of Defined Terms
| 1 | |
| 17g-5 Information Provider | 339 |
| 1986 Act | 508 |
| 1996 Act | 485 |
| 2 | |
| 2015 Budget Act | 517 |
| 3 | |
| 30/360 Basis | 194, 374 |
| 4 | |
| 401(c) Regulations | 530 |
| A | |
| AB Modified Loan | 387 |
| Accelerated Mezzanine Loan Lender | 331 |
| Acceptable Insurance Default | 390 |
| Access Lease | 163 |
| Access Lease Tenant | 163 |
| Acting General Counsel’s Letter | 141 |
| Actual/360 Basis | 194 |
| Actual/360 Loans | 363 |
| ADA | 487 |
| Additional Exclusions | 390 |
| Administrative Cost Rate | 315 |
| ADR | 148 |
| Advances | 359 |
| Advisers Act | 529 |
| Affected Investor | 122 |
| Affiliate Registration Statement | 1 |
| Affirmative Asset Review Vote | 430 |
| Annual Debt Service | 148 |
| Anticipated Repayment Date | 194 |
| Appraisal Institute | 235 |
| Appraisal Reduction Amount | 383 |
| Appraisal Reduction Event | 382 |
| Appraised Value | 148 |
| Appraised-Out Class | 388 |
| ARD | 205 |
| ARD Loan | 194 |
| ASR Consultation Process | 405 |
| Assessment of Compliance | 463 |
| Asset Representations Reviewer Asset Review Fee | 381 |
| Asset Representations Reviewer Fee | 381 |
| Asset Representations Reviewer Fee Rate | 381 |
| Asset Representations Reviewer Termination Event | 435 |
| Asset Representations Reviewer Upfront Fee | 381 |
| Asset Review | 431 |
| Asset Review Notice | 430 |
| Asset Review Quorum | 430 |
| Asset Review Report | 433 |
| Asset Review Report Summary | 433 |
| Asset Review Standard | 432 |
| Asset Review Trigger | 428 |
| Asset Review Vote Election | 429 |
| Asset Status Report | 402 |
| Assumed Certificate Coupon | 295 |
| Assumed Final Distribution Date | 323 |
| Assumed Scheduled Payment | 317 |
| Attestation Report | 463 |
| Available Funds | 307 |
| B | |
| Balloon or ARD LTV Ratio | 152 |
| Balloon or ARD Payment | 153 |
| BANK 2018-BNK12 PSA | 213 |
| Banking Act | 141 |
| Bankruptcy Code | 478 |
| Barclays | 244 |
| Barclays Data Tape | 246 |
| Barclays Mortgage Loans | 245 |
| Barclays Review Team | 246 |
| Barclays’ Qualification Criteria | 247 |
| Base Interest Fraction | 322 |
| Borrower Party | 331 |
| Borrower Party Affiliate | 331 |
| Breach Notice | 350 |
| BRRD | 124, 143 |
| C | |
| C(WUMP)O | 20 |
| Cash Flow Analysis | 149 |
| CERCLA | 484 |
| Certificate Administrator/Trustee Fee | 380 |
| Certificate Administrator/Trustee Fee Rate | 380 |
| Certificate Balance | 305 |
| Certificate Owners | 341 |
| Certificateholder | 332 |
| Certificateholder Quorum | 438 |
| Certificateholder Repurchase Request | 448 |
| Certifying Certificateholder | 344 |
| CGCMT 2018-C5 PSA | 213, 220 |
| C-III Capital Group | 259 |
535
| C-III CM | 259 |
| C-III CM Mortgage Loans | 259 |
| C-III MF | 260 |
| C-III Parent | 259 |
| City | 163 |
| Class A Certificates | 304 |
| Class A-SB Planned Principal Balance | 317 |
| Class X Certificates | 304 |
| Clearstream | 340 |
| Clearstream Participants | 342 |
| Closing Date | 147, 232 |
| CMBS | 56 |
| Code | 506 |
| Collateral Deficiency Amount | 387 |
| Collection Account | 363 |
| Collection Period | 308 |
| Communication Request | 344 |
| Companion Holder | 213 |
| Companion Holders | 213 |
| Companion Loans | 146 |
| Compensating Interest Payment | 324 |
| Constant Prepayment Rate | 496 |
| Constraining Level | 294 |
| Consultation Termination Event | 417 |
| Control Eligible Certificates | 412 |
| Control Note | 213 |
| Control Termination Event | 417 |
| Controlling Class | 411 |
| Controlling Class Certificateholder | 411 |
| Controlling Holder | 213 |
| Corrected Loan | 402 |
| Covenant | 176 |
| CPP | 496 |
| CPR | 496 |
| CPY | 496 |
| CRE Loans | 241 |
| CREC | 176 |
| Credit Risk Retention Rules | 289 |
| CREFC® | 328 |
| CREFC® Intellectual Property Royalty License Fee | 382 |
| CREFC® Intellectual Property Royalty License Fee Rate | 382 |
| CREFC® Reports | 328 |
| Cross-Over Date | 312 |
| Crown | 187 |
| Cumulative Appraisal Reduction Amount | 386 |
| Cure/Contest Period | 432 |
| Custodian | 273 |
| Cut-off Date | 145 |
| Cut-off Date Balance | 150 |
| Cut-off Date Loan-to-Value Ratio | 151 |
| Cut-off Date LTV Ratio | 151 |
| Cuyahoga County IRB Bonds | 212 |
| D | |
| D or @%(#) | 154 |
| D or GRTR of @% or YM(#) | 154 |
| D or YM(#) | 154 |
| D(#) | 154 |
| Dark Anchor Razing | 163 |
| DBRS | 433, 462 |
| Debt Service Coverage Ratio | 151 |
| Debt Yield Condition | 193 |
| Defaulted Loan | 408 |
| Defeasance Deposit | 198 |
| Defeasance Loans | 198 |
| Defeasance Lock-Out Period | 198 |
| Defeasance Option | 198 |
| Definitive Certificate | 340 |
| Delinquent Loan | 429 |
| Department | 176 |
| Depositories | 341 |
| Determination Date | 306 |
| Development Loan | 212 |
| Diligence File | 347 |
| Directing Certificateholder | 411 |
| Directing Certificateholder Asset Status Report Approval Process | 404 |
| Disclosable Special Servicer Fees | 379 |
| Discount Rate | 322 |
| Discount Yield | 294 |
| Dispute Resolution Consultation | 451 |
| Dispute Resolution Cut-off Date | 450 |
| Distribution Accounts | 363 |
| Distribution Date | 306 |
| Distribution Date Statement | 328 |
| Dodd-Frank Act | 124 |
| DOL | 526 |
| DSCR | 151 |
| DTC | 340 |
| DTC Participants | 341 |
| DTC Rules | 342 |
| Due Date | 193, 308 |
| E | |
| Easement Area | 187 |
| EDGAR | 524 |
| EEA | 18 |
| Effective Gross Income | 149 |
| EIL | 176 |
| Eligible Asset Representations Reviewer | 433 |
| Eligible Operating Advisor | 423 |
536
| Enforcing Party | 448 |
| Enforcing Servicer | 448 |
| ESA | 175 |
| Escrow/Reserve Mitigating Circumstances | 250 |
| EU Risk Retention and Due Diligence Requirements | 122 |
| EU Risk Retention Rules | 123 |
| Euroclear | 340 |
| Euroclear Operator | 343 |
| Euroclear Participants | 343 |
| Exception Schedules | 302 |
| Excess Interest | 306 |
| Excess Interest Distribution Account | 364 |
| Excess Modification Fee Amount | 376 |
| Excess Modification Fees | 374 |
| Excess Prepayment Interest Shortfall | 325 |
| Excluded Controlling Class Holder | 330 |
| Excluded Controlling Class Loan | 331 |
| Excluded Information | 332 |
| Excluded Loan | 332 |
| Excluded Plan | 528 |
| Excluded Special Servicer | 438 |
| Excluded Special Servicer Loan | 438 |
| Exemption | 527 |
| Exemption Rating Agency | 527 |
| F | |
| FATCA | 519 |
| FDIA | 140 |
| FDIC | 141 |
| FIEL | 21 |
| Final Asset Status Report | 404 |
| Final Dispute Resolution Election Notice | 451 |
| Financial Promotion Order | 19 |
| FINRA | 523 |
| FIRREA | 144 |
| Fitch | 277, 462 |
| Flats at East Bank AB Whole Loan | 220 |
| Flats at East Bank AB Whole Loan Controlling Holder | 229 |
| Flats at East Bank Control Appraisal Period | 229 |
| Flats at East Bank Controlling Subordinate Companion Loan Noteholder | 220 |
| Flats at East Bank Intercreditor Agreement | 220 |
| Flats at East Bank Major Decision | 225 |
| Flats at East Bank Mortgage Loan | 220 |
| Flats at East Bank Noteholders | 220 |
| Flats at East Bank Pari Passu Companion Loan | 220 |
| Flats at East Bank Purchase Notice | 230 |
| Flats at East Bank Senior Loan | 220 |
| Flats at East Bank Sequential Pay Event | 221 |
| Flats at East Bank Subordinate Companion Loan | 220 |
| Flats at East Bank Threshold Event Collateral | 230 |
| FPO Persons | 19 |
| FSMA | 18 |
| Fund | 290 |
| Funds | 284 |
| G | |
| GAAP | 289 |
| Gain-on-Sale Entitlement Amount | 308 |
| Gain-on-Sale Remittance Amount | 309 |
| Gain-on-Sale Reserve Account | 364 |
| Garn Act | 486 |
| GLA | 152 |
| Government Securities | 196 |
| Grantor Trust | 306 |
| GRTR of @% or YM(#) | 155 |
| H | |
| High Net Worth Companies, Unincorporated Associations, Etc. | 19 |
| Holdco | 290 |
| Horizontal Risk Retention Certificates | 289, 304 |
| Horizontal Risk Retention Percentage | 289 |
| I | |
| Impermissible Risk Retention Affiliate | 441 |
| Impermissible RP Affiliate | 440 |
| Income Tax Regulations | 506 |
| Indirect Participants | 341 |
| Individual Property | 200 |
| Initial Delivery Date | 402 |
| Initial Pool Balance | 145 |
| Initial Rate | 194 |
| Initial Requesting Certificateholder | 448 |
| In-Place Cash Management | 152 |
| Insolvency Act | 141 |
| Insurance and Condemnation Proceeds | 363 |
| Insurance Mediation Directive | 18 |
| Intercreditor Agreement | 213 |
| Interest Accrual Amount | 315 |
| Interest Accrual Period | 315 |
| Interest Distribution Amount | 315 |
537
| Interest Reserve Account | 363 |
| Interest Shortfall | 315 |
| Interested Person | 410 |
| Interest-Only Certificates | 292 |
| Interest-Only Expected Price | 298 |
| Interpolated Yield | 293, 297 |
| Investor Certification | 332 |
| IORPS | 123 |
| K | |
| KBRA | 433 |
| L | |
| L(#) | 154 |
| Lennar | 284 |
| Liquidation Fee | 376 |
| Liquidation Fee Rate | 376 |
| Liquidation Proceeds | 363 |
| LNR Partners | 279 |
| Loan Per Unit | 152 |
| Lock-out Period | 196 |
| Loss of Value Payment | 351 |
| Lower-Tier Regular Interests | 506 |
| Lower-Tier REMIC | 306, 506 |
| LTV Ratio | 150 |
| LTV Ratio at Maturity or Anticipated Repayment Date | 152 |
| LTV Ratio at Maturity or ARD | 152 |
| M | |
| MAI | 353 |
| Major Decision | 412 |
| Major Decision Reporting Package | 412 |
| MAS | 20 |
| Master Servicer Decision | 393 |
| Material Defect | 349 |
| Maturity Date Balloon or ARD Payment | 153 |
| MiFID II | 18 |
| MLPA | 345 |
| Modification Fees | 374 |
| Moody’s | 277, 462 |
| Morningstar | 277 |
| Mortgage | 146 |
| Mortgage File | 345 |
| Mortgage Loans | 145 |
| Mortgage Note | 146 |
| Mortgage Pool | 145 |
| Mortgage Rate | 315 |
| Mortgaged Property | 146 |
| N | |
| Net Mortgage Rate | 314 |
| Net Operating Income | 153 |
| NFA | 523 |
| NI 33-105 | 22 |
| NOI Date | 153 |
| Non-Control Note | 213 |
| Non-Controlling Holder | 213 |
| Nonrecoverable Advance | 360 |
| Non-Serviced Certificate Administrator | 213 |
| non-serviced companion loan | 45 |
| Non-Serviced Companion Loan | 213 |
| non-serviced companion loans | 45 |
| Non-Serviced Directing Certificateholder | 213 |
| Non-Serviced Master Servicer | 214 |
| non-serviced mortgage loan | 45 |
| Non-Serviced Mortgage Loan | 214 |
| Non-Serviced Pari Passu Whole Loan | 214 |
| Non-Serviced PSA | 214 |
| Non-Serviced Special Servicer | 214 |
| Non-Serviced Subordinate Companion Loan | 214 |
| Non-Serviced Trustee | 214 |
| non-serviced whole loan | 45 |
| Non-Serviced Whole Loan | 214 |
| Non-U.S. Person | 519 |
| Notional Amount | 306 |
| NRA | 153 |
| NRSRO | 330 |
| NRSRO Certification | 333 |
| O | |
| O(#) | 154 |
| OCC | 232 |
| Occupancy As Of Date | 154 |
| Occupancy Rate | 153 |
| Offered Certificates | 304 |
| OID Regulations | 510 |
| OLA | 141 |
| Operating Advisor Annual Report | 421 |
| Operating Advisor Consultation Event | 302 |
| Operating Advisor Consulting Fee | 380 |
| Operating Advisor Expenses | 381 |
| Operating Advisor Fee | 380 |
| Operating Advisor Fee Rate | 380 |
| Operating Advisor Standard | 421 |
| Operating Advisor Termination Event | 425 |
| P | |
| P&I Advance | 358 |
538
| P&I Advance Date | 358 |
| PACE | 212 |
| Pads | 159 |
| Par Purchase Price | 408 |
| Pari Passu Companion Loans | 146 |
| Pari Passu Mortgage Loan | 215 |
| Park Bridge Financial | 287 |
| Park Bridge Lender Services | 287 |
| Participants | 340 |
| Parties in Interest | 525 |
| partnership representatives | 517 |
| Pass-Through Rate | 313 |
| Patriot Act | 488 |
| PCIS Persons | 19 |
| Percentage Interest | 307 |
| Periodic Payments | 307 |
| Permitted Investments | 307, 364 |
| Permitted Special Servicer/Affiliate Fees | 379 |
| PIPs | 177 |
| PL | 236 |
| Plan Fiduciary | 529 |
| Plans | 525 |
| PML | 236, 265 |
| PRC | 19 |
| Pre-2019 Securitizations | 123 |
| Preliminary Dispute Resolution Election Notice | 450 |
| Prepayment Assumption | 511 |
| Prepayment Interest Excess | 324 |
| Prepayment Interest Shortfall | 324 |
| Prepayment Premium | 323 |
| Prepayment Provisions | 154 |
| PRIIPS Regulation | 18 |
| Prime Finance | 290 |
| Prime Rate | 362 |
| Principal Balance Certificates | 304 |
| Principal Distribution Amount | 315 |
| Principal Shortfall | 317 |
| Privileged Information | 424 |
| Privileged Information Exception | 425 |
| Privileged Person | 330 |
| Professional Investors | 20 |
| Prohibited Prepayment | 325 |
| Promotion of Collective Investment Schemes Exemptions Order | 19 |
| Proposed Course of Action | 449 |
| Proposed Course of Action Notice | 449 |
| Prospectus | 20 |
| Prospectus Directive | 18 |
| PSA | 304 |
| PSA Party Repurchase Request | 448 |
| PTCE | 530 |
| Purchase Price | 351 |
| Q | |
| Qualification Criteria | 240, 258 |
| Qualified Investor | 18 |
| Qualified Replacement Special Servicer | 438 |
| Qualified Substitute Mortgage Loan | 352 |
| Qualifying CRE Loan Percentage | 289 |
| R | |
| RAC No-Response Scenario | 461 |
| Rated Final Distribution Date | 324 |
| Rating Agencies | 462 |
| Rating Agency Confirmation | 462 |
| RCM | 284 |
| REA | 67 |
| Realized Loss | 326 |
| REC | 175 |
| Record Date | 306 |
| Registration Statement | 524 |
| Regular Certificates | 304 |
| Regular Interestholder | 509 |
| Regular Interests | 506 |
| Regulation AB | 464 |
| Regulatory Agreement | 164, 192 |
| Reimbursement Rate | 362 |
| Related Proceeds | 361 |
| Release Date | 198 |
| Relevant Institutions | 143 |
| Relevant Member State | 18 |
| Relevant Persons | 19 |
| Relief Act | 488 |
| Remaining Term to Maturity or ARD | 155 |
| REMIC | 506 |
| REO Account | 364 |
| REO Loan | 318 |
| REO Property | 402 |
| Repurchase Request | 448 |
| Requesting Certificateholder | 451 |
| Requesting Holders | 388 |
| Requesting Investor | 344 |
| Requesting Party | 460 |
| Required Credit Risk Retention Percentage | 289 |
| Requirements | 488 |
| Residual Certificates | 304 |
| Resolution Authorities | 143 |
| Resolution Authority | 123 |
| Resolution Failure | 448 |
| Resolved | 449 |
| Restricted Group | 527 |
539
| Restricted Party | 425 |
| Retaining Sponsor | 289 |
| Review Materials | 430 |
| Revised Rate | 194 |
| RevPAR | 155 |
| Rialto | 284 |
| Rialto Mortgage | 251 |
| Rialto Mortgage Data Tape | 257 |
| Rialto Mortgage Loans | 252 |
| Rialto Mortgage Review Team | 257 |
| Risk Retention Affiliate | 424 |
| Risk Retention Affiliated | 424 |
| ROFO | 186 |
| ROFR | 186 |
| Rooms | 159 |
| Ross Expansion Space | 178 |
| Rule 15Ga-1 Reporting Period | 241 |
| Rule 17g-5 | 333 |
| S | |
| S&P | 277 |
| Scheduled Certificate Interest Payments | 296 |
| Scheduled Certificate Principal Payments | 292 |
| Scheduled Principal Distribution Amount | 316 |
| Securities Act | 463 |
| Securitization Accounts | 304, 364 |
| Securitization Regulation | 122 |
| SEL | 236 |
| Senior Certificates | 304 |
| Servicer Termination Event | 441 |
| Servicing Advances | 359 |
| Servicing Fee | 372 |
| Servicing Fee Rate | 372 |
| Servicing Shift PSA | 458 |
| Servicing Standard | 357 |
| SF | 155 |
| SFA | 20 |
| SFO | 20 |
| Similar Law | 525 |
| SIPC | 523 |
| SMMEA | 530 |
| Special Servicing Fee | 375 |
| Special Servicing Fee Rate | 375 |
| Specially Serviced Loans | 399 |
| Sq. Ft. | 155 |
| Square Feet | 155 |
| SRB | 143 |
| SSM | 143 |
| Startup Day | 507 |
| Stated Principal Balance | 317 |
| Structured Product | 20 |
| Structuring Assumptions | 496 |
| STWD | 279 |
| Subordinate Certificates | 304 |
| Subordinate Companion Loan | 215 |
| Subordinate Companion Loans | 146 |
| Subsequent Asset Status Report | 402 |
| Sub-Servicing Agreement | 358 |
| Swap-Priced Expected Price | 296 |
| Swap-Priced Principal Balance Certificates | 292 |
| T | |
| T-12 | 155 |
| Target Price | 295 |
| Tax Cuts and Jobs Act | 509 |
| Term to Maturity | 155 |
| Termination Purchase Amount | 465 |
| Terms and Conditions | 343 |
| Tests | 431 |
| Third-Party Purchaser | 289 |
| Title V | 487 |
| TMPs | 517 |
| Total Operating Expenses | 149 |
| Transaction Parties | 529 |
| TRIPRA | 88 |
| Trust | 271 |
| Trust REMICs | 506 |
| TTM | 155 |
| U | |
| U.S. Person | 518 |
| U/W DSCR | 151 |
| U/W Expenses | 155 |
| U/W NCF | 155 |
| U/W NCF Debt Yield | 158 |
| U/W NCF DSCR | 151 |
| U/W Net Cash Flow | 155 |
| U/W Net Operating Income | 158 |
| U/W NOI | 158 |
| U/W NOI Debt Yield | 158 |
| U/W NOI DSCR | 158 |
| U/W Revenues | 159 |
| UCC | 472 |
| UCITS | 123 |
| UK Bank | 142 |
| Underwriter Entities | 111 |
| Underwriting Agreement | 521 |
| Underwritten Debt Service Coverage Ratio | 151 |
| Underwritten Expenses | 155 |
| Underwritten NCF | 155 |
540
| Underwritten NCF Debt Yield | 158 |
| Underwritten Net Cash Flow | 155 |
| Underwritten Net Cash Flow Debt Service Coverage Ratio | 151 |
| Underwritten Net Operating Income | 158 |
| Underwritten Net Operating Income Debt Service Coverage Ratio | 158 |
| Underwritten NOI | 158 |
| Underwritten NOI Debt Yield | 158 |
| Underwritten Revenues | 159 |
| Units | 159 |
| Unscheduled Principal Distribution Amount | 316 |
| Unsolicited Information | 431 |
| Upper-Tier REMIC | 306, 506 |
| V | |
| Volcker Rule | 124 |
| Voting Rights | 339 |
| W | |
| WAC Rate | 314 |
| Wachovia Bank | 232 |
| Weighted Average Mortgage Rate | 159 |
| weighted averages | 159 |
| Wells Fargo Bank | 232 |
| Wells Fargo Bank Data Tape | 239 |
| Wells Fargo Bank Deal Team | 238 |
| Wells Fargo Bank Mortgage Loans | 235 |
| WFCM 2018-C44 PSA | 215 |
| Whole Loan | 146 |
| Withheld Amounts | 364 |
| Workout Fee | 375 |
| Workout Fee Rate | 375 |
| Workout-Delayed Reimbursement Amount | 362 |
| WTNA | 271 |
| WWTP | 167 |
| Y | |
| Yield Maintenance Charge | 323 |
| Yield-Priced Expected Price | 299 |
| Yield-Priced Principal Balance Certificates | 292 |
| YM(#) | 154 |
541
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ANNEX A-1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
AND MORTGAGED PROPERTIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | |||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Cross Collateralized and Cross Defaulted Loan Flag | Address | City | State | Zip Code | General Property Type | Specific Property Type | Year Built | Year Renovated | Number of Units(2) | Unit of Measure(2) |
| 1 | Village at Leesburg | WFB | 1600-1610, 1612, 1614, 1616 Village Market Boulevard Southeast; 101 Crosstrail Boulevard; 1490 Classic Path Way Southeast | Leesburg | VA | 20175 | Retail | Anchored | 2009 | 2018 | 546,107 | Sq. Ft. | |
| 2 | Westport Self Storage Portfolio | WFB | Various | Various | Various | Various | Self Storage | Self Storage | Various | Various | 851,164 | Sq. Ft. | |
| 2.01 | San Antonio/Boerne USSC | WFB | 25290-25306, 25370, 25298, 25300, 25518, 28730 IH 10 West | San Antonio/Boerne | TX | Various | Self Storage | Self Storage | 1984 | 2004 | 176,939 | Sq. Ft. | |
| 2.02 | Fort Worth USSC | WFB | 4772 Golden Triangle Boulevard | Fort Worth | TX | 76244 | Self Storage | Self Storage | 2001 | 2016 | 65,140 | Sq. Ft. | |
| 2.03 | Grissom USSC | WFB | 7539 and 7645 Grissom Road | San Antonio | TX | 78251 | Self Storage | Self Storage | 1987 | 2016 | 100,320 | Sq. Ft. | |
| 2.04 | Laredo USSC | WFB | 2155 South Laredo Street | San Antonio | TX | 78207 | Self Storage | Self Storage | 2000 | 2016 | 56,706 | Sq. Ft. | |
| 2.05 | Austin USSC | WFB | 201 West Stassney Lane | Austin | TX | 78745 | Self Storage | Self Storage | 1983 | 2016 | 62,402 | Sq. Ft. | |
| 2.06 | Tampa USSC | WFB | 1108 Skipper Road | Tampa | FL | 33613 | Self Storage | Self Storage | 1987 | 60,496 | Sq. Ft. | ||
| 2.07 | Harker Heights USSC | WFB | 700 Indian Trail | Harker Heights | TX | 76548 | Self Storage | Self Storage | 2002 | 2016 | 66,075 | Sq. Ft. | |
| 2.08 | Denton USSC | WFB | 1811 and 1815 Shady Oaks Drive | Denton | TX | 76205 | Self Storage | Self Storage | 1960 | 2016 | 61,533 | Sq. Ft. | |
| 2.09 | Floresville USSC | WFB | 512 10th Street and 1802 B Street | Floresville | TX | 78114 | Self Storage | Self Storage | 1986 | 2006 | 56,197 | Sq. Ft. | |
| 2.10 | Blanco USSC | WFB | 5149 Blanco Road | San Antonio | TX | 78216 | Self Storage | Self Storage | 1986 | 2016 | 51,205 | Sq. Ft. | |
| 2.11 | Houston Hinman USSC | WFB | 8909 Hinman Street | Houston | TX | 77061 | Self Storage | Self Storage | 1975 | 2016 | 52,020 | Sq. Ft. | |
| 2.12 | Ocala USSC | WFB | 2853 South Pine Avenue | Ocala | FL | 34471 | Self Storage | Self Storage | 1989 | 42,131 | Sq. Ft. | ||
| 3 | Parkway Center | CIIICM | 875 Greentree Road and 2, 4, 6, 7, 9, 10 Parkway Center Drive South | Pittsburgh | PA | 15220 | Office | Suburban | 1960 | 2017 | 588,913 | Sq. Ft. | |
| 4 | 1801 L Street | WFB | 1801 L Street | Sacramento | CA | 95811 | Multifamily | Low Rise | 2007 | 176 | Units | ||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | Various | Various | Various | Various | Various | Various | Various | Various | 263,629 | Sq. Ft. | |
| 5.01 | Walgreens - Yorktown | Barclays | 6608 George Washington Memorial Highway | Yorktown | VA | 23692 | Retail | Single Tenant | 2007 | 14,739 | Sq. Ft. | ||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 5501 Patrick Way | Birmingham | AL | 35235 | Retail | Single Tenant | 2017 | 55,000 | Sq. Ft. | ||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 510 Main Street | Belpre | OH | 45714 | Office | Medical | 2017 | 7,516 | Sq. Ft. | ||
| 5.04 | Tractor Supply - Hollywood | Barclays | 23788 Mervell Dean Road | Hollywood | MD | 20636 | Retail | Single Tenant | 2013 | 20,097 | Sq. Ft. | ||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 433 Centerville Turnpike South | Chesapeake | VA | 23322 | Retail | Single Tenant | 2012 | 19,097 | Sq. Ft. | ||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 9924 South Vincennes Avenue | Chicago | IL | 60643 | Office | Medical | 2017 | 9,396 | Sq. Ft. | ||
| 5.07 | Walgreens - Valrico | Barclays | 1011 Bloomingdale Avenue | Valrico | FL | 33596 | Retail | Single Tenant | 1997 | 15,930 | Sq. Ft. | ||
| 5.08 | Tractor Supply - Scott | Barclays | 650 I-10 North Frontage Road | Scott | LA | 70583 | Retail | Single Tenant | 2017 | 19,097 | Sq. Ft. | ||
| 5.09 | Dollar General - Harvey | Barclays | 3958 Westbank Expressway | Harvey | LA | 70058 | Retail | Single Tenant | 2013 | 12,406 | Sq. Ft. | ||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 7214 Calumet Avenue | Hammond | IN | 46324 | Office | Medical | 2008 | 6,834 | Sq. Ft. | ||
| 5.11 | Walgreens - Huber Heights | Barclays | 6495 Troy Pike | Huber Heights | OH | 45424 | Retail | Single Tenant | 1998 | 13,905 | Sq. Ft. | ||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 7550 East Main Street | Reynoldsburg | OH | 43609 | Retail | Single Tenant | 2017 | 7,489 | Sq. Ft. | ||
| 5.13 | Dollar General - Amherst | Barclays | 46505 Telegraph Road | Amherst | OH | 44001 | Retail | Single Tenant | 2017 | 9,026 | Sq. Ft. | ||
| 5.14 | Dollar General - Louisville | Barclays | 5700 Ravenna Avenue | Louisville | OH | 44641 | Retail | Single Tenant | 2017 | 9,026 | Sq. Ft. | ||
| 5.15 | Dollar General - Mandeville | Barclays | 69300 Highway 59 | Mandeville | LA | 70471 | Retail | Single Tenant | 2012 | 9,026 | Sq. Ft. | ||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 2100 South Douglas Highway | Gillette | WY | 82718 | Retail | Single Tenant | 1998 | 2017 | 7,000 | Sq. Ft. | |
| 5.17 | Napa Auto Parts - McHenry | Barclays | 1145 Adams Drive | McHenry | IL | 60051 | Retail | Single Tenant | 2006 | 7,000 | Sq. Ft. | ||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 6936 Maynardville Pike | Knoxville | TN | 37918 | Retail | Single Tenant | 1997 | 6,500 | Sq. Ft. | ||
| 5.19 | Dollar General - Warren | Barclays | 2841 Niles Road SE | Warren | OH | 44484 | Retail | Single Tenant | 2018 | 7,545 | Sq. Ft. | ||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 431 Exchange Drive | Crystal Lake | IL | 60614 | Retail | Single Tenant | 1992 | 7,000 | Sq. Ft. | ||
| 6 | Mission Center | WFB | 5333-5353 Mission Center Road; 7947 Mission Center Court | San Diego | CA | 92108 | Office | Suburban | 1973 | 2018 | 183,410 | Sq. Ft. | |
| 7 | Center Pointe Plaza II | Barclays | 1201-99 West Churchman’s Road | Newark | DE | 19713 | Retail | Anchored | 2006 | 187,900 | Sq. Ft. | ||
| 8 | Addison Ridge Apartments - Phase II | RMF | 1000 Antietam Creek Drive | Fayetteville | NC | 28314 | Multifamily | Garden | 2016 | 214 | Units | ||
| 9 | Citadel Self Storage | RMF | 3425 Old Conejo Road | Thousand Oaks | CA | 91320 | Self Storage | Self Storage | 2002 | 143,754 | Sq. Ft. | ||
| 10 | 181 Fremont Street | Barclays | 181 Fremont Street | San Francisco | CA | 94105 | Office | CBD | 2018 | 436,332 | Sq. Ft. | ||
| 11 | CoolSprings Galleria | WFB | 1800, 1910, 1914 and 1916 Galleria Boulevard | Franklin | TN | 37067 | Retail | Super Regional Mall | 1991 | 2017 | 640,176 | Sq. Ft. | |
| 12 | Pueblo MHC Portfolio | RMF | Various | Pueblo | CO | Various | Manufactured Housing Community | Manufactured Housing Community | Various | 697 | Pads | ||
| 12.01 | Sunset Country MHC | RMF | 5000 Red Creek Spring Drive | Pueblo | CO | 81005 | Manufactured Housing Community | Manufactured Housing Community | 1970 | 198 | Pads | ||
| 12.02 | Oakwood Estates MHC | RMF | 33550 East Highway 96 | Pueblo | CO | 81001 | Manufactured Housing Community | Manufactured Housing Community | 1974 | 339 | Pads | ||
| 12.03 | Oasis MHC | RMF | 2221 South Prairie Avenue | Pueblo | CO | 81005 | Manufactured Housing Community | Manufactured Housing Community | 1970 | 160 | Pads | ||
| 13 | Roseville Corporate Center | WFB | 2998 Douglas Boulevard | Roseville | CA | 95661 | Office | Suburban | 1999 | 109,234 | Sq. Ft. | ||
| 14 | Montclair East | RMF | 5391-5497 Moreno Drive | Montclair | CA | 91423 | Retail | Anchored | 1992 | 135,603 | Sq. Ft. | ||
| 15 | Embassy Suites Tucson, AZ | Barclays | 3110 East Skyline Drive | Tucson | AZ | 85718 | Hospitality | Select Service | 2007 | 2017 | 119 | Rooms | |
| 16 | Amcor Industrial Center | Barclays | 8865 Smith’s Mill Road North | New Albany | OH | 43054 | Industrial | Warehouse | 2012 | 201,810 | Sq. Ft. | ||
| 17 | Evans Self Storage Portfolio | Barclays | Various | Evans | GA | 30809 | Self Storage | Self Storage | Various | 205,710 | Sq. Ft. | ||
| 17.01 | Blanchard; Evans I | Barclays | 850 Blanchard Road; 4731 Washington Road | Evans | GA | 30809 | Self Storage | Self Storage | 2006; 1995 | 147,764 | Sq. Ft. | ||
| 17.02 | Evans II | Barclays | 4492 Washington Road | Evans | GA | 30809 | Self Storage | Self Storage | 2015 | 57,946 | Sq. Ft. | ||
| 18 | Flats at East Bank | RMF | 1055 Old River Road | Cleveland | OH | 44113 | Mixed Use | Multifamily/Retail | 2015 | 241 | Units | ||
| 19 | Tarheel MHC Portfolio | RMF | Various | Various | NC | Various | Manufactured Housing Community | Manufactured Housing Community | Various | 536 | Pads | ||
| 19.01 | Cedar Grove | RMF | 209 Pegg Farm Lane | Kernersville | NC | 27284 | Manufactured Housing Community | Manufactured Housing Community | 1965 | 136 | Pads | ||
| 19.02 | Vandemere | RMF | 474 Earl Road | Greenville | NC | 27834 | Manufactured Housing Community | Manufactured Housing Community | 1989 | 124 | Pads | ||
| 19.03 | Parkwood | RMF | 338 Barnes Road | Winston-Salem | NC | 27107 | Manufactured Housing Community | Manufactured Housing Community | 1965 | 100 | Pads | ||
| 19.04 | Colonial | RMF | 76 Morning Star Drive | New Bern | NC | 28562 | Manufactured Housing Community | Manufactured Housing Community | 1985 | 114 | Pads | ||
| 19.05 | Lambeth | RMF | 4630 South Main Street | Winston-Salem | NC | 27127 | Manufactured Housing Community | Manufactured Housing Community | 1940 | 62 | Pads | ||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 2500 136th Ave Court East | Sumner | WA | 98390 | Hospitality | Limited Service | 2008 | 2018 | 112 | Rooms | |
| 21 | 2900 McLane Road | WFB | 2900 McLane Road | Lysander | NY | 13027 | Industrial | Warehouse | 1989 | 2016 | 496,200 | Sq. Ft. | |
| 22 | Bond Street Fund 16 | WFB | Various | Various | Various | Various | Retail | Shadow Anchored | Various | 42,216 | Sq. Ft. | ||
| 22.01 | Smyrna | WFB | 479 and 481 Sam Ridley Parkway West | Smyrna | TN | 37167 | Retail | Shadow Anchored | 2008 | 14,693 | Sq. Ft. | ||
| 22.02 | Shops At Eastchase | WFB | 7700, 7706, 7712, 7720, 7726, 7732 and 7738 Eastchase Parkway | Montgomery | AL | 36117 | Retail | Shadow Anchored | 2014 | 16,003 | Sq. Ft. | ||
| 22.03 | 271 Indian Lake Boulevard | WFB | 271 Indian Lake Boulevard | Hendersonville | TN | 37075 | Retail | Shadow Anchored | 2014 | 11,520 | Sq. Ft. | ||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 1811 West Avenue J-12 | Lancaster | CA | 93534 | Hospitality | Limited Service | 2008 | 2017 | 94 | Rooms | |
| 24 | Medical Towers at Sawyer Ranch | Barclays | 13830 Sawyer Ranch Road | Dripping Springs | TX | 78620 | Office | Medical | 2015 | 37,879 | Sq. Ft. | ||
| 25 | Manito Shopping Center | Barclays | 830 East 29th Avenue | Spokane | WA | 99203 | Retail | Anchored | 1969 | 2015 | 126,862 | Sq. Ft. | |
| 26 | Securitas Office | CIIICM | 3800 Tabs Drive | Uniontown | OH | 44685 | Office | Suburban | 1982 | 2016 | 67,352 | Sq. Ft. | |
| 27 | 5800 North Course Office | CIIICM | 5800 North Course Drive | Houston | TX | 77072 | Office | Suburban | 2001 | 2016 | 78,450 | Sq. Ft. | |
| 28 | 63-37/27 108th Street | WFB | 63-27, 63-37 108th Street | Forest Hills | NY | 11375 | Retail | Anchored | 1950 | 2015 | 16,000 | Sq. Ft. | |
| 29 | Goldmine Self Storage | CIIICM | 18600, 18635 & 18678 Eagle Ridge Drive | Sonora | CA | 95370 | Self Storage | Self Storage | 2010 | 2017 | 105,340 | Sq. Ft. | |
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 11201 Davenport Street | Omaha | NE | 68154 | Hospitality | Limited Service | 2014 | 110 | Rooms | ||
| 31 | Shops at Cross Creek II | Barclays | 6420 FM 1463 Road | Fulshear | TX | 77494 | Retail | Shadow Anchored | 2016 | 22,112 | Sq. Ft. | ||
| 32 | RC Plaza | WFB | 8001-8015, 8019-8029, 8031, 8035, 8063-8067 and 8081 Archibald Avenue; 9712, 9724-9726 and 9754 Foothill Boulevard | Rancho Cucamonga | CA | 91730 | Retail | Unanchored | 1984 | 2012 | 37,239 | Sq. Ft. | |
| 33 | Nut Tree Shopping Center | WFB | 1640 & 1650 East Monte Vista Avenue | Vacaville | CA | 95688 | Retail | Unanchored | 2014 | 13,987 | Sq. Ft. | ||
| 34 | Affordable Storage Woodlands | CIIICM | 1626 Sawdust Road | The Woodlands | TX | 77380 | Self Storage | Self Storage | 1997 | 90,845 | Sq. Ft. | ||
| 35 | Citi Bank - Chicago | RMF | 9449 South Western Avenue | Chicago | IL | 60805 | Retail | Single Tenant | 1981 | 2006 | 7,200 | Sq. Ft. | |
| 36 | The Shops at Vacaville Crossings | WFB | 196 Nut Tree Parkway | Vacaville | CA | 95687 | Retail | Unanchored | 2006 | 15,513 | Sq. Ft. | ||
| 37 | Keyway Apartments | CIIICM | 123 Willow Spring Road | Dundalk | MD | 21222 | Multifamily | Garden | 1948 | 2014 | 63 | Units | |
| 38 | Steelbrook Plaza | CIIICM | 1650 Watertown Avenue | Waterbury | CT | 06708 | Retail | Anchored | 1987 | 2018 | 43,327 | Sq. Ft. | |
| 39 | Plaza at Mableton | CIIICM | 5345 Floyd Road | Mableton | GA | 30126 | Retail | Anchored | 1975 | 1998 | 63,367 | Sq. Ft. | |
| 40 | La Quinta Batavia | CIIICM | 8200 Park Road | Batavia | NY | 14020 | Hospitality | Limited Service | 2005 | 2015 | 51 | Rooms | |
| 41 | Shops at Waycross | CIIICM | 2275 Memorial Drive | Waycross | GA | 31501 | Retail | Shadow Anchored | 1985 | 2017 | 17,536 | Sq. Ft. | |
| 42 | Whispering Pines | CIIICM | 2323 Brunns Road | Sebring | FL | 33872 | Manufactured Housing Community | Manufactured Housing Community | 1971 | 2017 | 243 | Pads | |
| 43 | Rio Grande MHP | CIIICM | 2519 New York Avenue Northwest | Albuquerque | NM | 87104 | Manufactured Housing Community | Manufactured Housing Community | 1946 | 2018 | 86 | Pads | |
| 44 | 189 Court Street | WFB | 189 Court Street | Brooklyn | NY | 11201 | Mixed Use | Retail/Multifamily | 1931 | 2014 | 3,000 | Sq. Ft. | |
| 45 | Economy SS Portfolio | CIIICM | Various | Various | NC | Various | Self Storage | Self Storage | Various | 42,100 | Sq. Ft. | ||
| 45.01 | Economy SS Raleigh | CIIICM | 931 Trinity Road | Raleigh | NC | 27607 | Self Storage | Self Storage | 1998 | 25,900 | Sq. Ft. | ||
| 45.02 | Economy SS Clayton | CIIICM | 577 US Highway 42 West | Clayton | NC | 27520 | Self Storage | Self Storage | 1988 | 16,200 | Sq. Ft. | ||
| 46 | Security Storage | CIIICM | 1650 Barlow Street | Garfield | MI | 49686 | Mixed Use | Self Storage/Office | 1975 | 1990 | 54,382 | Sq. Ft. | |
| 47 | Juniper Hilltop MHP | CIIICM | 63900 North Highway 97 | Bend | OR | 97701 | Manufactured Housing Community | Manufactured Housing Community | 1961 | 2017 | 54 | Pads | |
| 48 | Winding Creek MHC | CIIICM | 12420 North Florida Avenue | Tampa | FL | 33612 | Manufactured Housing Community | Manufactured Housing Community | 1946 | 2017 | 69 | Pads | |
| 49 | Cape Canaveral MHP | CIIICM | 8515 North Atlantic Avenue | Cape Canaveral | FL | 32920 | Manufactured Housing Community | Manufactured Housing Community | 1958 | 45 | Pads | ||
A-1-1
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Cut-off Date Balance Per Unit/SF(6) | Original Balance ($) | Cut-off Date Balance ($) | % of Aggregate Cut-off Date Balance | Maturity Date or ARD Balloon Payment ($) | ARD Loan | Origination Date | First Pay Date | Last IO Pay Date | First P&I Pay Date | Maturity Date or Anticipated Repayment Date | ARD Loan Maturity Date | Gross Mortgage Rate | Trust Advisor Fee |
| 1 | Village at Leesburg | WFB | 240 | 65,250,000 | 65,250,000 | 9.9% | 59,963,248 | N | 3/9/2018 | 5/1/2018 | 4/1/2023 | 5/1/2023 | 4/1/2028 | 4.75800% | 0.00000% | |
| 2 | Westport Self Storage Portfolio | WFB | 57 | 48,300,000 | 48,300,000 | 7.3% | 46,031,153 | N | 6/8/2018 | 7/11/2018 | 6/11/2025 | 7/11/2025 | 6/11/2028 | 4.68000% | 0.00297% | |
| 2.01 | San Antonio/Boerne USSC | WFB | 9,437,217 | 9,437,217 | 1.4% | |||||||||||
| 2.02 | Fort Worth USSC | WFB | 5,407,616 | 5,407,616 | 0.8% | |||||||||||
| 2.03 | Grissom USSC | WFB | 5,054,009 | 5,054,009 | 0.8% | |||||||||||
| 2.04 | Laredo USSC | WFB | 4,662,017 | 4,662,017 | 0.7% | |||||||||||
| 2.05 | Austin USSC | WFB | 4,291,045 | 4,291,045 | 0.7% | |||||||||||
| 2.06 | Tampa USSC | WFB | 3,454,403 | 3,454,403 | 0.5% | |||||||||||
| 2.07 | Harker Heights USSC | WFB | 3,450,344 | 3,450,344 | 0.5% | |||||||||||
| 2.08 | Denton USSC | WFB | 3,356,378 | 3,356,378 | 0.5% | |||||||||||
| 2.09 | Floresville USSC | WFB | 3,306,223 | 3,306,223 | 0.5% | |||||||||||
| 2.10 | Blanco USSC | WFB | 2,933,616 | 2,933,616 | 0.4% | |||||||||||
| 2.11 | Houston Hinman USSC | WFB | 1,571,800 | 1,571,800 | 0.2% | |||||||||||
| 2.12 | Ocala USSC | WFB | 1,375,332 | 1,375,332 | 0.2% | |||||||||||
| 3 | Parkway Center | CIIICM | 72 | 42,560,000 | 42,560,000 | 6.5% | 37,759,302 | N | 6/8/2018 | 7/11/2018 | 6/11/2021 | 7/11/2021 | 6/11/2028 | 5.10000% | 0.00297% | |
| 4 | 1801 L Street | WFB | 215,909 | 38,000,000 | 38,000,000 | 5.8% | 38,000,000 | N | 6/13/2018 | 8/11/2018 | 7/11/2028 | 7/11/2028 | 4.84500% | 0.00297% | ||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | 143 | 37,795,000 | 37,795,000 | 5.7% | 37,795,000 | N | 4/9/2018 | 5/6/2018 | 4/6/2028 | 4/6/2028 | 4.27000% | 0.00297% | ||
| 5.01 | Walgreens - Yorktown | Barclays | 4,150,000 | 4,150,000 | 0.6% | |||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 4,000,000 | 4,000,000 | 0.6% | |||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 3,130,000 | 3,130,000 | 0.5% | |||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 2,875,000 | 2,875,000 | 0.4% | |||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 2,875,000 | 2,875,000 | 0.4% | |||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 2,800,000 | 2,800,000 | 0.4% | |||||||||||
| 5.07 | Walgreens - Valrico | Barclays | 2,700,000 | 2,700,000 | 0.4% | |||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | 2,265,000 | 2,265,000 | 0.3% | |||||||||||
| 5.09 | Dollar General - Harvey | Barclays | 1,640,286 | 1,640,286 | 0.2% | |||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 1,550,000 | 1,550,000 | 0.2% | |||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 1,479,420 | 1,479,420 | 0.2% | |||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 1,050,000 | 1,050,000 | 0.2% | |||||||||||
| 5.13 | Dollar General - Amherst | Barclays | 1,034,007 | 1,034,007 | 0.2% | |||||||||||
| 5.14 | Dollar General - Louisville | Barclays | 1,000,000 | 1,000,000 | 0.2% | |||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | 980,000 | 980,000 | 0.1% | |||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 929,781 | 929,781 | 0.1% | |||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 925,000 | 925,000 | 0.1% | |||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 900,000 | 900,000 | 0.1% | |||||||||||
| 5.19 | Dollar General - Warren | Barclays | 796,680 | 796,680 | 0.1% | |||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 714,825 | 714,825 | 0.1% | |||||||||||
| 6 | Mission Center | WFB | 162 | 29,750,000 | 29,750,000 | 4.5% | 27,123,479 | N | 5/29/2018 | 7/11/2018 | 6/11/2023 | 7/11/2023 | 6/11/2028 | 4.26500% | 0.00297% | |
| 7 | Center Pointe Plaza II | Barclays | 150 | 28,270,000 | 28,270,000 | 4.3% | 24,245,188 | N | 4/20/2018 | 6/6/2018 | 5/6/2020 | 6/6/2020 | 5/6/2028 | 4.65500% | 0.00297% | |
| 8 | Addison Ridge Apartments - Phase II | RMF | 116,822 | 25,000,000 | 25,000,000 | 3.8% | 22,755,158 | N | 5/16/2018 | 7/6/2018 | 6/6/2022 | 7/6/2022 | 6/6/2028 | 5.36000% | 0.00297% | |
| 9 | Citadel Self Storage | RMF | 174 | 25,000,000 | 25,000,000 | 3.8% | 22,404,717 | N | 5/18/2018 | 7/6/2018 | 6/6/2021 | 7/6/2021 | 6/6/2028 | 5.58000% | 0.00297% | |
| 10 | 181 Fremont Street | Barclays | 573 | 20,000,000 | 20,000,000 | 3.0% | 20,000,000 | Y | 3/29/2018 | 5/6/2018 | 4/6/2028 | 4/6/2028 | 4/6/2031 | 3.70860% | 0.00000% | |
| 11 | CoolSprings Galleria | WFB | 242 | 20,000,000 | 19,950,390 | 3.0% | 16,188,909 | N | 4/30/2018 | 6/11/2018 | 6/11/2018 | 5/11/2028 | 4.83900% | 0.00000% | ||
| 12 | Pueblo MHC Portfolio | RMF | 26,399 | 18,400,000 | 18,400,000 | 2.8% | 16,049,057 | N | 5/9/2018 | 6/6/2018 | 5/6/2020 | 6/6/2020 | 5/6/2028 | 5.32000% | 0.00297% | |
| 12.01 | Sunset Country MHC | RMF | 6,700,000 | 6,700,000 | 1.0% | |||||||||||
| 12.02 | Oakwood Estates MHC | RMF | 6,000,000 | 6,000,000 | 0.9% | |||||||||||
| 12.03 | Oasis MHC | RMF | 5,700,000 | 5,700,000 | 0.9% | |||||||||||
| 13 | Roseville Corporate Center | WFB | 146 | 16,000,000 | 16,000,000 | 2.4% | 16,000,000 | N | 6/1/2018 | 7/11/2018 | 6/11/2028 | 6/11/2028 | 4.71000% | 0.00297% | ||
| 14 | Montclair East | RMF | 108 | 14,700,000 | 14,700,000 | 2.2% | 14,700,000 | N | 6/13/2018 | 8/6/2018 | 7/6/2028 | 7/6/2028 | 5.12000% | 0.00297% | ||
| 15 | Embassy Suites Tucson, AZ | Barclays | 117,505 | 14,000,000 | 13,983,135 | 2.1% | 11,506,336 | N | 6/6/2018 | 7/6/2018 | 7/6/2018 | 6/6/2028 | 4.98600% | 0.00297% | ||
| 16 | Amcor Industrial Center | Barclays | 68 | 13,650,000 | 13,650,000 | 2.1% | 12,514,364 | Y | 6/1/2018 | 7/6/2018 | 6/6/2023 | 7/6/2023 | 6/6/2028 | 6/6/2030 | 4.60800% | 0.00297% |
| 17 | Evans Self Storage Portfolio | Barclays | 65 | 13,300,000 | 13,300,000 | 2.0% | 11,583,607 | N | 5/3/2018 | 6/6/2018 | 5/6/2020 | 6/6/2020 | 5/6/2028 | 5.26000% | 0.00297% | |
| 17.01 | Blanchard; Evans I | Barclays | 9,600,000 | 9,600,000 | 1.5% | |||||||||||
| 17.02 | Evans II | Barclays | 3,700,000 | 3,700,000 | 0.6% | |||||||||||
| 18 | Flats at East Bank | RMF | 298,755 | 13,000,000 | 13,000,000 | 2.0% | 13,000,000 | N | 5/9/2018 | 6/6/2018 | 5/6/2028 | 5/6/2028 | 5.08980% | 0.00000% | ||
| 19 | Tarheel MHC Portfolio | RMF | 23,321 | 12,500,000 | 12,500,000 | 1.9% | 12,500,000 | N | 5/31/2018 | 7/6/2018 | 6/6/2028 | 6/6/2028 | 4.98000% | 0.00297% | ||
| 19.01 | Cedar Grove | RMF | 3,600,000 | 3,600,000 | 0.5% | |||||||||||
| 19.02 | Vandemere | RMF | 2,500,000 | 2,500,000 | 0.4% | |||||||||||
| 19.03 | Parkwood | RMF | 2,400,000 | 2,400,000 | 0.4% | |||||||||||
| 19.04 | Colonial | RMF | 2,300,000 | 2,300,000 | 0.3% | |||||||||||
| 19.05 | Lambeth | RMF | 1,700,000 | 1,700,000 | 0.3% | |||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 99,785 | 11,200,000 | 11,175,865 | 1.7% | 9,283,242 | N | 4/25/2018 | 6/6/2018 | 6/6/2018 | 5/6/2028 | 5.24500% | 0.00297% | ||
| 21 | 2900 McLane Road | WFB | 21 | 10,500,000 | 10,487,006 | 1.6% | 8,588,275 | N | 5/30/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 4.84000% | 0.00297% | ||
| 22 | Bond Street Fund 16 | WFB | 247 | 10,434,600 | 10,434,600 | 1.6% | 9,337,324 | N | 4/25/2018 | 6/11/2018 | 11/11/2021 | 12/11/2021 | 5/11/2028 | 5.01000% | 0.00297% | |
| 22.01 | Smyrna | WFB | 4,309,600 | 4,309,600 | 0.7% | |||||||||||
| 22.02 | Shops At Eastchase | WFB | 3,080,000 | 3,080,000 | 0.5% | |||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 3,045,000 | 3,045,000 | 0.5% | |||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 100,942 | 9,500,000 | 9,488,585 | 1.4% | 7,811,450 | N | 5/22/2018 | 7/6/2018 | 7/6/2018 | 6/6/2028 | 5.00000% | 0.00297% | ||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 245 | 9,270,000 | 9,270,000 | 1.4% | 8,192,146 | N | 4/13/2018 | 6/6/2018 | 5/6/2021 | 6/6/2021 | 5/6/2028 | 4.91800% | 0.00297% | |
| 25 | Manito Shopping Center | Barclays | 71 | 9,000,000 | 9,000,000 | 1.4% | 7,735,475 | N | 5/21/2018 | 7/6/2018 | 6/6/2020 | 7/6/2020 | 6/6/2028 | 4.74000% | 0.00297% | |
| 26 | Securitas Office | CIIICM | 125 | 8,400,000 | 8,388,639 | 1.3% | 6,672,368 | N | 6/5/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 5.48000% | 0.00297% | ||
| 27 | 5800 North Course Office | CIIICM | 95 | 7,500,000 | 7,488,582 | 1.1% | 5,739,712 | N | 6/11/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 5.65000% | 0.00297% | ||
| 28 | 63-37/27 108th Street | WFB | 463 | 7,400,000 | 7,400,000 | 1.1% | 7,400,000 | N | 6/1/2018 | 7/11/2018 | 6/11/2028 | 6/11/2028 | 4.98000% | 0.00297% | ||
| 29 | Goldmine Self Storage | CIIICM | 66 | 7,000,000 | 7,000,000 | 1.1% | 6,139,207 | N | 6/1/2018 | 7/11/2018 | 6/11/2020 | 7/11/2020 | 6/11/2028 | 5.55000% | 0.00297% | |
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 63,557 | 7,000,000 | 6,991,281 | 1.1% | 5,718,847 | N | 5/24/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 4.80500% | 0.00297% | ||
| 31 | Shops at Cross Creek II | Barclays | 314 | 6,950,000 | 6,950,000 | 1.1% | 6,162,186 | N | 6/6/2018 | 7/6/2018 | 6/6/2021 | 7/6/2021 | 6/6/2028 | 5.07100% | 0.00297% | |
| 32 | RC Plaza | WFB | 171 | 6,366,750 | 6,366,750 | 1.0% | 6,366,750 | N | 4/25/2018 | 6/11/2018 | 5/11/2028 | 5/11/2028 | 5.05000% | 0.00297% | ||
| 33 | Nut Tree Shopping Center | WFB | 443 | 6,200,000 | 6,192,509 | 0.9% | 5,092,991 | N | 5/16/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 4.97000% | 0.00297% | ||
| 34 | Affordable Storage Woodlands | CIIICM | 64 | 5,850,000 | 5,850,000 | 0.9% | 5,191,302 | N | 4/9/2018 | 5/11/2018 | 4/11/2021 | 5/11/2021 | 4/11/2028 | 5.11000% | 0.00297% | |
| 35 | Citi Bank - Chicago | RMF | 722 | 5,200,000 | 5,200,000 | 0.8% | 5,014,760 | N | 3/1/2018 | 4/6/2018 | 3/6/2020 | 4/6/2020 | 3/6/2023 | 6.11000% | 0.00297% | |
| 36 | The Shops at Vacaville Crossings | WFB | 266 | 4,127,500 | 4,127,500 | 0.6% | 3,658,139 | N | 5/3/2018 | 6/11/2018 | 5/11/2021 | 6/11/2021 | 5/11/2028 | 5.05000% | 0.00297% | |
| 37 | Keyway Apartments | CIIICM | 64,944 | 4,100,000 | 4,091,470 | 0.6% | 3,416,124 | N | 4/30/2018 | 6/11/2018 | 6/11/2018 | 5/11/2028 | 5.41000% | 0.00297% | ||
| 38 | Steelbrook Plaza | CIIICM | 81 | 3,500,000 | 3,492,811 | 0.5% | 2,921,682 | N | 5/3/2018 | 6/11/2018 | 6/11/2018 | 5/11/2028 | 5.47000% | 0.00297% | ||
| 39 | Plaza at Mableton | CIIICM | 55 | 3,500,000 | 3,492,545 | 0.5% | 2,906,097 | N | 4/19/2018 | 6/11/2018 | 6/11/2018 | 5/11/2028 | 5.30000% | 0.00297% | ||
| 40 | La Quinta Batavia | CIIICM | 54,736 | 2,800,000 | 2,791,549 | 0.4% | 2,353,789 | N | 3/23/2018 | 5/11/2018 | 5/11/2018 | 4/11/2028 | 5.70000% | 0.00297% | ||
| 41 | Shops at Waycross | CIIICM | 148 | 2,590,000 | 2,590,000 | 0.4% | 2,243,316 | N | 3/28/2018 | 5/11/2018 | 4/11/2020 | 5/11/2020 | 4/11/2028 | 5.04000% | 0.00297% | |
| 42 | Whispering Pines | CIIICM | 10,288 | 2,500,000 | 2,500,000 | 0.4% | 2,298,483 | N | 12/28/2017 | 2/11/2018 | 1/11/2023 | 2/11/2023 | 1/11/2028 | 4.80000% | 0.00297% | |
| 43 | Rio Grande MHP | CIIICM | 29,038 | 2,500,000 | 2,497,299 | 0.4% | 2,093,203 | N | 5/21/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 5.57000% | 0.00297% | ||
| 44 | 189 Court Street | WFB | 700 | 2,100,000 | 2,100,000 | 0.3% | 2,100,000 | N | 5/11/2018 | 6/11/2018 | 5/11/2028 | 5/11/2028 | 5.16000% | 0.00297% | ||
| 45 | Economy SS Portfolio | CIIICM | 47 | 2,000,000 | 1,997,884 | 0.3% | 1,680,221 | N | 6/8/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 5.68000% | 0.00297% | ||
| 45.01 | Economy SS Raleigh | CIIICM | 1,291,000 | 1,289,634 | 0.2% | |||||||||||
| 45.02 | Economy SS Clayton | CIIICM | 709,000 | 708,250 | 0.1% | |||||||||||
| 46 | Security Storage | CIIICM | 35 | 1,900,000 | 1,896,408 | 0.3% | 1,604,596 | N | 4/24/2018 | 6/11/2018 | 6/11/2018 | 5/11/2028 | 5.85000% | 0.00297% | ||
| 47 | Juniper Hilltop MHP | CIIICM | 32,407 | 1,750,000 | 1,750,000 | 0.3% | 1,507,690 | N | 11/21/2017 | 1/11/2018 | 12/11/2019 | 1/11/2020 | 12/11/2027 | 4.83000% | 0.00297% | |
| 48 | Winding Creek MHC | CIIICM | 22,441 | 1,550,000 | 1,548,427 | 0.2% | 1,310,834 | N | 6/7/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 5.90000% | 0.00297% | ||
| 49 | Cape Canaveral MHP | CIIICM | 17,715 | 798,000 | 797,183 | 0.1% | 673,861 | N | 5/31/2018 | 7/11/2018 | 7/11/2018 | 6/11/2028 | 5.85000% | 0.00297% | ||
A-1-2
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Certificate Administrator Fee Rate | Servicing Fee | CREFC® IP Royalty License Fee Rate | Asset Representations Reviewer Fee Rate | Net Mortgage Rate | Interest Accrual Method | Monthly P&I Payment ($) | Amortization Type | Interest Accrual Method During IO | Original Term to Maturity or ARD (Mos.) | Remaining Term to Maturity or ARD (Mos.) | Original IO Period (Mos.)(3) | Remaining IO Period (Mos.) | Original Amort Term (Mos.)(4) | ||||||||||||||
| 1 | Village at Leesburg | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.74134% | Actual/360 | 340,689.60 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 117 | 60 | 57 | 360 | ||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.66037% | Actual/360 | 249,921.77 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 84 | 83 | 360 | ||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | ||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | ||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | ||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | ||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | ||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | ||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | ||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | ||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | ||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | ||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | ||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | ||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.08037% | Actual/360 | 231,079.42 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 36 | 35 | 360 | ||||||||||||||
| 4 | 1801 L Street | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.82537% | Actual/360 | 155,555.90 | Interest-only, Balloon | Actual/360 | 120 | 120 | 120 | 120 | 0 | ||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.25037% | Actual/360 | 136,355.09 | Interest-only, Balloon | Actual/360 | 120 | 117 | 120 | 117 | 0 | ||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | ||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | ||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | ||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | ||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | ||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | ||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | ||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | ||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | ||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | ||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | ||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | ||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | ||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | ||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | ||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | ||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | ||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | ||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | ||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | ||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.24537% | Actual/360 | 146,613.48 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 60 | 59 | 360 | ||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.63537% | Actual/360 | 145,855.26 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 118 | 24 | 22 | 360 | ||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.34037% | Actual/360 | 139,759.12 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 48 | 47 | 360 | ||||||||||||||
| 9 | Citadel Self Storage | RMF | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.56037% | Actual/360 | 143,204.61 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 36 | 35 | 360 | ||||||||||||||
| 10 | 181 Fremont Street | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 3.69194% | Actual/360 | 62,668.47 | Interest-only, ARD | Actual/360 | 120 | 117 | 120 | 117 | 0 | ||||||||||||||
| 11 | CoolSprings Galleria | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.82234% | 30/360 | 105,405.06 | Amortizing Balloon | 120 | 118 | 0 | 0 | 360 | |||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.30037% | Actual/360 | 102,404.70 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 118 | 24 | 22 | 360 | ||||||||||||||
| 12.01 | Sunset Country MHC | RMF | ||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | ||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | ||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.69037% | Actual/360 | 63,672.22 | Interest-only, Balloon | Actual/360 | 120 | 119 | 120 | 119 | 0 | ||||||||||||||
| 14 | Montclair East | RMF | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.10037% | Actual/360 | 63,591.11 | Interest-only, Balloon | Actual/360 | 120 | 120 | 120 | 120 | 0 | ||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 0.01070% | 0.05500% | 0.00050% | 0.00046% | 4.91637% | Actual/360 | 75,035.29 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 16 | Amcor Industrial Center | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.58837% | Actual/360 | 70,041.23 | Interest-only, Amortizing ARD | Actual/360 | 120 | 119 | 60 | 59 | 360 | ||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.24037% | Actual/360 | 73,525.49 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 118 | 24 | 22 | 360 | ||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | ||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | ||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | 0.01070% | 0.00750% | 0.00050% | 0.00046% | 5.07064% | Actual/360 | 55,905.33 | Interest-only, Balloon | Actual/360 | 120 | 118 | 120 | 118 | 0 | ||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.96037% | Actual/360 | 52,595.49 | Interest-only, Balloon | Actual/360 | 120 | 119 | 120 | 119 | 0 | ||||||||||||||
| 19.01 | Cedar Grove | RMF | ||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | ||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | ||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | ||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | ||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.22537% | Actual/360 | 61,812.13 | Amortizing Balloon | 120 | 118 | 0 | 0 | 360 | |||||||||||||||
| 21 | 2900 McLane Road | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.82037% | Actual/360 | 55,344.02 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 22 | Bond Street Fund 16 | WFB | 0.01070% | 0.04250% | 0.00050% | 0.00046% | 4.95287% | Actual/360 | 56,078.98 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 118 | 42 | 40 | 360 | ||||||||||||||
| 22.01 | Smyrna | WFB | ||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | ||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | ||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.98037% | Actual/360 | 50,998.05 | Amortizing Balloon | Actual/360 | 120 | 119 | 0 | 0 | 360 | ||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.89837% | Actual/360 | 49,299.84 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 118 | 36 | 34 | 360 | ||||||||||||||
| 25 | Manito Shopping Center | Barclays | 0.01070% | 0.05500% | 0.00050% | 0.00046% | 4.67037% | Actual/360 | 46,894.03 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 24 | 23 | 360 | ||||||||||||||
| 26 | Securitas Office | CIIICM | 0.01070% | 0.04500% | 0.00050% | 0.00046% | 5.42037% | Actual/360 | 49,721.13 | Amortizing Balloon | 120 | 119 | 0 | 0 | 324 | |||||||||||||||
| 27 | 5800 North Course Office | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.63037% | Actual/360 | 46,730.82 | Amortizing Balloon | 120 | 119 | 0 | 0 | 300 | |||||||||||||||
| 28 | 63-37/27 108th Street | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.96037% | Actual/360 | 31,136.53 | Interest-only, Balloon | Actual/360 | 120 | 119 | 120 | 119 | 0 | ||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.53037% | Actual/360 | 39,965.10 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 24 | 23 | 360 | ||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.78537% | Actual/360 | 36,747.73 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.05137% | Actual/360 | 37,611.26 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 119 | 36 | 35 | 360 | ||||||||||||||
| 32 | RC Plaza | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.03037% | Actual/360 | 27,165.54 | Interest-only, Balloon | Actual/360 | 120 | 118 | 120 | 118 | 0 | ||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.95037% | Actual/360 | 33,169.36 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.09037% | Actual/360 | 31,798.52 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 117 | 36 | 33 | 360 | ||||||||||||||
| 35 | Citi Bank - Chicago | RMF | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 6.09037% | Actual/360 | 31,545.32 | Interest-only, Amortizing Balloon | Actual/360 | 60 | 56 | 24 | 20 | 360 | ||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.03037% | Actual/360 | 22,283.61 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 118 | 36 | 34 | 360 | ||||||||||||||
| 37 | Keyway Apartments | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.39037% | Actual/360 | 23,048.36 | Amortizing Balloon | 120 | 118 | 0 | 0 | 360 | |||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.45037% | Actual/360 | 19,806.79 | Amortizing Balloon | 120 | 118 | 0 | 0 | 360 | |||||||||||||||
| 39 | Plaza at Mableton | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.28037% | Actual/360 | 19,435.66 | Amortizing Balloon | 120 | 118 | 0 | 0 | 360 | |||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.68037% | Actual/360 | 16,251.21 | Amortizing Balloon | 120 | 117 | 0 | 0 | 360 | |||||||||||||||
| 41 | Shops at Waycross | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.02037% | Actual/360 | 13,967.06 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 117 | 24 | 21 | 360 | ||||||||||||||
| 42 | Whispering Pines | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.78037% | Actual/360 | 13,116.63 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 114 | 60 | 54 | 360 | ||||||||||||||
| 43 | Rio Grande MHP | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.55037% | Actual/360 | 14,304.72 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 44 | 189 Court Street | WFB | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.14037% | Actual/360 | 9,155.42 | Interest-only, Balloon | Actual/360 | 120 | 118 | 120 | 118 | 0 | ||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.66037% | Actual/360 | 11,582.67 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | ||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | ||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.83037% | Actual/360 | 11,208.88 | Amortizing Balloon | 120 | 118 | 0 | 0 | 360 | |||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 4.81037% | Actual/360 | 9,213.40 | Interest-only, Amortizing Balloon | Actual/360 | 120 | 113 | 24 | 17 | 360 | ||||||||||||||
| 48 | Winding Creek MHC | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.88037% | Actual/360 | 9,193.62 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | 0.01070% | 0.00500% | 0.00050% | 0.00046% | 5.83037% | Actual/360 | 4,707.73 | Amortizing Balloon | 120 | 119 | 0 | 0 | 360 | |||||||||||||||
A-1-3
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Remaining Amort Term (Mos.) | Seasoning | Prepayment Provisions | Grace Period Default (Days) | Grace Period Late (Days) | Appraised Value ($)(5) | Appraisal Date | Coop -Rental Value | Coop - LTV as Rental | Coop - Unsold Percent | Coop - Sponsor Units | Coop - Investor Units | Coop - Units | Coop - Sponsor Carry | Coop - Committed Secondary Debt | U/W NOI DSCR (x)(6) | ||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | 360 | 3 | L(27),D(89),O(4) | 5 | 5 | 226,000,000 | 12/1/2018 | 1.34 | ||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | 360 | 1 | L(25),D(91),O(4) | 0 | 0 | 82,240,000 | 4/18/2018 | 1.56 | ||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | 15,640,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | 8,920,000 | 4/18/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | 7,830,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | 7,870,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | 7,790,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | 5,300,000 | 4/18/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | 5,320,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | 5,600,000 | 4/18/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | 5,070,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | 4,660,000 | 4/16/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | 2,710,000 | 4/17/2018 | ||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | 2,500,000 | 4/18/2018 | ||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | 360 | 1 | L(25),D(92),O(3) | 0 | 0 | 66,600,000 | 3/13/2018 | 1.64 | ||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | 0 | 0 | L(24),D(92),O(4) | 0 | 0 | 60,260,000 | 4/9/2018 | 1.64 | ||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | 0 | 3 | L(27),D(89),O(4) | 0 | 0 | 61,230,000 | Various | 2.23 | ||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | 6,330,000 | 3/15/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 7,325,000 | 2/1/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 4,550,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 4,800,000 | 3/23/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 4,475,000 | 3/15/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 4,400,000 | 3/21/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | 4,350,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | 3,850,000 | 3/20/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | 2,630,000 | 3/23/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 2,350,000 | 3/21/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 2,390,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 1,510,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | 1,510,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | 1,480,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | 1,500,000 | 3/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 2,100,000 | 1/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 1,470,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 1,450,000 | 3/21/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | 1,290,000 | 3/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 1,470,000 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | 360 | 1 | L(25),D(91),O(4) | 0 | 0 | 43,500,000 | 4/5/2018 | 1.87 | ||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | 360 | 2 | L(26),D(90),O(4) | 0 | 0 | 48,825,000 | 3/15/2018 | 2.12 | ||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | 360 | 1 | L(25),D(91),O(4) | 0 | 0 | 35,800,000 | 3/27/2018 | 1.38 | ||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | 360 | 1 | L(25),D(91),O(4) | 0 | 0 | 41,720,000 | 4/11/2018 | 1.26 | ||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | 0 | 3 | L(23),GRTR 1% or YM(4),GRTR 1% or YM or D(86),O(7) | 0 | 0 | 632,000,000 | 3/1/2021 | 3.15 | ||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | 358 | 2 | L(26),GRTR 1% or YM or D(90),O(4) | 0 | 5 | 322,000,000 | 3/23/2018 | 2.01 | ||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | 360 | 2 | L(26),D(90),O(4) | 0 | 0 | 31,950,000 | 3/30/2018 | 1.46 | ||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | 10,200,000 | 3/30/2018 | ||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | 13,300,000 | 3/30/2018 | ||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | 8,450,000 | 3/30/2018 | ||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | 0 | 1 | L(25),D(91),O(4) | 0 | 0 | 24,100,000 | 4/25/2018 | 2.45 | ||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | 0 | 0 | L(24),GRTR 1% or YM(92),O(4) | 0 | 0 | 25,200,000 | 3/23/2018 | 1.80 | ||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 359 | 1 | L(25),D(91),O(4) | 0 | 0 | 22,000,000 | 4/27/2018 | 2.32 | ||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | 360 | 1 | L(25),D(91),O(4) | 0 | 0 | 21,000,000 | 5/7/2018 | 1.56 | ||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | 360 | 2 | L(26),D(90),O(4) | 0 | 0 | 18,125,000 | 3/5/2018 | 1.34 | ||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | 13,100,000 | 3/5/2018 | ||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | 5,025,000 | 3/5/2018 | ||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | 0 | 2 | L(26),D(87),O(7) | 0 | 0 | 138,420,000 | 3/1/2018 | 1.92 | ||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | 0 | 1 | L(23),GRTR 1% or YM(93),O(4) | 0 | 0 | 19,370,000 | 4/9/2018 | 1.85 | ||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | 5,330,000 | 4/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | 3,840,000 | 4/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | 3,830,000 | 4/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | 3,610,000 | 4/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | 2,760,000 | 4/9/2018 | ||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 358 | 2 | L(26),D(90),O(4) | 0 | 0 | 19,000,000 | 1/31/2018 | 2.15 | ||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | 359 | 1 | L(25),D(91),O(4) | 0 | 5 | 17,600,000 | 11/8/2017 | 1.71 | ||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | 360 | 2 | L(26),D(90),O(4) | 0 | 0 | 15,450,000 | Various | 1.54 | ||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | 6,400,000 | 4/1/2019 | ||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | 4,600,000 | 4/1/2019 | ||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 4,450,000 | 3/21/2018 | ||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 359 | 1 | L(25),D(91),O(4) | 0 | 0 | 14,400,000 | 3/19/2018 | 2.19 | ||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 360 | 2 | L(26),D(90),O(4) | 0 | 0 | 12,700,000 | 3/12/2018 | 1.46 | ||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | 360 | 1 | L(25),D(91),O(4) | 0 | 0 | 17,500,000 | 3/26/2018 | 2.11 | ||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | 323 | 1 | L(25),D(92),O(3) | 0 | 0 | 14,920,000 | 5/15/2018 | 1.45 | ||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | 299 | 1 | L(25),D(92),O(3) | 0 | 0 | 12,800,000 | 3/13/2018 | 2.16 | ||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | 0 | 1 | L(25),GRTR 1% or YM(90),O(5) | 0 | 0 | 11,850,000 | 4/13/2018 | 1.65 | ||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | 360 | 1 | L(25),D(92),O(3) | 0 | 0 | 11,560,000 | 4/6/2018 | 1.39 | ||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 359 | 1 | L(25),D(91),O(4) | 0 | 0 | 11,150,000 | 3/26/2018 | 1.99 | ||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | 360 | 1 | L(25),D(91),O(4) | 0 | 3 | 9,850,000 | 4/16/2018 | 1.46 | ||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | 0 | 2 | L(26),D(90),O(4) | 0 | 0 | 9,800,000 | 3/12/2018 | 1.90 | ||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | 359 | 1 | L(25),D(91),O(4) | 0 | 0 | 10,290,000 | 3/15/2018 | 1.49 | ||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | 360 | 3 | L(27),D(90),O(3) | 0 | 0 | 8,250,000 | 2/8/2018 | 1.35 | ||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | 360 | 4 | L(28),D(28),O(4) | 0 | 0 | 7,700,000 | 1/22/2018 | 1.38 | ||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | 360 | 2 | L(26),D(90),O(4) | 0 | 0 | 6,350,000 | 3/15/2018 | 1.58 | ||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | 358 | 2 | L(26),D(91),O(3) | 0 | 0 | 5,660,000 | 3/23/2018 | 1.37 | ||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | 358 | 2 | L(26),D(91),O(3) | 0 | 0 | 5,300,000 | 3/22/2018 | 1.52 | ||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | 358 | 2 | L(26),D(91),O(3) | 0 | 0 | 5,210,000 | 3/2/2018 | 1.78 | ||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 357 | 3 | L(27),D(90),O(3) | 0 | 0 | 4,900,000 | 2/1/2018 | 2.29 | ||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | 360 | 3 | L(27),GRTR 1% or YM(90),O(3) | 0 | 0 | 3,760,000 | 3/5/2018 | 1.62 | ||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | 360 | 6 | L(30),D(87),O(3) | 0 | 0 | 5,170,000 | 10/6/2017 | 1.84 | ||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | 359 | 1 | L(25),D(91),O(4) | 0 | 0 | 3,600,000 | 4/13/2018 | 1.46 | ||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | 0 | 2 | L(26),GRTR 1% or YM(90),O(4) | 0 | 0 | 4,000,000 | 3/19/2018 | 1.70 | ||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | 359 | 1 | L(25),D(92),O(3) | 0 | 0 | 2,680,000 | 4/13/2018 | 1.50 | ||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | 1,730,000 | 4/13/2018 | ||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | 950,000 | 4/13/2018 | ||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | 358 | 2 | L(26),D(91),O(3) | 0 | 0 | 2,930,000 | 3/6/2018 | 1.48 | ||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | 360 | 7 | L(31),D(86),O(3) | 0 | 0 | 2,475,000 | 9/7/2017 | 1.83 | ||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | 359 | 1 | L(25),D(92),O(3) | 0 | 0 | 2,500,000 | 3/15/2018 | 1.35 | ||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | 359 | 1 | L(25),D(92),O(3) | 0 | 0 | 1,400,000 | 4/29/2018 | 1.34 | ||||||||||||||||||||||||||||||||||
A-1-4
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | U/W NCF DSCR (x)(6) | Cut-off Date LTV Ratio(5)(6) | LTV Ratio at Maturity or ARD(5)(6) | Cut-off Date U/W NOI Debt Yield(6) | Cut-off Date U/W NCF Debt Yield(6) | U/W Revenues ($)(2) | U/W Expenses ($) | U/W Net Operating Income ($) | U/W Replacement ($)(11) | U/W TI/LC ($)(11) | U/W Net Cash Flow ($) | Occupancy Rate(2)(7) | Occupancy as-of Date | U/W Hotel ADR | |||||||||||||||||||||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | 1.28 | 58.1% | 53.4% | 8.4% | 8.0% | 14,588,909 | 3,574,354 | 11,014,555 | 80,007 | 403,415 | 10,531,133 | 91.6% | 3/9/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | 1.51 | 58.7% | 56.0% | 9.7% | 9.4% | 8,105,950 | 3,430,604 | 4,675,346 | 157,132 | 0 | 4,518,214 | 87.1% | 5/21/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | 1,520,034 | 617,709 | 902,325 | 33,513 | 0 | 868,811 | 88.9% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | 749,368 | 255,809 | 493,559 | 9,771 | 0 | 483,788 | 88.8% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | 853,144 | 332,408 | 520,736 | 18,072 | 0 | 502,664 | 95.1% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | 784,468 | 338,535 | 445,933 | 10,005 | 0 | 435,928 | 89.7% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | 741,608 | 309,487 | 432,121 | 14,038 | 0 | 418,084 | 80.3% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | 526,008 | 201,098 | 324,910 | 9,867 | 0 | 315,043 | 83.6% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | 555,288 | 224,940 | 330,348 | 12,381 | 0 | 317,966 | 89.2% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | 664,850 | 303,356 | 361,494 | 9,230 | 0 | 352,264 | 83.2% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | 508,223 | 181,328 | 326,895 | 12,665 | 0 | 314,230 | 82.4% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | 558,592 | 261,018 | 297,574 | 12,121 | 0 | 285,453 | 90.2% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | 348,716 | 244,266 | 104,450 | 7,803 | 0 | 96,647 | 76.5% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | 295,652 | 160,649 | 135,003 | 7,667 | 0 | 127,336 | 86.8% | 5/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | 1.38 | 63.9% | 56.7% | 10.7% | 9.0% | 9,194,024 | 4,656,855 | 4,537,169 | 117,783 | 588,913 | 3,830,474 | 85.8% | 4/30/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | 1.61 | 63.1% | 63.1% | 8.1% | 7.9% | 4,789,700 | 1,721,068 | 3,068,632 | 50,583 | 10,840 | 3,007,209 | 94.3% | 4/23/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | 2.19 | 61.7% | 61.7% | 9.6% | 9.5% | 4,024,258 | 381,942 | 3,642,316 | 27,056 | 35,261 | 3,580,000 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | 388,000 | 9,334 | 378,666 | 0 | 0 | 378,666 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 525,897 | 124,094 | 401,803 | 8,250 | 26,125 | 367,428 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 334,831 | 50,915 | 283,916 | 1,127 | 0 | 282,788 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 278,042 | 7,345 | 270,697 | 3,015 | 12,838 | 254,845 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 267,991 | 7,265 | 260,726 | 2,865 | 11,936 | 245,926 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 272,648 | 9,766 | 262,883 | 1,409 | 0 | 261,473 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | 267,000 | 7,124 | 259,876 | 2,390 | 0 | 257,487 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | 224,674 | 15,965 | 208,709 | 2,865 | 11,271 | 194,573 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | 205,574 | 42,968 | 162,606 | 0 | 7,850 | 154,756 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 159,545 | 6,032 | 153,513 | 1,025 | 5,809 | 146,679 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 145,307 | 4,315 | 140,992 | 2,086 | 7,648 | 131,258 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 97,102 | 2,194 | 94,908 | 0 | 0 | 94,908 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | 98,334 | 4,111 | 94,222 | 0 | 0 | 94,222 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | 114,905 | 23,006 | 91,899 | 0 | 0 | 91,899 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | 108,687 | 13,345 | 95,342 | 0 | 5,190 | 90,152 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 139,302 | 11,050 | 128,252 | 1,050 | 0 | 127,202 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 90,630 | 2,450 | 88,180 | 0 | 4,200 | 83,980 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 96,073 | 2,478 | 93,595 | 975 | 4,144 | 88,476 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | 119,086 | 36,136 | 82,950 | 0 | 0 | 82,950 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 90,630 | 2,048 | 88,582 | 0 | 4,200 | 84,382 | 100.0% | 7/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | 1.68 | 68.4% | 62.4% | 11.0% | 9.9% | 4,967,665 | 1,684,476 | 3,283,188 | 45,853 | 279,029 | 2,958,306 | 94.6% | 5/24/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | 2.00 | 57.9% | 49.7% | 13.1% | 12.4% | 4,580,308 | 876,945 | 3,703,363 | 28,185 | 171,558 | 3,503,620 | 85.2% | 3/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | 1.36 | 69.8% | 63.6% | 9.3% | 9.1% | 3,212,219 | 890,227 | 2,321,992 | 42,800 | 0 | 2,279,192 | 98.1% | 5/31/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | 1.25 | 59.9% | 53.7% | 8.7% | 8.6% | 3,224,874 | 1,051,844 | 2,173,030 | 21,563 | 0 | 2,151,467 | 96.3% | 5/4/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | 3.14 | 39.6% | 39.6% | 11.8% | 11.8% | 43,664,053 | 14,094,390 | 29,569,663 | 87,266 | 0 | 29,482,397 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | 1.91 | 48.0% | 39.0% | 12.8% | 12.1% | 30,554,183 | 10,828,665 | 19,725,518 | 128,035 | 868,402 | 18,729,081 | 96.2% | 4/24/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | 1.43 | 57.6% | 50.2% | 9.7% | 9.5% | 2,746,743 | 958,197 | 1,788,546 | 34,850 | 0 | 1,753,696 | 71.2% | 4/6/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | 896,679 | 296,187 | 600,492 | 9,900 | 0 | 590,592 | 81.3% | 4/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | 1,113,619 | 468,927 | 644,692 | 16,950 | 0 | 627,742 | 57.2% | 4/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | 736,445 | 193,082 | 543,363 | 8,000 | 0 | 535,363 | 88.1% | 4/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | 2.15 | 66.4% | 66.4% | 11.7% | 10.3% | 2,770,885 | 896,651 | 1,874,235 | 36,047 | 197,621 | 1,640,567 | 90.8% | 5/23/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | 1.68 | 58.3% | 58.3% | 9.3% | 8.7% | 1,847,613 | 474,097 | 1,373,516 | 20,340 | 67,802 | 1,285,374 | 98.8% | 5/11/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 2.05 | 63.6% | 52.3% | 14.9% | 13.2% | 6,080,718 | 3,994,549 | 2,086,169 | 243,229 | 0 | 1,842,940 | 83.7% | 4/30/2018 | 156 | |||||||||||||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | 1.56 | 65.0% | 59.6% | 9.6% | 9.6% | 1,339,752 | 26,795 | 1,312,957 | 0 | 0 | 1,312,957 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | 1.32 | 73.4% | 63.9% | 8.9% | 8.8% | 1,591,148 | 405,977 | 1,185,171 | 18,856 | 0 | 1,166,315 | 89.5% | 3/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | 1,177,433 | 270,037 | 907,395 | 14,446 | 0 | 892,949 | 93.9% | 3/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | 413,716 | 135,940 | 277,776 | 4,410 | 0 | 273,366 | 78.2% | 3/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | 1.90 | 52.0% | 52.0% | 9.9% | 9.8% | 9,355,038 | 2,226,632 | 7,128,405 | 57,134 | 29,781 | 7,041,490 | 100.0% | 4/24/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | 1.81 | 64.5% | 64.5% | 9.4% | 9.1% | 1,707,442 | 537,230 | 1,170,213 | 26,900 | 0 | 1,143,313 | 91.0% | 3/14/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | 484,260 | 146,106 | 338,154 | 6,800 | 0 | 331,354 | 89.0% | 3/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | 312,736 | 70,076 | 242,660 | 6,200 | 0 | 236,460 | 87.1% | 3/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | 369,496 | 150,727 | 218,769 | 5,000 | 0 | 213,769 | 95.0% | 3/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | 289,520 | 74,020 | 215,500 | 5,700 | 0 | 209,800 | 91.2% | 3/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | 251,431 | 96,300 | 155,130 | 3,200 | 0 | 151,930 | 96.8% | 3/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 1.92 | 58.8% | 48.9% | 14.2% | 12.8% | 4,121,151 | 2,529,087 | 1,592,064 | 164,846 | 0 | 1,427,218 | 79.8% | 2/28/2018 | 124 | |||||||||||||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | 1.59 | 59.6% | 48.8% | 10.8% | 10.1% | 2,001,616 | 865,732 | 1,135,883 | 49,620 | 30,877 | 1,055,386 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | 1.50 | 67.5% | 60.4% | 10.0% | 9.6% | 1,297,022 | 258,441 | 1,038,581 | 12,290 | 19,709 | 1,006,582 | 89.7% | Various | ||||||||||||||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | 476,712 | 89,569 | 387,142 | 6,465 | 6,541 | 374,136 | 87.4% | 5/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | 429,262 | 91,504 | 337,757 | 3,521 | 9,772 | 324,465 | 84.4% | 3/23/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 391,049 | 77,367 | 313,682 | 2,304 | 3,397 | 307,981 | 100.0% | 5/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 1.97 | 65.9% | 54.2% | 14.1% | 12.7% | 3,254,305 | 1,916,321 | 1,337,984 | 130,172 | 0 | 1,207,812 | 74.7% | 4/30/2018 | 125 | |||||||||||||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 1.36 | 73.0% | 64.5% | 9.3% | 8.7% | 1,229,479 | 362,963 | 866,516 | 7,576 | 52,646 | 806,294 | 100.0% | 4/9/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | 1.93 | 51.4% | 44.2% | 13.2% | 12.1% | 1,634,853 | 447,527 | 1,187,326 | 25,372 | 74,325 | 1,087,629 | 93.8% | 5/21/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | 1.31 | 56.2% | 44.7% | 10.3% | 9.3% | 1,359,011 | 491,858 | 867,153 | 13,440 | 70,875 | 782,838 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | 1.93 | 58.5% | 44.8% | 16.2% | 14.5% | 2,104,334 | 892,355 | 1,211,979 | 15,690 | 111,643 | 1,084,646 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | 1.58 | 62.4% | 62.4% | 8.3% | 8.0% | 931,698 | 316,780 | 614,918 | 3,200 | 21,620 | 590,098 | 100.0% | 5/30/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | 1.36 | 60.6% | 53.1% | 9.5% | 9.3% | 942,811 | 275,541 | 667,270 | 15,801 | 0 | 651,469 | 95.5% | 4/30/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 1.73 | 62.7% | 51.3% | 12.6% | 10.9% | 2,934,684 | 2,055,391 | 879,293 | 117,387 | 0 | 761,905 | 63.7% | 4/30/2018 | 112 | |||||||||||||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | 1.36 | 70.6% | 62.6% | 9.5% | 8.8% | 929,752 | 272,042 | 657,710 | 3,317 | 41,601 | 612,792 | 100.0% | 6/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | 1.78 | 65.0% | 65.0% | 9.7% | 9.1% | 888,328 | 268,866 | 619,462 | 10,799 | 27,929 | 580,734 | 94.4% | 4/17/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | 1.44 | 60.2% | 49.5% | 9.6% | 9.3% | 855,352 | 262,200 | 593,153 | 2,797 | 16,640 | 573,715 | 100.0% | 3/18/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | 1.31 | 70.9% | 62.9% | 8.8% | 8.6% | 775,663 | 261,181 | 514,482 | 13,627 | 0 | 500,855 | 89.3% | 2/28/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | 1.36 | 67.5% | 65.1% | 10.1% | 9.9% | 628,374 | 104,664 | 523,710 | 1,080 | 7,200 | 515,430 | 100.0% | 7/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | 1.51 | 65.0% | 57.6% | 10.3% | 9.8% | 630,641 | 206,893 | 423,749 | 7,291 | 11,635 | 404,823 | 100.0% | 4/26/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | 1.30 | 72.3% | 60.4% | 9.3% | 8.8% | 613,884 | 235,002 | 378,882 | 19,200 | 0 | 359,682 | 92.1% | 3/5/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | 1.33 | 65.9% | 55.1% | 10.3% | 9.1% | 670,023 | 308,813 | 361,210 | 10,732 | 34,116 | 316,363 | 100.0% | 4/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | 1.56 | 67.0% | 55.8% | 11.9% | 10.4% | 581,065 | 166,269 | 414,796 | 10,772 | 39,340 | 364,683 | 100.0% | 3/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 2.03 | 57.0% | 48.0% | 16.0% | 14.2% | 1,278,961 | 831,451 | 447,510 | 51,158 | 0 | 396,352 | 74.7% | 3/31/2018 | 93 | |||||||||||||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | 1.51 | 68.9% | 59.7% | 10.5% | 9.8% | 340,799 | 69,842 | 270,957 | 1,754 | 15,579 | 253,624 | 100.0% | 3/12/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | 1.75 | 48.4% | 44.5% | 11.6% | 11.0% | 660,219 | 370,125 | 290,094 | 14,699 | 0 | 275,395 | 98.4% | 4/30/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | 1.44 | 69.4% | 58.1% | 10.0% | 9.9% | 376,741 | 125,937 | 250,804 | 4,300 | 0 | 246,504 | 91.9% | 4/30/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | 1.68 | 52.5% | 52.5% | 8.9% | 8.8% | 212,157 | 24,986 | 187,172 | 690 | 1,500 | 184,982 | 100.0% | 4/20/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | 1.46 | 74.5% | 62.7% | 10.4% | 10.1% | 297,069 | 88,333 | 208,736 | 6,405 | 0 | 202,331 | 86.1% | 4/18/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | 180,444 | 48,487 | 131,957 | 3,975 | 0 | 127,982 | 85.1% | 4/18/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | 116,625 | 39,846 | 76,779 | 2,430 | 0 | 74,349 | 87.7% | 4/18/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | 1.37 | 64.7% | 54.8% | 10.5% | 9.7% | 308,148 | 108,669 | 199,479 | 8,825 | 6,060 | 184,594 | 88.3% | 3/6/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | 1.81 | 70.7% | 60.9% | 11.6% | 11.4% | 299,180 | 96,637 | 202,543 | 2,916 | 0 | 199,627 | 98.1% | 4/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | 1.30 | 61.9% | 52.4% | 9.6% | 9.2% | 290,867 | 141,819 | 149,048 | 5,850 | 0 | 143,198 | 95.7% | 4/23/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | 1.30 | 56.9% | 48.1% | 9.5% | 9.2% | 165,516 | 89,744 | 75,771 | 2,300 | 0 | 73,471 | 91.1% | 4/1/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
A-1-5
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | U/W Hotel RevPAR | Most Recent Period(8) | Most Recent Revenues ($) | Most Recent Expenses ($) | Most Recent NOI ($) | Most Recent Capital Expenditures | Most Recent NCF ($) | Most Recent Hotel ADR | Most Recent Hotel RevPAR | Second Most Recent Period | Second Most Recent Revenues ($) | Second Most Recent Expenses ($) | Second Most Recent NOI ($) | Second Most Recent Capital Expenditures | Second Most Recent NCF ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | Actual 2017 | 12,375,621 | 3,689,722 | 8,685,899 | 0 | 8,685,899 | Actual 2016 | 11,547,492 | 3,781,438 | 7,766,054 | 0 | 7,766,054 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | Annualized 3 5/31/2018 | 8,107,136 | 3,324,048 | 4,783,088 | 0 | 4,783,088 | TTM 5/31/2018 | 7,997,416 | 3,320,200 | 4,677,216 | 0 | 4,677,216 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | Annualized 3 5/31/2018 | 1,550,208 | 579,826 | 970,382 | 0 | 970,382 | TTM 5/31/2018 | 1,528,208 | 578,477 | 949,731 | 0 | 949,731 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | Annualized 3 5/31/2018 | 749,368 | 246,863 | 502,505 | 0 | 502,505 | TTM 5/31/2018 | 750,109 | 246,684 | 503,425 | 0 | 503,425 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | Annualized 3 5/31/2018 | 853,144 | 318,074 | 535,070 | 0 | 535,070 | TTM 5/31/2018 | 856,006 | 317,902 | 538,104 | 0 | 538,104 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | Annualized 3 5/31/2018 | 796,888 | 325,600 | 471,288 | 0 | 471,288 | TTM 5/31/2018 | 786,693 | 325,449 | 461,244 | 0 | 461,244 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | Annualized 3 5/31/2018 | 741,608 | 297,577 | 444,031 | 0 | 444,031 | TTM 5/31/2018 | 706,768 | 297,157 | 409,612 | 0 | 409,612 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | Annualized 3 5/31/2018 | 526,008 | 201,320 | 324,688 | 0 | 324,688 | TTM 5/31/2018 | 542,099 | 201,313 | 340,786 | 0 | 340,786 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | Annualized 3 5/31/2018 | 555,288 | 239,706 | 315,582 | 0 | 315,582 | TTM 5/31/2018 | 551,045 | 239,148 | 311,898 | 0 | 311,898 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | Annualized 3 5/31/2018 | 683,668 | 253,685 | 429,983 | 0 | 429,983 | TTM 5/31/2018 | 633,498 | 253,884 | 379,614 | 0 | 379,614 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | Annualized 3 5/31/2018 | 511,032 | 187,780 | 323,252 | 0 | 323,252 | TTM 5/31/2018 | 503,355 | 187,429 | 315,926 | 0 | 315,926 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | Annualized 3 5/31/2018 | 558,592 | 254,620 | 303,972 | 0 | 303,972 | TTM 5/31/2018 | 545,690 | 254,715 | 290,975 | 0 | 290,975 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | Annualized 3 5/31/2018 | 285,680 | 258,323 | 27,357 | 0 | 27,357 | TTM 5/31/2018 | 295,014 | 257,606 | 37,408 | 0 | 37,408 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | Annualized 3 5/31/2018 | 295,652 | 160,674 | 134,978 | 0 | 134,978 | TTM 5/31/2018 | 298,931 | 160,438 | 138,493 | 0 | 138,493 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | TTM 4/30/2018 | 9,146,385 | 4,564,747 | 4,581,637 | 0 | 4,581,637 | Actual 2017 | 8,890,833 | 4,558,824 | 4,332,009 | 0 | 4,332,009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | TTM 4/30/2018 | 4,678,469 | 1,705,321 | 2,973,148 | 0 | 2,973,148 | Actual 2017 | 4,620,919 | 1,669,129 | 2,951,790 | 0 | 2,951,790 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | Annualized 8 8/31/2017 | 4,104,368 | 1,589,208 | 2,515,160 | 0 | 2,515,160 | Actual 2016 | 3,366,396 | 1,470,115 | 1,896,281 | 0 | 1,896,281 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | TTM 2/28/2018 | 4,259,591 | 854,677 | 3,404,914 | 0 | 3,404,914 | Actual 2017 | 4,255,270 | 815,924 | 3,439,346 | 0 | 3,439,346 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | TTM 5/31/2018 | 2,683,083 | 826,520 | 1,856,564 | 0 | 1,856,564 | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | TTM 3/31/2018 | 3,026,110 | 889,781 | 2,136,329 | 0 | 2,136,329 | Actual 2017 | 2,872,908 | 852,606 | 2,020,302 | 0 | 2,020,302 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | Actual 2017 | 31,190,786 | 10,512,713 | 20,678,073 | 0 | 20,678,073 | Actual 2016 | 30,477,106 | 10,176,949 | 20,300,157 | 0 | 20,300,157 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | TTM 2/28/2018 | 2,648,465 | 947,196 | 1,701,269 | 0 | 1,701,269 | Actual 2017 | 2,634,276 | 951,151 | 1,683,125 | 0 | 1,683,125 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | TTM 2/28/2018 | 848,453 | 288,482 | 559,971 | 0 | 559,971 | Actual 2017 | 854,965 | 291,741 | 563,224 | 0 | 563,224 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | TTM 2/28/2018 | 1,078,143 | 466,148 | 611,995 | 0 | 611,995 | Actual 2017 | 1,071,611 | 467,951 | 603,660 | 0 | 603,660 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | TTM 2/28/2018 | 721,869 | 192,567 | 529,302 | 0 | 529,302 | Actual 2017 | 707,700 | 191,459 | 516,241 | 0 | 516,241 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | Annualized 6 3/31/2018 | 2,643,607 | 790,155 | 1,853,452 | 0 | 1,853,452 | Actual 2017 | 2,175,284 | 778,261 | 1,397,023 | 0 | 1,397,023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | TTM 3/31/2018 | 1,041,153 | 434,997 | 606,157 | 0 | 606,157 | Actual 2017 | 1,075,280 | 441,565 | 633,715 | 0 | 633,715 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 131 | TTM 4/30/2018 | 6,080,708 | 4,010,988 | 2,069,720 | 0 | 2,069,720 | 156 | 131 | Actual 2017 | 5,807,956 | 3,962,320 | 1,845,636 | 0 | 1,845,636 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | TTM 3/31/2018 | 1,552,052 | 384,618 | 1,167,434 | 0 | 1,167,434 | Actual 2017 | 1,502,097 | 382,914 | 1,119,183 | 0 | 1,119,183 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | TTM 3/31/2018 | 1,177,675 | 270,958 | 906,717 | 0 | 906,717 | Actual 2017 | 1,160,831 | 269,966 | 890,865 | 0 | 890,865 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | TTM 3/31/2018 | 374,377 | 113,660 | 260,717 | 0 | 260,717 | Actual 2017 | 341,266 | 112,948 | 228,318 | 0 | 228,318 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | TTM 3/31/2018 | 8,029,843 | 1,999,144 | 6,030,699 | 0 | 6,030,699 | Actual 2017 | 7,723,421 | 2,012,411 | 5,711,010 | 0 | 5,711,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | TTM 4/30/2018 | 1,652,140 | 486,663 | 1,165,477 | 0 | 1,165,477 | Actual 2017 | 1,625,143 | 473,154 | 1,151,988 | 0 | 1,151,988 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | TTM 4/30/2018 | 447,869 | 134,473 | 313,396 | 0 | 313,396 | Actual 2017 | 439,156 | 123,266 | 315,889 | 0 | 315,889 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | TTM 4/30/2018 | 298,425 | 54,422 | 244,003 | 0 | 244,003 | Actual 2017 | 293,370 | 57,638 | 235,731 | 0 | 235,731 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | TTM 4/30/2018 | 364,896 | 147,132 | 217,764 | 0 | 217,764 | Actual 2017 | 359,725 | 144,367 | 215,358 | 0 | 215,358 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | TTM 4/30/2018 | 289,520 | 62,407 | 227,113 | 0 | 227,113 | Actual 2017 | 283,299 | 60,393 | 222,907 | 0 | 222,907 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | TTM 4/30/2018 | 251,431 | 88,230 | 163,201 | 0 | 163,201 | Actual 2017 | 249,593 | 87,489 | 162,103 | 0 | 162,103 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 99 | TTM 2/28/2018 | 4,121,151 | 2,492,455 | 1,628,696 | 0 | 1,628,696 | 124 | 99 | Actual 2017 | 4,043,412 | 2,436,603 | 1,606,809 | 0 | 1,606,809 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | TTM 3/31/2018 | 1,306,971 | 89,874 | 1,217,098 | 0 | 1,217,098 | Actual 2017 | 1,302,836 | 86,332 | 1,216,505 | 0 | 1,216,505 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | Various | 1,325,306 | 268,387 | 1,056,920 | 0 | 1,056,920 | Actual 2017 | 1,261,781 | 248,226 | 1,013,555 | 0 | 1,013,555 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | TTM 1/31/2018 | 514,442 | 93,738 | 420,703 | 0 | 420,703 | Actual 2017 | 502,499 | 92,744 | 409,756 | 0 | 409,756 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | TTM 1/31/2018 | 405,845 | 87,440 | 318,405 | 0 | 318,405 | Actual 2017 | 390,902 | 90,087 | 300,815 | 0 | 300,815 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | TTM 3/31/2018 | 405,019 | 87,208 | 317,811 | 0 | 317,811 | Actual 2017 | 368,380 | 65,395 | 302,985 | 0 | 302,985 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 93 | TTM 4/30/2018 | 3,254,305 | 1,888,482 | 1,365,823 | 0 | 1,365,823 | 125 | 93 | Actual 2017 | 3,034,853 | 1,866,761 | 1,168,092 | 0 | 1,168,092 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | TTM 3/31/2018 | 1,099,374 | 315,551 | 783,823 | 0 | 783,823 | Actual 2017 | 996,237 | 256,411 | 739,826 | 0 | 739,826 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | TTM 2/28/2018 | 1,595,030 | 373,430 | 1,221,601 | 0 | 1,221,601 | Actual 2017 | 1,594,067 | 391,483 | 1,202,584 | 0 | 1,202,584 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | Actual 2017 | 1,384,956 | 0 | 1,384,956 | 0 | 1,384,956 | Actual 2016 | 1,384,956 | 0 | 1,384,956 | 0 | 1,384,956 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | TTM 3/31/2018 | 964,366 | 314,335 | 650,031 | 0 | 650,031 | Actual 2017 | 962,499 | 313,008 | 649,491 | 0 | 649,491 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | Annualized 3 4/30/2018 | 977,628 | 139,760 | 837,868 | 0 | 837,868 | Annualized 6 4/30/2018 | 886,569 | 146,754 | 739,815 | 0 | 739,815 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 72 | TTM 4/30/2018 | 2,934,684 | 2,043,364 | 891,320 | 0 | 891,320 | 112 | 72 | Actual 2017 | 2,893,868 | 2,012,473 | 881,395 | 0 | 881,395 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | TTM 3/31/2018 | 638,821 | 132,756 | 506,065 | 0 | 506,065 | Actual 2017 | 502,651 | 85,501 | 417,150 | 0 | 417,150 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | Annualized 3 3/31/2018 | 883,876 | 224,279 | 659,597 | 0 | 659,597 | Actual 2017 | 798,190 | 224,039 | 574,152 | 0 | 574,152 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | TTM 3/31/2018 | 901,672 | 269,381 | 632,291 | 0 | 632,291 | Actual 2017 | 907,052 | 266,713 | 640,339 | 0 | 640,339 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | TTM 2/28/2018 | 776,464 | 217,340 | 559,124 | 0 | 559,124 | Actual 2016 | 760,871 | 225,645 | 535,226 | 0 | 535,226 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | Actual 2017 | 606,349 | 82,639 | 523,710 | 0 | 523,710 | Actual 2016 | 583,350 | 82,409 | 500,941 | 0 | 500,941 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | Annualized 6 12/31/2017 | 605,578 | 171,618 | 433,960 | 0 | 433,960 | TTM 6/30/2017 | 513,116 | 200,331 | 312,786 | 0 | 312,786 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | TTM 2/28/2018 | 629,903 | 169,577 | 460,326 | 0 | 460,326 | Actual 2017 | 634,301 | 172,347 | 461,954 | 0 | 461,954 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | TTM 3/31/2018 | 694,818 | 297,907 | 396,911 | 0 | 396,911 | Actual 2017 | 657,238 | 298,984 | 358,254 | 0 | 358,254 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | TTM 4/30/2018 | 592,760 | 173,037 | 419,723 | 0 | 419,723 | Actual 2017 | 554,793 | 160,923 | 393,870 | 0 | 393,870 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 68 | TTM 3/31/2018 | 1,307,757 | 832,744 | 475,013 | 0 | 475,013 | 93 | 69 | Actual 2017 | 1,267,528 | 853,985 | 413,543 | 0 | 413,543 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | Actual 2017 | 390,199 | 71,569 | 318,630 | 0 | 318,630 | Actual 2016 | 201,626 | 55,719 | 145,906 | 0 | 145,906 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | TTM 3/31/2018 | 719,735 | 351,838 | 367,897 | 1,302 | 366,595 | Actual 2017 | 710,817 | 355,026 | 355,791 | 1,302 | 354,489 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | TTM 3/31/2018 | 377,066 | 112,942 | 264,125 | 0 | 264,125 | Actual 2017 | 369,894 | 113,378 | 256,516 | 0 | 256,516 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | TTM 4/20/2018 | 231,647 | 11,046 | 220,601 | 0 | 220,601 | Actual 2017 | 232,412 | 13,032 | 219,380 | 0 | 219,380 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | TTM 3/31/2018 | 303,586 | 77,876 | 225,710 | 0 | 225,710 | Actual 2017 | 303,170 | 86,583 | 216,587 | 0 | 216,587 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | TTM 3/31/2018 | 182,791 | 42,117 | 140,674 | 0 | 140,674 | Actual 2017 | 183,301 | 42,089 | 141,212 | 0 | 141,212 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | TTM 3/31/2018 | 120,795 | 35,758 | 85,037 | 0 | 85,037 | Actual 2017 | 119,869 | 44,494 | 75,375 | 0 | 75,375 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | TTM 3/31/2018 | 316,056 | 103,711 | 212,346 | 0 | 212,346 | Actual 2017 | 308,736 | 100,372 | 208,365 | 0 | 208,365 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | Annualized 10 4/30/2018 | 266,865 | 75,777 | 191,088 | 0 | 191,088 | Annualized 10 12/30/2017 | 249,290 | 87,022 | 162,268 | 0 | 162,268 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | TTM 4/30/2018 | 280,129 | 127,992 | 152,137 | 500 | 151,637 | Actual 2017 | 277,277 | 133,748 | 143,528 | 175 | 143,353 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | TTM 4/30/2018 | 161,642 | 74,593 | 87,049 | 0 | 87,049 | Actual 2017 | 161,857 | 74,951 | 86,906 | 0 | 86,906 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A-1-6
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Second Most Recent Hotel ADR | Second Most Recent Hotel RevPAR | Third Most Recent Period | Third Most Recent Revenues ($) | Third Most Recent Expenses ($) | Third Most Recent NOI ($) | Third Most Recent Capital Expenditures | Third Most Recent NCF ($) | Third Most Recent Hotel ADR | Third Most Recent Hotel RevPAR | Master Lease (Y/N) | Largest Tenant Name(7)(9)(16) | Largest Tenant Sq. Ft. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | Actual 2015 | 10,449,504 | 4,248,761 | 6,200,743 | 0 | 6,200,743 | N | Wegmans (Ground Lease) | 142,692 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | Actual 2017 | 7,884,458 | 3,117,322 | 4,767,136 | 0 | 4,767,136 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | Actual 2017 | 1,500,499 | 513,316 | 987,183 | 0 | 987,183 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | Actual 2017 | 714,964 | 235,571 | 479,393 | 0 | 479,393 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | Actual 2017 | 833,904 | 314,276 | 519,628 | 0 | 519,628 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | Actual 2017 | 772,469 | 324,392 | 448,077 | 0 | 448,077 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | Actual 2017 | 675,746 | 274,540 | 401,206 | 0 | 401,206 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | Actual 2017 | 548,956 | 194,679 | 354,277 | 0 | 354,277 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | Actual 2017 | 511,519 | 207,770 | 303,749 | 0 | 303,749 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | Actual 2017 | 659,921 | 258,237 | 401,684 | 0 | 401,684 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | Actual 2017 | 484,980 | 175,816 | 309,164 | 0 | 309,164 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | Actual 2017 | 523,490 | 210,046 | 313,444 | 0 | 313,444 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | Actual 2017 | 353,760 | 250,780 | 102,980 | 0 | 102,980 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | Actual 2017 | 304,250 | 157,900 | 146,350 | 0 | 146,350 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | Actual 2016 | 7,911,012 | 4,821,709 | 3,089,303 | 0 | 3,089,303 | N | Quest Diagnostics PA | 136,197 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | Actual 2016 | 4,418,917 | 1,667,754 | 2,751,164 | 0 | 2,751,164 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Various | Various | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Walgreens | 14,739 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | N | Hobby Lobby | 55,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | N | Fresenius Medical Care | 7,516 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Tractor Supply | 20,097 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Tractor Supply | 19,097 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | N | Fresenius Medical Care | 9,396 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Walgreens | 15,930 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | N | Tractor Supply | 19,097 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Dollar General | 12,406 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Fresenius Medical Care | 6,834 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Walgreens | 13,905 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | N | Dollar General | 7,489 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | N | Dollar General | 9,026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | N | Dollar General | 9,026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Dollar General | 9,026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Advance Auto Parts | 7,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Napa Auto Parts | 7,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | O’Reilly Auto Parts | 6,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | N | Dollar General | 7,545 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | Napa Auto Parts | 7,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | NAV | NAV | NAV | NAV | NAV | NAV | N | County of San Diego | 53,006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | Actual 2016 | 4,519,228 | 761,974 | 3,757,254 | 0 | 3,757,254 | N | Johnny Janosik | 30,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | NAV | NAV | NAV | NAV | NAV | NAV | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | Actual 2016 | 2,610,249 | 794,159 | 1,816,090 | 0 | 1,816,090 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | N | Facebook, Inc. | 436,332 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | Actual 2015 | 27,089,106 | 9,072,495 | 18,016,611 | 0 | 18,016,611 | N | Belk | 132,621 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | Actual 2016 | 2,609,255 | 937,262 | 1,671,993 | 0 | 1,671,993 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | Actual 2016 | 843,382 | 285,456 | 557,926 | 0 | 557,926 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | Actual 2016 | 1,042,713 | 463,951 | 578,762 | 0 | 578,762 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | Actual 2016 | 723,160 | 187,854 | 535,306 | 0 | 535,306 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | Actual 2016 | 2,112,356 | 771,300 | 1,341,057 | 0 | 1,341,057 | N | Umpqua Bank | 16,162 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | NAV | NAV | NAV | NAV | NAV | NAV | N | Ross Stores | 41,623 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 153 | 125 | Actual 2016 | 5,212,037 | 3,595,219 | 1,616,818 | 0 | 1,616,818 | 139 | 114 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | NAV | NAV | NAV | NAV | NAV | NAV | N | AMCOR | 201,810 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | Actual 2016 | 1,337,892 | 352,146 | 985,746 | 0 | 985,746 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | Actual 2016 | 1,131,700 | 260,228 | 871,472 | 0 | 871,472 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | Actual 2016 | 206,192 | 91,918 | 114,274 | 0 | 114,274 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | Actual 2016 | 7,662,241 | 1,836,663 | 5,825,578 | 0 | 5,825,578 | N | Punch Bowl Social | 19,746 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | Actual 2016 | 1,541,247 | 467,404 | 1,073,844 | 0 | 1,073,844 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | Actual 2016 | 416,045 | 110,989 | 305,056 | 0 | 305,056 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | Actual 2016 | 279,629 | 61,730 | 217,899 | 0 | 217,899 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | Actual 2016 | 348,262 | 143,975 | 204,287 | 0 | 204,287 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | Actual 2016 | 261,129 | 65,229 | 195,900 | 0 | 195,900 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | Actual 2016 | 236,182 | 85,481 | 150,701 | 0 | 150,701 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 123 | 97 | Actual 2016 | 3,675,517 | 2,273,571 | 1,401,946 | 0 | 1,401,946 | 117 | 88 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | Actual 2016 | 1,412,958 | 74,741 | 1,338,217 | 0 | 1,338,217 | N | PaperWorks | 496,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | Various | 845,873 | 179,177 | 666,696 | 0 | 666,696 | N | Various | Various | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | Actual 2016 | 482,865 | 89,909 | 392,956 | 0 | 392,956 | N | Bank of Nashville | 3,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | Actual 2016 | 363,008 | 89,268 | 273,740 | 0 | 273,740 | N | Urban Cookhouse | 3,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | NAV | NAV | NAV | NAV | NAV | NAV | N | First Watch | 3,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 124 | 87 | Actual 2016 | 2,918,579 | 1,801,041 | 1,117,538 | 0 | 1,117,538 | 112 | 75 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | N | Heart of Texas Eye Institute | 6,214 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | Actual 2016 | 1,446,851 | 351,403 | 1,095,448 | 0 | 1,095,448 | N | Rosauer’s Super 1 Foods | 52,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | NAV | NAV | NAV | NAV | NAV | NAV | N | Securitas Electronic Security, Inc. | 67,352 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | Actual 2015 | 1,384,956 | 0 | 1,384,956 | 0 | 1,384,956 | N | Alltran Financial, LP | 78,450 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | Actual 2016 | 901,299 | 286,711 | 614,588 | 0 | 614,588 | N | Rite Aid of New York, Inc. | 9,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | Actual 2017 | 633,425 | 109,712 | 523,713 | 0 | 523,713 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 112 | 70 | Actual 2016 | 2,885,466 | 1,990,743 | 894,723 | 0 | 894,723 | 115 | 70 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | Actual 2016 | 31,040 | 433 | 30,607 | 0 | 30,607 | N | Golden Eagle | 3,737 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | Actual 2016 | 888,950 | 186,951 | 701,999 | 0 | 701,999 | N | TLC Pet Food and Supplies | 4,783 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | Actual 2016 | 856,496 | 294,621 | 561,875 | 0 | 561,875 | N | Buckhorn Grill | 3,056 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | Actual 2015 | 731,383 | 215,460 | 515,923 | 0 | 515,923 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | Actual 2015 | 530,862 | 74,559 | 456,303 | 0 | 456,303 | N | Citibank | 7,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | TTM 6/30/2016 | 472,804 | 169,930 | 302,874 | 0 | 302,874 | N | Golden One | 4,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | Actual 2016 | 512,683 | 187,283 | 325,400 | 0 | 325,400 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | Actual 2016 | 595,561 | 245,391 | 350,170 | 0 | 350,170 | N | Universal Gym & Fitness | 11,800 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | Actual 2016 | 560,102 | 192,826 | 367,276 | 0 | 367,276 | N | All American Quality Foods, INC | 43,207 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 95 | 67 | Actual 2016 | 1,185,408 | 764,880 | 420,528 | 0 | 420,528 | 95 | 63 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | Actual 2015 | 175,480 | 44,054 | 131,426 | 0 | 131,426 | N | Aaron’s Rents | 6,842 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | Actual 2016 | 669,979 | 314,266 | 355,714 | 0 | 355,714 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | Actual 2016 | 369,064 | 117,782 | 251,281 | 0 | 251,281 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | Actual 2016 | 219,246 | 11,945 | 207,301 | 0 | 207,301 | N | Matt Cohen & Shayna Pilnick | 1,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | NAV | NAV | NAV | NAV | NAV | NAV | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | NAV | NAV | NAV | NAV | NAV | NAV | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | NAV | NAV | NAV | NAV | NAV | NAV | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | Actual 2016 | 292,880 | 86,116 | 206,764 | 0 | 206,764 | N | TC Party Rentals | 4,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | Actual 2016 | 248,219 | 79,430 | 168,789 | 0 | 168,789 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | Actual 2016 | 163,856 | 110,530 | 53,326 | 0 | 53,326 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | Actual 2016 | 154,505 | 73,268 | 81,237 | 0 | 81,237 | N | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A-1-7
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Largest Tenant % of NRA | Largest Tenant Exp. Date | 2nd Largest Tenant Name(5)(7)(9) | 2nd Largest Tenant Sq. Ft. | 2nd Largest Tenant % of NRA | 2nd Largest Tenant Exp. Date | 3rd Largest Tenant Name(9)(16) | 3rd Largest Tenant Sq. Ft. | 3rd Largest Tenant % of NRA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | 26.1% | 7/31/2034 | Cobb Theatres | 63,564 | 11.6% | 12/31/2028 | LA Fitness | 45,000 | 8.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | 23.1% | 11/30/2029 | McKesson | 49,413 | 8.4% | 12/31/2022 | County of Allegheny | 38,853 | 6.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | Various | Various | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | 100.0% | 5/31/2033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 100.0% | 4/30/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 100.0% | 11/30/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 100.0% | 3/1/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 100.0% | 4/30/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 100.0% | 12/31/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | 100.0% | 11/30/2029 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | 100.0% | 10/20/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | 100.0% | 4/30/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 100.0% | 9/30/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 100.0% | 6/30/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 100.0% | 1/31/2033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | 100.0% | 1/31/2033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | 100.0% | 11/30/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | 100.0% | 9/30/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 100.0% | 5/31/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 100.0% | 4/5/2038 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 100.0% | 4/14/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | 100.0% | 1/31/2033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 100.0% | 4/5/2038 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | 28.9% | 5/31/2026 | Azusa Pacific | 47,234 | 25.8% | 3/31/2028 | Haley & Aldrich | 9,910 | 5.4% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | 16.0% | 5/14/2028 | Petsmart, Inc. | 20,063 | 10.7% | 5/31/2027 | La-Z-Boy Incorporated | 18,000 | 9.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | 100.0% | 2/28/2031 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | 20.7% | 1/31/2030 | Belk Men’s and Kid’s | 50,458 | 7.9% | 1/31/2030 | H&M | 23,644 | 3.7% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | 14.8% | 2/28/2025 | Philadelphia Insurance/Maguire Insurance | 14,119 | 12.9% | 12/31/2024 | Merrill, Lynch, Pierce, Fenner & Smith Incorporated | 12,442 | 11.4% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | 30.7% | 2/28/2028 | dd’s Discounts | 24,000 | 17.7% | 1/31/2024 | Fallas Discount Stores | 22,500 | 16.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | 100.0% | 5/31/2033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | 8193.4% | 9/18/2030 | Rascal Flatts | 10,287 | 4268.5% | 11/1/2025 | Thirsty Dog Brewery | 8,583 | 3561.4% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | 100.0% | 12/31/2032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | Various | Various | Various | Various | Various | Various | Various | Various | Various | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | 23.8% | 2/28/2027 | Sun Tan City | 2,673 | 18.2% | 1/31/2024 | Batteries Plus | 2,319 | 15.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | 18.7% | 9/30/2025 | Dixie Pride Inc/dba Bama | 2,500 | 15.6% | 8/31/2021 | Little Donkey Eastchase | 2,500 | 15.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 31.3% | 12/31/2024 | Apex Endodontics | 3,120 | 27.1% | 2/28/2027 | Pie Five Pizza Co. | 2,800 | 24.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 16.4% | 7/31/2026 | Lewis Family Medicine and Urgent Care | 5,105 | 13.5% | 12/31/2026 | River City Docs Orthopedics | 3,995 | 10.5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | 41.4% | 12/31/2025 | Ross Dress for Less | 27,690 | 21.8% | 1/31/2022 | Rite Aid | 21,361 | 16.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | 100.0% | 6/30/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | 100.0% | 12/31/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | 60.0% | 11/30/2021 | Na & Sang Produce Inc. | 2,720 | 17.0% | 3/31/2020 | Reiss Cleaners, Inc. | 1,280 | 8.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | 16.9% | 6/30/2022 | Beat Strong Fitness & Nutrition | 3,180 | 14.4% | 11/30/2021 | Big Paulie’s Pizza | 2,833 | 12.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | 12.8% | 8/31/2022 | Foothill Carpet Flooring | 2,808 | 7.5% | 4/30/2020 | Tai Pan House | 2,808 | 7.5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | 21.8% | 2/28/2025 | Noodles & Company | 2,659 | 19.0% | 1/31/2025 | Habit Burger | 2,629 | 18.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | 100.0% | 5/31/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | 25.8% | 6/30/2021 | University of Beer | 3,000 | 19.3% | 9/30/2027 | Kids Care Dental | 2,513 | 16.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | 27.2% | 11/30/2024 | Dollar General | 9,607 | 22.2% | 3/31/2022 | Lepage Bakeries | 4,900 | 11.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | 68.2% | 12/31/2026 | Robert & Shenita Mitchell | 3,050 | 4.8% | 7/31/2022 | Craig D.Swiger, DMD, P.C. | 2,400 | 3.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | 39.0% | 9/30/2026 | Aspen Dental Management | 3,500 | 20.0% | 10/31/2026 | Ultimate Audio | 3,274 | 18.7% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | 40.0% | 5/31/2019 | Erin Keane & Dan Fitzgerald | 900 | 30.0% | 9/30/2018 | Madcadi Inc., dba Jacadi Paris | 900 | 30.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | 8.3% | 2/28/2031 | Mold Matters | 2,300 | 4.2% | 3/31/2030 | Great Lakes Home Healthcare | 2,075 | 3.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A-1-8
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | 3rd Largest Tenant Exp. Date | 4th Largest Tenant Name(7)(9) | 4th Largest Tenant Sq. Ft. | 4th Largest Tenant % of NRA | 4th Largest Tenant Exp. Date | 5th Largest Tenant Name(7)(9) | 5th Largest Tenant Sq. Ft. | 5th Largest Tenant % of NRA | 5th Largest Tenant Exp. Date | Engineering Report Date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | 3/31/2026 | Bowlero | 21,564 | 3.9% | 3/31/2027 | Atomic Trampoline | 16,653 | 3.0% | 8/31/2026 | 2/23/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | 6/30/2032 | Alorica | 38,354 | 6.5% | 10/31/2023 | Comcast | 18,476 | 3.1% | 6/30/2022 | 12/17/2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | 4/19/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | Various | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | 3/8/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 2/9/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 3/22/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 3/27/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 3/5/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 3/26/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | 3/15/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | 3/5/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | 3/19/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 3/20/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 3/13/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 3/26/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | 3/20/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | 3/23/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | 2/23/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 1/10/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 3/8/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 3/27/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | 3/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 3/7/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | 12/31/2022 | American Cancer Society | 6,653 | 3.6% | 1/31/2022 | Blue Sky Network | 5,649 | 3.1% | 7/31/2022 | 4/13/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | 3/31/2021 | Golf Galaxy | 15,000 | 8.0% | 1/31/2021 | Firebirds of Wilmington | 7,952 | 4.2% | 6/30/2023 | 3/21/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | 4/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | 2/26/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | 3/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | 1/31/2026 | Kings Bowl | 22,678 | 3.5% | 1/31/2026 | Forever 21 | 18,015 | 2.8% | 11/30/2020 | 3/23/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | Various | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | 4/4/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | 4/4/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | 4/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | 8/31/2022 | Bank of America | 10,242 | 9.4% | 1/31/2020 | Prudential Insurance Company | 9,984 | 9.1% | 2/28/2021 | 5/4/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | 1/31/2023 | Five Below, Inc. | 12,652 | 9.3% | 12/31/2027 | Dollar Tree | 10,385 | 7.7% | 9/30/2020 | 4/5/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 5/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | 5/17/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | 5/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | 5/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | 5/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | 10/19/2027 | Big Bang | 4,722 | 1959.3% | 8/6/2025 | Dante’s Inferno | 4,340 | 1800.8% | 9/4/2027 | 4/2/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | Various | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | 4/11/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | 4/11/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | 4/11/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | 4/16/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | 4/11/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 2/6/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | 5/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | Various | Various | Various | Various | Various | Various | Various | Various | Various | Various | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | 7/24/2021 | UPS Store | 1,500 | 10.2% | 10/12/2021 | Jersey Mikes | 1,438 | 9.8% | 10/1/2024 | 3/20/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | 4/30/2022 | Alfa Mutual Insurance Co | 2,000 | 12.5% | 2/28/2020 | Splurge | 1,978 | 12.4% | 9/30/2018 | 3/2/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 1/31/2025 | Casa Blanca Nail Bar | 2,000 | 17.4% | 11/30/2024 | 3/9/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 3/21/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 8/31/2026 | Sanova Dermatology | 3,891 | 10.3% | 9/30/2026 | Hill Country OBGYN | 3,493 | 9.2% | 10/31/2022 | 3/28/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | 4/30/2025 | Sola Salon | 6,659 | 5.2% | 10/31/2026 | Spokane Teachers Credit Union (GL) | 3,400 | 2.7% | 2/28/2022 | 4/18/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | 12/5/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | 3/20/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | 7/31/2019 | RM & M Pizza Corp. | 1,280 | 8.0% | 1/31/2025 | Elmhurst News Corporation | 1,120 | 7.0% | MTM | 4/19/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | 4/9/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 3/27/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | 5/31/2022 | Em’s Vietnamese Cuisine | 2,200 | 9.9% | 11/30/2022 | Starbucks | 1,850 | 8.4% | 6/30/2026 | 4/30/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | 8/31/2021 | Stevie Dee’s Café | 2,434 | 6.5% | 4/30/2022 | Peter Lopez | 2,360 | 6.3% | 11/30/2020 | 3/19/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | 12/31/2024 | Pieology Pizzeria | 2,278 | 16.3% | 4/30/2025 | Firehouse Subs | 2,128 | 15.2% | 2/28/2023 | 3/29/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | 3/19/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | 3/1/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | 8/17/2022 | Massage Envy | 2,400 | 15.5% | 10/31/2024 | Cali Nails | 1,200 | 7.7% | 12/31/2019 | 3/20/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | 3/28/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | 4/30/2024 | Marios Pizza | 4,100 | 9.5% | 3/31/2021 | Nutmeg Fine Wines & Spirits | 3,665 | 8.5% | 10/31/2020 | 3/22/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | 5/31/2021 | Sukar & Sons of North Georgia | 2,000 | 3.2% | 11/30/2022 | Fashion Hibachi Japan, Inc. | 1,800 | 2.8% | 8/31/2027 | 3/5/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 2/13/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | 8/31/2021 | Highway 55 Burgers, Shakes & Fries | 2,520 | 14.4% | 2/28/2027 | Benchmark Physical Therapy | 1,400 | 8.0% | 1/31/2022 | 3/12/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | 10/12/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | 4/23/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | 6/11/2025 | 4/2/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | 4/24/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | 4/24/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | 4/24/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | 2/28/2031 | Modified Metals | 1,205 | 2.2% | 3/31/2028 | Norvel Derickson | 1,000 | 1.8% | 2/28/2028 | 3/14/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | 9/13/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | 3/20/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | 5/4/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A-1-9
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Environmental Report Date (Phase I) | Environmental Report Date (Phase II) | Seismic Report Date | Seismic PML % | Seismic Insurance Required (Y/N) | Terrorism Insurance (Y/N) | Loan Purpose | Engineering Escrow / Deferred Maintenance ($) | Tax Escrow (Initial) | Monthly Tax Escrow ($) | Tax Escrow - Cash or LoC | Tax Escrow - LoC Counterparty | Insurance Escrow (Initial) | Monthly Insurance Escrow ($) | Insurance Escrow - Cash or LoC | Insurance Escrow - LoC Counterparty | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Village at Leesburg | WFB | 2/23/2018 | N | Y | Recapitalization | 28,125 | 560,062 | 112,013 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Westport Self Storage Portfolio | WFB | 4/30/2018 | N | Y | Refinance | 74,520 | 0 | Springing | 0 | Springing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.02 | Fort Worth USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.03 | Grissom USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.04 | Laredo USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.05 | Austin USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.06 | Tampa USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.07 | Harker Heights USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.08 | Denton USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.09 | Floresville USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.10 | Blanco USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.11 | Houston Hinman USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.12 | Ocala USSC | WFB | 4/30/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Parkway Center | CIIICM | 12/18/2017 | N | Y | Refinance | 254,896 | 705,609 | 100,801 | Cash | 31,673 | 10,558 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 1801 L Street | WFB | 4/19/2018 | 4/19/2018 | 10.0% | N | Y | Refinance | 63,232 | 117,936 | 29,484 | Cash | 54,120 | 4,510 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | Various | N | Y | Acquisition | 52,133 | 68,033 | 13,633 | Cash | 1,728 | 1,728 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | 3/8/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 2/12/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 3/28/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 3/28/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 3/2/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 3/28/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | 3/19/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | 3/2/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | 3/15/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 3/21/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 3/14/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 3/27/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | 3/20/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | 3/26/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | 2/27/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 1/10/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 2/5/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 3/28/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.19 | Dollar General - Warren | Barclays | 3/13/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 2/5/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Mission Center | WFB | 4/13/2018 | 5/11/2018 | 11.0% | N | Y | Acquisition | 632,500 | 121,395 | 40,465 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | Center Pointe Plaza II | Barclays | 3/16/2018 | N | Y | Refinance | 0 | 194,163 | 24,270 | Cash | 53,798 | Springing | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | 4/13/2018 | N | Y | Refinance | 0 | 122,848 | 19,500 | Cash | 18,894 | 3,599 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9 | Citadel Self Storage | RMF | 2/26/2018 | 5/2/2018 | 11.0% | N | Y | Refinance | 0 | 25,291 | 8,265 | Cash | 29,892 | 2,847 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 | 181 Fremont Street | Barclays | 3/7/2018 | 3/7/2018 | 12.0% | N | Y | Refinance | 0 | 0 | 509,418 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11 | CoolSprings Galleria | WFB | 3/21/2018 | N | Y | Refinance | 0 | 702,515 | 234,171 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | 4/4/2018 | N | Y | Refinance | 0 | 0 | 3,226 | Cash | 34,346 | 4,673 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.01 | Sunset Country MHC | RMF | 4/4/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | 4/4/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.03 | Oasis MHC | RMF | 4/4/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | Roseville Corporate Center | WFB | 5/3/2018 | 5/4/2018 | 4.0% | N | Y | Acquisition | 41,185 | 88,104 | 22,026 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14 | Montclair East | RMF | 4/5/2018 | 4/5/2018 | 12.0% | N | Y | Refinance | 0 | 60,818 | 14,480 | Cash | 2,061 | 654 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | 5/2/2018 | N | Y | Refinance | 0 | 56,039 | 18,680 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16 | Amcor Industrial Center | Barclays | 5/21/2018 | N | Y | Acquisition | 0 | 0 | Springing | 0 | Springing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | 5/1/2018 | N | Y | Acquisition | 26,375 | 33,358 | 6,672 | Cash | 2,110 | 2,110 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | 5/1/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.02 | Evans II | Barclays | 5/1/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18 | Flats at East Bank | RMF | 4/2/2018 | N | Y | Refinance | 0 | 194,558 | 48,639 | Cash | 52,646 | 5,571 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19 | Tarheel MHC Portfolio | RMF | Various | N | Y | Acquisition | 185,485 | 56,299 | 7,660 | Cash | 4,085 | 1,945 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.01 | Cedar Grove | RMF | 3/27/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.02 | Vandemere | RMF | 3/27/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.03 | Parkwood | RMF | 3/27/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.04 | Colonial | RMF | 3/27/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19.05 | Lambeth | RMF | 3/21/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 2/5/2018 | 3/5/2018 | 9.0% | N | Y | Refinance | 0 | 10,667 | 10,667 | Cash | 2,662 | 2,662 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21 | 2900 McLane Road | WFB | 9/28/2017 | N | Y | Refinance | 0 | 0 | Springing | 0 | Springing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22 | Bond Street Fund 16 | WFB | Various | N | Y | Acquisition | 0 | 37,125 | 8,488 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.01 | Smyrna | WFB | 3/20/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.02 | Shops At Eastchase | WFB | 3/1/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 3/16/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 3/21/2018 | 3/29/2018 | 5.0% | N | Y | Refinance | 0 | 62,244 | 12,449 | Cash | 25,058 | 2,088 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 3/22/2018 | N | Y | Acquisition | 0 | 30,648 | 7,662 | Cash | 954 | 954 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25 | Manito Shopping Center | Barclays | 4/18/2018 | N | Y | Acquisition | 12,500 | 26,420 | 13,210 | Cash | 1,817 | 1,817 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 26 | Securitas Office | CIIICM | 12/5/2017 | N | Y | Refinance | 17,250 | 53,616 | 10,723 | Cash | 6,118 | 2,039 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27 | 5800 North Course Office | CIIICM | 3/20/2018 | N | Y | Acquisition | 0 | 0 | Springing | 0 | Springing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28 | 63-37/27 108th Street | WFB | 4/26/2018 | N | Y | Refinance | 10,000 | 0 | 21,316 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29 | Goldmine Self Storage | CIIICM | 4/9/2018 | 4/9/2018 | 4.0% | N | Y | Acquisition | 625 | 14,010 | 2,335 | Cash | 1,888 | 944 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 3/27/2018 | N | Y | Refinance | 0 | 51,711 | 10,342 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31 | Shops at Cross Creek II | Barclays | 4/30/2018 | N | Y | Refinance | 0 | 111,825 | 18,638 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32 | RC Plaza | WFB | 1/30/2018 | 3/19/2018 | 12.0% | N | Y | Acquisition | 0 | 8,170 | 4,085 | Cash | 4,204 | 601 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Nut Tree Shopping Center | WFB | 3/29/2018 | 3/29/2018 | 6.0% | N | Y | Refinance | 0 | 28,854 | 9,618 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | 2/22/2018 | N | Y | Acquisition | 13,188 | 19,239 | 6,413 | Cash | 15,580 | 2,226 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 35 | Citi Bank - Chicago | RMF | 3/1/2018 | N | Y | Refinance | 0 | 17,402 | 5,524 | Cash | 15,373 | 1,627 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | 3/20/2018 | 7.0% | N | Y | Acquisition | 0 | 12,162 | 6,081 | Cash | 0 | Springing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 37 | Keyway Apartments | CIIICM | 3/27/2018 | N | Y | Acquisition | 7,763 | 32,259 | 3,226 | Cash | 1,548 | 1,548 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 38 | Steelbrook Plaza | CIIICM | 3/23/2018 | N | Y | Refinance | 1,313 | 80,492 | 16,098 | Cash | 7,252 | 2,417 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39 | Plaza at Mableton | CIIICM | 3/9/2018 | N | Y | Refinance | 11,614 | 25,200 | 3,150 | Cash | 3,042 | 507 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40 | La Quinta Batavia | CIIICM | 2/15/2018 | N | Y | Refinance | 1,875 | 25,426 | 6,356 | Cash | 9,595 | 1,371 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 41 | Shops at Waycross | CIIICM | 3/12/2018 | N | Y | Acquisition | 4,375 | 14,136 | 2,356 | Cash | 300 | 300 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 42 | Whispering Pines | CIIICM | 10/13/2017 | N | Y | Refinance | 37,969 | 7,329 | 3,664 | Cash | 3,934 | 1,311 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 43 | Rio Grande MHP | CIIICM | 4/23/2018 | N | Y | Refinance | 4,813 | 8,646 | 1,235 | Cash | 1,480 | 493 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 44 | 189 Court Street | WFB | 3/30/2018 | N | Y | Refinance | 0 | 3,774 | 629 | Cash | 0 | Springing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45 | Economy SS Portfolio | CIIICM | 4/24/2018 | N | Y | Refinance | 1,250 | 8,750 | 1,750 | Cash | 428 | 428 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | 4/24/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | 4/24/2018 | N | Y | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 46 | Security Storage | CIIICM | 3/14/2018 | N | Y | Refinance | 77,125 | 29,686 | 3,298 | Cash | 7,760 | 647 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | 8/3/2017 | N | Y | Acquisition | 39,500 | 1,817 | 908 | Cash | 804 | 402 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 48 | Winding Creek MHC | CIIICM | 3/20/2018 | N | Y | Refinance | 13,000 | 13,704 | 2,284 | Cash | 1,401 | 1,401 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | 5/4/2018 | N | Y | Refinance | 5,313 | 8,858 | 1,107 | Cash | 1,057 | 526 | Cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A-1-10
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES |
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Upfront Replacement Reserve ($)(11) | Monthly Replacement Reserve ($)(10)(13) | Replacement Reserve Cap ($) | Replacement Reserve Escrow - Cash or LoC | Replacement Reserve Escrow - LoC Counterparty | Upfront TI/LC Reserve ($)(5)(7)(11) | Monthly TI/LC Reserve ($)(5)(7)(11) | TI/LC Reserve Cap ($) | TI/LC Escrow - Cash or LoC | TI/LC Escrow - LoC Counterparty | Debt Service Escrow (Initial) ($) | Debt Service Escrow (Monthly) ($)(12) | Debt Service Escrow - Cash or LoC |
| 1 | Village at Leesburg | WFB | 0 | 6,801 | 244,818 | Cash | 0 | 45,894; Springing | 2,010,135 | Cash | 0 | 0 | |||
| 2 | Westport Self Storage Portfolio | WFB | 0 | Springing | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 2.01 | San Antonio/Boerne USSC | WFB | |||||||||||||
| 2.02 | Fort Worth USSC | WFB | |||||||||||||
| 2.03 | Grissom USSC | WFB | |||||||||||||
| 2.04 | Laredo USSC | WFB | |||||||||||||
| 2.05 | Austin USSC | WFB | |||||||||||||
| 2.06 | Tampa USSC | WFB | |||||||||||||
| 2.07 | Harker Heights USSC | WFB | |||||||||||||
| 2.08 | Denton USSC | WFB | |||||||||||||
| 2.09 | Floresville USSC | WFB | |||||||||||||
| 2.10 | Blanco USSC | WFB | |||||||||||||
| 2.11 | Houston Hinman USSC | WFB | |||||||||||||
| 2.12 | Ocala USSC | WFB | |||||||||||||
| 3 | Parkway Center | CIIICM | 9,815 | 9,815 | 0 | Cash | 299,076 | 49,076 | 0 | Cash | 0 | 0 | |||
| 4 | 1801 L Street | WFB | 0 | 4,216 | 0 | Cash | 160,000 | 903 | 0 | Cash | 0 | 0 | |||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | 244,457 | 1,409 | 0 | Cash | 500,000 | 15,378 | 0 | Cash | 0 | 0 | |||
| 5.01 | Walgreens - Yorktown | Barclays | |||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | |||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | |||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | |||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | |||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | |||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | |||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | |||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | |||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | |||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | |||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | |||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | |||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | |||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | |||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | |||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | |||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | |||||||||||||
| 5.19 | Dollar General - Warren | Barclays | |||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | |||||||||||||
| 6 | Mission Center | WFB | 0 | 3,821; Springing | 137,545 | Cash | 0 | 22,926 | 825,265 | Cash | 0 | 0 | |||
| 7 | Center Pointe Plaza II | Barclays | 0 | 2,349 | 0 | Cash | 270,000 | 11,744 | 270,000 | Cash | 0 | 0 | |||
| 8 | Addison Ridge Apartments - Phase II | RMF | 0 | 3,567 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 9 | Citadel Self Storage | RMF | 0 | 1,797 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 10 | 181 Fremont Street | Barclays | 0 | Springing | 0 | 42,717,266 | Springing | 15,271,620 | Cash | 0 | 0 | ||||
| 11 | CoolSprings Galleria | WFB | 0 | 10,907 | 392,643 | Cash | 3,000,000 | 54,534 | The greater of (i) $2,500,000; and (ii) the positive difference equal to $5,500,000 less the sum of all disbursments from the TILC reserve | Cash | 0 | 0 | |||
| 12 | Pueblo MHC Portfolio | RMF | 0 | 2,904 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 12.01 | Sunset Country MHC | RMF | |||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | |||||||||||||
| 12.03 | Oasis MHC | RMF | |||||||||||||
| 13 | Roseville Corporate Center | WFB | 0 | 3,018; Springing | 108,648 | Cash | 0 | 11,379; Springing | 500,000 | Cash | 0 | 0 | |||
| 14 | Montclair East | RMF | 0 | 1,695 | 0 | Cash | 500,000 | Springing | 0 | Cash | 0 | 0 | |||
| 15 | Embassy Suites Tucson, AZ | Barclays | 0 | Springing | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 16 | Amcor Industrial Center | Barclays | 0 | Springing | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 17 | Evans Self Storage Portfolio | Barclays | 0 | 1,571 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 17.01 | Blanchard; Evans I | Barclays | |||||||||||||
| 17.02 | Evans II | Barclays | |||||||||||||
| 18 | Flats at East Bank | RMF | 0 | 5,765 | 0 | Cash | 276,895 | 2,482 | 0 | Cash | 0 | 0 | |||
| 19 | Tarheel MHC Portfolio | RMF | 0 | 2,242 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 19.01 | Cedar Grove | RMF | |||||||||||||
| 19.02 | Vandemere | RMF | |||||||||||||
| 19.03 | Parkwood | RMF | |||||||||||||
| 19.04 | Colonial | RMF | |||||||||||||
| 19.05 | Lambeth | RMF | |||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | 0 | 6,869 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 21 | 2900 McLane Road | WFB | 99,240 | 4,135; Springing | 99,240 | Cash | 0 | 6,616; Springing | 238,176 | Cash | 0 | 0 | |||
| 22 | Bond Street Fund 16 | WFB | 0 | 1,025 | 0 | Cash | 382,000 | 5,000 | 200,000 | Cash | 0 | 0 | |||
| 22.01 | Smyrna | WFB | |||||||||||||
| 22.02 | Shops At Eastchase | WFB | |||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | |||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 0 | 10,848 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | 0 | 631 | 0 | Cash | 0 | 4,735 | 284,094 | Cash | 0 | 0 | |||
| 25 | Manito Shopping Center | Barclays | 0 | Springing | 0 | 0 | Springing | 0 | 0 | 0 | |||||
| 26 | Securitas Office | CIIICM | 1,120 | 1,120 | 0 | Cash | 0 | Springing | 0 | Cash | 0 | 0 | |||
| 27 | 5800 North Course Office | CIIICM | 0 | 0 | 0 | 0 | Springing | 0 | 0 | 0 | |||||
| 28 | 63-37/27 108th Street | WFB | 0 | 267 | 0 | Cash | 0 | 2,293; Springing | 82,500 | Cash | 0 | 0 | |||
| 29 | Goldmine Self Storage | CIIICM | 1,317 | 1,317 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 0 | 9,767 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 31 | Shops at Cross Creek II | Barclays | 0 | 276 | 0 | Cash | 0 | 2,764 | 165,840 | Cash | 0 | 0 | |||
| 32 | RC Plaza | WFB | 0 | 900 | 43,200 | Cash | 0 | 3,675 | 110,000 | Cash | 0 | 0 | |||
| 33 | Nut Tree Shopping Center | WFB | 0 | 233 | 5,592 | Cash | 0 | 2,331 | 195,804 | Cash | 0 | 0 | |||
| 34 | Affordable Storage Woodlands | CIIICM | 1,136 | 1,136 | 40,896 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 35 | Citi Bank - Chicago | RMF | 0 | 90 | 0 | Cash | 0 | 600 | 0 | Cash | 0 | 0 | |||
| 36 | The Shops at Vacaville Crossings | WFB | 0 | 608 | 14,592 | Cash | 0 | 2,235 | 80,460 | Cash | 0 | 0 | |||
| 37 | Keyway Apartments | CIIICM | 1,600 | 1,600 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 38 | Steelbrook Plaza | CIIICM | 25,894 | 894 | 0 | Cash | 2,843 | 2,843 | 0 | Cash | 0 | 0 | |||
| 39 | Plaza at Mableton | CIIICM | 898 | 898 | 0 | Cash | 3,432 | 3,432 | 200,000 | Cash | 0 | 0 | |||
| 40 | La Quinta Batavia | CIIICM | 4,272 | 4,272 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 41 | Shops at Waycross | CIIICM | 146 | 146 | 0 | Cash | 1,298 | 1,298 | 50,000 | Cash | 0 | 0 | |||
| 42 | Whispering Pines | CIIICM | 1,225 | 1,225 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 43 | Rio Grande MHP | CIIICM | 358 | 358 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 44 | 189 Court Street | WFB | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 45 | Economy SS Portfolio | CIIICM | 534 | 534 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 45.01 | Economy SS Raleigh | CIIICM | |||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | |||||||||||||
| 46 | Security Storage | CIIICM | 735 | 735 | 45,000 | Cash | 505 | 505 | 20,000 | Cash | 0 | 0 | |||
| 47 | Juniper Hilltop MHP | CIIICM | 246 | 246 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 48 | Winding Creek MHC | CIIICM | 488 | 488 | 0 | Cash | 0 | 0 | 0 | 0 | 0 | ||||
| 49 | Cape Canaveral MHP | CIIICM | 192 | 192 | 0 | Cash | 0 | 0 | 0 | 0 | 0 |
A-1-11
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES |
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Debt Service Escrow - LoC Counterparty | Other Escrow I Reserve Description | Other Escrow I (Initial) ($)(5)(7) | Other Escrow I (Monthly) ($)(7)(13) | Other Escrow I Cap ($) | Other Escrow I Escrow - Cash or LoC | Other Escrow I - LoC Counterparty | Other Escrow II Reserve Description | Other Escrow II (Initial) ($) | Other Escrow II (Monthly) ($) | Other Escrow II Cap ($) |
| 1 | Village at Leesburg | WFB | Rent Concession Reserve | 842,933 | 0 | 0 | Cash | Outstanding TILC Reserve | 7,649,629 | 0 | 0 | ||
| 2 | Westport Self Storage Portfolio | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 2.01 | San Antonio/Boerne USSC | WFB | |||||||||||
| 2.02 | Fort Worth USSC | WFB | |||||||||||
| 2.03 | Grissom USSC | WFB | |||||||||||
| 2.04 | Laredo USSC | WFB | |||||||||||
| 2.05 | Austin USSC | WFB | |||||||||||
| 2.06 | Tampa USSC | WFB | |||||||||||
| 2.07 | Harker Heights USSC | WFB | |||||||||||
| 2.08 | Denton USSC | WFB | |||||||||||
| 2.09 | Floresville USSC | WFB | |||||||||||
| 2.10 | Blanco USSC | WFB | |||||||||||
| 2.11 | Houston Hinman USSC | WFB | |||||||||||
| 2.12 | Ocala USSC | WFB | |||||||||||
| 3 | Parkway Center | CIIICM | Quest Reserve | 1,616,313 | 13,000 | 0 | Cash | Free Rent Reserve | 45,530 | 0 | 0 | ||
| 4 | 1801 L Street | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 5.01 | Walgreens - Yorktown | Barclays | |||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | |||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | |||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | |||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | |||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | |||||||||||
| 5.07 | Walgreens - Valrico | Barclays | |||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | |||||||||||
| 5.09 | Dollar General - Harvey | Barclays | |||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | |||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | |||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | |||||||||||
| 5.13 | Dollar General - Amherst | Barclays | |||||||||||
| 5.14 | Dollar General - Louisville | Barclays | |||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | |||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | |||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | |||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | |||||||||||
| 5.19 | Dollar General - Warren | Barclays | |||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | |||||||||||
| 6 | Mission Center | WFB | Rent Concession Reserve | 149,706 | 0 | 0 | Cash | Existing TILC Reserve | 46,872 | 0 | 0 | ||
| 7 | Center Pointe Plaza II | Barclays | Janosik Rent Abatement/CAM Reserve | 295,516 | 0 | 0 | Cash | Janosik LC Reserve | 107,000 | 0 | 0 | ||
| 8 | Addison Ridge Apartments - Phase II | RMF | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 9 | Citadel Self Storage | RMF | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 10 | 181 Fremont Street | Barclays | Rent Concession Reserve | 68,379,092 | 0 | 0 | Cash | Project Charges Reserve | 0 | Springing | 0 | ||
| 11 | CoolSprings Galleria | WFB | Tenant Specific TILC Reserve | 2,107,816 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 12 | Pueblo MHC Portfolio | RMF | Home Purchase Reserve | 600,000 | 0 | 0 | Cash | Titling Reserve | 13,965 | 0 | 0 | ||
| 12.01 | Sunset Country MHC | RMF | |||||||||||
| 12.02 | Oakwood Estates MHC | RMF | |||||||||||
| 12.03 | Oasis MHC | RMF | |||||||||||
| 13 | Roseville Corporate Center | WFB | Revionics TILC Reserve | 204,544 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 14 | Montclair East | RMF | New Tenant Reserve | 1,500,000 | 0 | 0 | Cash | Rent Concession Reserve | 245,976 | 0 | 0 | ||
| 15 | Embassy Suites Tucson, AZ | Barclays | PIP Reserve Fund | 297,323 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 16 | Amcor Industrial Center | Barclays | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 17 | Evans Self Storage Portfolio | Barclays | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 17.01 | Blanchard; Evans I | Barclays | |||||||||||
| 17.02 | Evans II | Barclays | |||||||||||
| 18 | Flats at East Bank | RMF | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 19 | Tarheel MHC Portfolio | RMF | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 19.01 | Cedar Grove | RMF | |||||||||||
| 19.02 | Vandemere | RMF | |||||||||||
| 19.03 | Parkwood | RMF | |||||||||||
| 19.04 | Colonial | RMF | |||||||||||
| 19.05 | Lambeth | RMF | |||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | PIP Reserve | 2,357,672 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 21 | 2900 McLane Road | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 22 | Bond Street Fund 16 | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 22.01 | Smyrna | WFB | |||||||||||
| 22.02 | Shops At Eastchase | WFB | |||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | |||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | Hill Country Reserve | 50,000 | 0 | 0 | Cash | Free Rent Reserve | 7,584 | 0 | 0 | ||
| 25 | Manito Shopping Center | Barclays | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 26 | Securitas Office | CIIICM | Rent Concession Reserve | 84,048 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 27 | 5800 North Course Office | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 28 | 63-37/27 108th Street | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 29 | Goldmine Self Storage | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 31 | Shops at Cross Creek II | Barclays | Outstanding TI/Free Rent Reserve Funds | 254,748 | 0 | 0 | Cash | USAA Reserve Account | 200,000 | 0 | 0 | ||
| 32 | RC Plaza | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 33 | Nut Tree Shopping Center | WFB | Buckhorn Grill Reservce | 0 | Springing | 0 | 0 | 0 | 0 | ||||
| 34 | Affordable Storage Woodlands | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 35 | Citi Bank - Chicago | RMF | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 36 | The Shops at Vacaville Crossings | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 37 | Keyway Apartments | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 38 | Steelbrook Plaza | CIIICM | Paving Reserve | 17,500 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 39 | Plaza at Mableton | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 40 | La Quinta Batavia | CIIICM | Seasonality Reserve | 0 | 27,000 | 108,000 | Cash | 0 | 0 | 0 | |||
| 41 | Shops at Waycross | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 42 | Whispering Pines | CIIICM | Seasonality Reserve | 30,000 | 5,000; Springing | 30,000 | Cash | 0 | 0 | 0 | |||
| 43 | Rio Grande MHP | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 44 | 189 Court Street | WFB | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 45 | Economy SS Portfolio | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 45.01 | Economy SS Raleigh | CIIICM | |||||||||||
| 45.02 | Economy SS Clayton | CIIICM | |||||||||||
| 46 | Security Storage | CIIICM | Restoration Reserve | 25,000 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 47 | Juniper Hilltop MHP | CIIICM | Septic System Reserve | 300,000 | 0 | 0 | Cash | 0 | 0 | 0 | |||
| 48 | Winding Creek MHC | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 | |||||
| 49 | Cape Canaveral MHP | CIIICM | 0 | 0 | 0 | 0 | 0 | 0 |
A-1-12
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES |
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Other Escrow II Escrow - Cash or LoC | Other Escrow II - LoC Counterparty | Holdback(14) | Ownership Interest | Ground Lease Initial Expiration Date(15) | Annual Ground Rent Payment(15) | Annual Ground Rent Increases | Lockbox | Whole Loan Cut-off Date Balance ($) | Whole Loan Debt Service ($) | Subordinate Secured Debt Original Balance ($) | Subordinate Secured Debt Cut-off Date Balance ($) | Whole Loan U/W NOI DSCR (x) | Whole Loan U/W NCF DSCR (x) |
| 1 | Village at Leesburg | WFB | Cash | Fee | Hard/Upfront Cash Management | |||||||||||
| 2 | Westport Self Storage Portfolio | WFB | Fee | Springing | ||||||||||||
| 2.01 | San Antonio/Boerne USSC | WFB | Fee | |||||||||||||
| 2.02 | Fort Worth USSC | WFB | Fee | |||||||||||||
| 2.03 | Grissom USSC | WFB | Fee | |||||||||||||
| 2.04 | Laredo USSC | WFB | Fee | |||||||||||||
| 2.05 | Austin USSC | WFB | Fee | |||||||||||||
| 2.06 | Tampa USSC | WFB | Fee | |||||||||||||
| 2.07 | Harker Heights USSC | WFB | Fee | |||||||||||||
| 2.08 | Denton USSC | WFB | Fee | |||||||||||||
| 2.09 | Floresville USSC | WFB | Fee | |||||||||||||
| 2.10 | Blanco USSC | WFB | Fee | |||||||||||||
| 2.11 | Houston Hinman USSC | WFB | Fee | |||||||||||||
| 2.12 | Ocala USSC | WFB | Fee | |||||||||||||
| 3 | Parkway Center | CIIICM | Cash | Fee | Hard/Springing Cash Management | |||||||||||
| 4 | 1801 L Street | WFB | 700,000 | Fee | Springing | 4,750,000 | 6,244,117 | |||||||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | Fee | Hard/Springing Cash Management | ||||||||||||
| 5.01 | Walgreens - Yorktown | Barclays | Fee | |||||||||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | Fee | |||||||||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | Fee | |||||||||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | Fee | |||||||||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | Fee | |||||||||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | Fee | |||||||||||||
| 5.07 | Walgreens - Valrico | Barclays | Fee | |||||||||||||
| 5.08 | Tractor Supply - Scott | Barclays | Fee | |||||||||||||
| 5.09 | Dollar General - Harvey | Barclays | Fee | |||||||||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | Fee | |||||||||||||
| 5.11 | Walgreens - Huber Heights | Barclays | Fee | |||||||||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | Fee | |||||||||||||
| 5.13 | Dollar General - Amherst | Barclays | Fee | |||||||||||||
| 5.14 | Dollar General - Louisville | Barclays | Fee | |||||||||||||
| 5.15 | Dollar General - Mandeville | Barclays | Fee | |||||||||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | Fee | |||||||||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | Fee | |||||||||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | Fee | |||||||||||||
| 5.19 | Dollar General - Warren | Barclays | Fee | |||||||||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | Fee | |||||||||||||
| 6 | Mission Center | WFB | Cash | Fee | Soft/Springing Cash Management | |||||||||||
| 7 | Center Pointe Plaza II | Barclays | Cash | Fee | Hard/Springing Cash Management | |||||||||||
| 8 | Addison Ridge Apartments - Phase II | RMF | Fee | Springing | ||||||||||||
| 9 | Citadel Self Storage | RMF | Fee | Springing | ||||||||||||
| 10 | 181 Fremont Street | Barclays | Fee | Hard/Upfront Cash Management | ||||||||||||
| 11 | CoolSprings Galleria | WFB | Fee | Hard/Springing Cash Management | ||||||||||||
| 12 | Pueblo MHC Portfolio | RMF | Cash | Fee | Springing | |||||||||||
| 12.01 | Sunset Country MHC | RMF | Fee | |||||||||||||
| 12.02 | Oakwood Estates MHC | RMF | Fee | |||||||||||||
| 12.03 | Oasis MHC | RMF | Fee | |||||||||||||
| 13 | Roseville Corporate Center | WFB | Fee | Springing | ||||||||||||
| 14 | Montclair East | RMF | Cash | Fee | Springing | |||||||||||
| 15 | Embassy Suites Tucson, AZ | Barclays | Fee | Hard/Springing Cash Management | ||||||||||||
| 16 | Amcor Industrial Center | Barclays | Fee | Hard/Springing Cash Management | ||||||||||||
| 17 | Evans Self Storage Portfolio | Barclays | Fee | Springing | ||||||||||||
| 17.01 | Blanchard; Evans I | Barclays | Fee | |||||||||||||
| 17.02 | Evans II | Barclays | Fee | |||||||||||||
| 18 | Flats at East Bank | RMF | Fee and Leasehold | 12/31/2034 | $24,000 | Hard/Upfront Cash Management | 92,829,951 | 557,582 | 21,000,000 | 20,829,951 | 1.07 | 1.05 | ||||
| 19 | Tarheel MHC Portfolio | RMF | Fee | Springing | ||||||||||||
| 19.01 | Cedar Grove | RMF | Fee | |||||||||||||
| 19.02 | Vandemere | RMF | Fee | |||||||||||||
| 19.03 | Parkwood | RMF | Fee | |||||||||||||
| 19.04 | Colonial | RMF | Fee | |||||||||||||
| 19.05 | Lambeth | RMF | Fee | |||||||||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | Fee | Hard/Springing Cash Management | ||||||||||||
| 21 | 2900 McLane Road | WFB | Fee | Springing | ||||||||||||
| 22 | Bond Street Fund 16 | WFB | Fee | Springing | ||||||||||||
| 22.01 | Smyrna | WFB | Fee | |||||||||||||
| 22.02 | Shops At Eastchase | WFB | Fee | |||||||||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | Fee | |||||||||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | Fee | Hard/Springing Cash Management | ||||||||||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | Cash | Fee | Springing | |||||||||||
| 25 | Manito Shopping Center | Barclays | Fee | Hard/Springing Cash Management | ||||||||||||
| 26 | Securitas Office | CIIICM | Fee | Springing | ||||||||||||
| 27 | 5800 North Course Office | CIIICM | Fee | Hard/Upfront Cash Management | ||||||||||||
| 28 | 63-37/27 108th Street | WFB | Fee | Springing | ||||||||||||
| 29 | Goldmine Self Storage | CIIICM | Fee | Springing | ||||||||||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | Fee | Hard/Springing Cash Management | ||||||||||||
| 31 | Shops at Cross Creek II | Barclays | Cash | Fee | Hard/Springing Cash Management | |||||||||||
| 32 | RC Plaza | WFB | Fee | Springing | ||||||||||||
| 33 | Nut Tree Shopping Center | WFB | Fee | Springing | ||||||||||||
| 34 | Affordable Storage Woodlands | CIIICM | Fee | Springing | ||||||||||||
| 35 | Citi Bank - Chicago | RMF | Fee | Springing | ||||||||||||
| 36 | The Shops at Vacaville Crossings | WFB | Fee | Springing | ||||||||||||
| 37 | Keyway Apartments | CIIICM | Fee | Springing | ||||||||||||
| 38 | Steelbrook Plaza | CIIICM | Fee | Springing | ||||||||||||
| 39 | Plaza at Mableton | CIIICM | Fee | Springing | ||||||||||||
| 40 | La Quinta Batavia | CIIICM | Fee | Springing | ||||||||||||
| 41 | Shops at Waycross | CIIICM | Fee | Springing | ||||||||||||
| 42 | Whispering Pines | CIIICM | Fee | Springing | ||||||||||||
| 43 | Rio Grande MHP | CIIICM | Fee | Springing | ||||||||||||
| 44 | 189 Court Street | WFB | Fee | None | ||||||||||||
| 45 | Economy SS Portfolio | CIIICM | Fee | Springing | ||||||||||||
| 45.01 | Economy SS Raleigh | CIIICM | Fee | |||||||||||||
| 45.02 | Economy SS Clayton | CIIICM | Fee | |||||||||||||
| 46 | Security Storage | CIIICM | Fee | Springing | ||||||||||||
| 47 | Juniper Hilltop MHP | CIIICM | Fee | Springing | ||||||||||||
| 48 | Winding Creek MHC | CIIICM | Fee | Springing | ||||||||||||
| 49 | Cape Canaveral MHP | CIIICM | Fee | Springing |
A-1-13
| ANNEX A-1 — CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES |
| Mortgage Loan Number | Property Name | Mortgage Loan Seller(1) | Whole Loan Cut-off Date LTV Ratio | Whole Loan Cut-off Date U/W NOI Debt Yield | Whole Loan Cut-off Date U/W NCF Debt Yield | Mezzanine Debt Cut-off Date Balance($) | Sponsor(16) | Affiliated Sponsors | Mortgage Loan Number |
| 1 | Village at Leesburg | WFB | Gary D. Rappaport | 1 | |||||
| 2 | Westport Self Storage Portfolio | WFB | Westport Properties Inc. | 2 | |||||
| 2.01 | San Antonio/Boerne USSC | WFB | 2.01 | ||||||
| 2.02 | Fort Worth USSC | WFB | 2.02 | ||||||
| 2.03 | Grissom USSC | WFB | 2.03 | ||||||
| 2.04 | Laredo USSC | WFB | 2.04 | ||||||
| 2.05 | Austin USSC | WFB | 2.05 | ||||||
| 2.06 | Tampa USSC | WFB | 2.06 | ||||||
| 2.07 | Harker Heights USSC | WFB | 2.07 | ||||||
| 2.08 | Denton USSC | WFB | 2.08 | ||||||
| 2.09 | Floresville USSC | WFB | 2.09 | ||||||
| 2.10 | Blanco USSC | WFB | 2.10 | ||||||
| 2.11 | Houston Hinman USSC | WFB | 2.11 | ||||||
| 2.12 | Ocala USSC | WFB | 2.12 | ||||||
| 3 | Parkway Center | CIIICM | 4,700,000 | Jeffery Aeder; Daniel Warman; Robert Oppenheim; Allan Serviansky | 3 | ||||
| 4 | 1801 L Street | WFB | Sotiris K. Kolokotronis; Matina R. Kolokotronis | 4 | |||||
| 5 | ExchangeRight Net Leased Portfolio #21 | Barclays | ExchangeRight Real Estate | 5 | |||||
| 5.01 | Walgreens - Yorktown | Barclays | 5.01 | ||||||
| 5.02 | Hobby Lobby - Birmingham | Barclays | 5.02 | ||||||
| 5.03 | Fresenius Medical Care - Belpre | Barclays | 5.03 | ||||||
| 5.04 | Tractor Supply - Hollywood | Barclays | 5.04 | ||||||
| 5.05 | Tractor Supply - Chesapeake | Barclays | 5.05 | ||||||
| 5.06 | Fresenius Medical Care - Chicago | Barclays | 5.06 | ||||||
| 5.07 | Walgreens - Valrico | Barclays | 5.07 | ||||||
| 5.08 | Tractor Supply - Scott | Barclays | 5.08 | ||||||
| 5.09 | Dollar General - Harvey | Barclays | 5.09 | ||||||
| 5.10 | Fresenius Medical Care - Hammond | Barclays | 5.10 | ||||||
| 5.11 | Walgreens - Huber Heights | Barclays | 5.11 | ||||||
| 5.12 | Dollar General - Reynoldsburg | Barclays | 5.12 | ||||||
| 5.13 | Dollar General - Amherst | Barclays | 5.13 | ||||||
| 5.14 | Dollar General - Louisville | Barclays | 5.14 | ||||||
| 5.15 | Dollar General - Mandeville | Barclays | 5.15 | ||||||
| 5.16 | Advance Auto Parts - Gillette | Barclays | 5.16 | ||||||
| 5.17 | Napa Auto Parts - McHenry | Barclays | 5.17 | ||||||
| 5.18 | O’Reilly Auto Parts - Knoxville | Barclays | 5.18 | ||||||
| 5.19 | Dollar General - Warren | Barclays | 5.19 | ||||||
| 5.20 | Napa Auto Parts - Crystal Lake | Barclays | 5.20 | ||||||
| 6 | Mission Center | WFB | Neil Kadisha; Benjamin Nazarian | 6 | |||||
| 7 | Center Pointe Plaza II | Barclays | Louis Capano, III and Louis Capano Jr. | 7 | |||||
| 8 | Addison Ridge Apartments - Phase II | RMF | Charles F. Weber | 8 | |||||
| 9 | Citadel Self Storage | RMF | Kabir Sundher; Raubi Sundher | 9 | |||||
| 10 | 181 Fremont Street | Barclays | 225,000,000 | Joseph K. Paul | 10 | ||||
| 11 | CoolSprings Galleria | WFB | CBL & Associates Limited Partnership; CBL & Associates Properties, Inc.; Teachers Insurance and Annuity Association of America; APG Asset Management US Inc. | 11 | |||||
| 12 | Pueblo MHC Portfolio | RMF | Ben Braband; Geoff Rosenhain | 12 | |||||
| 12.01 | Sunset Country MHC | RMF | 12.01 | ||||||
| 12.02 | Oakwood Estates MHC | RMF | 12.02 | ||||||
| 12.03 | Oasis MHC | RMF | 12.03 | ||||||
| 13 | Roseville Corporate Center | WFB | Stephen B. Dwelle; Walter A. Dwelle; Thomas A. Dwelle; David W. Dwelle | 13 | |||||
| 14 | Montclair East | RMF | Benjamin Donel; Behnam “Benny” Kohanteb | 14 | |||||
| 15 | Embassy Suites Tucson, AZ | Barclays | Lodging Dynamics | 15 | |||||
| 16 | Amcor Industrial Center | Barclays | Livingston Street Capital, LLC | 16 | |||||
| 17 | Evans Self Storage Portfolio | Barclays | Franklin F. Adams | 17 | |||||
| 17.01 | Blanchard; Evans I | Barclays | 17.01 | ||||||
| 17.02 | Evans II | Barclays | 17.02 | ||||||
| 18 | Flats at East Bank | RMF | 67.1% | 7.7% | 7.6% | Scott A. Wolstein and Iris S. Wolstein, as Trustee of the Iris S. Wolstein Trust originally dated October 26, 1995, as amended and restated on September 18, 2017 | 18 | ||
| 19 | Tarheel MHC Portfolio | RMF | Austin Rian Berk; Ridaa H. Murad | 19 | |||||
| 19.01 | Cedar Grove | RMF | 19.01 | ||||||
| 19.02 | Vandemere | RMF | 19.02 | ||||||
| 19.03 | Parkwood | RMF | 19.03 | ||||||
| 19.04 | Colonial | RMF | 19.04 | ||||||
| 19.05 | Lambeth | RMF | 19.05 | ||||||
| 20 | Holiday Inn Express & Suites - Sumner, WA | Barclays | Dave Allegre, Cory Shelest and John Graham | 20 | |||||
| 21 | 2900 McLane Road | WFB | George Hicker | 21 | |||||
| 22 | Bond Street Fund 16 | WFB | Michael D. Reynolds | 22 | |||||
| 22.01 | Smyrna | WFB | 22.01 | ||||||
| 22.02 | Shops At Eastchase | WFB | 22.02 | ||||||
| 22.03 | 271 Indian Lake Boulevard | WFB | 22.03 | ||||||
| 23 | Springhill Suites - Lancaster, CA | Barclays | Hyunsoo Lee; Jae Chan Lee | 23 | |||||
| 24 | Medical Towers at Sawyer Ranch | Barclays | Ben Sheridan; Joe Greulich; Ted Barr | 24 | |||||
| 25 | Manito Shopping Center | Barclays | Anthony L. N. Hampel | 25 | |||||
| 26 | Securitas Office | CIIICM | D. Wayne Whipkey and The Richard W. Janson Revocable Trust dated 12/1/2006 | 26 | |||||
| 27 | 5800 North Course Office | CIIICM | Daniel R. Carter | 27 | |||||
| 28 | 63-37/27 108th Street | WFB | Joshua Goldberg | 28 | |||||
| 29 | Goldmine Self Storage | CIIICM | James R. Medeiros, Sr.; Irene Medeiros | 29 | |||||
| 30 | Hampton Inn Omaha West Dodge Road Old Mill | WFB | D. Keith Wilson | 30 | |||||
| 31 | Shops at Cross Creek II | Barclays | Sanford P. Aron | 31 | |||||
| 32 | RC Plaza | WFB | Leon S. Kaplan | 32 | |||||
| 33 | Nut Tree Shopping Center | WFB | Charles F. Smith; Ricardo Capretta; Lida Capretta | 33 | |||||
| 34 | Affordable Storage Woodlands | CIIICM | Gregg M. Pratka; Joel Patrick Collier | 34 | |||||
| 35 | Citi Bank - Chicago | RMF | Yitzchak Meyer Green; Rivka Green | 35 | |||||
| 36 | The Shops at Vacaville Crossings | WFB | Sreenivasulu Ramireddy | 36 | |||||
| 37 | Keyway Apartments | CIIICM | George Divel, III | 37 | |||||
| 38 | Steelbrook Plaza | CIIICM | David Levitan; Shimmie Horn; Sidney Borenstein | 38 | |||||
| 39 | Plaza at Mableton | CIIICM | Carnegie Properties, Inc. | 39 | |||||
| 40 | La Quinta Batavia | CIIICM | Jayesh Patel | 40 | |||||
| 41 | Shops at Waycross | CIIICM | Donald S. Williams; Kathy Williams | 41 | |||||
| 42 | Whispering Pines | CIIICM | George Branton | Y - Group 1 | 42 | ||||
| 43 | Rio Grande MHP | CIIICM | David Worth; Andrew Goetz | 43 | |||||
| 44 | 189 Court Street | WFB | Gerard R. Longo | 44 | |||||
| 45 | Economy SS Portfolio | CIIICM | Mark Foushee; Mike Harkey; Jeff Loggins; | 45 | |||||
| 45.01 | Economy SS Raleigh | CIIICM | 45.01 | ||||||
| 45.02 | Economy SS Clayton | CIIICM | 45.02 | ||||||
| 46 | Security Storage | CIIICM | Jim Harvey | 46 | |||||
| 47 | Juniper Hilltop MHP | CIIICM | Jonathan Bond; Paras Shah; Jacob Bond | 47 | |||||
| 48 | Winding Creek MHC | CIIICM | Douglas A. Dattilo | 48 | |||||
| 49 | Cape Canaveral MHP | CIIICM | Charles Trail | Y - Group 1 | 49 |
A-1-14
FOOTNOTES TO ANNEX A-1
| See “Annex A-3: Summaries of the Fifteen Largest Mortgage Loans” in the Preliminary Prospectus for additional information on the 15 largest mortgage loans. | |
| (1) | “WFB” denotes Wells Fargo Bank, National Association, “Barclays” denotes Barclays Bank PLC, “RMF” denotes Rialto Mortgage Finance, LLC and “CIIICM” denotes C-III Commercial Mortgage LLC. |
| (2) | For mortgage loan #2 (Westport Self Storage Portfolio), 16.2% of U/W revenues includes retail/commercial tenants, tenant insurance, cell tower/billboard, administrative fee, merchandise sales and other miscellaneous income. |
| For Mortgage Loan #3 (Parkway Center), the Number of Units does not include a 365 space parking garage located adjacent to Building 7, which is part of the collateral. | |
| For mortgage loan #4 (1801 L Street), 28.1% of U/W Revenues includes tenant utilities, parking, storage, retail and other income. | |
| For mortgage loan #18 (Flats at East Bank), the Number of Units includes 241 multifamily units and 59,562 square feet of retail space. | |
| For mortgage loan #19 (Tarheel MHC Portfolio), the Number of Units of the Lambeth property includes 62 manufactured housing community pads and two units of retail. The two units of retail are not included in the Number of Units of the mortgaged property but are part of the collateral. | |
| For Mortgage Loan #42 (Whispering Pines), the Number of Units includes 165 RV sites and 3 apartments, which accounts for approximately 43.1% of U/W Revenues. | |
| For mortgage loan #44 (189 Court Street), the Number of Units includes 2,100 square feet of multifamily and 900 square feet of retail. | |
| For Mortgage Loan #45 (Economy SS Portfolio), the Number of Units does not include a 600 square feet of office space located at the Economy SS Raleigh Mortgage Property. The Occupancy Rate does not reflect the occupancy of the office space. | |
| For Mortgage Loan #46 (Security Storage), the Number of Units includes 13,355 square feet of office/warehouse space and 41,027 square feet of storage units. | |
| For Mortgage Loan #48 (Winding Creek), the Number of Units includes 11 apartments and one single family home. The Occupancy Rate reflects the occupancy of the mobile homes, apartments and single family home. | |
| (3) | For mortgage loan #6 (Mission Center), if as of the monthly payment date in June 2023 the NCF Debt Yield is at least 10.5%, the borrower will have one additional year of interest-only debt service payments. The LTV Ratio at Maturity or ARD, assuming the borrower has one additional year of interest-only debt service payments, is 63.7%. |
| (4) | For mortgage loan #18 (Flats at East Bank), the borrower is paying on a 30-year amortization schedule on the Whole Loan of $93,000,000 with all amortization being applied to the B Note with an original balance of $21,000,000; therefore, the B Note interest rate varies every month. |
| (5) | For mortgage loan #1 (Village at Leesburg), the Appraised Value assumes the second largest tenant (63,564 square feet), representing 11.6% of net rentable square feet, has completed its |
A-1-15
| renovation. All outstanding tenant improvement and leasing commission costs have been reserved. The Appraised Value assuming the renovations have not been completed is $205,000,000. The Cut-off Date LTV Ratio and LTV Ratio at Maturity or ARD based on the $205,000,000 appraised value are 64.0% and 58.8%, respectively. | |
| For mortgage loan #2 (Westport Self Storage Portfolio), the Appraised Value assumes the pool level appraisal, which includes a diversity premium based on an assumption that all the mortgaged properties would be sold together as a portfolio. The aggregate appraised value of the individual mortgaged properties is $79,210,000. | |
| For mortgage loan #10 (181 Fremont Street), the Appraised Value is a prospective market value that assumes the mortgaged property is complete and/or achieves stabilization as of March 1, 2021. The As-Is Appraised Value is $461,000,000 as of February 28, 2018 and is inclusive of deductions for free rent, tenant improvement and leasing commission (“TI/LC”) obligations. The borrower deposited upfront reserves totaling $111,096,358 for such contractual TI/LC obligations and free rent. The Cut-off Date LTV Ratio and LTV Ratio at Maturity or ARD based on the $461,000,000 appraised value are 54.2% and 54.2%, respectively. | |
| For mortgage loan #20 (Holiday Inn Express & Suites - Sumner, WA), the Appraised Value assumes a capital improvement plan in the amount of $2,357,672 has been reserved. At loan closing, $2,357,672 was deposited into a property improvement plan reserve. | |
| For mortgage loan #22 (Bond Street Fund 16), the Appraised Value assumes the portfolio achieves stabilized occupancy by April 2019. The appraised value assuming stabilized occupancy has not been achieved is $15,250,000. The Cut-off Date LTV Ratio and LTV Ratio at Maturity or ARD based on the $15,250,000 appraised value are 68.4% and 61.2%, respectively. | |
| (6) | For mortgage loan #1 (Village at Leesburg), the mortgage loan represents Note A-2, one of two pari passu notes, which have a combined Cut-off Date Balance of $131,250,000. Note A-1 is not included in the trust. All LTV, DSCR, Debt Yield and Cut-off Date Balance Per Unit/SF figures presented are based on Notes A-1 and A-2 in the aggregate (the “Village at Leesburg Whole Loan”). Note A-2 represents the non-controlling interest in the Village at Leesburg Whole Loan. |
| For mortgage loan #10 (181 Fremont Street) the mortgage loan represents Note A-6-2, one of seven pari passu notes, which have a combined Cut-off Date Balance of $250,000,000. Note A-1, A-2, A-3, A-4, A-5 and A-6-1 are not included in the trust. All LTV, DSCR, Debt Yield and Cut-off Date Balance per Unit/SF figures presented are based on Notes A-1, A-2, A-3, A-4, A-5, A-6-1 and A-6-2 in the aggregate (the “181 Fremont Street Whole Loan”). Note A-1 represents a controlling interest in the 181 Fremont Street Whole Loan. | |
| For mortgage loan #11 (CoolSprings Galleria), the mortgage loan represents Note A-3, one of four pari passu notes, which have a combined Cut-off Date Balance of $154,615,523. Notes A-1, A-2 and A-4 are not included in the trust. All LTV, DSCR, Debt Yield and Cut-off Date Balance Per Unit/SF figures presented are based on Notes A-1, A-2, A-3 and A-4 in the aggregate (the “CoolSprings Galleria Whole Loan”). Note A-3 represents a non-controlling interest in the CoolSprings Galleria Whole Loan. | |
| For mortgage loan #18 (Flats at East Bank), the mortgage loan represents Note A-2, one of two pari passu notes, which have a combined Cut-off Date Balance of $72,000,000. Notes A-1 is not included in the trust. All LTV, DSCR, Debt Yield and Cut-off Date Balance Per Unit/SF figures presented are based on Notes A-1 and A-2 in the aggregate (the “Flats at East Bank Whole Loan”). Note A-2 represents a non-controlling interest in the Flats at East Bank Whole Loan. | |
| (7) | In certain cases, mortgage loans may have tenants that have executed leases, but may not be fully paying rent or occupying the related leased premises that were included in the underwriting. |
A-1-16
| For mortgage loan #1 (Village at Leesburg), the second largest tenant (63,564 square feet), representing 11.6% of net rentable square feet, is expanding its space and will not begin paying rent on the expansion until its completion, expected in November 2018. All outstanding rent concession, tenant improvements and leasing commissions were reserved for at closing. | |
| For Mortgage Loan #3 (Parkway Center), the largest tenant (136,197 square feet), representing approximately 23.1% of net rentable square feet, recently expanded into an additional 11,162 square feet for which it does not begin paying rent until December 2018. | |
| For mortgage loan #6 (Mission Center), the second largest tenant (47,234 square feet), representing 25.8% of net rentable square feet, has a 50% rent abatement through September 2018. All outstanding rent abatements were reserved for at closing. | |
| For mortgage loan #7 (Center Pointe Plaza II), the largest tenant (30,000 square feet), was offered no tenant improvements but has a rent abatement period of five months and a CAM abatement period of six months. At loan closing, $295,516 was deposited into the Rent Abatement/CAM Reserve Account, representing the outstanding rent abatement and CAM abatement due to the largest tenant. | |
| For mortgage loan #10 (181 Fremont Street), the largest tenant (436,332 square feet), representing 100% of net rentable square feet, has executed a lease but has yet to take occupancy at the mortgaged property or commence paying rent. The tenant is expected to take occupancy in three phases with floors 5 through 13 being occupied in February 2019, floors 14 through 25 being occupied in March 2020 and floors 26 through 38 being occupied in March 2021. The tenant will begin paying partial rent in February 2019 and will commence paying full unabated rent in March 2021. At loan closing, $68,379,092 was deposited into the free rent reserve account, representing the outstanding rent abatement due to the largest tenant. | |
| For mortgage loan #14 (Montclair East), the largest tenant (41,623 square feet), representing approximately 30.7% of net rentable square feet, has been a tenant at the mortgaged property since 1993. The tenant recently executed a new lease, relocating from their current 24,000-square-feet space to the 41,623-square-feet space, which was vacated in early 2017. The second largest tenant (24,000 square feet), representing approximately 17.7% of net rentable square feet, is moving into the current 24,000-square-feet space, which is expected to be completed by July 2018. Upon the delivery of the spaces, the two tenants will pay abated rents for 120 days in order to facilitate relocation to the new spaces. At closing, the borrower deposited $245,976 to the Free Rent reserve. The fourth largest tenant (12,652 square feet), Five Below, Inc., representing approximately 9.3% of net rentable square feet, is currently building out their space and plans to take occupancy and start paying rent in June 2018. The current base rent is $12.95 per square foot and will increase to $14.16 per square foot in January 2023. | |
| For mortgage loan #24 (Medical Towers at Sawyer Ranch), the fifth largest tenant (3,493 square feet), representing approximately 9.2% of net rentable square feet, has recently agreed to expand their space by 1,247 square feet. The tenant will take occupancy of the expansion space and begin rent payments upon the earlier of (i) the completion of the tenant improvements in the expansion space or (ii) October 10, 2018. At loan closing, $50,000 was deposited into a gap rent reserve account, representing approximately 21 months of holdback for the fifth largest tenant’s expansion space. | |
| For mortgage loan #31 (Shops at Cross Creek II), the fourth largest tenant (2,200 square feet), representing 9.9% of net rentable square feet, has executed a lease and commenced paying rent, but has yet to take occupancy at the property. The fourth largest tenant is expected to take occupancy in mid-June. At loan closing, $100,000 was deposited into the outstanding tenant improvement and leasing commission reserve account for this tenant. |
A-1-17
| For mortgage loan #36 (The Shops at Vacaville Crossings), the fourth largest tenant (2,400 square feet), representing 15.5% of net rentable square feet, has two months of free rent in January 2020 and 2023. | |
| (8) | For Mortgage Loan #26 (Securitas Office), the property is, and has historically been, leased to a single tenant. The tenant is responsible for paying all expenses directly. As such, historical operating statements were not provided. |
| For Mortgage Loan #47 (Juniper Hilltop MHP), the Borrower acquired the property in November 2017. During and immediately following acquisition, the Borrower was unable to obtain operating statements. The Most Recent Period represents the 10 months annualized ending April 30, 2018, excluding the months of October and November. The Second Most Recent Period represents the 10 months annualized ended December 2017, excluding the months of October and November. | |
| (9) | The tenant early termination options discussed in this footnote are not intended to be an exclusive list. In particular, termination options based on co-tenancy clauses are generally included only for top five tenants by net rentable square feet if the option is currently or imminently exercisable. |
| For Mortgage Loan #3 (Parkway Center), the fourth largest tenant (38,354 square feet), representing approximately 6.5% of net rentable square feet, may terminate its lease on May 30, 2021 upon no less than 270 days’ notice and payment of a termination fee equal to approximately $1,391,115. The fifth largest tenant, (18,476 square feet), representing approximately 3.1% of the net rentable square feet, may terminate its lease beginning on July 1, 2020 upon 270 days’ notice and payment of a termination fee equal to approximately $1,082,115. | |
| For mortgage loan #11 (CoolSprings Galleria), the third largest tenant (23,644 square feet), representing 3.7% of net rentable square feet, may terminate its lease if gross sales for the trailing twelve month period ending May 1, 2020 are less than $4,000,000, upon providing 180 days’ written notice. | |
| For mortgage loan #13 (Roseville Corporate Center), the second largest tenant (14,119 square feet), representing 12.9% of net rentable square feet, may terminate its lease as of August 31, 2022 upon providing 12 months written notice and payment of a termination fee equal to the base rent abatement plus all unamortized tenant improvements and leasing commissions. The second largest tenant may only terminate if its operations have shut down in Sacramento and Placer County, or the landlord cannot accommodates its expansion. The fourth largest tenant (10,242 square feet), representing 9.4% of net rentable square feet, may terminate its lease on 4,164 square feet on January 31, 2020 upon providing written notice by April 30, 2019 and payment of a termination fee equal to all unamortized tenant improvements, leasing commissions and rent abatements. | |
| For mortgage loan #14 (Montclair East), the fourth largest tenant (12,652 square feet), representing approximately 9.3% of net rentable square feet, may terminate its lease if the built out premises are smaller than 12,000 square feet by 3% or more by providing 30 days’ prior written notice. Additionally, the fourth largest tenant may terminate its lease effective the last day of the 60th full calendar month by providing written notice prior to the expiration of the 57th full calendar month and paying a termination fee equal to 50% of unamortized tenant improvement allowance. If termination date falls within months of September through December, the tenant may extend termination date to the next succeeding January 31. | |
| For Mortgage Loan #41 (Shops at Waycross), the largest tenant (6,842 square feet), representing approximately 39.0% of net rentable square feet, may terminate its lease beginning on September 1, 2022 upon 120 days’ written notice. The third largest tenant (3,274 |
A-1-18
| square feet), representing approximately 18.7% of net rentable square feet, may terminate its lease beginning on August 1, 2019 upon 120 days’ written notice. | |
| (10) | For mortgage loan #23 (Springhill Suites - Lancaster, CA), the Monthly Replacement Reserve shall be deposited in an amount equal to 1/12th of the greater of (i) 4.0% of projected annual gross income from operations of the Property or (ii) that amount required pursuant to the franchise agreement. |
| For mortgage loans #40 (La Quinta Batavia), the Monthly Replacement Reserve will be adjusted based on the annual operating statements for the mortgaged property reflecting 1/12th of 4% of the operating income from the prior fiscal year. | |
| (11) | For mortgage loan #5 (ExchangeRight Net Leased Portfolio #21), TI/LC underwriting is inclusive of a straight-line credit for the upfront TI/LC reserve equal to $50,000, which is 10.0% of the upfront TI/LC reserve of $500,000, and replacement reserves underwriting is inclusive of a straight-line credit equal to $24,446, which is 10.0% of the upfront replacement reserves of $244,457. At loan closing, $500,000 was deposited into a tenant improvement and leasing commission reserve account for future re-tenanting expenses and $244,457 was deposited into a replacement reserve account. |
| For mortgage loan #7 (Center Pointe Plaza II), TI/LC underwriting is inclusive of a straight-line credit for the upfront TI/LC reserve equal to $27,000, which is 10.0% of the upfront TI/LC reserve of $270,000. At loan closing, $270,000 was deposited into a tenant improvement and leasing commission reserve account for future re-tenanting expenses. | |
| For Mortgage Loan #27 (5800 North Course Office), the loan sweeps all excess cash flows to the TI/LC reserve between the first and 24th payments. Beginning with the June 11, 2020 payment date the Monthly TI/LC escrow shall be $8,304. | |
| (12) | For mortgage loan #18 (Flats at East Bank), the borrower sponsor received a $17,000,000 loan from Cuyahoga County to finance the mortgaged property in April, 2014. The loan was made from the proceeds of Cuyahoga County’s issuance of bonds named $17,000,000 Taxable Economic Development Revenue Bonds, Series 2014A (Flats East Development LLC Project) (“IRB Bonds”). The bonds are allocated into three tranches of approximately $3.78M (at 4.5%), $6.865M (at 5.5%), and $6.355M (at 6.0%) and expire in 2024, 2033 and 2038, respectively. The debt service for the loan will be used to repay the IRB Bonds and is secured by a subordinate mortgage on the mortgaged property (subject to a subordination and intercreditor agreement). The bond trustee is holding one year of debt service ($1,366,650) in a reserve for the IRB Bonds. The current outstanding balance of the IRB Bonds is $16,565,000. All tranches of the IRB Bonds are fully amortizing. The guarantor (and other affiliates of the borrower) have guaranteed amounts due under the IRB Bonds. |
| (13) | For Mortgage Loan #3 (Parkway Center), the Other Escrow I (Monthly) deposit of $13,000 is only required to be made from the first through the 77th payment date. |
| For mortgage loan #10 (181 Fremont Street), for a description of escrows, see Annex A-3 to this Preliminary Prospectus. | |
| For mortgage loan #15 (Embassy Suites Tucson, AZ), beginning on the July 6, 2019 payment date, the borrower will make monthly deposits into the FF&E Reserve Account in an amount equal to 1/12th of the greater of (i) 4.0% of total gross revenues of the Property or (ii) that amount required pursuant to the franchise agreement. | |
| For mortgage loan #16 (Amcor Industrial Center), the borrower will make monthly deposits of $1,683 into the Monthly Replacement Reserve account, capped at $100,000, upon the occurrence of any of the following: (i) an event of default, (ii) the debt service coverage ratio is less than 1.15x, (iii) an Amcor trigger event, as defined in the loan agreement or (iv) an extension term trigger event, as defined in the loan agreement. |
A-1-19
| For mortgage loan #20 (Holiday Inn Express & Suites – Sumner, WA), commencing on the first payment date and continuing through the May 6, 2020 payment date, the borrower will deposit into the FF&E reserve 1/12th of the greater of (i) 2% of the projected annual gross income from operations of the property and (ii) the amount required pursuant to the franchise agreement. Commencing on the June 6, 2020 payment date, the borrower will deposit into the FF&E reserve one-twelfth of the greater of (i) 4.0% of the annual gross income from operations of the property and (ii) the amount required pursuant to the franchise agreement. | |
| For Mortgage Loan #40 (La Quinta Batavia), the Other Escrow I (Monthly) deposit of $27,000, capped at $108,000, is only required to be made from June through September of each calendar year. | |
| For Mortgage Loan #42 (Whispering Pines), the Other Escrow I (Monthly) deposit shall be $5,000 if the amount in escrow falls below $30,000 and is only required to be made on December through May of any calendar year. | |
| (14) | For mortgage loan #4 (1801 L Street), all LTVs, DSCRs and Debt Yields are calculated assuming the full loan amount of $38,000,000. The Holdback can be disbursed in whole provided that the following conditions are satisfied: (i) a minimum net cash flow debt yield of 7.9%; (ii) a minimum net cash flow debt service coverage ratio, based on a 30 year amortization schedule, of 1.20x; (iii) a minimum net cash flow debt service coverage ratio of 1.45x; (iv) 3,128 square feet of vacant space has been leased pursuant to a lease approved by the lender and the tenant is in occupancy and has no outstanding tenant improvements, leasing commissions or free rent; and (v) no event of default has occurred or is continuing. If the Holdback has not been released by June 1, 2021, the lender may apply the unreleased proceeds to pay down the loan, accompanied by the applicable yield maintenance premium to be paid by the borrower. Assuming the full Holdback balance is applied to the full loan amount of $38,000,000, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, U/W NOI DSCR, U/W NCF DSCR, U/W NOI Debt Yield and U/W NCF Debt Yield are 61.9%, 61.9%, 1.67x, 1.64x, 8.2% and 8.1%, respectively. |
| For mortgage loan #14 (Montclair East), all LTVs, DSCRs and Debt Yields are calculated assuming the full loan amount of $14,700,000. At loan closing, the borrower deposited $1,500,000 into a new tenant reserve holdback, of which (i) $842,493.03 was deposited with respect to Hair Beauty Secret, and (ii) $657,506.97 was deposited with respect to USA Furniture. The holdback can be disbursed in whole or in part provided that the following conditions are satisfied: (i) the debt yield calculated based on the underwritten net cash flow and calculated assuming a loan amount equal to the outstanding principal balance less any new tenant holdback not being disbursed, is not less than 8.7%; and (ii) the borrower provides an executed estoppel stating that the tenant is in occupancy, open for business and paying full, unabated rent and common area reimbursements in according to its lease. If the holdback has not been released by December 31, 2018, the lender may apply the unreleased proceeds to pay down the loan, accompanied by the applicable yield maintenance premium to be paid by the borrower. | |
| (15) | For mortgage loan #18 (Flats at East Bank), the Mortgaged Property is subject to a temporary ground lease with Cleveland-Cuyahoga Port Authority that was created in connection with sales tax savings related to construction costs. The ground lease expires on December 31, 2034 with no renewal options. The base rent under the ground lease is $24,000 per year, payable $2,000 monthly. At any time on or after April 1, 2019, the borrower is required to purchase the fee interest from Cleveland-Cuyahoga Port Authority for $100 plus all of Cleveland-Cuyahoga Port Authority’s costs associated with terminating the ground lease. |
| (16) | For Mortgage Loan #46 (Security Storage), the largest tenant (4,500 square feet) and the third largest tenant (2,075 square feet), representing approximately 8.3% and 3.8% of net rentable square feet, respectively, are sponsor-affiliated tenants. |
A-1-20
ANNEX A-2
MORTGAGE POOL INFORMATION (TABLES)
(THIS PAGE INTENTIONALLY LEFT BLANK)
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Mortgage Loans by Mortgage Loan Seller
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgage | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| Loan Seller | Loans | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| Wells Fargo Bank, National Association | 14 | $271,350,036 | 41.2% | 4.745% | 119 | 360 | 1.57x | 9.7% | 9.2% | 60.7% | 56.4% |
| Barclays Bank PLC | 11 | 172,882,585 | 26.2 | 4.623 | 118 | 360 | 2.02 | 11.5 | 10.9 | 60.3 | 54.5 |
| Rialto Mortgage Finance, LLC | 7 | 113,800,000 | 17.3 | 5.333 | 116 | 360 | 1.50 | 9.3 | 9.1 | 61.4 | 57.4 |
| C-III Commercial Mortgage LLC | 17 | 100,732,798 | 15.3 | 5.295 | 118 | 352 | 1.45 | 11.0 | 9.8 | 63.5 | 54.6 |
| Total/Weighted Average: | 49 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
Mortgaged Properties by Property Type(1)(2)
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgaged | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| Property Type | Properties | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| Retail | 34 | $223,732,106 | 34.0% | 4.812% | 116 | 360 | 1.66x | 10.2% | 9.7% | 59.4% | 54.3% |
| Anchored | 7 | 131,605,357 | 20.0 | 4.821 | 118 | 360 | 1.55 | 10.0 | 9.4 | 58.3 | 53.1 |
| Single Tenant | 18 | 35,515,000 | 5.4 | 4.539 | 108 | 360 | 2.07 | 9.7 | 9.6 | 62.5 | 62.2 |
| Shadow Anchored | 5 | 19,974,600 | 3.0 | 5.035 | 118 | 360 | 1.45 | 9.9 | 9.3 | 68.8 | 61.1 |
| Super Regional Mall | 1 | 19,950,390 | 3.0 | 4.839 | 118 | 358 | 1.91 | 12.8 | 12.1 | 48.0 | 39.0 |
| Unanchored | 3 | 16,686,759 | 2.5 | 5.020 | 118 | 359 | 1.59 | 9.8 | 9.3 | 63.2 | 57.4 |
| Office | 10 | 140,937,221 | 21.4 | 4.678 | 119 | 352 | 1.85 | 11.2 | 10.1 | 61.4 | 56.0 |
| Suburban | 5 | 104,187,221 | 15.8 | 4.872 | 119 | 351 | 1.62 | 11.3 | 9.9 | 64.6 | 58.0 |
| CBD | 1 | 20,000,000 | 3.0 | 3.709 | 117 | IO | 3.14 | 11.8 | 11.8 | 39.6 | 39.6 |
| Medical | 4 | 16,750,000 | 2.5 | 4.629 | 118 | 360 | 1.73 | 9.4 | 9.1 | 68.0 | 63.2 |
| Self Storage | 19 | 101,447,884 | 15.4 | 5.082 | 119 | 360 | 1.40 | 9.3 | 9.1 | 62.1 | 56.8 |
| Self Storage | 19 | 101,447,884 | 15.4 | 5.082 | 119 | 360 | 1.40 | 9.3 | 9.1 | 62.1 | 56.8 |
| Multifamily | 3 | 67,091,470 | 10.2 | 5.071 | 120 | 360 | 1.50 | 8.6 | 8.4 | 66.2 | 63.1 |
| Low Rise | 1 | 38,000,000 | 5.8 | 4.845 | 120 | IO | 1.61 | 8.1 | 7.9 | 63.1 | 63.1 |
| Garden | 2 | 29,091,470 | 4.4 | 5.367 | 119 | 360 | 1.35 | 9.3 | 9.1 | 70.2 | 63.1 |
| Hospitality | 5 | 44,430,416 | 6.7 | 5.071 | 119 | 359 | 1.95 | 14.3 | 12.7 | 62.3 | 51.4 |
| Limited Service | 4 | 30,447,281 | 4.6 | 5.109 | 118 | 358 | 1.90 | 14.0 | 12.5 | 61.7 | 51.0 |
| Select Service | 1 | 13,983,135 | 2.1 | 4.986 | 119 | 359 | 2.05 | 14.9 | 13.2 | 63.6 | 52.3 |
| Manufactured Housing Community | 13 | 39,992,909 | 6.1 | 5.208 | 118 | 360 | 1.58 | 9.8 | 9.6 | 60.6 | 55.3 |
| Manufactured Housing Community | 13 | 39,992,909 | 6.1 | 5.208 | 118 | 360 | 1.58 | 9.8 | 9.6 | 60.6 | 55.3 |
| Industrial | 2 | 24,137,006 | 3.7 | 4.709 | 119 | 360 | 1.57 | 10.1 | 9.8 | 62.7 | 54.9 |
| Warehouse | 2 | 24,137,006 | 3.7 | 4.709 | 119 | 360 | 1.57 | 10.1 | 9.8 | 62.7 | 54.9 |
| Mixed Use | 3 | 16,996,408 | 2.6 | 5.183 | 118 | 358 | 1.81 | 9.8 | 9.7 | 53.5 | 52.4 |
| Multifamily/Retail | 1 | 13,000,000 | 2.0 | 5.090 | 118 | IO | 1.90 | 9.9 | 9.8 | 52.0 | 52.0 |
| Retail/Multifamily | 1 | 2,100,000 | 0.3 | 5.160 | 118 | IO | 1.68 | 8.9 | 8.8 | 52.5 | 52.5 |
| Self Storage/Office | 1 | 1,896,408 | 0.3 | 5.850 | 118 | 358 | 1.37 | 10.5 | 9.7 | 64.7 | 54.8 |
| Total/Weighted Average: | 89 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
(1) A mortgaged property is classified as shadow anchored if it is located in close proximity to an anchored retail property.
(2) Because this table presents information relating to the mortgaged properties and not the mortgage loans, the information for mortgage loans secured by more than one mortgaged property is based on allocated amounts (allocating the mortgage loan principal balance to each of those properties according to the relative appraised values of the mortgaged properties or the allocated loan amounts or property-specific release prices set forth in the related mortgage loan documents or in such other manner as the related mortgage loan seller deemed appropriate).
A-2-1
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Mortgaged Properties by Location(1)(2)
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgaged | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| State | Properties | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| California | 11 | $176,625,344 | 26.8% | 4.786% | 119 | 360 | 1.81x | 10.1% | 9.5% | 60.8% | 57.5% |
| Northern | 6 | 91,320,009 | 13.9 | 4.644 | 119 | 360 | 2.00 | 9.8 | 9.5 | 58.2 | 56.6 |
| Southern | 5 | 85,305,335 | 12.9 | 4.938 | 119 | 360 | 1.59 | 10.3 | 9.6 | 63.6 | 58.4 |
| Texas | 14 | 73,028,847 | 11.1 | 4.881 | 119 | 354 | 1.50 | 10.2 | 9.7 | 62.6 | 57.1 |
| Virginia | 3 | 72,275,000 | 11.0 | 4.711 | 117 | 360 | 1.37 | 8.5 | 8.1 | 58.4 | 54.2 |
| Ohio | 9 | 43,528,746 | 6.6 | 4.854 | 118 | 346 | 1.74 | 9.8 | 9.6 | 58.8 | 54.9 |
| Pennsylvania | 1 | 42,560,000 | 6.5 | 5.100 | 119 | 360 | 1.38 | 10.7 | 9.0 | 63.9 | 56.7 |
| North Carolina | 8 | 39,497,884 | 6.0 | 5.256 | 119 | 360 | 1.51 | 9.4 | 9.2 | 68.4 | 63.8 |
| Delaware | 1 | 28,270,000 | 4.3 | 4.655 | 118 | 360 | 2.00 | 13.1 | 12.4 | 57.9 | 49.7 |
| Tennessee | 4 | 28,204,990 | 4.3 | 4.865 | 118 | 359 | 1.81 | 12.0 | 11.4 | 53.5 | 45.3 |
| New York | 4 | 22,778,555 | 3.5 | 5.020 | 119 | 359 | 1.65 | 10.4 | 9.8 | 59.5 | 53.5 |
| Washington | 2 | 20,175,865 | 3.1 | 5.020 | 118 | 359 | 1.92 | 13.8 | 12.5 | 55.5 | 46.8 |
| Georgia | 4 | 19,382,545 | 2.9 | 5.238 | 118 | 360 | 1.39 | 9.7 | 9.2 | 71.6 | 61.9 |
| Colorado | 3 | 18,400,000 | 2.8 | 5.320 | 118 | 360 | 1.43 | 9.7 | 9.5 | 57.6 | 50.2 |
| Arizona | 1 | 13,983,135 | 2.1 | 4.986 | 119 | 359 | 2.05 | 14.9 | 13.2 | 63.6 | 52.3 |
| Florida | 6 | 12,375,345 | 1.9 | 4.843 | 118 | 360 | 1.67 | 10.0 | 9.7 | 57.6 | 54.0 |
| Illinois | 4 | 9,639,825 | 1.5 | 5.263 | 84 | 360 | 1.74 | 9.9 | 9.7 | 64.8 | 63.5 |
| Alabama | 2 | 7,080,000 | 1.1 | 4.592 | 117 | 360 | 1.89 | 9.8 | 9.5 | 64.2 | 61.1 |
| Nebraska | 1 | 6,991,281 | 1.1 | 4.805 | 119 | 359 | 1.73 | 12.6 | 10.9 | 62.7 | 51.3 |
| Maryland | 2 | 6,966,470 | 1.1 | 4.940 | 118 | 358 | 1.67 | 9.4 | 9.1 | 67.9 | 60.9 |
| Louisiana | 3 | 4,885,286 | 0.7 | 4.270 | 117 | 0 | 2.19 | 9.6 | 9.5 | 61.7 | 61.7 |
| Connecticut | 1 | 3,492,811 | 0.5 | 5.470 | 118 | 358 | 1.33 | 10.3 | 9.1 | 65.9 | 55.1 |
| New Mexico | 1 | 2,497,299 | 0.4 | 5.570 | 119 | 359 | 1.44 | 10.0 | 9.9 | 69.4 | 58.1 |
| Michigan | 1 | 1,896,408 | 0.3 | 5.850 | 118 | 358 | 1.37 | 10.5 | 9.7 | 64.7 | 54.8 |
| Oregon | 1 | 1,750,000 | 0.3 | 4.830 | 113 | 360 | 1.81 | 11.6 | 11.4 | 70.7 | 60.9 |
| Indiana | 1 | 1,550,000 | 0.2 | 4.270 | 117 | 0 | 2.19 | 9.6 | 9.5 | 61.7 | 61.7 |
| Wyoming | 1 | 929,781 | 0.1 | 4.270 | 117 | 0 | 2.19 | 9.6 | 9.5 | 61.7 | 61.7 |
| Total/Weighted Average: | 89 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
(1) For purposes of determining whether a mortgaged property is in Northern California or Southern California, Northern California includes areas with zip codes above 93600 and Southern California includes areas with zip codes of 93600 and below.
(2) Because this table presents information relating to the mortgaged properties and not the mortgage loans, the information for mortgage loans secured by more than one mortgaged property is based on allocated amounts (allocating the mortgage loan principal balance to each of those properties according to the relative appraised values of the mortgaged properties or the allocated loan amounts or property-specific release prices set forth in the related mortgage loan documents or in such other manner as the related mortgage loan seller deemed appropriate).
Range of Cut-off Date Balances
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgage | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| Range of Cut-off Date Balances ($) | Loans | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| 797,183 - 1,000,000 | 1 | $797,183 | 0.1% | 5.850% | 119 | 359 | 1.30x | 9.5% | 9.2% | 56.9% | 48.1% |
| 1,000,001 - 2,000,000 | 4 | 7,192,719 | 1.1 | 5.565 | 117 | 359 | 1.49 | 10.5 | 10.1 | 68.3 | 58.0 |
| 2,000,001 - 3,000,000 | 5 | 12,478,849 | 1.9 | 5.266 | 117 | 359 | 1.69 | 11.6 | 10.9 | 59.5 | 52.5 |
| 3,000,001 - 4,000,000 | 2 | 6,985,357 | 1.1 | 5.385 | 118 | 358 | 1.44 | 11.1 | 9.7 | 66.4 | 55.4 |
| 4,000,001 - 5,000,000 | 2 | 8,218,970 | 1.2 | 5.229 | 118 | 359 | 1.41 | 9.8 | 9.3 | 68.6 | 59.0 |
| 5,000,001 - 6,000,000 | 2 | 11,050,000 | 1.7 | 5.581 | 88 | 360 | 1.33 | 9.4 | 9.2 | 69.3 | 63.9 |
| 6,000,001 - 7,000,000 | 5 | 33,500,540 | 5.1 | 5.093 | 119 | 360 | 1.53 | 10.2 | 9.5 | 63.9 | 56.3 |
| 7,000,001 - 8,000,000 | 2 | 14,888,582 | 2.3 | 5.317 | 119 | 299 | 1.76 | 12.3 | 11.3 | 60.4 | 53.5 |
| 8,000,001 - 9,000,000 | 2 | 17,388,639 | 2.6 | 5.097 | 119 | 342 | 1.63 | 11.8 | 10.7 | 53.7 | 44.4 |
| 9,000,001 - 10,000,000 | 2 | 18,758,585 | 2.8 | 4.959 | 119 | 359 | 1.67 | 11.7 | 10.7 | 69.4 | 59.3 |
| 10,000,001 - 15,000,000 | 9 | 113,230,606 | 17.2 | 5.016 | 119 | 359 | 1.71 | 10.7 | 10.2 | 62.5 | 56.7 |
| 15,000,001 - 20,000,000 | 4 | 74,350,390 | 11.3 | 4.626 | 118 | 359 | 2.17 | 11.5 | 11.0 | 52.1 | 47.8 |
| 20,000,001 - 30,000,000 | 4 | 108,020,000 | 16.4 | 4.925 | 119 | 360 | 1.59 | 10.6 | 10.1 | 64.0 | 57.3 |
| 30,000,001 - 50,000,000 | 4 | 166,655,000 | 25.3 | 4.732 | 119 | 360 | 1.65 | 9.6 | 9.0 | 61.7 | 59.1 |
| 50,000,001 - 65,250,000 | 1 | 65,250,000 | 9.9 | 4.758 | 117 | 360 | 1.28 | 8.4 | 8.0 | 58.1 | 53.4 |
| Total/Weighted Average: | 49 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
A-2-2
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Range of Underwritten Net Cash Flow Debt Service Coverage Ratios
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgage | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| Range of Underwritten NCF DSCRs (x) | Loans | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| 1.25 - 1.30 | 5 | $96,687,080 | 14.7% | 5.025% | 118 | 360 | 1.27x | 8.5% | 8.2% | 59.2% | 53.7% |
| 1.31 - 1.40 | 11 | 128,907,858 | 19.6 | 5.264 | 116 | 358 | 1.36 | 9.9 | 9.0 | 66.9 | 59.2 |
| 1.41 - 1.50 | 5 | 39,522,292 | 6.0 | 5.217 | 118 | 360 | 1.45 | 9.8 | 9.6 | 62.2 | 53.9 |
| 1.51 - 1.75 | 13 | 184,088,333 | 27.9 | 4.735 | 119 | 360 | 1.60 | 9.7 | 9.2 | 62.2 | 58.5 |
| 1.76 - 2.00 | 10 | 118,990,172 | 18.1 | 4.943 | 118 | 354 | 1.92 | 12.5 | 11.7 | 57.1 | 50.3 |
| 2.01 - 3.00 | 4 | 70,569,684 | 10.7 | 4.568 | 118 | 359 | 2.15 | 11.4 | 10.6 | 63.0 | 60.4 |
| 3.01 - 3.14 | 1 | 20,000,000 | 3.0 | 3.709 | 117 | 0 | 3.14 | 11.8 | 11.8 | 39.6 | 39.6 |
| Total/Weighted Average: | 49 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
Range of Underwritten Net Operating Income Debt Yields
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgage | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| Range of Underwritten NOI Debt Yields (%) | Loans | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| 8.1 - 9.0 | 7 | $156,900,000 | 23.8% | 4.982% | 118 | 360 | 1.38x | 8.4% | 8.2% | 61.5% | 57.5% |
| 9.1 - 10.0 | 18 | 238,493,238 | 36.2 | 4.908 | 118 | 360 | 1.63 | 9.6 | 9.3 | 62.4 | 58.6 |
| 10.1 - 11.0 | 10 | 110,490,248 | 16.8 | 4.959 | 116 | 357 | 1.48 | 10.7 | 9.5 | 64.7 | 57.1 |
| 11.1 - 12.0 | 5 | 43,742,545 | 6.6 | 4.309 | 117 | 359 | 2.52 | 11.8 | 11.1 | 53.3 | 51.8 |
| 12.1 - 13.0 | 2 | 26,941,672 | 4.1 | 4.830 | 118 | 358 | 1.86 | 12.7 | 11.8 | 51.8 | 42.2 |
| 13.1 - 14.0 | 2 | 37,270,000 | 5.7 | 4.676 | 118 | 360 | 1.98 | 13.1 | 12.3 | 56.3 | 48.4 |
| 14.1 - 15.0 | 3 | 34,647,585 | 5.3 | 5.073 | 119 | 359 | 1.99 | 14.5 | 12.9 | 62.7 | 51.7 |
| 15.1 - 16.0 | 1 | 2,791,549 | 0.4 | 5.700 | 117 | 357 | 2.03 | 16.0 | 14.2 | 57.0 | 48.0 |
| 16.1 - 16.2 | 1 | 7,488,582 | 1.1 | 5.650 | 119 | 299 | 1.93 | 16.2 | 14.5 | 58.5 | 44.8 |
| Total/Weighted Average: | 49 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
Range of Underwritten Net Cash Flow Debt Yields
| Weighted Average | |||||||||||
| Percent by | |||||||||||
| Number of | Aggregate | Remaining | Remaining | U/W NOI | U/W NCF | ||||||
| Mortgage | Aggregate Cut-off | Cut-off Date | Mortgage | Term to Maturity | Amortization | U/W NCF | Debt | Debt | Cut-off Date | Balloon or ARD | |
| Range of Underwritten NCF Debt Yields (%) | Loans | Date Balance ($) | Pool Balance (%) | Rate (%) | or ARD (mos.) | Term (mos.) | DSCR (x) | Yield (%) | Yield (%) | LTV (%) | LTV (%) |
| 7.9 - 8.0 | 3 | $110,650,000 | 16.8% | 4.803% | 118 | 360 | 1.41x | 8.3% | 8.0% | 60.1% | 57.3% |
| 8.1 - 9.0 | 9 | 123,821,470 | 18.8 | 5.213 | 119 | 360 | 1.38 | 9.6 | 8.8 | 64.9 | 58.3 |
| 9.1 - 10.0 | 21 | 258,927,126 | 39.3 | 4.871 | 117 | 358 | 1.63 | 9.9 | 9.5 | 62.7 | 58.3 |
| 10.1 - 11.0 | 6 | 41,468,717 | 6.3 | 4.861 | 119 | 359 | 1.83 | 11.6 | 10.4 | 63.4 | 57.0 |
| 11.1 - 12.0 | 2 | 21,750,000 | 3.3 | 3.799 | 117 | 360 | 3.03 | 11.8 | 11.8 | 42.1 | 41.3 |
| 12.1 - 13.0 | 5 | 77,884,840 | 11.8 | 4.839 | 118 | 359 | 1.95 | 13.3 | 12.4 | 55.7 | 46.8 |
| 13.1 - 14.0 | 1 | 13,983,135 | 2.1 | 4.986 | 119 | 359 | 2.05 | 14.9 | 13.2 | 63.6 | 52.3 |
| 14.1 - 14.5 | 2 | 10,280,131 | 1.6 | 5.664 | 118 | 315 | 1.96 | 16.1 | 14.4 | 58.1 | 45.7 |
| Total/Weighted Average: | 49 | $658,765,419 | 100.0% | 4.899% | 118 | 358 | 1.66x | 10.3% | 9.7% | 61.2% | 55.8% |
A-2-3
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Range of Loan-to-Value Ratios as of the Cut-off Date
| Weighted Average | |||||||||||||||||||||||||||||
| Range of Cut-off Date LTV Ratios (%) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| 39.6 | 1 | $20,000,000 | 3.0 | % | 3.709 | % | 117 | 0 | 3.14 | x | 11.8 | % | 11.8 | % | 39.6 | % | 39.6 | % | |||||||||||
| 45.1 - 50.0 | 2 | 22,450,390 | 3.4 | 4.835 | 118 | 358 | 1.89 | 12.7 | 12.0 | 48.0 | 39.6 | ||||||||||||||||||
| 50.1 - 55.0 | 3 | 24,100,000 | 3.7 | 4.965 | 118 | 360 | 1.89 | 11.0 | 10.6 | 51.8 | 49.1 | ||||||||||||||||||
| 55.1 - 60.0 | 12 | 241,048,823 | 36.6 | 4.974 | 118 | 356 | 1.52 | 10.2 | 9.7 | 58.4 | 52.5 | ||||||||||||||||||
| 60.1 - 65.0 | 14 | 200,011,010 | 30.4 | 4.853 | 119 | 360 | 1.70 | 10.0 | 9.3 | 63.1 | 59.1 | ||||||||||||||||||
| 65.1 - 70.0 | 10 | 107,945,841 | 16.4 | 4.931 | 116 | 360 | 1.64 | 10.8 | 10.0 | 68.0 | 61.9 | ||||||||||||||||||
| 70.1 - 74.5 | 7 | 43,209,354 | 6.6 | 5.152 | 118 | 360 | 1.36 | 9.3 | 8.9 | 72.4 | 63.2 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Range of Loan-to-Value Ratios as of the Maturity Date or ARD
| Weighted Average | |||||||||||||||||||||||||||||
| Range of Balloon or ARD LTV Ratios (%) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| 39.0 - 40.0 | 2 | $39,950,390 | 6.1 | % | 4.273 | % | 117 | 358 | 2.53 | x | 12.3 | % | 11.9 | % | 43.8 | % | 39.3 | % | |||||||||||
| 40.1 - 45.0 | 4 | 27,377,221 | 4.2 | 5.221 | 119 | 332 | 1.72 | 13.0 | 11.8 | 54.5 | 44.5 | ||||||||||||||||||
| 45.1 - 50.0 | 6 | 59,714,112 | 9.1 | 4.895 | 118 | 359 | 1.85 | 12.6 | 11.8 | 58.6 | 49.3 | ||||||||||||||||||
| 50.1 - 55.0 | 11 | 164,657,837 | 25.0 | 5.069 | 118 | 360 | 1.48 | 9.9 | 9.3 | 59.1 | 52.8 | ||||||||||||||||||
| 55.1 - 60.0 | 9 | 135,410,156 | 20.6 | 4.923 | 119 | 360 | 1.49 | 10.1 | 9.3 | 61.9 | 57.0 | ||||||||||||||||||
| 60.1 - 65.0 | 15 | 210,455,704 | 31.9 | 4.811 | 119 | 360 | 1.65 | 9.4 | 9.0 | 66.6 | 62.8 | ||||||||||||||||||
| 65.1 - 66.4 | 2 | 21,200,000 | 3.2 | 5.053 | 104 | 360 | 1.96 | 11.3 | 10.2 | 66.7 | 66.1 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Range of Mortgage Rates
| Weighted Average | |||||||||||||||||||||||||||||
| Range of Mortgage Rates (%) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| 3.709 | 1 | $20,000,000 | 3.0 | % | 3.709 | % | 117 | 0 | 3.14 | x | 11.8 | % | 11.8 | % | 39.6 | % | 39.6 | % | |||||||||||
| 4.251 - 4.500 | 2 | 67,545,000 | 10.3 | 4.268 | 118 | 360 | 1.97 | 10.2 | 9.7 | 64.7 | 62.0 | ||||||||||||||||||
| 4.501 - 4.750 | 5 | 115,220,000 | 17.5 | 4.674 | 119 | 360 | 1.76 | 11.1 | 10.5 | 59.7 | 55.4 | ||||||||||||||||||
| 4.751 - 5.000 | 13 | 203,762,906 | 30.9 | 4.851 | 118 | 359 | 1.58 | 10.0 | 9.4 | 60.3 | 54.8 | ||||||||||||||||||
| 5.001 - 5.250 | 11 | 119,854,715 | 18.2 | 5.101 | 119 | 360 | 1.56 | 10.4 | 9.5 | 62.5 | 57.1 | ||||||||||||||||||
| 5.251 - 5.500 | 7 | 76,165,466 | 11.6 | 5.351 | 118 | 356 | 1.37 | 9.6 | 9.2 | 65.8 | 57.4 | ||||||||||||||||||
| 5.501 - 5.750 | 6 | 46,775,314 | 7.1 | 5.598 | 119 | 350 | 1.44 | 10.6 | 10.1 | 60.7 | 52.5 | ||||||||||||||||||
| 5.751 - 6.000 | 3 | 4,242,018 | 0.6 | 5.868 | 119 | 359 | 1.33 | 10.0 | 9.4 | 62.2 | 52.7 | ||||||||||||||||||
| 6.001 - 6.110 | 1 | 5,200,000 | 0.8 | 6.110 | 56 | 360 | 1.36 | 10.1 | 9.9 | 67.5 | 65.1 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
A-2-4
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Mortgage Loans by Original Term to Maturity or ARD
| Weighted Average | |||||||||||||||||||||||||||||
| Original Terms to Maturity or ARD (mos.) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| 60 | 1 | $5,200,000 | 0.8 | % | 6.110 | % | 56 | 360 | 1.36 | x | 10.1 | % | 9.9 | % | 67.5 | % | 65.1 | % | |||||||||||
| 120 | 48 | 653,565,419 | 99.2 | 4.889 | 118 | 358 | 1.66 | 10.3 | 9.7 | 61.1 | 55.7 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Range of Remaining Terms to Maturity or ARD as of the Cut-off Date
| Weighted Average | |||||||||||||||||||||||||||||
| Range of Remaining Terms to Maturity or ARD (mos.) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| 56 | 1 | $5,200,000 | 0.8 | % | 6.110 | % | 56 | 360 | 1.36 | x | 10.1 | % | 9.9 | % | 67.5 | % | 65.1 | % | |||||||||||
| 57 - 120 | 48 | 653,565,419 | 99.2 | 4.889 | 118 | 358 | 1.66 | 10.3 | 9.7 | 61.1 | 55.7 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Range of Mortgage Loans by Original Amortization Term
| Weighted Average | |||||||||||||||||||||||||||||
| Range of Original Amortization Terms (mos.) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| Non-Amortizing | 10 | $167,861,750 | 25.5 | % | 4.638 | % | 118 | 0 | 2.02 | x | 9.6 | % | 9.3 | % | 59.0 | % | 59.0 | % | |||||||||||
| 300 | 1 | 7,488,582 | 1.1 | 5.650 | 119 | 299 | 1.93 | 16.2 | 14.5 | 58.5 | 44.8 | ||||||||||||||||||
| 301 - 360 | 38 | 483,415,088 | 73.4 | 4.977 | 118 | 359 | 1.53 | 10.5 | 9.8 | 61.9 | 54.9 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Range of Remaining Amortization Terms as of the Cut-off Date(1)
| Weighted Average | |||||||||||||||||||||||||||||
| Range of Remaining Amortization Terms (mos.) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| Non-Amortizing | 10 | $167,861,750 | 25.5 | % | 4.638 | % | 118 | 0 | 2.02 | x | 9.6 | % | 9.3 | % | 59.0 | % | 59.0 | % | |||||||||||
| 299 | 1 | 7,488,582 | 1.1 | 5.650 | 119 | 299 | 1.93 | 16.2 | 14.5 | 58.5 | 44.8 | ||||||||||||||||||
| 301 - 360 | 38 | 483,415,088 | 73.4 | 4.977 | 118 | 359 | 1.53 | 10.5 | 9.8 | 61.9 | 54.9 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
(1)The remaining amortization term shown for any mortgage loan that is interest-only for part of its term does not include the number of months in its interest-only period and reflects only the number of months as of the commencement of amortization remaining from the end of such interest-only period.
A-2-5
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Mortgage Loans by Amortization Type
| Weighted Average | |||||||||||||||||||||||||||||
| Amortization Type | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| Interest-only, Amortizing Balloon | 20 | $360,502,100 | 54.7 | % | 4.949 | % | 117 | 360 | 1.46 | x | 9.9 | % | 9.3 | % | 62.4 | % | 56.4 | % | |||||||||||
| Interest-only, Balloon | 9 | 147,861,750 | 22.4 | 4.764 | 119 | 0 | 1.87 | 9.4 | 9.0 | 61.7 | 61.7 | ||||||||||||||||||
| Amortizing Balloon | 18 | 116,751,569 | 17.7 | 5.152 | 119 | 352 | 1.74 | 12.6 | 11.5 | 59.8 | 49.0 | ||||||||||||||||||
| Interest-only, ARD | 1 | 20,000,000 | 3.0 | 3.709 | 117 | 0 | 3.14 | 11.8 | 11.8 | 39.6 | 39.6 | ||||||||||||||||||
| Interest-only, Amortizing ARD | 1 | 13,650,000 | 2.1 | 4.608 | 119 | 360 | 1.56 | 9.6 | 9.6 | 65.0 | 59.6 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Mortgage Loans by Loan Purpose
| Weighted Average | |||||||||||||||||||||||||||||
| Loan Purpose | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| Refinance | 31 | $402,551,518 | 61.1 | % | 4.992 | % | 118 | 359 | 1.67 | x | 10.6 | % | 10.0 | % | 59.6 | % | 53.9 | % | |||||||||||
| Acquisition | 17 | 190,963,902 | 29.0 | 4.749 | 118 | 356 | 1.76 | 10.4 | 9.8 | 65.5 | 60.6 | ||||||||||||||||||
| Recapitalization | 1 | 65,250,000 | 9.9 | 4.758 | 117 | 360 | 1.28 | 8.4 | 8.0 | 58.1 | 53.4 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
Mortgage Loans by Lockbox Type
| Weighted Average | |||||||||||||||||||||||||||||
| Type of Lockbox | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Mortgage Rate (%) | Remaining Term to Maturity or ARD (mos.) | Remaining Amortization Term (mos.) | U/W NCF DSCR (x) | U/W NOI Debt Yield (%) | U/W NCF Debt Yield (%) | Cut-off Date LTV (%) | Balloon or ARD LTV (%) | ||||||||||||||||||
| Springing | 32 | $321,362,581 | 48.8 | % | 5.101 | % | 118 | 358 | 1.52 | x | 9.6 | % | 9.2 | % | 63.3 | % | 58.4 | % | |||||||||||
| Hard/Springing Cash Management | 11 | 199,814,257 | 30.3 | 4.788 | 118 | 359 | 1.83 | 11.8 | 10.8 | 60.5 | 53.7 | ||||||||||||||||||
| Hard/Upfront Cash Management | 4 | 105,738,582 | 16.1 | 4.663 | 117 | 354 | 1.75 | 9.8 | 9.4 | 53.9 | 50.0 | ||||||||||||||||||
| Soft/Springing Cash Management | 1 | 29,750,000 | 4.5 | 4.265 | 119 | 360 | 1.68 | 11.0 | 9.9 | 68.4 | 62.4 | ||||||||||||||||||
| None | 1 | 2,100,000 | 0.3 | 5.160 | 118 | 0 | 1.68 | 8.9 | 8.8 | 52.5 | 52.5 | ||||||||||||||||||
| Total/Weighted Average: | 49 | $658,765,419 | 100.0 | % | 4.899 | % | 118 | 358 | 1.66 | x | 10.3 | % | 9.7 | % | 61.2 | % | 55.8 | % | |||||||||||
A-2-6
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
| Mortgage Loans by Escrow Type | ||||||||||||||||||
| Initial | Monthly | Springing | ||||||||||||||||
| Type of Escrow | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | Number of Mortgage Loans | Aggregate Cut-off Date Balance ($) | Percent by Aggregate Cut-off Date Pool Balance (%) | |||||||||
| Tax Escrow | 42 | $533,039,832 | 80.9% | 45 | $578,839,832 | 87.9% | 4 | $79,925,588 | 12.1% | |||||||||
| Insurance Escrow | 32 | $369,710,416 | 56.1% | 31 | $341,440,416 | 51.8% | 18 | $317,325,003 | 48.2% | |||||||||
| Replacement Reserve | 18 | $141,526,222 | 21.5% | 42 | $544,243,703 | 82.6% | 8 | $161,170,141 | 24.5% | |||||||||
| TI/LC Reserve(1) | 12 | $198,181,755 | 48.8% | 21 | $330,475,520 | 83.0% | 9 | $158,714,227 | 39.1% | |||||||||
(1)The percentage of Cut-off Date Pool Balance for loans with TI/LC reserves is based on the aggregate principal balance of loans secured in whole or in part by office, retail, industrial and mixed-use properties. Notwithstanding the foregoing, the 1801 L Street mortgage loan is collecting a TI/LC reserve due to the retail portion of the mortgaged property
A-2-7
Wells Fargo Commercial Mortgage Trust 2018-C45
Annex A-2: Mortgage Pool Information
Percentage of Mortgage Pool by Prepayment Restriction(1)(2)
| Prepayment Restriction | July 2018 | July 2019 | July 2020 | July 2021 | July 2022 | July 2023 | July 2024 | July 2025 | July 2026 | July 2027 | July 2028 | |||||||||||
| Locked Out | 100.00% | 100.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | |||||||||||
| Defeasance | 0.00 | 0.00 | 88.00 | 88.00 | 87.97 | 87.84 | 87.77 | 87.70 | 87.60 | 87.50 | 0.00 | |||||||||||
| Yield Maintenance | 0.00 | 0.00 | 12.00 | 12.00 | 12.03 | 12.16 | 12.23 | 12.30 | 12.40 | 12.50 | 0.00 | |||||||||||
| Prepayment Premium | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
| Open | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
| Total: | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 0.00% | |||||||||||
| Mortgage Pool Balance Outstanding (in millions) | $658.77 | $657.08 | $655.12 | $651.91 | $647.29 | $636.76 | $629.69 | $622.13 | $613.52 | $604.46 | $0.00 | |||||||||||
| Percent of Aggregate Cut-off Date Pool Balance | 100.00% | 99.74% | 99.45% | 98.96% | 98.26% | 96.66% | 95.59% | 94.44% | 93.13% | 91.76% | 0.00% |
(1) Prepayment provisions in effect as a percentage of outstanding Mortgage Loan balances as of the indicated date assuming no prepayments on the Mortgage Loans, if any.
(2) Assumes yield maintenance for each Mortgage Loan with the option to defease or pay yield maintenance.
A-2-8
ANNEX A-3
SUMMARIES OF THE FIFTEEN LARGEST MORTGAGE LOANS
A-3-1
| VILLAGE AT LEESBURG |
Certain portions of the improvements shown in the pictures below are part of the overall Village at Leesburg development but may not serve as collateral for the Village at Leesburg Whole Loan. See “The Property” section for further detail regarding the overall Village at Leesburg development and the Village at Leesburg Property.
| A-3-2 |
| VILLAGE AT LEESBURG |
| A-3-3 |
| No. 1 – Village at Leesburg | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Wells Fargo Bank, National Association | Single Asset/Portfolio: | Single Asset | ||||
| Property Type: | Retail | ||||||
| Original Principal Balance(1): | $65,250,000 | Specific Property Type: | Anchored | ||||
| Cut-off Date Balance(1): | $65,250,000 | Location: | Leesburg, VA | ||||
| % of Initial Pool Balance: | 9.9% | Size(4): | 546,107 SF | ||||
| Loan Purpose(2): | Recapitalization | Cut-off Date Balance Per SF(1)(4): | $240.34 | ||||
| Borrower Name: | CRP/TRC Leesburg Retail Owner, L.L.C. | Year Built/Renovated: | 2009/2018 | ||||
| Sponsor: | Gary D. Rappaport | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.7580% | Property Manager: | Self-managed | ||||
| Note Date: | March 9, 2018 | 4th Most Recent Occupancy (As of): | 78.7% (12/31/2014) | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of): | 82.1% (12/31/2015) | ||||
| Maturity Date: | April 1, 2028 | 2nd Most Recent Occupancy (As of): | 88.4% (12/31/2016) | ||||
| IO Period: | 60 months | Most Recent Occupancy (As of): | 93.6% (12/31/2017) | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of)(4): | 91.6% (3/9/2018) | ||||
| Seasoning: | 3 months | ||||||
| Amortization Term (Original): | 360 months | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | ||||||
| Interest Accrual Method: | Actual/360 | 4th Most Recent NOI (As of)(5): | $6,914,642 (12/31/2014) | ||||
| Call Protection: | L(27),D(89),O(4) | 3rd Most Recent NOI (As of)(5): | $6,200,743 (12/31/2015) | ||||
| Lockbox Type: | Hard/Upfront Cash Management | 2nd Most Recent NOI (As of)(5): | $7,766,054 (12/31/2016) | ||||
| Additional Debt(1): | Yes | Most Recent NOI (As of)(5): | $8,685,899 (12/31/2017) | ||||
| Additional Debt Type(1): | Pari Passu | ||||||
| U/W Revenues: | $14,588,909 | ||||||
| U/W Expenses: | $3,574,353 | ||||||
| Escrows and Reserves(3): | U/W NOI(4): | $11,014,555 | |||||
| U/W NCF: | $10,531,133 | ||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI DSCR(1): | 1.34x | ||
| Taxes | $560,062 | $112,013 | NAP | U/W NCF DSCR(1): | 1.28x | ||
| Insurance | $0 | Springing | NAP | U/W NOI Debt Yield(1): | 8.4% | ||
| Deferred Maintenance | $28,125 | $0 | NAP | U/W NCF Debt Yield(1): | 8.0% | ||
| Replacement Reserve | $0 | $6,801 | $244,818 | Appraised Value(6): | $226,000,000 | ||
| TI / LC Reserve | $0 | $45,894 | $2,010,135(3) | Appraisal Valuation Date(6): | December 1, 2018 | ||
| Rent Concession Reserve | $842,933 | $0 | NAP | Cut-off Date LTV Ratio(1)(6): | 58.1% | ||
| Existing TI/LC Reserve | $7,649,629 | $0 | NAP | LTV Ratio at Maturity or ARD(1)(6): | 53.4% | ||
| (1) | See “The Mortgage Loan” section. All statistical financial information related to balance per square foot, loan-to-value ratios, debt service coverage ratios and debt yields are based on the funded outstanding principal balance of the Village at Leesburg Whole Loan (as defined below). |
| (2) | The Village at Leesburg Property (as defined below) was previously majority owned by an affiliate of the Carlyle Group, which originally developed the overall Village at Leesburg community in 2009. At the time of origination, an entity related to Rappaport (see “Borrower Sponsor” section) acquired a 60% equity ownership interest in the Village at Leesburg Property with the Carlyle Group maintaining a 40% equity ownership interest. |
| (3) | See “Escrows” section. |
| (4) | The Size, Cut-off Date Balance per SF and Current Occupancy assume the completion of the 12,297 square foot expansion related to Cobb Theatres (see “The Property” section). Excluding the expansion space, the Size, Cut-off Date Balance per SF and Current Occupancy are 533,810, $245.87 and 91.4%, respectively. |
| (5) | See “Cash Flow Analysis” section. |
| (6) | The Appraised Value and LTV Ratios shown are based on the appraiser’s Prospective Market Value Upon Completion, which assumes the completion of planned renovations and an expansion related to Cobb Theatres. Cobb Theatres is expected to renovate all existing auditoriums and add two new auditoriums with all work projected to be completed by December 2018 (see “The Property” section). Cobb Theatres is required to commence paying rent on its expanded premises once the tenant is open for business in such space. The underwritten base rent for Cobb Theatres is based on its expanded premises, and the difference between the tenant’s underwritten base rent and current base rent through December 31, 2018 was reserved upon origination of the Village at Leesburg Whole Loan (see “Major Tenants” section). In addition, outstanding tenant improvement obligations related to Cobb Theatres were reserved upon origination of the Village at Leesburg Whole Loan (see “Escrows” section). Based on the as-is appraised value of $205,000,000 (as of February 2, 2018), the Cut-off Date LTV Ratio and LTV Ratio at Maturity are 64.0% and 58.8%, respectively. |
The Mortgage Loan. The mortgage loan (the “Village at Leesburg Mortgage Loan”) is part of a whole loan (the “Village at Leesburg Whole Loan”) evidenced by two pari passu notes secured by a first mortgage encumbering the fee interest in an anchored retail shopping center located in Leesburg, Virginia (the “Village at Leesburg Property”). The Village at Leesburg Whole Loan was originated on March 9, 2018 by Wells Fargo Bank, National Association. The Village at Leesburg Whole Loan had an original principal balance of $131,250,000, has an outstanding principal balance as of the Cut-off Date of $131,250,000 and accrues interest at an interest rate of 4.7580% per annum. The Village at Leesburg Whole Loan had an initial term of 120 months, has a remaining term of 117 months as of the Cut-off Date and requires interest-only payments for the first 60 months following origination and, thereafter, requires payments of principal and interest based on a 30-year amortization schedule. The Village at Leesburg Whole Loan matures on April 1, 2028.
| A-3-4 |
| VILLAGE AT LEESBURG |
The non-controlling Note A-2, which will be contributed to the WFCM 2018-C45 securitization trust, had an original principal balance of $65,250,000 and has an outstanding principal balance as of the Cut-off Date of $65,250,000. The controlling Note A-1, which has been contributed to the WFCM 2018-C44 securitization trust, had an original principal balance of $66,000,000 and has an outstanding principal balance as of the Cut-off Date of $66,000,000. The mortgage loan evidenced by Note A-1 is referred to herein as the “Village at Leesburg Companion Loan”. The lender provides no assurances that the non-securitized pari passu note will not be split further. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” and “Pooling and Servicing Agreement” in the Prospectus.
Note Summary
| Notes | Original Balance | Note Holder | Controlling Interest | |
| A-1 | $66,000,000 | WFCM 2018-C44 | Yes | |
| A-2 | $65,250,000 | WFCM 2018-C45 | No | |
| Total | $131,250,000 |
Following the lockout period, on any date before January 1, 2028, the borrower has the right to defease the Village at Leesburg Whole Loan in whole, but not in part. In addition, the Village at Leesburg Whole Loan is prepayable without penalty on or after January 1, 2028. The lockout period will expire on the earlier to occur of (i) two years after the closing date of the securitization that includes the last note to be securitized and (ii) May 1, 2021.
Sources and Uses
| Sources | Uses | |||||||
| Original whole loan amount | $131,250,000 | 100.0% | Loan payoff(1): | $112,394,408 | 85.6% | |||
| Upfront reserves: | 9,080,749 | 6.9 | ||||||
| Closing costs: | 1,181,685 | 0.9 | ||||||
| Return of equity: | 8,593,158 | 6.5 | ||||||
| Total Sources | $131,250,000 | 100.0% | Total Uses | $131,250,000 | 100.0% |
| (1) | Prior to the origination of the Village at Leesburg Whole Loan, the Village at Leesburg Property was majority owned by an affiliate of the Carlyle Group, which originally developed the overall Village at Leesburg community in 2009. At the time of origination, an entity related to Rappaport (see “Borrower Sponsor” section) acquired a 60% equity ownership interest in the Village at Leesburg Property with the Carlyle Group maintaining a 40% equity ownership interest. The loan payoff shown represents a mortgage loan related to the Carlyle Group’s prior majority ownership of the Village at Leesburg Property. |
The Property. The Village at Leesburg Property consists of 546,107 square feet of retail, open-air lifestyle and entertainment space within the Village at Leesburg development in Leesburg, Virginia. The Village at Leesburg Property is situated on 55.0 acres of land and encompasses 16 one- and two-story buildings. In addition to the Village at Leesburg Property, the overall Village at Leesburg development contains office and multifamily components, which do not serve as collateral for the Village at Leesburg Whole Loan. The non-collateral office component comprises approximately 120,000 square feet of class A office space above the street level retail space and was 91.2% occupied as of April 2018, while the non-collateral multifamily component comprises 335 class A rental units with monthly rental rates for one-bedroom units starting at approximately $1,571. The Village at Leesburg Property was built in 2009, and in 2016, the Village at Leesburg development underwent a $6.6 million common area maintenance project that included upgrades to landscaping, patio seating, and the addition of a fountain and fire-pit. The Village at Leesburg Property hosts entertainment and cultural events throughout the year, including the Winter Ice Festival and ice carving in January, the Leesburg Fine Arts Festival in May, movie nights throughout the summer, Halloween activities and an annual holiday tree lighting in December. The Village at Leesburg Property has exclusive use of 3,128 surface and garage parking spaces, resulting in a parking ratio of 5.7 spaces per 1,000 square feet of rentable area (the overall Village at Leesburg development contains 3,732 surface and garage parking spaces, of which 604 spaces are for the exclusive use of the non-collateral multifamily units).
As of March 9, 2018, the Village at Leesburg Property was 91.6% leased to 65 tenants. In addition to the Wegmans grocery anchor, the tenant mix at the Village at Leesburg Property consists of entertainment options, including Cobb Theatres, Bowlero bowling alley, Atomic Trampoline and Luv2Play Indoor Playground; restaurant tenants, including Firebirds Wood Fire Grill, Travinia Italian Kitchen, Eggspectations, Noodles & Company, BurgerFi and Bon Chon Chicken; and national retail tenants including Ulta, Verizon Wireless, AT&T, European Wax Center, Massage Envy, Visionworks and GNC.
The Village at Leesburg Property is anchored by a Wegmans grocery store (Rated ‘BBB+’ by S&P, 142,692 square feet, 26.1% of net rentable area and 10.1% of underwritten base rent), which is subject to a ground lease with a lease expiration date in July 2034 with five, five-year renewal options. Wegmans is a regional supermarket chain with 96 stores in the northeastern United States. The company reported 2017 sales of approximately $8.7 billion and was ranked 31st of the top 75 supermarkets in the country based on sales volume by an industry news publication. The store provides customers with the convenience of an in-store pharmacy, a Market Café with take-out and in-store dining, a cheese shop, a sub shop, a fresh sushi shop, a salad bar, a pizza shop, a floral shop and a pastry shop.
The second largest tenant is Cobb Theatres (63,564 square feet, 11.6% of net rentable area and 15.0% of underwritten base rent), which currently features 12 screens with approximately 1,900 seats. Cobb Theatres is currently renovating its existing auditoriums with new, reclining seats and is expected to add two new auditoriums (for a total of 14 screens) with a total estimated renovation and construction cost of approximately $7.6 million. The existing auditorium renovations are currently underway and are expected to be completed by October 2018; while the expansion work is expected to begin in June 2018 and is expected to be completed by December 2018. With respect to Cobb Theatres, all outstanding tenant improvement costs and gap rent through December 31, 2018 were reserved upon origination of the Village at Leesburg Whole Loan. Cobb Theatres recently exercised a 10-year lease renewal and has a lease expiration date in December 2028 with three, five-year renewal options.
| A-3-5 |
| VILLAGE AT LEESBURG |
The third largest tenant is LA Fitness (45,000 square feet, 8.2% of net rentable area and 9.1% of underwritten base rent). LA Fitness is a privately-owned American health club with headquarters in Irvine, California. LA Fitness has 675 locations across 27 states in the U.S. and Canada, serving over 3.8 million members. The LA Fitness at the Village at Leesburg Property features basketball courts, group fitness classes, indoor cycling, an indoor pool, a kids club, personal training, a racquetball court, a sauna, a whirlpool spa and a juice bar.
The fourth largest tenant is Bowlero (21,564 square feet, 3.9% net rentable area and 4.2% underwritten base rent). Bowlmor AMF, the owner of Bowlero, is the largest ten-pin bowling center operator in the world with over 300 locations. Bowlero leased the former King Pinz bowling alley space at the Village at Leesburg Property with a lease that commenced in March 2017.
The Village at Leesburg Property comprises two retail condominium units consisting of the Wegmans leased fee parcel (excluding the improvements), and the remaining retail space within the related project (having a 58.06% voting rights interest in each of (i) a condominium regime governing the common elements of the related mixed use buildings within the overall Village at Leesburg development and (ii) a master condominium regime governing the common areas within the overall Village of Leesburg development, including parking garages and structures and private streets). The loan documents provide for springing full recourse to the borrower and guarantors resulting from the condominium regime’s being withdrawn or terminated, or the master owners’ association regime being terminated. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Condominium Interests” in the Prospectus.
The following table presents certain information relating to the tenancy at the Village at Leesburg Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/ S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(2) | Annual U/W Base Rent(2) | % of Total Annual U/W Base Rent | Sales | Occupancy Cost | Lease Expiration Date |
| Anchor Tenant | |||||||||
| Wegmans (Ground Lease) | NR/NR/BBB+ | 142,692 | 26.1% | $8.30(3) | $1,184,921(3) | 10.1% | NAV | NAV | 7/31/2034(4) |
| Total Anchor Tenant | 142,692 | 26.1% | $8.30 | $1,184,921 | 100.0% | ||||
| Major Tenants | |||||||||
| Cobb Theatres | NR/NR/NR | 63,564(5) | 11.6% | $27.50(5) | $1,748,010(5) | 15.0% | $516,260(6) | 24.4%(6) | 12/31/2028(7) |
| LA Fitness | NR/NR/NR | 45,000 | 8.2% | $23.67 | $1,065,042 | 9.1% | NAV | NAV | 3/31/2026(8) |
| Bowlero | NR/B3/B | 21,564 | 3.9% | $22.49 | $485,000 | 4.2% | NAV | NAV | 3/31/2027(9) |
| Wells Fargo (Ground Lease) | AA-/Aa2/A+ | (10) | (10) | (10) | $430,532(11) | 3.7% | NAV | NAV | 11/14/2029(12) |
| Atomic Trampoline | NR/NR/NR | 16,653 | 3.0% | $19.26 | $320,736 | 2.7% | NAV | NAV | 8/31/2026(13) |
| Total Major Tenants | 289,473 | 53.0% | $16.59(14) | $5,234,241 | 44.8% | ||||
| Non-Major Tenants | 210,864 | 38.6% | $30.59 | $6,451,262 | 55.2% | ||||
| Occupied Collateral Total | 500,337 | 91.6% | $22.49(14) | $11,685,503 | 100.0% | ||||
| Vacant Space | 45,770 | 8.4% | |||||||
| Collateral Total | 546,107 | 100.0% | |||||||
| (1) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (2) | Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent steps totaling $147,163 through January 2019 and straight-line rent averaging for investment grade tenants over the loan term for Wegmans and Wells Fargo (totaling $165,453) and over the remaining lease term for Charles Schwab (totaling $28,642). |
| (3) | Wegman’s Annual U/W Base Rent PSF and Annual U/W Base Rent are based on the tenant’s average rental rate over the loan term. Wegman’s current annual base rent is $1,065,000 ($7.46 per square foot). Commencing on August 1, 2019, Wegman’s annual base rent will increase to $1,164,367 ($8.16 per square foot) and commencing on August 1, 2024, Wegman’s annual base rent will increase to $1,265,678 ($8.87 per square foot). |
| (4) | Wegmans has five, five-year renewal options, with nine months’ notice, at rental rates as specified in the lease. |
| (5) | Cobb Theatres’ Tenant NRSF, Annual U/W Base Rent PSF and Annual U/W Base Rent assume the completion of the planned renovation and expansion, which are expected to be completed by December 2018 (see “The Property” section). The tenant’s current net rentable square footage, annual base rent per square foot and annual base rent are 51,267, $23.10 and $1,184,961, respectively. The tenant is required to begin paying rent on its expanded premises once it is open for business in such space, and the difference between the tenant’s underwritten base rent and current base rent through December 31, 2018 was reserved at origination of the Village at Leesburg Whole Loan. We cannot assure you that such renovation or expansion work will be completed or that the tenant will begin paying rent on such expansion space. |
| (6) | Sales and Occupancy Cost are for the trailing 12-month period ending December 31, 2017. Sales shown are per screen and based on the tenant’s current 12 screens; and occupancy cost shown is based on the tenant’s current annual base rent of $1,184,961 and underwritten reimbursements. |
| (7) | Cobb Theatres has three five-year renewal options, with nine months’ notice, at rental rates as specified in the lease. |
| (8) | LA Fitness has three five-year renewal options, with six months’ notice, at rental rates calculated in accordance with the Consumer Price Index or 12.0% greater than the minimum rent in effect immediately prior to the extension. |
| (9) | Bowlero has two five-year renewal options, with 180 days’ notice, at rental rates as specified in the lease. |
| (10) | Wells Fargo is subject to a ground lease and owns its improvements with no attributed square footage. |
| (11) | Wells Fargo’s Annual U/W Base Rent is based on the tenant’s average rental rate over the loan term. Wells Fargo’s current annual base rent is $385,000. Commencing on December 1, 2019, Wells Fargo’s annual base rent will increase to $423,519 and commencing on December 1, 2024, Wells Fargo’s annual base rent will increase to $465,838. |
| (12) | Wells Fargo has four five-year renewal options, with 270 days’ notice, at rental rates as specified in the lease. |
| (13) | Atomic Trampoline has one five-year renewal option, with 12 months’ notice, at rental rates as specified in the lease. |
| (14) | Annual U/W Base Rent PSF for Total Major Tenants and Occupied Collateral Total excludes Annual U/W Base Rent related to Wells Fargo, which is on a ground lease and owns its improvements with no attributed square footage. |
| A-3-6 |
| VILLAGE AT LEESBURG |
The following table presents certain information relating to the lease rollover schedule at the Village at Leesburg Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent(3) | % of Total Annual U/W Base Rent(3) | Annual U/W Base Rent PSF(3)(4) |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2018 | 2 | 5,819 | 1.1% | 5,819 | 1.1% | $171,678 | 1.5% | $29.50 |
| 2019 | 4 | 10,544 | 1.9% | 16,363 | 3.0% | $270,722 | 2.3% | $25.68 |
| 2020 | 13 | 35,568 | 6.5% | 51,931 | 9.5% | $1,566,326 | 13.4% | $44.04 |
| 2021 | 8 | 35,416 | 6.5% | 87,347 | 16.0% | $878,891 | 7.5% | $24.82 |
| 2022 | 4 | 16,161 | 3.0% | 103,508 | 19.0% | $455,520 | 3.9% | $28.19 |
| 2023 | 3 | 14,127 | 2.6% | 117,635 | 21.5% | $369,802 | 3.2% | $26.18 |
| 2024 | 4 | 17,290 | 3.2% | 134,925 | 24.7% | $402,174 | 3.4% | $23.26 |
| 2025 | 7 | 24,061 | 4.4% | 158,986 | 29.1% | $774,013 | 6.6% | $32.17 |
| 2026 | 6 | 76,309 | 14.0% | 235,295 | 43.1% | $1,955,297 | 16.7% | $25.62 |
| 2027 | 8 | 43,074 | 7.9% | 278,369 | 51.0% | $1,115,539 | 9.5% | $25.90 |
| 2028 | 4 | 79,276 | 14.5% | 357,645 | 65.5% | $2,110,088 | 18.1% | $26.62 |
| Thereafter | 2 | 142,692 | 26.1% | 500,337 | 91.6% | $1,615,453 | 13.8% | $11.32 |
| Vacant | 0 | 45,770 | 8.4% | 546,107 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 65 | 546,107 | 100.0% | $11,685,503 | 100.0% | $22.49 |
| (1) | Information obtained from the underwritten rent roll. |
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and that are not considered in the Lease Expiration Schedule. |
| (3) | Weighted Average Annual U/W Base Rent PSF and Total Annual U/W Base Rent exclude vacant space. |
| (4) | Annual U/W Base Rent PSF excludes Annual U/W Base Rent related to Wells Fargo, which is on a ground lease and owns its improvements. |
The following table presents historical occupancy percentages at the Village at Leesburg Mortgaged Property:
Historical Occupancy
12/31/2014(1) | 12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 3/9/2018(2) |
| 78.7% | 82.1% | 88.4% | 93.6% | 91.6% |
| (1) | Information obtained from the borrower. |
| (2) | Information obtained from the underwritten rent roll. Occupancy assumes the completion of the 12,297 square foot expansion related to Cobb Theatres (see “The Property” section). Excluding the expansion space, the physical occupancy as of March 9, 2018 was 91.4%. |
| A-3-7 |
| VILLAGE AT LEESBURG |
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 Village at Leesburg Property:
Cash Flow Analysis
| 2014 | 2015(2) | 2016(3) | 2017(4) | U/W(5) | % of U/W Effective Gross Income | U/W $ per SF | |||||||||
| Base Rent | $8,506,614 | $7,561,648 | $8,431,880 | $9,277,247 | $11,685,503 | 80.1% | $21.40 | ||||||||
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | 1,532,967 | 10.5 | 2.81 | ||||||||
| Percentage Rent | 181,679 | 194,854 | 153,795 | 72,657 | 55,276 | 0.4 | 0.10 | ||||||||
| Total Reimbursables | 2,416,951 | 2,643,318 | 2,832,773 | 2,846,697 | 2,843,935 | 19.5 | 5.21 | ||||||||
| Other Income(1) | 89,005 | 49,684 | 129,044 | 179,020 | 4,195 | 0.0 | 0.01 | ||||||||
| Less Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (1,532,967)(6) | (10.5) | (2.81) | ||||||||
| Effective Gross Income | $11,194,249 | $10,449,504 | $11,547,492 | $12,375,621 | $14,588,909 | 100.0% | $26.71 | ||||||||
| Total Operating Expenses | $4,279,607 | $4,248,761 | $3,781,438 | $3,689,722 | $3,574,353 | 24.5% | $6.55 | ||||||||
| Net Operating Income | $6,914,642 | $6,200,743 | $7,766,054 | $8,685,899 | $11,014,555 | 75.5% | $20.17 | ||||||||
| TI/LC | 0 | 0 | 0 | 0 | 403,415 | 2.8 | 0.74 | ||||||||
| Capital Expenditures | 0 | 0 | 0 | 0 | 80,007 | 0.5 | 0.15 | ||||||||
| Net Cash Flow | $6,914,642 | $6,200,743 | $7,766,054 | $8,685,899 | $10,531,133 | 72.2% | $19.28 | ||||||||
| NOI DSCR(7) | 0.84x | 0.75x | 0.94x | 1.06x | 1.34x | ||||||||||
| NCF DSCR(7) | 0.84x | 0.75x | 0.94x | 1.06x | 1.28x | ||||||||||
| NOI DY(7) | 5.3% | 4.7% | 5.9% | 6.6% | 8.4% | ||||||||||
| NCF DY(7) | 5.3% | 4.7% | 5.9% | 6.6% | 8.0% |
| (1) | Other income includes income from storage, stroller rentals, ATMs and other miscellaneous rental income. |
| (2) | The decline in Base Rent and Net Operating Income from 2014 to 2015 was driven partly by bad debt expense in 2015 from multiple tenants totaling $730,948. |
| (3) | The increase in Net Operating Income from 2015 to 2016 was primarily driven by an increase in Base Rent and decrease in Total Operating Expenses. The increase in Base Rent from 2015 to 2016 was driven by 13 new leases (10.6% of net rentable area, 12.6% of underwritten base rent) signed from March 2015 to December 2016 and three renewal leases (1.9% of net rentable area, 3.4% of underwritten base rent) signed from March 2015 to November 2015. The decrease in Total Operating Expenses from 2015 to 2016 was primarily driven by reduced expenses for snow removal, advertising and holiday decorating. |
| (4) | The increase in Base Rent and Net Operating Income from 2016 to 2017 was driven by eight new leases (7.2% of net rentable area, 10.1% of underwritten base rent) signed from January 2017 to July 2017 and two renewal leases (0.9% of net rentable area, 1.7% of underwritten base rent) signed from May 2017 to November 2017. |
| (5) | The increase in Net Operating Income from 2017 to U/W was driven by (i) three new leases (2.9% of net rentable area, 3.1% of underwritten base rent) and three renewal leases (1.8% of net rentable area, 2.4% of underwritten base rent) signed since January 2018; (ii) the inclusion of increased base rent for Cobb Theatres assuming the completion of the tenant’s planned renovation and expansion (annual base rent increase of $563,049; see “The Property” and “Major Tenants” sections); (iii) the inclusion of contractual rent steps totaling $147,163 through January 2019 and straight-line rent averaging for investment grade tenants over the lesser of the loan term and remaining lease term (totaling $194,095); and (iv) bad debt expenses in 2017 from multiple tenants totaling approximately $1.0 million. |
| (6) | The underwritten economic vacancy is 11.6%. The Village at Leesburg Property was 91.6% leased as of March 9, 2018. |
| (7) | The debt service coverage ratios and debt yields shown are based on the Village at Leesburg Whole Loan. |
Appraisal. The appraiser concluded to a Prospective Market Value Upon Completion for the Village at Leesburg Property of $226,000,000 as of December 1, 2018, which assumes the completion of the renovation and expansion related to Cobb Theatres.
Environmental Matters. According to a Phase I environmental site assessment dated February 23, 2018, there was no evidence of any recognized environmental conditions at the Village at Leesburg Property.
Market Overview and Competition. The Village at Leesburg Property is located in Leesburg, Loudoun County, Virginia, approximately 38.1 miles northwest of the Washington, D.C. central business district, 14.4 miles northwest of Washington Dulles International Airport and 1.7 miles southeast of U.S. Route 15. Per U.S. Census Bureau estimates, Loudoun County has the highest median household income of any county in the United States, and according to a third party market research report, the 2017 estimated average household income within a three- and five-mile radius of the Village at Leesburg Property was $144,117 and $151,624, respectively. According to the appraisal, Loudoun County has grown faster than any other Virginia jurisdiction since 1990, and the county’s population grew by approximately 3.7% annually from 2006 to 2016. According to a third party market research report, the estimated 2017 population within a three- and five-mile radius of the Village at Leesburg Property was 74,657 and 137,723, respectively.
The Metropolitan Washington Airports Authority is constructing a 23-mile extension of the existing Metrorail system, branching from the East Falls Church Station in Arlington, Virginia to the Washington Dulles International Airport and west to eastern Loudoun County. Phase 2 of the extension, expected to be completed in 2020, is expected to continue 11 miles from Wiehle Avenue to eastern Loudoun County. This phase will add six stations, including stops in Reston, Herndon, Dulles Airport, and Ashburn. The Ashburn Station is expected to be located approximately 9.7 miles southeast of the Village at Leesburg Property.
According to a third party market research report, the Village at Leesburg Property is situated within the Loudoun County submarket of the Suburban Virginia retail market. As of year-end 2017, the submarket reported total inventory of approximately 6.8 million square feet with a 3.0% vacancy rate and an average asking net rental rate of $29.13 per square foot. Submarket vacancy has decreased from 6.6% in 2012 and has averaged 4.4% in the last six years. The appraiser concluded to a weighted average net market rent for the Village at Leesburg Property of $22.89 per square foot.
| A-3-8 |
| VILLAGE AT LEESBURG |
The table below presents certain information relating to five comparable properties to the Village at Leesburg Property identified by the appraiser:
Competitive Set(1)
Village at Leesburg (Subject) | Marketplace at Potomac Station | Fort Evan Plaza I | Fort Evans Plaza II | Battlefield Shopping Center | Leesburg Plaza | |
| Location | Leesburg, VA | Leesburg, VA | Leesburg, VA | Leesburg, VA | Leesburg, VA | Leesburg, VA |
| Distance from Subject | -- | 1.1 miles | 2.1 miles | 1.8 miles | 2.3 miles | 2.4 miles |
| Property Type | Anchored | Community Center | Community Center | Community Center | Power Center | Community Center |
| Year Built/Renovated | 2009/2018 | 2004/NAP | 1999/NAP | 2008/NAP | 1991/NAP | 1956/1992 |
| Anchors | Wegmans, Cobb Theatres, LA Fitness, Bowlero | Giant Food, Best Buy | Home Depot, Hobby Lobby | Marshall’s, Bed, Bath & Beyond, Walgreens, Jo-Ann Stores | Dick’s Sporting Goods, DSW, Ross Dress for Less, Staples, Stein Mart, Michael’s | Giant Food, Office Depot, PetSmart, Party City |
| Total GLA | 546,107 SF | 143,176 SF | 214,477 SF | 228,529 SF | 296,140 SF | 228,878 SF |
| Total Occupancy | 91.6%(2) | 92.0% | 97.0% | 100.0% | 97.0% | 96.0% |
| (1) | Information obtained from the appraisal. In total, the appraiser identified 10 comparable properties totaling approximately 2.7 million square feet with an average occupancy rate of approximately 96.0% and minimum occupancy rate of 90.0%. |
| (2) | Information obtained from underwritten rent roll. |
The Borrower. The borrower is CRP/TRC Leesburg Retail Owner, L.L.C., a Delaware limited liability company and single purpose entity with two independent directors. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Village at Leesburg Whole Loan. Gary D. Rappaport and the Gary D. Rappaport Revocable Trust, individually and/or collectively, are the guarantors of certain nonrecourse carveouts under the Village at Leesburg Whole Loan.
The Borrower Sponsor. The borrower sponsor is Gary D. Rappaport, the chief executive officer of Rappaport, a retail real estate company founded in 1984. Rappaport’s portfolio includes more than 50 shopping centers and ground floor retail spaces in approximately 125 mixed-use properties, both residential and office, located primarily throughout the mid-Atlantic region of the United States. Mr. Rappaport is the former chairman and trustee of the International Council of Shopping Centers and is the principal partner for approximately 4.3 million square feet of the shopping centers managed by Rappaport. At the time of origination of the Village at Leesburg Whole Loan, an entity related to Rappaport acquired a 60% equity interest in the Village at Leesburg Property. Gary D. Rappaport and affiliates owned an indirect and non-controlling 10% interest in an entity that defaulted on a loan that was the subject of a foreclosure in 2009. See “Description of the Mortgage Pool— Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” in the Prospectus.
The remaining 40% equity interest in the Village at Leesburg Property is held by an affiliate of the Carlyle Group (“Carlyle”). Carlyle was the original developer of the overall Village at Leesburg community and was the majority owner of the Village at Leesburg Property prior to the origination of the Village at Leesburg Whole Loan. Founded in 1987 in Washington, D.C., Carlyle currently has approximately $195 billion of assets under management and more than 1,600 professionals operating in 31 offices in North America, South America, Europe, the Middle East, Africa, Asia and Australia. Carlyle’s real estate division has made more than 850 investments in 397 metropolitan statistical areas around the world. As of December 31, 2017, Carlyle’s real estate funds reported more than $18 billion in assets under management.
Escrows. The loan documents provide for upfront reserves of $560,062 for real estate taxes, $28,125 for immediate repairs, $842,933 for outstanding rent concessions and gap rent related to multiple tenants (including $520,190 related to the Cobb Theatres expansion) and $7,649,629 for existing tenant improvements and leasing commissions (“TI/LC”) related to multiple tenants (including $6,455,836 related to the Cobb Theatres renovation and expansion). The loan documents also provide for ongoing monthly reserves of $112,013 for real estate taxes, $6,801 for replacement reserves (subject to a cap of $244,818), and $45,894 for general TI/LCs (subject to a cap of $2,010,135 so long as no event of default exists and the net cash flow debt service coverage ratio is equal to or greater than 1.20x).
The loan documents do not require ongoing monthly escrows for insurance premiums as long as (i) no event of default has occurred and is continuing; (ii) the borrower provides the lender with evidence that the Village at Leesburg Property’s insurance coverage is included in a blanket policy and such policy is in full force and effect; and (iii) the borrower pays all applicable insurance premiums and provides the lender with evidence of renewals.
Lockbox and Cash Management. The Village at Leesburg Whole Loan requires a lender-controlled lockbox account, which is already in place, and that the borrower directs tenants to pay all rents directly into such lockbox account. The loan documents also require that all rents received by the borrower or the property manager be deposited into the lockbox account within one business day of receipt. All funds in the lockbox account are required to be swept each business day into the cash management account controlled by the lender and disbursed on each payment date in accordance with the loan documents. Prior to the occurrence of a Cash Trap Event Period (as defined below), all excess funds are required to be distributed to the borrower. During a Cash Trap Event Period, all excess funds are required to be swept to an excess cash flow subaccount.
| A-3-9 |
| VILLAGE AT LEESBURG |
A “Cash Trap Event Period” will commence upon the earlier of the following:
| (i) | the occurrence of an event of default; |
| (ii) | the amortizing net cash flow debt service coverage ratio falling below 1.15x at the end of any calendar quarter; or |
| (iii) | the occurrence of a Lease Expiration Cash Trap Event Period (as defined below). |
A Cash Trap Event Period will end upon the occurrence of the following:
| ● | with regard to clause (i), the cure of such event of default; |
| ● | with regard to clause (ii), the amortizing net cash flow debt service coverage ratio being equal to or greater than 1.20x for two consecutive calendar quarters; or |
| ● | with regard to clause (iii), a Lease Expiration Cash Trap Event Period Cure (as defined below). |
A “Lease Expiration Cash Trap Event Period” will commence upon the earlier of the following:
| (i) | either Wegmans or Cobb Theatres giving notice of its intent to terminate its lease or vacate its space; |
| (ii) | either Wegmans or Cobb Theatres failing to be in actual, physical occupancy of its entire space, failing to be open to the public during customary hours or going dark; |
| (iii) | either Wegmans or Cobb Theatres becoming insolvent or filing for bankruptcy; or |
| (iv) | Cobb Theatres failing to extend its lease nine months prior to expiration upon terms and conditions reasonably satisfactory to the lender. |
A “Lease Expiration Cash Trap Event Period Cure” will occur upon the following:
| ● | with regard to clause (i), a Qualified Re-Leasing Event (as defined below); |
| ● | with regard to clause (ii), Wegmans or Cobb Theatres, as applicable, being in actual, physical possession of its entire space, being open to the public during customary hours and no longer being dark; |
| ● | with regard to clause (iii), Wegmans or Cobb Theatres, as applicable, being no longer insolvent or subject to any bankruptcy or insolvency proceedings and its lease having been affirmed or assigned pursuant to a final and non-appealable order of a court of competent jurisdiction; or |
| ● | with regard to clause (iv), Cobb Theatres extending its lease upon terms and conditions reasonably satisfactory to the lender. |
A “Qualified Re-Leasing Event” will occur upon one or more replacement tenants reasonably acceptable to the lender executing leases covering all of the space currently occupied by Wegmans or Cobb Theatres, as applicable, and delivering an estoppel certificate confirming such replacement tenants having taken physical occupancy of the entire space, commencing normal business operations and paying full unabated rent.
Property Management. The Village at Leesburg Property is managed by Rappaport Management Company, an affiliate of the borrower.
Assumption. The borrower has the two-time right to transfer the Village at Leesburg Property, provided that certain conditions are satisfied, including (i) no event of default has occurred and is continuing; (ii) the lender has reasonably determined that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration the transferee’s experience, financial strength and general business standing; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 certificates and similar confirmations from each rating agency rating any securities backed by the Village at Leesburg Companion Loan with respect to the ratings of such securities.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Ground Lease. None.
Terrorism Insurance. The loan documents require that the “all risk” insurance policies required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the Village at Leesburg Property. The loan documents also require business interruption insurance covering no less than the 18-month period following the occurrence of a casualty event, together with a six-month extended period of indemnity.
| A-3-10 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
| A-3-11 |
| WESTPORT SELF STORAGE PORTFOLIO |
| A-3-12 |
| WESTPORT SELF STORAGE PORTFOLIO |
| A-3-13 |
| No. 2 – Westport Self Storage Portfolio | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Wells Fargo Bank, National Association | Single Asset/Portfolio: | Portfolio | ||||
| Property Type: | Self Storage | ||||||
| Original Principal Balance: | $48,300,000 | Specific Property Type: | Self Storage | ||||
| Cut-off Date Balance: | $48,300,000 | Location: | Various – See Table | ||||
| % of Initial Pool Balance: | 7.3% | Size: | 851,164 SF | ||||
| Loan Purpose: | Refinance | Cut-off Date Balance Per SF: | $56.75 | ||||
| Borrower Names(1): | Various | Year Built/Renovated: | Various – See Table | ||||
| Borrower Sponsor: | Westport Properties Inc. | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.6800% | Property Manager: | Self-Managed | ||||
| Note Date: | June 8, 2018 | 4th Most Recent Occupancy(3): | NAV | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy(3): | NAV | ||||
| Maturity Date: | June 11, 2028 | 2nd Most Recent Occupancy (As of): | 80.3% (12/31/2016) | ||||
| IO Period: | 84 months | Most Recent Occupancy (As of): | 85.1% (12/31/2017) | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of): | 87.1% (5/21/2018) | ||||
| Seasoning: | 1 month | ||||||
| Amortization Term (Original): | 360 months | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | 4th Most Recent NOI (As of)(4): | $4,113,114 (Annualized 10 or 11 12/31/2016) | ||||
| Interest Accrual Method: | Actual/360 | ||||||
| Call Protection: | L(25),D(91),O(4) | 3rd Most Recent NOI (As of)(4): | $4,767,136 (12/31/2017) | ||||
| Lockbox Type: | Springing | 2nd Most Recent NOI (As of): | $4,677,216 (TTM 5/31/2018) | ||||
| Additional Debt: | None | Most Recent NOI (As of): | $4,783,088 (Annualized 3 5/31/2018) | ||||
| Additional Debt Type: | NAP | ||||||
| U/W Revenues: | $8,105,950 | ||||||
| U/W Expenses: | $3,430,604 | ||||||
| U/W NOI: | $4,675,346 | ||||||
| U/W NCF: | $4,518,214 | ||||||
| U/W NOI DSCR: | 1.56x | ||||||
| U/W NCF DSCR: | 1.51x | ||||||
| Escrows and Reserves(2): | U/W NOI Debt Yield: | 9.7% | |||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF Debt Yield: | 9.4% | ||
| Taxes | $0 | Springing | NAP | As-Is Appraised Value(5): | $82,240,000 | ||
| Insurance | $0 | Springing | NAP | As-Is Appraisal Valuation Date(5) : | April 18, 2018 | ||
| Deferred Maintenance | $74,520 | $0 | NAP | Cut-off Date LTV Ratio(5) : | 58.7% | ||
| Replacement Reserves | $0 | Springing | NAP | LTV Ratio at Maturity(5) : | 56.0% | ||
| (1) | See “The Borrower” section. |
| (2) | See “Escrows” section. |
| (3) | The Westport Self Storage Portfolio Borrower (as defined below) acquired the Westport Self Storage Portfolio Properties (as defined below) on March 31, 2016 and historical occupancy prior to such date is not available. |
| (4) | See “Cash Flow Analysis” section. |
| (5) | The individual property level appraised values total $79,210,000, which would equate to a Cut-off Date LTV Ratio and LTV Ratio at Maturity of 61.0% and 58.1%, respectively; however, the appraiser concluded to a portfolio value of $82,240,000 based on the assumption that the entire portfolio is marketed to a single purchaser. |
The Mortgage Loan. The mortgage loan (the “Westport Self Storage Mortgage Loan”) is evidenced by a single promissory note secured by the fee interest in a 12-property self-storage portfolio located in Texas and Florida (the “Westport Self Storage Portfolio Properties”). The Westport Self Storage Mortgage Loan was originated on June 8, 2018 by Wells Fargo Bank, National Association. The Westport Self Storage Mortgage Loan had an original principal balance of $48,300,000, has an outstanding principal balance as of the Cut-off Date of $48,300,000 and accrues interest at an interest rate of 4.6800% per annum. The Westport Self Storage Mortgage Loan had an initial term of 120 months, has a remaining term of 119 months as of the Cut-off Date and requires interest-only payments for the first 84 months following origination and, thereafter, requires payments of principal and interest based on a 30-year amortization schedule. The Westport Self Storage Mortgage Loan matures on June 11, 2028.
Following the lockout period, the borrower has the right to defease the Westport Self Storage Mortgage Loan in whole, or in part (see “Partial Release” section), on any date before March 11, 2028. In addition, the Westport Self Storage Mortgage Loan is prepayable without penalty on or after March 11, 2028.
| A-3-14 |
| WESTPORT SELF STORAGE PORTFOLIO |
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $48,300,000 | 100.0% | Loan payoff | $39,966,576 | 82.7% | |||
| Reserves | 74,520 | 0.2 | ||||||
| Closing costs | 667,552 | 1.4 | ||||||
| Return of equity | 7,591,352 | 15.7 | ||||||
| Total Sources | $48,300,000 | 100.0% | Total Uses | $48,300,000 | 100.0% |
The Properties. The Westport Self Storage Portfolio Properties comprise 12 self-storage properties totaling 851,164 square feet of rentable area, including 5,913 self storage units and 32,127 square feet of retail and commercial space, plus 406 RV parking spaces (see “Unit Mix” table below). The net rentable area of the Westport Self Storage Portfolio consists of approximately 96.2% self storage space and 3.8% retail and commercial space with no square footage attributed to the RV parking spaces. The Westport Self Storage Portfolio Properties range in size from 42,131 square feet to 176,939 square feet and were originally built between 1960 and 2002, with 10 properties having been renovated and/or expanded since 2004 (including eight since 2016).
The Westport Self Storage Portfolio Properties are located in Texas (10 properties; 748,537 square feet; 87.9% of net rentable area) and Florida (two properties; 102,627 square feet; 12.1% of net rentable area). Since acquiring the Westport Self Storage Portfolio Properties in 2016, the borrower sponsor has spent approximately $8.1 million in capital expenditures across the portfolio to rebrand the properties to US Storage Centers (“USSC”) and add CCTV security systems. As of May 21, 2018, the Westport Self Storage Portfolio Properties were 87.1% occupied with individual property occupancies ranging from 76.5% to 95.1% (see “Historical Occupancy” table below).
The following table presents certain information relating to the Westport Self Storage Portfolio Properties:
| Property Name – Location | Year Built/ Renovated | Allocated Cut-off Date Balance | % of ALA | Appraised Value(1) | Allocated LTV | UW NCF | % UW NCF |
| San Antonio/Boerne USSC – San Antonio/Boerne, TX | 1984/2004 | $9,437,217 | 19.5% | $15,640,000 | 60.3% | $868,811 | 19.2% |
| Fort Worth USSC – Fort Worth, TX | 2001/2016 | $5,407,616 | 11.2% | $8,920,000 | 60.6% | $483,788 | 10.7% |
| Grissom USSC – San Antonio, TX | 1987/2016 | $5,054,009 | 10.5% | $7,830,000 | 64.5% | $502,664 | 11.1% |
| Laredo USSC – San Antonio, TX | 2000/2016 | $4,662,017 | 9.7% | $7,870,000 | 59.2% | $435,928 | 9.6% |
| Austin USSC – Austin, TX | 1983/2016 | $4,291,045 | 8.9% | $7,790,000 | 55.1% | $418,084 | 9.3% |
| Tampa USSC – Tampa, FL | 1987/NAP | $3,454,403 | 7.2% | $5,300,000 | 65.2% | $315,043 | 7.0% |
| Harker Heights USSC – Harker Heights, TX | 2002/2016 | $3,450,344 | 7.1% | $5,320,000 | 64.9% | $317,966 | 7.0% |
| Denton USSC – Denton, TX | 1960/2016 | $3,356,378 | 6.9% | $5,600,000 | 59.9% | $352,264 | 7.8% |
| Floresville USSC – Floresville, TX | 1986/2006 | $3,306,223 | 6.8% | $5,070,000 | 65.2% | $314,230 | 7.0% |
| Blanco USSC – San Antonio, TX | 1986/2016 | $2,933,616 | 6.1% | $4,660,000 | 63.0% | $285,453 | 6.3% |
| Houston Hinman USSC – Houston, TX | 1975/2016 | $1,571,800 | 3.3% | $2,710,000 | 58.0% | $96,647 | 2.1% |
| Ocala USSC – Ocala, FL | 1989/NAP | $1,375,332 | 2.8% | $2,500,000 | 55.0% | $127,336 | 2.8% |
| Total/Weighted Average | $48,300,000 | 100.0% | $82,240,000 | 58.7% | $4,518,214 | 100.0% |
| (1) | The individual property level appraised values total $79,210,000, which would equate to a Cut-off Date LTV Ratio and LTV Ratio at Maturity of 61.0% and 58.1%, respectively; however, the appraiser concluded to a portfolio value of $82,240,000 based on the assumption that the entire portfolio is marketed to a single purchaser. |
The following table presents detailed information with respect to the unit mix of the Westport Self Storage Portfolio Properties:
Unit Mix
| Property Name | Net Rentable Area (SF)(1) | % GLA | Self Storage Units | Commercial Space (SF) | RV Parking Units |
| San Antonio/Boerne USSC | 176,939 | 20.8% | 741 | 11,055 | 45 |
| Fort Worth USSC | 65,140 | 7.7% | 453 | 0 | 60 |
| Grissom USSC | 100,320 | 11.8% | 330 | 0 | 276 |
| Laredo USSC | 56,706 | 6.7% | 577 | 0 | 8 |
| Austin USSC | 62,402 | 7.3% | 707 | 0 | 0 |
| Tampa USSC | 60,496 | 7.1% | 435 | 0 | 1 |
| Harker Heights USSC | 66,075 | 7.8% | 464 | 0 | 4 |
| Denton USSC | 61,533 | 7.2% | 524 | 18,000 | 0 |
| Floresville USSC | 56,197 | 6.6% | 369 | 3,072 | 0 |
| Blanco USSC | 51,205 | 6.0% | 490 | 0 | 0 |
| Houston Hinman USSC | 52,020 | 6.1% | 466 | 0 | 0 |
| Ocala USSC | 42,131 | 4.9% | 357 | 0 | 12 |
| Total/Weighted Average | 851,164 | 100% | 5,913 | 32,127 | 406 |
| A-3-15 |
| WESTPORT SELF STORAGE PORTFOLIO |
The following table presents historical occupancy percentages at the Westport Self Storage Portfolio Properties:
Historical Occupancy(1)
| Property Name | 12/31/2016(2) | 12/31/2017(2) | 5/21/2018(3) |
| San Antonio/Boerne USSC | 87.6% | 90.2% | 88.9% |
| Fort Worth USSC | 76.9% | 90.6% | 88.8% |
| Grissom USSC | 94.3% | 93.9% | 95.1% |
| Laredo USSC | 92.6% | 88.3% | 89.7% |
| Austin USSC | 72.8% | 78.8% | 80.3% |
| Tampa USSC | 82.5% | 91.6% | 83.6% |
| Harker Heights USSC | 81.3% | 87.3% | 89.2% |
| Denton USSC | 73.7% | 82.7% | 83.2% |
| Floresville USSC | 84.7% | 86.8% | 82.4% |
| Blanco USSC | 89.0% | 89.4% | 90.2% |
| Houston Hinman USSC | 68.8% | 34.8%(4) | 76.5% |
| Ocala USSC | 74.3% | 82.6% | 86.8% |
| Total/Weighted Average | 83.0% | 85.1% | 87.1% |
| (1) | The Westport Self Storage Portfolio Borrower acquired the Westport Self Storage Portfolio Properties on March 31, 2016, and historical occupancy is not available prior to such date. |
| (2) | Information obtained from the Westport Self Storage Portfolio Borrower. |
| (3) | Information obtained from the underwritten rent roll. |
| (4) | The decline in occupancy at the Houston Hinman USSC property from 2016 to 2017 was due to damage sustained from Hurricane Harvey. |
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 Westport Self Storage Portfolio Properties:
Cash Flow Analysis
| Annualized 10 or 11 12/31/2016(1) | 2017(2) | TTM 5/31/2018 | Annualized 3 5/31/2018 | U/W | % of U/W Effective Gross Income | U/W $ per SF | |||||||||
| Base Rent | $6,491,761 | $6,981,609 | $7,037,957 | $6,914,044 | $7,285,656(4) | 89.9% | $8.56 | ||||||||
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | 1,242,624 | 15.3 | 1.46 | ||||||||
| Other Income(3) | 953,817 | 997,930 | 936,219 | 988,076 | 988,076 | 12.2 | 1.16 | ||||||||
| Retail/Commercial | 144,781 | 348,052 | 372,326 | 387,336 | 323,114 | 4.0 | 0.38 | ||||||||
| Less Vacancy and Credit Loss | (340,639) | (443,133) | (349,086) | (182,320) | (1,733,520)(5) | (21.4) | (2.04) | ||||||||
| Effective Gross Income | $7,249,719 | $7,884,458 | $7,997,416 | $8,107,136 | $8,105,950 | 100.0% | $9.52 | ||||||||
| Total Operating Expenses | $3,136,605 | $3,117,322 | $3,320,200 | $3,324,048 | $3,430,604 | 42.3% | $4.03 | ||||||||
| Net Operating Income | $4,113,114 | $4,767,136 | $4,677,216 | $4,783,088 | $4,675,346 | 57.7% | $5.49 | ||||||||
| Capital Expenditures | 0 | 0 | 0 | 0 | 157,132 | 1.9 | 0.18 | ||||||||
| Net Cash Flow | $4,113,114 | $4,767,136 | $4,677,216 | $4,783,088 | $4,518,214 | 55.7% | $5.31 | ||||||||
| NOI DSCR | 1.37x | 1.59x | 1.56x | 1.59x | 1.56x | ||||||||||
| NCF DSCR | 1.37x | 1.59x | 1.56x | 1.59x | 1.51x | ||||||||||
| NOI DY | 8.5% | 9.9% | 9.7% | 9.9% | 9.7% | ||||||||||
| NCF DY | 8.5% | 9.9% | 9.7% | 9.9% | 9.4% |
| (1) | Of the 12 Westport Self Storage Portfolio properties, financials for four properties represent trailing 10-month annualized financials ending December 31, 2016, and financials for the remaining eight properties represent trailing 11-month annualized financials ending December 31, 2016. |
| (2) | 2017 NOI is higher than Annualized 10 or 11 2016 NOI due in part to a $247,384 increase in other income, primarily driven by retail and commercial tenant income, and an overall increase in occupancy from 80.3% as of December 31, 2016 to 85.1% as of December 31, 2017. |
| (3) | Other Income consists of late fees, administrative fees, retail merchandise sales, truck rental income, postal box income, income from two cell tower leases (at the San Antonio/Boerne USSC property and Blanco USSC property) and two billboard leases (at the San Antonio/Boerne USSC property and Ocala USSC property), and tenant insurance. |
| (4) | Underwritten Base Rent comprises approximately 95.3% of income from self storage units and 4.7% of income from RV parking income. |
| (5) | The underwritten economic vacancy is 20.3%. As of May 21, 2018, the Westport Self Storage Portfolio Properties were 87.1% physically occupied. |
Appraisal. The appraiser concluded to an “as is” appraised value for the Westport Self Storage Portfolio Properties of $82,240,000 as of April 18, 2018.
Environmental Matters. According to the Phase I environmental site assessments dated April 30, 2018, there are no recognized environmental conditions at the Westport Self Storage Portfolio Properties.
Market Overview and Competition. The Westport Self Storage Portfolio Properties are located in eight cities in Texas (87.9% of net rentable area) and two cities in Florida (12.1% of net rentable area). Within a five-mile radius of the Westport Self Storage Portfolio Properties, the average estimated population and median household income are 185,670 and $78,311, respectively (see table below).
| A-3-16 |
| WESTPORT SELF STORAGE PORTFOLIO |
Four of the Westport Self Storage Portfolio Properties are located in San Antonio, Texas (45.7% of the allocated loan amount and 45.3% of net rentable area). According to the appraisal, the overall San Antonio self storage market reported an average vacancy rate of 13.4% from 2011 to 2017, with a 2017 vacancy rate of 14.4%.
The following table presents certain demographic information with respect to the Westport Self Storage Portfolio Properties:
Demographic Summary (1)
| Property | City | State | 2017/2018 Population (within 1- ,3- , 5-mile radius) | 2017/2018 Median Income (within 1- ,3- , 5-mile radius) |
| San Antonio/Boerne USSC | San Antonio/Boerne | TX | 4,552, 23,555, 36,905 | $115,357, $127,041, $126,484 |
| Fort Worth USSC | Fort Worth | TX | 11,873, 98,031, 216,520 | $89,197, $93,373, $89,624 |
| Grissom USSC | San Antonio | TX | 4,552, 23,555, 36,905 | $115,357, $127,041, $126,484 |
| Laredo USSC | San Antonio | TX | 4,552, 23,555, 36,905 | $115,357, $127,041, $126,484 |
| Austin USSC | Austin | TX | 19,953, 144,227, 308,009 | $46,068, $46,129, $53,641 |
| Tampa USSC | Tampa | FL | 106,870, 250,987, 757,077 | $32,915, $42,031, $49,471 |
| Harker Heights USSC | Harker Heights | TX | 9,666, 49,067, 105,102 | $53,788, $61,940, $54,682 |
| Denton USSC | Denton | TX | 8,794, 87,558, 145,329 | $30,231, $40,160, $52,047 |
| Floresville USSC | Floresville | TX | 484, 7,413, 11,349 | $58,053, $51,955, $54,338 |
| Blanco USSC | San Antonio | TX | 4,522, 23,555, 36,905 | $115,357, $127,041, $126,484 |
| Houston Hinman USSC | Houston | TX | 15,300, 131,046, 337,043 | $31,593, $39,979, $40,319 |
| Ocala USSC | Ocala | FL | 39,677, 88,048, 199,990 | $36,341, $39,205, $39,672 |
| (1) | Based on 2017 and 2018 demographic and market information as provided by third party research reports and the appraisal. |
The Borrowers. The borrowers are Westport Austin Self Storage, LLC; Westport Blanco Self Storage, LLC; Westport Boerne Self Storage, LLC; Westport Denton Self Storage, LLC; Westport Floresville Self Storage, LLC; Westport Ft. Worth Self Storage, LLC; Westport Grissom Self Storage, LLC; Westport Harker Self Storage, LLC; Westport Houston Self Storage, LLC; Westport Laredo Self Storage, LLC; Westport Ocala Self Storage, LLC; and Westport Tampa Self Storage, LLC (collectively, the “Westport Self Storage Portfolio Borrower”), each a Delaware limited liability company and single purpose entity with one independent director. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Westport Self Storage Portfolio Mortgage Loan. Westport/TR Storage Venture LLC is the guarantor of certain nonrecourse carveouts under the Westport Self Storage Portfolio Mortgage Loan.
The Borrower Sponsor. The borrower sponsor is Westport Properties Inc., which is a joint venture between entities affiliated with Westport Properties, Inc. (10.0% interest; “Westport”) and Teachers’ Retirement System of the State of Illinois (90.0% interest; “TRS”).
Westport was founded in 1985 and currently operates 120 self storage facilities totaling over six million square feet and located in 15 states. TRS is the 37th largest pension system in the United States and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed in the state of Illinois, excluding those employed in Chicago. TRS serves approximately 412,000 members and reported total assets of approximately $51.5 billion as of April 30, 2018, with 13.6% of those assets invested in real estate.
Escrows. The loan documents provide for upfront reserves of $74,520 for immediate repairs and springing monthly reserves of $13,093 for replacement reserves during the continuance of an event of default.
The loan documents do not require ongoing monthly escrows for real estate taxes as long as (i) no event of default has occurred and is continuing; and (ii) the Westport Self Storage Portfolio Borrower pays all applicable taxes prior to delinquency and provides the lender with evidence of payment. The loan documents do not require ongoing monthly escrows for insurance premiums as long as (i) no event of default has occurred and is continuing; (ii) the Westport Self Storage Portfolio Borrower provides the lender with evidence that the Westport Self Storage Portfolio Properties’ insurance coverage is included in a blanket policy and such policy is in full force and effect; and (iii) the Westport Self Storage Portfolio Borrower pays all applicable insurance premiums and provides the lender with evidence of renewals at least 30 days prior to the expiration date of such policy.
Lockbox and Cash Management. Upon the occurrence of a Cash Trap Event Period (as defined below), the loan documents require that the borrower establish a lockbox account and the borrower or property manager must cause all rents to be deposited directly into such lockbox account. During a Cash Trap Event Period, all excess cash flow after payment of all amounts due and payable under the loan documents and all operating expenses will be retained by the lender as additional collateral for the Westport Self Storage Portfolio Mortgage Loan.
A “Cash Trap Event Period” will commence upon the earlier of the following; provided, however that the Westport Self Storage Portfolio Borrower has the right to release an individual property from the lien of the Westport Self Storage Portfolio Mortgage Loan to prevent the commencement thereof (see “Partial Release” below):
| (i) | the occurrence and continuance of an event of default; or |
| (ii) | the debt yield being less than 7.5% at the end of any calendar quarter. |
A Cash Trap Event Period will end:
| ● | with regard to clause (i), upon the cure of such event of default; and |
| ● | with regard to clause (ii), upon the debt yield being at least 7.5% for two consecutive calendar quarters. |
Property Management. The Westport Self Storage Portfolio Properties are managed by an affiliate of the Westport Self Storage Portfolio Borrower.
| A-3-17 |
| WESTPORT SELF STORAGE PORTFOLIO |
Assumption. The Westport Self Storage Portfolio Borrower has the two-time right, commencing 12 months after loan origination, to transfer the Westport Self Storage Portfolio Properties in their entirety, provided that certain conditions are satisfied, including (i) no event of default has occurred and is continuing; (ii) the lender has reasonably determined that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration the transferee’s experience, financial strength and general business standing; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 certificates.
Partial Release. Following the lockout period, the Westport Self Storage Portfolio Borrower may obtain the release of any of the Westport Self Storage Portfolio Properties to (a) prevent the commencement of, or cause the expiration of, a Cash Trap Event Period (see “Lockbox” section) or to otherwise prevent or cure the occurrence of an event of default or (b) in connection with a bona fide sale of any of the Westport Self Storage Portfolio Properties to an unaffiliated third party, with both (a) and (b) being subject to certain conditions, including (i) partial defeasance in an amount equal to or greater than the applicable Partial Release Defeasance Amount (as defined below); (ii) the amortizing net cash flow debt service coverage ratio of the remaining properties is not less than the greater of 1.55x and the net cash flow debt service coverage ratio immediately prior to the release; (iii) the net cash flow debt yield of the remaining properties is not less than the greater of the applicable Partial Release Debt Yield Requirement (as defined below) and the net cash flow debt yield prior to the release; (iv) the loan-to-value ratio of the remaining properties is no greater than the lesser of 60.0% and the loan-to-value ratio prior to the release; (v) delivery of a legal opinion covering compliance in all respects with all laws, rules and regulations governing REMICs, (vi) rating agency confirmation that the sale (as applicable) and release will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the WFCM 2018-C45 certificates, and (vii) if the Fort Worth USSC property remains part of the collateral for the Westport Self Storage Mortgage Loan, the collateral must also include at least four other Westport Self Storage Portfolio Properties.
“Partial Release Defeasance Amount” is equal to (i) in the event of a release of the first through the fifth Westport Self Storage Portfolio Properties, 120% of the Allocated Cut-off Date Balance of such release property (identified in “The Properties” section chart above); (ii) in the event of a release of the sixth through the ninth Westport Self Storage Portfolio Properties, 125% of the Allocated Cut-off Date Balance of such release property; and (iii) in the event of a release of the tenth through the twelfth Westport Self Storage Portfolio Properties, 130% of the Allocated Cut-off Date Balance of such release property.
“Partial Release Debt Yield Requirement” is equal to (i) in the event of a release of the first through the fifth Westport Self Storage Portfolio Properties, 9.75%, (ii) in the event of a release of the sixth through the ninth Westport Self Storage Portfolio Properties, 10.0% or (iii) in the event of a release of the tenth through the twelfth Westport Self Storage Portfolio Properties, 10.5%.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Ground Lease. None.
Terrorism Insurance. The loan documents require that the “all risk” insurance policy required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the Westport Self Storage Portfolio Properties. The loan documents also require business interruption insurance covering no less than the 12-month period following the occurrence of a casualty event, together with a 6-month extended period of indemnity.
Windstorm Insurance. The Westport Self Storage Portfolio loan documents require windstorm and flood insurance covering the full replacement cost of the Westport Self Storage Portfolio Properties during the loan term. At the time of loan closing, Westport Self Storage Portfolio Properties had windstorm insurance coverage and flood insurance in the maximum limit available under the National Flood Insurance Program together with excess coverage.
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| A-3-20 |
PARKWAY CENTER |
| A-3-21 |
PARKWAY CENTER |
| A-3-22 |
PARKWAY CENTER |
| A-3-23 |
| No. 3 – Parkway Center |
| Loan Information | Property Information | |||||
| Mortgage Loan Seller: | C-III Commercial Mortgage | Single Asset/Portfolio: | Single Asset | |||
| Property Type: | Office | |||||
| Original Principal Balance: | $42,560,000 | Specific Property Type: | Suburban | |||
| Cut-off Date Balance: | $42,560,000 | Location: | Pittsburgh, PA | |||
| % of Initial Pool Balance: | 6.5% | Size: | 588,913 SF | |||
| Loan Purpose: | Refinance | Cut-off Date Balance Per SF: | $72.27 | |||
| Borrower: | PWC Pitt, LLC | Year Built/Renovated(3): | 1960/2017 | |||
| Borrower Sponsor: | Allan Serviansky, Daniel Warman, Robert Oppenheim, Jeffrey Aeder | Title Vesting: | Fee | |||
| Mortgage Rate: | 5.1000% | Property Manager: | Self-managed | |||
| Note Date: | June 8, 2018 | |||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of): | 64.5% (12/31/2015) | |||
| Maturity Date: | June 11, 2028 | 2nd Most Recent Occupancy (As of): | 72.7% (12/31/2016) | |||
| IO Period: | 36 months | Most Recent Occupancy (As of): | 86.5% (12/31/2017) | |||
| Loan Term (Original): | 120 months | Current Occupancy (As of): | 85.8% (4/30/2018) | |||
| Seasoning: | 1 month | |||||
| Amortization Term (Original): | 360 months | Underwriting and Financial Information: | ||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | |||||
| Interest Accrual Method: | Actual/360 | 4th Most Recent NOI (As of): | $3,181,233(12/31/2015) | |||
| Call Protection: | L(25),D(92),O(3) | 3rd Most Recent NOI (As of) (4): | $3,089,303 (12/31/2016) | |||
| Lockbox Type: | Hard/Springing Cash Management | 2nd Most Recent NOI (As of) (4): | $4,332,009 (12/31/2017) | |||
| Additional Debt(1): | Yes | Most Recent NOI (As of): | $4,581,637 (TTM 4/30/2018) | |||
| Additional Debt Type(1): | Mezzanine | |||||
| U/W Revenues: | $9,194,024 | |||||
| U/W Expenses: | $4,656,855 | |||||
| U/W NOI: | $4,537,169 | |||||
| Escrows and Reserves(2): | U/W NCF: | $3,830,474 | ||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI DSCR: | 1.64x | |
| Taxes | $705,609 | 100,801 | NAP | U/W NCF DSCR(1): | 1.38x | |
| Insurance | 31,673 | 10,558 | NAP | U/W NOI Debt Yield: | 10.7% | |
| Replacement Reserves | $9,815 | $9,815 | NAP | U/W NCF Debt Yield(1): | 9.0% | |
| TI/LC Reserve | $299,076 | $49,076 | NAP | As-Is Appraised Value: | $66,600,000 | |
| Quest Leasing Reserve(2) | $1,616,313 | $13,000 | NAP | As-Is Appraisal Valuation Date: | March 13, 2018 | |
| Deferred Maintenance | $254,896 | $0 | NAP | Cut-off Date LTV Ratio(1): | 63.9% | |
| Free Rent Reserve | $45,530 | $0 | NAP | LTV Ratio at Maturity or ARD: | 56.7% | |
| (1) | See “Subordinate and Mezzanine Indebtedness” section. The Cut-off Date LTV Ratio, U/W NCF DSCR and U/W NCF Debt Yield based on the Parkway Center Mortgage Loan (as defined below), and the Parkway Center Mezzanine Loan (as defined below), together, are 71.0%, 1.18x and 8.11%, respectively. |
| (2) | See “Escrows” section. |
| (3) | The Parkway Center Property consists of 6 separate buildings which were constructed at various times. Building 2 was constructed in 1960, Building 4 in 1961, Building 6 in 1975, Building 7 in 1970, Building 9 in 1962 and Building 10 in 1965. All buildings were renovated in 2017. |
| (4) | The increase from in NOI from 2016 to 2017 is primarily attributable to lease up of two buildings to Alorica in June 2016 and County of Allegheny in June 2017. |
The Mortgage Loan. The mortgage loan (the “Parkway Center Mortgage Loan”) was originated on June 8, 2018 by C-III Commercial Mortgage LLC. The Parkway Center Mortgage Loan had an original principal balance of $42,560,000, has an outstanding principal balance as of the Cut-off Date of $42,560,000 and has an interest rate of 5.1000% per annum. The Parkway Center Mortgage Loan had an initial term of 120 months, has a remaining term of 119 months as of the Cut-off Date and requires payments of interest-only for the first three years of the term, followed by payments on a 30-year amortization schedule through maturity. The Parkway Center Mortgage Loan has a maturity date on June 11, 2028.
Following the defeasance lockout period, the Parkway Center Borrower (as defined below) has the right to defease the Parkway Center Mortgage Loan in whole or in connection with a parcel release in part. In addition, the Parkway Center Mortgage Loan is prepayable without penalty on or after March 11, 2028. The defeasance lockout period will expire two years and one day after the closing date of the securitization, which is expected to occur in July 2018.
| A-3-24 |
PARKWAY CENTER |
Sources and Uses
| Sources | Uses | |||||
| Original loan amount | $42,560,000 | 90.1% | Loan payoff | $37,723,904 | 79.8% | |
| Mezzanine Loan | 4,700,000 | 9.9 | Return of Equity | 5,099,389 | 10.8 | |
| Reserves | 2,962,912 | 6.3 | ||||
| Closing costs | 1,473,795 | 3.1 | ||||
| Total Sources | $47,260,000 | 100.0% | Total Uses | $47,260,000 | 100.0% |
The Property. The Parkway Center Mortgage Loan is secured by a first mortgage lien on the Parkway Center Borrower’s fee interest in a 6 building 588,913 square-foot, Class B office park located in Pittsburgh, Pennsylvania (the “Parkway Center Property”). The Parkway Center Property is part of a larger office park that has 11 total buildings with a combined NRA of nearly 930,000 SF. The Parkway Center Property is located along GreenTree Road in Pittsburgh, which has direct access to Interstate-376. I-376 is a main east-west running highway that connects the Pittsburgh central business district to the east with the Pittsburgh International Airport to the northwest. The Parkway Center Property is less than a 4-mile drive from downtown Pittsburgh and is less than a 15-mile drive from Pittsburgh International Airport. The 6 separate buildings comprising the Parkway Center Property were constructed at different times. Building 2 was built in 1960, Building 4 in 1961, Building 6 in 1975, Building 7 in 1970, Building 9 in 1962 and Building 10 in 1965. The Parkway Center Property was most recently renovated in 2017. The Parkway Center Property sits on an approximately 19.4-acre site within the Pittsburgh suburb of Green Tree. The Parkway Center Property includes an adjacent three-level parking garage (which along with surface parking and parking granted through easements) has 2,107 total spaces, representing 3.58 spaces per 1000 square feet, and tenant amenities such as a 3,891 square-foot landlord operated fitness center, a 6,895 square-foot food court, a Jitters Café and The Alcove Restaurant. The Parkway Center Property was renovated and repositioned by the Parkway Center Borrower after acquisition in 2014 to bring in new tenancy and keep the Parkway Center Property amenities competitive with other offices in the market.
As of April 30, 2018, the Parkway Center Property was 85.8% leased to 53 tenants across a variety of industries. The top five tenants include Quest Diagnostics PA (NYSE: DGX), McKesson (NYSE: MCK), County of Allegheny, Alorica and Comcast Spotlight (Parent Company: Comcast Cable (NASDAQ: CMCSA)). Outside the top five tenants, no other tenant at the Parkway Center Property accounts for more than 2.7% of the net rentable area.
The largest tenant at the Parkway Center Property, Quest Diagnostics PA (Moody’s: Baa2, S&P: BBB+) has been in occupancy since 1994, has extended and expanded their lease 3 times previously and recently extended their lease by an additional 10 years from 2019 to 2029. As part of their extension, they also signed a lease for an additional 11,162 SF space located on the third story of Building 4, which will bring their total presence at the Parkway Center Property to 136,197 SF across Buildings 4 and 6. They have one 10-year renewal option at the end of their lease term. According to discussions with the tenant the office and lab at the Parkway Center Property serve a radius of more than 250 miles from Syracuse and Buffalo to central and western Pennsylvania with the nearest facility performing similar services located in Horsham, Pennsylvania. This location also has a relationship with the University of Pittsburgh Medical Center, which per the appraisal, is the largest employer in Allegheny County.
The following table presents certain information relating to the tenancy at the Parkway Center Property:
Major Tenants
| Tenant Name | Credit Rating S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(2) | Annual U/W Base Rent(2) | % of Total Annual U/W Base Rent | Lease Expiration Date | |
| Major Tenant(3) | ||||||||
| Quest Diagnostics PA | BBB/Baa2/BBB+ | 136,197 | 23.1% | $10.24 | $1,395,265 | 18.6% | 11/30/2029(4) | |
| McKesson | BBB+/Baa2/BBB+ | 49,413 | 8.4% | $19.00 | $938,847 | 12.5% | 12/31/2022 | |
| County of Allegheny | NR/A1/AA- | 38,853 | 6.6% | $18.18 | $706,459 | 9.4% | 6/30/2032(5) | |
| Alorica | NR/B1/BB- | 38,354 | 6.5% | $11.19 | $429,181 | 5.7% | 10/31/2023(6) | |
| Comcast | A-/A3/A- | 18,476 | 3.1% | $21.32 | $393,845 | 5.3% | 6/30/2022(7) | |
| Total Major Tenants | 281,293 | 47.8% | $13.74 | $3,863,597 | 51.6% | |||
| Non-Major Tenants | 223,829 | 38.0% | $16.21 | $3,627,455 | 48.4% | |||
| Occupied Collateral Total | 505,122 | 85.8% | $14.83 | $7,491,052 | 100.0% | |||
| Vacant Space | 83,791 | 14.2% | ||||||
| Collateral Total | 588,913 | 100.0% | ||||||
| (1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
| (2) | Annual U/W Base Rent PSF and Annual U/W Base Rent include: (a) contractual rent steps through December 2018; and (b) in the case of an investment grade tenant lease that runs through the loan term, the average rent over the remaining term of that lease through the end of the loan term, totaling approximately $184,257 ($118,873 for Quest Diagnostics PA and $65,384 for the County of Allegheny). Underwritten Base Rent does not include rental income for Sprint and Blue Network. |
| (3) | The Quest Diagnostics PA and Alorica leases are NNN. McKesson, County of Allegheny and Comcast are on modified gross lease structures. |
| (4) | Quest Diagnostics PA has two 5 year renewal options. |
| (5) | County of Allegheny has one 10 year renewal option. |
| (6) | Alorica has two 3 year renewal options. Alorica also has a one-time right to terminate its lease effective May 30, 2021 with nine months’ notice and payment of a termination fee equal to unamortized tenant improvements, architectural fees, legal fees and any commissions paid by the landlord, equal to approximately $1,391,115. |
| (7) | Comcast has two, five-year lease renewal options. Comcast has a one-time right to terminate its lease effective July 1, 2020 with nine months’ notice and payment of a termination fee equal to two months’ rent and unamortized leasing costs equal to $1,082,664. Comcast has been a tenant at Parkway Center since 2005. |
| A-3-25 |
PARKWAY CENTER |
The following table presents certain information relating to the lease rollover schedule at the Parkway Center Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF(3) |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2018 | 8 | 32,839 | 5.6% | 32,839 | 5.6% | $341,081 | 4.6% | $10.39 |
| 2019 | 6 | 19,465 | 3.3% | 52,304 | 8.9% | $382,474 | 5.1% | $19.65 |
| 2020 | 8 | 19,419 | 3.3% | 71,723 | 12.2% | $323,232 | 4.3% | $16.65 |
| 2021 | 8 | 34,548 | 5.9% | 106,271 | 18.0% | $705,739 | 9.4% | $20.43 |
| 2022 | 11 | 114,465 | 19.4% | 220,736 | 37.5% | $2,145,523 | 28.6% | $18.74 |
| 2023 | 7 | 72,280 | 12.3% | 293,016 | 49.8% | $1,031,818 | 13.8% | $14.28 |
| 2024 | 2 | 22,326 | 3.8% | 315,342 | 53.5% | $417,460 | 5.6% | $18.70 |
| 2025 | 0 | 0 | 0.0% | 315,342 | 53.5% | $0 | 0.0% | $0.00 |
| 2026 | 1 | 6,895 | 1.2% | 322,237 | 54.7% | $42,000 | 0.6% | $6.09 |
| 2027 | 0 | 0 | 0.0% | 322,237 | 54.7% | $0 | 0.0% | $0.00 |
| 2028 | 0 | 0 | 0.0% | 322,237 | 54.7% | $0 | 0.0% | $0.00 |
| Thereafter | 2 | 182,885 | 31.1% | 505,122 | 85.8% | $2,101,723 | 28.1% | $11.49 |
| Vacant | 0 | 83,791 | 14.2% | 588,913 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 53 | 588,913 | 100.0% | $7,491,052 | 100.0% | $14.83 |
| (1) | Information obtained from the underwritten rent roll. The rentable conference room, gym space and management office are located in Building 7 totaling 7,835 NRSF and are occupied, but are not on leases. Underwritten Base Rent does not include rental income for Sprint and Blue Network. |
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and that are not considered in the Lease Expiration Schedule. |
| (3) | Weighted Average U/W Base Rent PSF excludes vacant space. |
The following table presents historical occupancy percentages at the Parkway Center Property:
Historical Occupancy
5/28/2014(1)(2) | 12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 4/30/2018(3) |
| 71.9% | 64.5% | 72.7% | 86.5% | 85.8% |
| (1) | Information obtained from the Parkway Center Borrower. |
| (2) | Occupancy at acquisition. |
| (3) | Information obtained from the 4/30/2018 rent roll. |
| A-3-26 |
PARKWAY CENTER |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating history and underwritten net cash flow at the Parkway Center Property:
Cash Flow Analysis(1)(2)
| 2015 | 2016 | 2017 | TTM 4/30/2018 | U/W | % of U/W Effective Gross Income | U/W $ per SF | |
| Base Rent | $6,052,101 | $5,964,667 | $6,885,104 | $7,080,716 | $7,491,052(1) | 81.5% | $12.72 |
| Grossed Up Vacant | 0 | 0 | 0 | 0 | 2,415,352 | 26.3 | 4.10 |
| Total Reimbursables | 1,759,057 | 1,836,596 | 1,887,954 | 1,974,642 | 1,611,945 | 17.5 | 2.74 |
| Other Income | 90,870 | 109,749 | 117,775 | 91,027 | 91,027 | 1.0 | 0.15 |
| Less Vacancy & Credit | 0 | 0 | 0 | 0 | (2,415,352) | (26.3) | (4.10) |
| Effective Gross | $7,902,027 | $7,911,012 | $8,890,833 | $9,146,385 | $9,194,024 | 100.0% | $15.61 |
| Total Operating Expenses | $4,720,795 | $4,821,709 | $4,558,824 | $4,564,747 | $4,656,855 | 50.7% | $7.91 |
| Net Operating Income | $3,181,233 | $3,089,303(2) | $4,332,009(2) | $4,581,637 | $4,537,169 | 49.3% | $7.70 |
| TI/LC | 0 | 0 | 0 | 0 | 588,913 | 6.4 | 1.00 |
| Capital Expenditures | 0 | 0 | 0 | 0 | 117,783 | 1.3 | 0.20 |
| Net Cash Flow | $3,181,233 | $3,089,303 | $4,332,009 | $4,581,637 | $3,830,474 | 41.7% | $6.50 |
| NOI DSCR | 1.15x | 1.11x | 1.56x | 1.65x | 1.64x | ||
| NCF DSCR | 1.15x | 1.11x | 1.56x | 1.65x | 1.38x | ||
| NOI DY | 7.5% | 7.3% | 10.2% | 10.8% | 10.7% | ||
| NCF DY | 7.5% | 7.3% | 10.2% | 10.8% | 9.0% |
| (1) | U/W Base Rent includes: (a) contractual rent steps through December 2018; and (b) in the case of an investment grade tenant lease that runs through the loan term, the average rent over the remaining term of that lease through the end of the loan term, totaling approximately $184,257 ($118,873 for Quest Diagnostics PA and 465,384 for County of Allegheny). Underwritten Base Rent does not include rental income for Sprint and Blue Network. |
| (2) | The increase in Net Operating Income from 2016 to 2017 was driven partly by Alorica and County of Allegheny executing leases for 38,354 and 38,853 square feet in June 2016 and June 2017, respectively. This additional leasing accounted for approximately $1,000,000 in base rent. |
Appraisal. As of the appraisal valuation date of March 13, 2018 the Parkway Center Property had an “as-is” appraised value of $66,600,000.
Environmental Matters. According to a Phase I environmental site assessment dated December 18, 2017, there was no evidence of any recognized environmental conditions at the Parkway Center Property. O&M plans have been implemented by the borrower to manage the asbestos containing materials and lead based paints at the property.
Market Overview and Competition. The Parkway Center Property is located in the South Pittsburgh/Route 19 Office submarket of the Pittsburgh market. According to the appraisal, the South Pittsburgh/Route 19 submarket had, as of year end 2017, approximately 4.9 million square feet of office inventory, average asking rents of $18.93 per square foot and a vacancy rate of 6.7%. The fourth quarter 2017 vacancy rate (6.5%) is consistent with last year (6.7%) and substantially lower than the average vacancy over the past ten years (10.7%). According to the appraisal, the historic vacancy trend indicates stable long-term demand for office space in the South Pittsburgh/Route 19 submarket. The most recent vacancy trends demonstrate superior market conditions in comparison to the historic trend and suggest continued stability moving forward. According to the appraisal, the 2017 estimated population within a three-mile radius of the Parkway Center Property was 131,138, while the 2017 estimated median household income within the same radius was $50,774.
| A-3-27 |
PARKWAY CENTER |
The following table presents certain information relating to comparable office leases for the Parkway Center Property:
Comparable Leases(1)
| Property Name/Location | Year Built | Occupancy | Distance Subject | Tenant Name | Lease Date/Term | Lease Area (SF) | Annual Base Rent PSF | Lease Type |
Greentree Commons Pittsburgh, PA | 1987 | 84.0% | 0.8 miles | NAV | NAV | 11,825 | $22.00 | MG |
Foster Plaza 9 Pittsburgh, PA | 1989 | 82.1% | 1.3 miles | Stantec | Nov. 2017 / 3Yrs. | 1,852 | $23.50 | MG |
Cherrington Corporate Center 700 Pittsburgh, PA | 1993 | 100.0% | 12.3 miles | Chevron Corporation | July 2015 / 10 Yrs. | 120,000 | $22.50 | FSG |
Parkway Center 11 Pittsburgh, PA | 1989 | 82.9% | 0.0 miles | PA Department of Revenue | Oct. 2017 / 10 Yrs. | 6,112 | $19.50 | MG |
Landmarks Building Pittsburgh, PA | 1900 | 91.9% | 2.0 miles | NAV | Mar. 2017/ 3 Yrs. | 1,536 | $23.00 | MG |
| (1) | Information obtained from the appraisal and third party reports. |
The Borrower. The borrower under the Parkway Center Mortgage Loan is PWC Pitt, LLC (the “Parkway Center Borrower”), a recycled Delaware limited liability company and a special purpose entity with two independent directors. The Parkway Center Borrower is a recycled SPE that purchased the Parkway Center Property in 2014 and 7 months later sold off one building (Building 1) to a single tenant user. A nonrecourse carve-out has been added for any losses suffered in connection with the borrower’s prior ownership of Building 1. Legal counsel to the Parkway Center Borrower delivered a non-consolidation opinion in connection with the origination of the Parkway Center Mortgage Loan. Allan Serviansky, Daniel Warman, Robert Oppenheim and Jeffrey Aeder are the guarantors of certain non-recourse carveouts under the Parkway Center Mortgage Loan.
The Borrower Sponsor. The borrower sponsors and carveout guarantors are Allan Serviansky, Daniel Warman, Robert Oppenheim and Jeffrey Aeder. Collectively Mr. Serviansky, Mr. Warman, Mr. Oppenheim and Mr. Aeder have more than 50 years of real estate experience. Mr. Warman is the founder of Market Street Real Estate Partners, a privately-held real estate investment and management firm headquartered in Miami, Florida. Prior to forming Market Street, Mr. Warman was most recently a senior member of Bayview’s commercial loan acquisition and asset management team. Mr. Oppenheim was head of a specialized group responsible for restructuring non-performing and sub-performing commercial loans and oversaw the property management division. Mr. Oppenheim was also a member of the investment committee for the Bayview Opportunity Fund. Mr. Oppenheim is originally a native of Pittsburgh and earned his Bachelor of Science degree from Carnegie Mellon University. Robbie Oppenheim, Daniel Warman and Allan Serviansky together have ownership interests in 10 properties with a total net rentable area of over 1.17 million SF across the states of Pennsylvania, California, Florida, Texas, Kentucky and Rhode Island. Mr. Aeder co-founded JDI Realty in 1988 and currently serves as Chairman. JDI Realty is a private real estate investment firm.
Escrows. The related loan documents provide for upfront escrows in the amount of $705,609 for real estate taxes, $31,673 for insurance premiums, $9,815 for replacement reserves, $1,616,313 for the Quest leasing reserve for tenant improvements awarded as part of the renewal and expansion of the Quest Diagnostics PA lease, $254,896 for deferred maintenance and $45,530 for a free rent reserve. The loan documents also provide for ongoing monthly escrow deposits of $100,801 for real estate taxes, $10,558 for insurance premiums, $9,815 for replacement reserves, $49,076 for TI/LC reserve and $13,000 for the Quest leasing reserve from months 1 through 77 of the loan term.
Lockbox and Cash Management. The Parkway Center Mortgage Loan is structured with a hard lockbox and springing cash management. All rents and payments (including credit card receivables) are required to be deposited by the Parkway Center Borrower into the applicable lender-controlled lockbox account and swept each business day into the applicable borrower operating account, unless a Trigger Period has occurred and is continuing, in which case such funds are required to be swept each business day into the applicable lender-controlled cash management account and disbursed on each payment date in accordance with the related loan documents. Upon the occurrence and during the continuance of a Trigger Period, all excess cash flow is required to be swept into the applicable cash management account and held by the lender as additional collateral for the Parkway Center Mortgage Loan.
A “Trigger Period” will commence upon the earliest of the following:
| (i) | an event of default under the Parkway Center Mortgage Loan; |
| (ii) | the NCF debt service coverage ratio for the Parkway Center Mortgage Loan being below 1.15x; |
| (iii) | the Parkway Center Borrower, McKesson, County of Allegheny, Alorica, and/or Quest Diagnostics PA become insolvent or petition in bankruptcy has been filed by or against the Parkway Center Borrower and/or Quest Diagnostics PA; |
| (iv) | the property manager has become insolvent or a petition in bankruptcy has been filed by or against the property manager, and the Parkway Center Borrower has not replaced the property manager within thirty (30) days after the earlier of the date of such insolvency or the filing of such bankruptcy; and |
| (v) | McKesson, County of Allegheny, Alorica, and/or Quest Diagnostics PA has (a) ceased all or substantially all of its business operations at its leased premises at the Parkway Center Property for a period in excess of sixty (60) consecutive days (i.e., “goes dark”), (b) fails to cure a default under its lease for more than thirty (30) days, and/or (c) fails to provide notice to renew is lease as required therein. |
| A-3-28 |
PARKWAY CENTER |
A “Trigger Period” will end:
| (a) | with regard to clause (i) upon Lender’s written waiver of such event of default; and |
| (b) | with regards to clause (ii) upon the NCF debt service coverage ratio for the Parkway Center Mortgage Loan being equal to or greater than 1.25x for two consecutive calendar quarters. |
Property Management. The Parkway Center Property is managed by MSREP Property Management, LLC, an affiliate of the Parkway Center Borrower.
Assumption. The Parkway Center Borrower has an unlimited right to transfer the Parkway Center Property, provided that certain conditions are satisfied, including, but not limited to: (i) no mortgage loan default or event of default has occurred and is continuing; (ii) the lender’s reasonable determination that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration the transferee’s experience, financial strength and general business standing; (iii) execution of a recourse guaranty and an environmental indemnity by an acceptable replacement guarantor; and (iv) receipt of a rating agency confirmation from the applicable rating agencies.
Partial Release. Following the lockout period, the borrower is permitted to obtain a partial release of any building of the Parkway Center Property (with the exception of Building 7) (the “Parkway Center Release Parcel”) from the lien of the Parkway Center Mortgage Loan subject to certain conditions, including, but not limited to: (i) partial defeasance in an amount equal to the 125.0% of the allocated loan amount for the Parkway Center Release Parcel; (ii) the debt yield of the undefeased portion of the Parkway Center Mortgage Loan based on the remaining portion of the Parkway Center Property is not less than 9.75%; (iii) the debt service coverage ratio of the undefeased portion of the Parkway Center Mortgage Loan based on the remaining portion of the Parkway Center Property is not less than the greater of 1.35x and the debt service coverage ratio as of the notice date and the release date and (iv) the loan-to-value ratio of the undefeased portion of the Parkway Center Mortgage Loan based on the remaining portion of the Parkway Center Property is no greater than the lesser of 70% and the loan-to-value ratio of the Parkway Center Mortgage Loan as of the notice date and the release date.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. RCC Real Estate, Inc. funded $4,700,000 of mezzanine debt (the “Parkway Center Mezzanine Loan”). The Parkway Center Mezzanine loan has a 10.0% coupon and pays interest only for the entire term. The Parkway Center Mezzanine loan is coterminous with the Parkway Center Mortgage Loan. Including the Parkway Center Mezzanine Loan, the cumulative cut-off date LTV, cumulative UW NCF DSCR and cumulative UW NCF Debt Yield are 71.0%, 1.18x and 8.1%. The mortgage lenders and mezzanine lenders have entered into an intercreditor agreement. The rights of the lender of the Parkway Center Mezzanine Loan are further described under Description of the Mortgage Pool – Additional Indebtedness – Mezzanine Indebtedness” in the Preliminary Prospectus.
Ground Lease. Not Applicable
Terrorism Insurance. The Parkway Center Mortgage Loan documents require that the “all risk” insurance policies required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the Parkway Center Property, or that if the Terrorism Risk Insurance Program Reauthorization Act is no longer in effect and such policies contain an exclusion for acts of terrorism, the borrower will obtain, to the extent available, a stand-alone policy that provides the same coverage as the policies would have if such exclusion did not exist.
| A-3-29 |
1801 L STREET |
| A-3-30 |
1801 L STREET |
| A-3-31 |
| No. 4 – 1801 L Street | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Well Fargo Bank, National Association | Single Asset/Portfolio: | Single Asset | ||||
| Property Type: | Multifamily | ||||||
| Original Principal Balance: | $38,000,000 | Specific Property Type: | Low Rise | ||||
| Cut-off Date Balance: | $38,000,000 | Location: | Sacramento, CA | ||||
| % of Initial Pool Balance: | 5.8% | Size: | 176 Units | ||||
| Loan Purpose: | Refinance | Cut-off Date Balance Per Unit: | $215,909 | ||||
| Borrower Name: | 1801 L Street Associates, a California Limited Partnership | Year Built/Renovated: | 2007/NAP | ||||
| Borrower Sponsors: | Sotiris K. Kolokotronis; Matina R. Kolokotronis | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.8450% | Property Manager: | FPI Management, Inc. | ||||
| Note Date: | June 13, 2018 | 4th Most Recent Occupancy(As of)(3): | 95.5% (12/31/2014) | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of)(3): | 95.7% (12/31/2015) | ||||
| Maturity Date: | July 11, 2028 | 2nd Most Recent Occupancy (As of)(3): | 95.3% (12/31/2016) | ||||
| IO Period: | 120 months | Most Recent Occupancy (As of)(3): | 96.3% (12/31/2017) | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of)(3): | 94.3% (4/23/2018) | ||||
| Seasoning: | 0 months | ||||||
| Amortization Term (Original): | NAP | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Interest-only, Balloon | 4th Most Recent NOI (As of): | $2,691,028 (12/31/2015) | ||||
| Interest Accrual Method: | Actual/360 | 3rd Most Recent NOI (As of): | $2,751,164 (12/31/2016) | ||||
| Call Protection: | L(24),D(92),O(4) | 2nd Most Recent NOI (As of): | $2,951,790 (12/31/2017) | ||||
| Lockbox Type: | Springing | Most Recent NOI (As of): | $2,973,148 (TTM 4/30/2018) | ||||
| Additional Debt(1): | Yes | ||||||
| Additional Debt Type(1): | Subordinate | U/W Revenues: | $4,789,700 | ||||
| U/W Expenses: | $1,721,068 | ||||||
| U/W NOI: | $3,068,632 | ||||||
| Escrows and Reserves(2): | U/W NCF: | $3,007,209 | |||||
| U/W NOI DSCR: | 1.64x | ||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF DSCR: | 1.61x | ||
| Taxes | $117,936 | $29,484 | NAP | U/W NOI Debt Yield: | 8.1% | ||
| Insurance | $54,120 | $4,510 | NAP | U/W NCF Debt Yield: | 7.9% | ||
| Deferred Maintenance | $63,232 | $0 | NAP | As-Is Appraised Value: | $60,260,000 | ||
| Replacement Reserves | $0 | $4,216 | NAP | As-Is Appraisal Valuation Date: | April 9, 2018 | ||
| Leasing Reserves | $160,000 | $903 | NAP | Cut-off Date LTV Ratio(1): | 63.1% | ||
| Economic Holdback Reserve | $700,000 | $0 | NAP | LTV Ratio at Maturity or ARD(1): | 63.1% | ||
| (1) | See “Subordinate and Mezzanine Indebtedness” section. All statistical information related to the balance per square foot, loan-to-value (“LTV”) ratios, debt service coverage ratios and debt yields are based solely on the 1801 L Street Mortgage Loan. The Subordinate Agency Loan (as defined below) has a current balance of approximately $6,244,117 and, with accrued interest, is projected to have a total outstanding balance of approximately $8,649,945 at the Maturity Date of the 1801 L Street Mortgage Loan. Assuming full interest deferral (as outlined in the “Subordinate and Mezzanine Indebtedness” section), the Cut-off Date LTV Ratio and LTV Ratio at Maturity based on the 1801 L Street Mortgage Loan and Subordinate Agency Loan are 73.4% and 77.4%, respectively. |
| (2) | See “Escrows” section. |
| (3) | See “Historical Occupancy” section. |
The Mortgage Loan. The 1801 L Street mortgage loan (the “1801 L Street Mortgage Loan”) is evidenced by a single promissory note secured by a first mortgage encumbering the fee interest in a multifamily property located in Sacramento, California (the “1801 L Street Property”). The 1801 L Street Mortgage Loan was originated on June 13, 2018 by Wells Fargo Bank, National Association. The 1801 L Street Mortgage Loan had an original principal balance of $38,000,000, has an outstanding principal balance as of the Cut-off Date of $38,000,000 and accrues interest at an interest rate of 4.845% per annum. The 1801 L Street Mortgage Loan had an initial term of 120 months, has a remaining term of 120 months as of the Cut-off Date and requires interest-only payments through the full term of the 1801 L Street Mortgage Loan. The 1801 L Street Mortgage Loan matures on July 11, 2028.
Following the lockout period, on any date before April 11, 2028, the borrower has the right to defease the 1801 L Street Mortgage Loan in whole, but not in part. The 1801 L Street Mortgage Loan is prepayable without penalty on or after April 11, 2028.
| A-3-32 |
1801 L STREET |
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $38,000,000 | 100.0% | Refinance | $34,520,353 | 90.8% | |||
| Reserves | 1,095,288 | 2.9 | ||||||
| Closing costs | 785,449 | 2.1 | ||||||
| Return of equity | 1,598,910 | 4.2 | ||||||
| Total Sources | $38,000,000 | 100.0% | Total Uses | $38,000,000 | 100.0% |
The Property. The 1801 L Street Property is a class A, four-story multifamily property located in Sacramento, California. Constructed in 2007 by the borrower sponsor for a total cost of approximately $45.3 million, the 1801 L Street Property comprises 176 unfurnished apartment units and also contains 10,840 square feet of ground floor retail space (11.5% of the underwritten effective gross income). The apartment units include 38 studio units, 97 one-bedroom units, 39 two-bedroom units, and two three-bedroom units. Common area amenities at the 1801 L Street Property include an outdoor swimming pool, spa, fitness center, and storage closets. Unit amenities include wood flooring, in-unit washer/dryer, walk-in closet, balcony, granite countertops, garbage disposal, and stainless steel appliances including an oven/range combination, dishwasher, and refrigerator/freezer. As of April 23, 2018, the multifamily component of the 1801 L Street Property was 94.3% occupied and has averaged 96.1% occupancy since 2014. As of April 23, 2018, the retail space was 71.1% leased by six tenants. There is an executed letter of intent for the remaining 28.9% of the retail net rentable area; however, the lender provides no assurance that such letter of intent will result in a lease being executed.
The 1801 L Street Property contains a secured access parking garage with 160 parking spaces, resulting in a parking ratio of 0.9 spaces per unit. The parking is rented to residents on a monthly basis ($175 per month for an unreserved space or $250 per month for a reserved space) and is also used as hourly and event parking pursuant to an agreement with the City of Sacramento.
In conjunction with a subordinate agency loan from the Housing Authority of the City of Sacramento (see “Subordinate and Mezzanine Indebtedness” section), the 1801 L Street Property is subject to regulatory agreements expiring in 2032 and 2057 with The Redevelopment Agency of the City of Sacramento and the California Tax Credit Allocation Committee. As part of the agreements, the 1801 L Street Property is required to allocate 36 Below-Market-Rate (“BMR”) units to Very Low Income residents (tenants earning less than 50% of the Sacramento Area Median Income (“AMI”)) and 9 BMR units to Moderate Income residents (tenants earning less than 110% of the AMI). The 45 BMR units are 100.0% leased with a waiting list of more than 800 people as of May 31, 2018, according to the property manager. The 1801 L Street Property receives a 20.45% tax exemption so long as 36 BMR units are allocated to Very Low Income residents. Twenty of the BMR units at the 1801 L Street Property are subject to an agreement expiring in 2032, and the remaining 25 BMR units are subject to an agreement expiring in 2057.
The following table presents certain information relating to the unit mix of the 1801 L Street Property:
Unit Mix Summary(1)
| Unit Type | Total No. of Units | % of Total Units | Average Unit Size (SF) | No. of BMR Units | Average Monthly Rent per Unit (Market Rate Units) | Average Monthly Rent per Unit (BMR) |
| Studio / 1 Bathroom | 38 | 21.6% | 459 | 12 | $1,521 | $825(2) |
| 1 Bedroom / 1 Bathroom | 97 | 55.1% | 756 | 24 | $2,083 | $762(3) |
| 2 Bedroom / 2 Bathroom | 39 | 22.2% | 1,057 | 9 | $2,569 | $907(4) |
| 3 Bedroom / 2 Bathroom | 2 | 1.1% | 1,885 | 0 | $4,473 | NAP |
| Total/Weighted Average | 176 | 100.0% | 772 | 45 | $2,126 | $808 |
| (1) | Information obtained from the appraisal and underwritten rent roll. |
| (2) | Eight BMR units are rented at an average rate of $575 per month to Very Low Income tenants, and four BMR units are rented at an average rate of $1,325 to Moderate Income tenants. |
| (3) | 20 BMR units are rented at an average rate of $635 per month to Very Low Income tenants, and four BMR units are rented at an average rate of $1,400 to Moderate Income tenants. |
| (4) | Eight BMR units are rented at an average rate of $793 per month to Very Low Income tenants, and one BMR unit is rented at $1,820 to a Moderate Income tenant. |
The following table presents historical occupancy percentages at the 1801 L Street Property:
Historical Occupancy
12/31/2014(1)(2) | 12/31/2015(1)(2) | 12/31/2016(1)(2) | 12/31/2017(1)(2) | 4/23/2018(2)(3) |
| 95.5% | 95.7% | 95.3% | 96.3% | 94.3% |
| (1) | Information obtained from the borrower. |
| (2) | Occupancy shown above represents the multifamily component of the 1801 L Street Property. Historical occupancy of the retail portion is as follows: 96.5% in 2014; 100.0% in 2015; 99.9% in 2016; and 76.0% in 2017. As of April 23, 2018, the retail component was 71.1% occupied by six tenants. There is an executed letter of intent for the remaining 28.9% of the net rentable area of the retail space; however, the lender provides no assurance that such letter of intent will result in a lease being executed. |
| (3) | Information obtained from the underwritten rent roll. |
| A-3-33 |
1801 L STREET |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and underwritten net cash flow at the 1801 L Street Property:
Cash Flow Analysis
| 2015 | 2016 | 2017 | TTM 4/30/2018 | U/W | % of U/W Effective Gross Income | U/W $ per Unit | |
| Base Rent | $3,067,566 | $3,250,777 | $3,370,316 | $3,415,454 | $3,519,180 | 73.5% | $19,995 |
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | $105,900 | 2.2 | 602 |
| Retail Income | 559,693 | 399,929 | 460,237 | 466,571 | 549,430(1) | 11.5 | 3,122 |
| Parking Income | 348,415 | 484,489 | 512,133 | 525,080 | 525,080 | 11.0 | 2,983 |
| Other Income(2) | 242,710 | 283,722 | 278,233 | 271,364 | 271,364 | 5.7 | 1,542 |
| Less Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (181,254)(3) | (3.8) | (1,030) |
| Effective Gross Income | $4,218,384 | $4,418,917 | $4,620,919 | $4,678,469 | $4,789,700 | 100.0% | $27,214 |
| Total Operating Expenses | $1,527,355 | $1,667,754 | $1,669,129 | $1,705,321 | $1,721,068 | 35.9% | $9,779 |
|
|
|
|
|
|
| |
| Net Operating Income | $2,691,028 | $2,751,164 | $2,951,790 | $2,973,148 | $3,068,632 | 64.1% | $17,435 |
| Capital Expenditures | 0 | 0 | 0 | 0 | 50,583 | 1.1 | 287 |
| TI/LC | 0 | 0 | 0 | 0 | 10,840 | 0.2 | 62 |
| Net Cash Flow | $2,691,028 | $2,751,164 | $2,951,790 | $2,973,148 | $3,007,209 | 62.8% | $17,086 |
| NOI DSCR | 1.44x | 1.47x | 1.58x | 1.59x | 1.64x | ||
| NCF DSCR | 1.44x | 1.47x | 1.58x | 1.59x | 1.61x | ||
| NOI DY | 7.1% | 7.2% | 7.8% | 7.8% | 8.1% | ||
| NCF DY | 7.1% | 7.2% | 7.8% | 7.8% | 7.9% |
| (1) | U/W Retail Income includes $93,840 of base rent, plus applicable reimbursements, attributed to an executed letter of intent related to the currently vacant retail space totaling 3,128 square feet. The lender provides no assurance that such letter of intent will result in a lease being executed, and the 1801 L Street Mortgage Loan is structured with a $700,000 economic holdback, which the lender is required to apply to pay down the principal balance of the mortgage loan if a lease is not executed on such currently vacant retail space (along with additional conditions fully outlined in the “Escrows” section) by June 1, 2021. Removing credit for the aforementioned letter of intent from the U/W would result in an U/W Net Cash Flow of $2,950,525, which would reflect a NCF DSCR and NCF DY of 1.58x and 7.8%, respectively, based on the $38,000,000 Original Principal Balance of the 1801 L Street Mortgage Loan and a NCF DSCR and NCF DY of 1.61x and 7.9%, respectively, based on the $37,300,000 net-of-holdback principal balance (Original Principal Balance minus the $700,000 economic holdback). |
| (2) | Other income includes laundry, storage, application fees, pet fees, and other revenue. |
| (3) | The underwritten economic vacancy is 5.0%. The multifamily component of the 1801 L Street Property was 94.3% physically occupied and 97.1% economically occupied as of April 23, 2018. |
Appraisal. As of the appraisal valuation date of April 9, 2018, the 1801 L Street Property had an “as-is” appraised value of $60,260,000.
Environmental Matters. According to a Phase I environmental site assessment dated April 19, 2018, there was no evidence of any recognized environmental conditions at the 1801 L Street Property.
Market Overview and Competition. The 1801 L Street Property is located in downtown Sacramento, California, approximately 11.2 miles southeast of the Sacramento International Airport. Sacramento is the capital of the state of California and is located at the nucleus of several major freeways, including U.S. Highway 50, State Highway 99, and Interstates 5 and 80. These freeways provide access to the San Francisco Bay Area to the west, Southern California to the south, Oregon and Washington to the north, and Nevada to the east. The Sacramento metropolitan statistical area (“MSA”) has a population of approximately 2.1 million people and its economy is primarily driven by the government sector, with federal, state and local government being the largest employers in the MSA, followed by the agriculture, education and healthcare industries. Additionally, the inland Port of West Sacramento’s deep water port connecting to San Francisco Bay via a 43-mile channel provides transportation services for goods grown and produced along the farming communities surrounding the MSA.
Approximately 1.1 miles west of the 1801 L Street Property is the Golden 1 Center, home of the Sacramento Kings (the “Kings”) of the National Basketball Association (“NBA”). Matina Kolokotronis, one of the borrower sponsors of the 1801 L Street Mortgage Loan, is the Chief Operating Officer (“COO”) of the Kings and has been involved in the development of Golden 1 Center, as well as its adjacent approximately $500 million mixed-use development project, Downtown Commons. Golden 1 Center opened in September 2016 and is recognized as being a “green” and technologically advanced arena. According to a third party market report, since the opening of Golden 1 Center, 11 Downtown properties with more than 1.3 million square feet of office space have been sold, totaling more than $359 million with additional development projects currently under construction and in the planning stages. In its inaugural year, Golden 1 Center hosted more than 350 events, including 161 ticketed events (43 concerts, 34 family shows, 16 graduations, 25 live sporting events and 43 Kings’ basketball games), as well as hundreds of community and private events. Additionally, the NCAA March Madness tournament returned to Sacramento in 2017 for the first time in 10 years.
According to the appraisal, the estimated 2017 population within a three- and five-mile radius of the 1801 L Street Property was 140,969 and 360,886, respectively; while the estimated average household income within the same radii was $79,399 and $71,173, respectively. According to a third party market report, Sacramento and the greater Northern California region are experiencing an influx of people, primarily from the Bay Area, moving to the region in search of more affordable living. According to a third party market report as of December 2017, more than 17,000 people commute from Sacramento to the Bay Area for work.
| A-3-34 |
1801 L STREET |
According to a third party market research report, the 1801 L Street Property is located in the Downtown submarket of the Sacramento multifamily market. As of year-end 2017, the class A submarket reported total inventory of 1,457 multifamily units with a 4.9% vacancy rate and average monthly asking rent of $1,882 with projected rent growth of 4.8% over the next 12 months.
The following table presents certain information relating to comparable multifamily properties for the 1801 L Street Property:
Competitive Set(1)
| 1801 L Street (Subject) | Legado de Ravel Apartments | EVIVA Midtown | Fremont Mews | 16 Powerhouse | 800 J Lofts | Linq Midtown | |
| Location | Sacramento, CA | Sacramento, CA | Sacramento, CA | Sacramento, CA | Sacramento, CA | Sacramento, CA | Sacramento, CA |
| Distance to Subject | -- | 0.5 miles | 0.4 miles | 0.6 miles | 0.5 miles | 0.9 miles | 1.5 miles |
| Property Type | Low Rise | Mid Rise | Mid Rise | Garden | Mid Rise | Mid Rise | Garden |
| Year Built/Renovated | 2007/NAP | 2014/NAP | 2016/NAP | 2006/NAP | 2015/NAP | 2006/NAP | 2010/NAP |
| Number of Units | 176 | 84 | 118 | 70 | 50 | 225 | 275 |
| Average Monthly Rent (per unit) | |||||||
| Studio | $1,521(2) | NAP | $1,900 | $1,762 | NAP | $1,317 | $1,674 |
| 1 Bedroom | $2,083(2) | $1,792 | $2,056 | $2,000 | $2,450 | $2,120 | $1,965 |
| 2 Bedroom | $2,569(2) | $2,378 | $2,970 | $2,399 | $3,694 | $2,633 | $2,324 |
| 3 Bedroom | $4,473(2) | NAP | NAP | NAP | NAP | NAP | NAP |
| Occupancy | 94.3% | 98.8% | 94.9% | 95.7% | 100.0% | 96.0% | 96.4% |
| (1) | Information obtained from the appraisal and underwritten rent roll. |
| (2) | The rents shown represent the market rate units at the 1801 L Street Property. See “Unit Mix Summary” above for information related to the BMR units at the 1801 L Street Property. |
The Borrower. The borrower is 1801 L Street Associates, a California Limited Partnership, a single purpose entity with one independent director. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the 1801 L Street Mortgage Loan. Sotiris K. Kolokotronis and Matina R. Kolokotronis, each an individual, individually and/or collectively, are the guarantors of certain nonrecourse carveouts under the 1801 L Street Mortgage Loan.
The Borrower Sponsors. The borrower sponsors are Sotiris K. Kolokotronis and Matina R. Kolokotronis, husband and wife and long-time Sacramento residents. Sotiris Kolokotronis is the founder and owner of SKK Developments, a real estate firm that specializes in mixed-use, multi-family and land development projects. Mr. Kolokotronis began his real estate career in 1985 and has been involved in developing more than 7,000 residential home sites, 2,000 single-family homes, 1,500 multi-family units, and 300,000 square feet of commercial buildings in Northern California, Colorado, Nevada, and Oregon that are valued at more than $1.0 billion. Mr. Kolokotronis is currently involved in the development of multiple projects in Sacramento’s urban core valued at approximately $225 million. Mr. Kolokotronis is also involved in the planning and entitlement of approximately 3,000 acres in Sacramento. Mr. Kolokotronis was subjected to a foreclosure in 2010 and personal bankruptcy 2012, which have both been resolved. See “Description of the Mortgage Pool— Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” in the Preliminary Prospectus.
As previously mentioned, Mrs. Kolokotronis is the COO of the Kings, has worked for the Kings for 21 years, and is the only woman in the NBA to hold the titles of both Chief Operating Officer and President of Business Operations. Mrs. Kolokotronis has been involved in the development of the Kings’ new downtown arena, Golden 1 Center, as well as its adjacent $500 million mixed-use development project, Downtown Commons. Together, Golden 1 Center and Downtown Commons are part of nearly $2.0 billion in investment in downtown Sacramento since 2015.
Escrows. The loan documents provide for upfront reserves of $117,936 for real estate taxes, $54,120 for insurance, $63,232 for immediate repairs, and $160,000 for outstanding tenant improvements and leasing commissions (“TI/LC”). The loan documents also provide for ongoing monthly reserves of $29,484 for real estate taxes, $4,510 for insurance, $4,216 for replacement reserves, and $903 for general TI/LCs.
The 1801 L Street Mortgage Loan is structured with a $700,000 upfront economic holdback. The loan documents require the lender to disburse the economic holdback reserve funds to the borrower if the following conditions are satisfied on or before June 1, 2021: (i) no Cash Trap Event Period (as defined below) then exists; (ii) the net cash flow debt yield is equal to or greater than 7.9%; (iii) the net cash flow debt service coverage ratio (calculated based on a hypothetical 30-year amortization schedule) is equal to or greater than 1.20x; (iv) lender has reasonably determined there have been no material changes that could adversely impact the 1801 L Street Property; and (v) the currently vacant retail space, totaling 3,128 square feet, is leased with such tenant being in occupancy, paying full, unabated rent, with all TI/LCs having been paid. If the preceding conditions are not satisfied as of June 1, 2021, the lender is required to apply the economic holdback reserve funds to pay down the principal balance of the 1801 L Street Mortgage Loan. There is an executed letter of intent for the currently vacant retail space, which is included in the lender’s underwritten net cash flow ($93,840 of annual rent included in Retail Income); however, the lender provides no assurance that such letter of intent will result in a lease being executed.
Lockbox and Cash Management. Upon the occurrence and continuance of a Cash Trap Event Period (as defined below), the 1801 L Street Mortgage Loan requires the borrower to establish a lender-controlled lockbox account and instruct tenants to deposit rents into such lockbox account. All funds in the lockbox account are required to be swept each business day into the cash management account controlled by the lender and disbursed on each payment date in accordance with the loan documents. During a Cash Trap Event Period, all excess funds are required to be swept to an excess cash flow subaccount controlled by the lender.
| A-3-35 |
1801 L STREET |
A “Cash Trap Event Period” will commence upon the earlier of the following:
| (i) | the occurrence of an event of default; or |
| (ii) | the net cash flow debt service coverage ratio falling below 1.45x at the end of any calendar quarter. |
A Cash Trap Event Period will end upon the occurrence of the following:
| ● | with regard to clause (i), the cure of such event of default; or |
| ● | with regard to clause (ii), the net cash flow debt service coverage ratio being equal to or greater than 1.55x for two consecutive calendar quarters. |
Property Management. The 1801 L Street Property is managed by FPI Management, Inc. (“FPI”), a privately owned, third party multifamily property manager. FPI manages more than 100,000 units located in 13 states, and its portfolio consists of approximately 60% market rate units and 40% affordable units.
Assumption. The borrower has the two-time right to transfer the 1801 L Street Property, provided that certain conditions are satisfied, including (i) no event of default has occurred and is continuing; (ii) the lender has reasonably determined that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration the transferee’s experience, financial strength and general business standing; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 certificates.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. The Housing Authority of the City of Sacramento (the “Subordinate Lender”), as successor to the Redevelopment Agency of the City of Sacramento, funded a $4,750,000 subordinate agency loan (the “Subordinate Agency Loan”) to 1801 L Street Associates in January 2006. The Subordinate Agency Loan is secured by the 1801 L Street Property. The Subordinate Agency Loan accrues interest at a rate of 4.000% per annum, however, payments are deferred, and interest accrues, unless the 1801 L Street Property’s average net operating income (“NOI”) meets or exceeds certain thresholds as tested every five years, on a trailing five-year basis, beginning in 2021. The trailing five-year NOI thresholds in 2021, 2026 and 2031 are $3,409,078, $4,217,573 and $5,210,656, respectively. If the 2021 NOI threshold is met (based on the trailing five-year test period ending December 31, 2020), monthly payments are required in the amount of $24,167 in 2021 through 2025, $43,333 in 2026 through 2030, $78,000 in 2031 through 2035 and $83,799 due on January 1, 2036. If the 2026 NOI threshold is met (based on the trailing five-year test period ending December 31, 2025), monthly payments are required in the amount of $43,333 in 2026 through 2030, $103,583 in 2031 through 2035 and $105,715 due on January 1, 2036. If the 2031 NOI threshold is met (based on the trailing five-year test period ending December 31, 2030), monthly payments are required in the amount of $168,417 in 2031 through 2035, and $174,044 due on January 1, 2036.
As of June 2018, the Subordinate Agency Loan has accrued interest of $1,494,117, bringing the total balance of the Subordinate Agency Loan to approximately $6,244,117. The Subordinate Agency Loan has a maturity date of January 1, 2036. Assuming the NOI threshold is not satisfied in 2021, 2026, or 2031, no payments will be required until the Subordinate Agency Loan matures in 2036, at which point the balance, including principal and accrued interest, would be approximately $10,260,000. If the NOI threshold is not satisfied in 2021 or 2026, the total balance of the Subordinate Agency Loan, including principal and accrued interest, at the maturity date of the 1801 L Street Mortgage Loan in 2028 would be approximately $8,649,945.
The lender of the 1801 L Street Mortgage Loan (the “Senior Lender”) has the right to notice of, and the right to cure, any defaults under the Subordinate Agency Loan agreement. The Subordinate Agency Loan is fully subordinate to the 1801 L Street Mortgage Loan pursuant to the 1801 L Street Subordination Agreement, and a default under the Subordinate Agency Loan agreement is a default under the 1801 L Street Mortgage Loan documents. A foreclosure of the 1801 L Street Mortgage Loan would extinguish the deed of trust securing the Subordinate Agency Loan, and the Senior Lender or any purchaser of the 1801 L Street Mortgage Loan at foreclosure would take the 1801 L Street Property free and clear. In addition, the associated Affordable Housing Agreement will automatically terminate (although Federal law requires the continuation of affordable housing for three years after the termination of the Affordable Housing Agreement).
Ground Lease. None.
Terrorism Insurance. The loan documents require that the “all risk” insurance policies required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the 1801 L Street Property. The loan documents also require business interruption insurance covering no less than the 18-month period following the occurrence of a casualty event, together with a six-month extended period of indemnity.
Earthquake Insurance. The loan documents do not require earthquake insurance. The seismic report indicated a probable maximum loss for the 1801 L Street Property of 10.0%.
| A-3-36 |
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| A-3-37 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
| A-3-38 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
| A-3-39 |
| No. 5 – ExchangeRight Net Leased Portfolio #21 | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Barclays Bank PLC | Single Asset/Portfolio: | Portfolio | ||||
| Property Type: | Various | ||||||
| Original Principal Balance: | $37,795,000 | Specific Property Type: | Various | ||||
| Cut-off Date Balance: | $37,795,000 | Location(3): | Various | ||||
| % of Initial Pool Balance: | 5.7% | Size: | 263,629 SF | ||||
| Loan Purpose: | Acquisition | Cut-off Date Balance Per SF: | $143.36 | ||||
| Borrower Name(1): | ExchangeRight Net Leased Portfolio 21 DST | Year Built/Renovated(3): | Various | ||||
| Borrower Sponsor: | ExchangeRight Real Estate | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.2700% | Property Manager: | Self-managed | ||||
| Note Date: | April 9, 2018 | 4th Most Recent Occupancy(4): | NAV | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy(4): | NAV | ||||
| Maturity Date: | April 6, 2028 | 2nd Most Recent Occupancy(4): | NAV | ||||
| IO Period: | 120 months | Most Recent Occupancy(4): | NAV | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of): | 100.0% (7/1/2018) | ||||
| Seasoning: | 3 months | ||||||
| Amortization Term (Original): | NAP | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Interest-only, Balloon | ||||||
| Interest Accrual Method: | Actual/360 | 4th Most Recent NOI(5): | NAV | ||||
| Call Protection: | L(27),D(89),O(4) | 3rd Most Recent NOI(5): | NAV | ||||
| Lockbox Type: | Hard/Springing Cash Management | 2nd Most Recent NOI(5): | NAV | ||||
| Additional Debt: | None | Most Recent NOI(5): | NAV | ||||
| Additional Debt Type: | NAP | ||||||
| U/W Revenues: | $4,024,258 | ||||||
| U/W Expenses: | $381,942 | ||||||
| U/W NOI: | $3,642,316 | ||||||
| U/W NCF: | $3,580,000 | ||||||
| Escrows and Reserves(2): | U/W NOI DSCR: | 2.23x | |||||
| U/W NCF DSCR: | 2.19x | ||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI Debt Yield: | 9.6% | ||
| Taxes | $68,033 | $13,633 | NAP | U/W NCF Debt Yield: | 9.5% | ||
| Insurance | $1,728 | $1,728 | NAP | As-Is Appraised Value(6): | $61,230,000 | ||
| Replacement Reserves | $244,457 | $1,409 | NAP | As-Is Appraisal Valuation Date(6): | Various | ||
| TI/LC Reserve | $500,000 | $15,378 | NAP | Cut-off Date LTV Ratio: | 61.7% | ||
| Deferred Maintenance | $52,133 | $0 | NAP | LTV Ratio at Maturity or ARD: | 61.7% | ||
| (1) | See “The Borrower” section. |
| (2) | See “Escrows” section. |
| (3) | See “The Properties” section. |
| (4) | See “Historical Occupancy” section. |
| (5) | See “Cash Flow Analysis” section. Historical cash flows are unavailable as the ExchangeRight Properties (as defined below) were acquired by ExchangeRight (as defined below) between December 2017 and April 2018. According to ExchangeRight, the sellers of the ExchangeRight Properties did not provide historical operating statements to ExchangeRight. |
| (6) | See “Appraisal” section. Each of the ExchangeRight Properties was valued individually. The appraisals are dated from January 22, 2018 to March 23, 2018. |
The Mortgage Loan. The mortgage loan (the “ExchangeRight Mortgage Loan”) is evidenced by a single promissory note that is secured by a first mortgage encumbering 20 cross-collateralized, triple-net leased, retail and medical office properties located in 10 states (the “ExchangeRight Properties”). The ExchangeRight Mortgage Loan was originated on April 9, 2018 by Barclays Bank PLC. The ExchangeRight Mortgage Loan had an original principal balance of $37,795,000, has an outstanding principal balance as of the Cut-off Date of $37,795,000 and accrues interest at an interest rate of 4.2700% per annum. The ExchangeRight Mortgage Loan had an initial term of 120 months, has a remaining term of 117 months as of the Cut-off Date and requires interest-only payments through its term. The ExchangeRight Mortgage Loan matures on April 6, 2028.
Following the lockout period, the borrower has the right to defease the ExchangeRight Mortgage Loan in whole, but not in part, on any date before January 6, 2028. The ExchangeRight Mortgage Loan is prepayable without penalty on or after January 6, 2028.
| A-3-40 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $37,795,000 | 60.3% | Purchase price | $61,022,845 | 97.4% | |||
| Sponsor’s new cash contribution | 24,853,186 | 39.7 | Reserves | 866,351 | 1.4 | |||
| Closing costs | 758,990 | 1.2 | ||||||
| Total Sources | $62,648,186 | 100.0% | Total Uses | $62,648,186 | 100.0% |
The Properties. The ExchangeRight Properties are comprised of 17 retail and 3 medical office properties totaling 263,629 square feet located in 10 states. The largest geographical concentrations by state include Ohio (six properties, 22.5% of the allocated Cut-Off date balance), Virginia (two properties, 18.6% of the allocated Cut-Off date balance) and Louisiana (three properties, 12.9% of the allocated Cut-Off date balance). Built between 1992 and 2018, the ExchangeRight Properties range in size from 6,500 square feet to 55,000 square feet. As of July 1, 2018, the ExchangeRight Properties were 100.0% occupied.
The ExchangeRight Properties include nationally recognized credit-tenants, such as Dollar General (rated Baa2/BBB by Moody’s/S&P), Walgreens (rated BBB/Baa2/BBB by Fitch/Moody’s/S&P), Fresenius Medical Care (rated BBB-/Baa3/BBB- by Fitch/Moody’s/S&P), Advance Auto Parts (rated Baa2/BBB- by Moody’s/S&P) and O’Reilly Auto Parts (rated Baa1/BBB by Moody’s/S&P). Credit rated tenants occupy 14 of the 20 properties representing 62.6% of underwritten base rent (leases are directly with rated entities or are guaranteed by such entities, with the exception of O’Reilly Auto Parts). The ExchangeRight Properties have a weighted average remaining initial lease term of approximately 13.1 years. If the fully extended lease maturity dates are used, the weighted average remaining lease term is approximately 34.7 years. Leases representing approximately 86.4% of the net rentable area and 85.4% of the underwritten base rent expire after the ExchangeRight Mortgage Loan maturity date. No individual property accounts for more than 11.4% of the underwritten base rent of the ExchangeRight Properties. The largest property, Hobby Lobby – Birmingham, comprises approximately 55,000 square feet (20.9% of the total net rentable area) and $440,000 of the underwritten base rent (11.4% of underwritten base rent). Excluding Hobby Lobby – Birmingham, no individual property accounts for more than 10.1% of the underwritten base rent.
The following table presents certain information relating to the ExchangeRight Properties:
| Tenant Name | City, State | Allocated Cut-off Date Balance | % of Portfolio Cut-off Date Balance | Occupancy | Year Built/ Renovated | Net Rentable Area (SF) | Lease Expiration | Appraised Value(1) | |||
| Walgreens | Yorktown, VA | $4,150,000 | 11.0% | 100.0% | 2007/NAP | 14,739 | 5/31/2033 | $6,330,000 | |||
| Hobby Lobby | Birmingham, AL | $4,000,000 | 10.6% | 100.0% | 2017/NAP | 55,000 | 4/30/2032 | $7,325,000 | |||
| Fresenius Medical Care | Belpre, OH | $3,130,000 | 8.3% | 100.0% | 2017/NAP | 7,516 | 11/30/2032 | $4,550,000 | |||
| Tractor Supply | Chesapeake, VA | $2,875,000 | 7.6% | 100.0% | 2012/NAP | 19,097 | 4/30/2028 | $4,475,000 | |||
| Tractor Supply | Hollywood, MD | $2,875,000 | 7.6% | 100.0% | 2013/NAP | 20,097 | 3/1/2028 | $4,800,000 | |||
| Fresenius Medical Care | Chicago, IL | $2,800,000 | 7.4% | 100.0% | 2017/NAP | 9,396 | 12/31/2032 | $4,400,000 | |||
| Walgreens | Valrico, FL | $2,700,000 | 7.1% | 100.0% | 1997/NAP | 15,930 | 11/30/2029 | $4,350,000 | |||
| Tractor Supply | Scott, LA | $2,265,000 | 6.0% | 100.0% | 2017/NAP | 19,097 | 10/20/2032 | $3,850,000 | |||
| Dollar General | Harvey, LA | $1,640,286 | 4.3% | 100.0% | 2013/NAP | 12,406 | 4/30/2028 | $2,630,000 | |||
| Fresenius Medical Care | Hammond, IN | $1,550,000 | 4.1% | 100.0% | 2008/NAP | 6,834 | 9/30/2027 | $2,350,000 | |||
| Walgreens | Huber Heights, OH | $1,479,420 | 3.9% | 100.0% | 1998/NAP | 13,905 | 6/30/2028 | $2,390,000 | |||
| Dollar General | Reynoldsburg, OH | $1,050,000 | 2.8% | 100.0% | 2017/NAP | 7,489 | 1/31/2033 | $1,510,000 | |||
| Dollar General | Amherst, OH | $1,034,007 | 2.7% | 100.0% | 2017/NAP | 9,026 | 1/31/2033 | $1,510,000 | |||
| Dollar General | Louisville, OH | $1,000,000 | 2.6% | 100.0% | 2017/NAP | 9,026 | 11/30/2032 | $1,480,000 | |||
| Dollar General | Mandeville, LA | $980,000 | 2.6% | 100.0% | 2012/NAP | 9,026 | 9/30/2027 | $1,500,000 | |||
| Advance Auto Parts | Gillette, WY | $929,781 | 2.5% | 100.0% | 1998/2017 | 7,000 | 5/31/2032 | $2,100,000 | |||
| Napa Auto Parts | McHenry, IL | $925,000 | 2.4% | 100.0% | 2006/NAP | 7,000 | 4/5/2038 | $1,470,000 | |||
| O’Reilly Auto Parts | Knoxville, TN | $900,000 | 2.4% | 100.0% | 1997/NAP | 6,500 | 4/14/2028 | $1,450,000 | |||
| Dollar General | Warren, OH | $796,680 | 2.1% | 100.0% | 2018/NAP | 7,545 | 1/31/2033 | $1,290,000 | |||
| Napa Auto Parts | Crystal Lake, IL | $714,825 | 1.9% | 100.0% | 1992/NAP | 7,000 | 4/5/2038 | $1,470,000 | |||
| Total/Weighted Average | $37,795,000 | 100.0% | 100.0% | 263,629 | $61,230,000 | ||||||
| (1) | In addition, each appraisal provides a “go-dark” value for the related property. The ExchangeRight Properties have an aggregate “go-dark” value of $36,160,000. |
| A-3-41 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
The following table presents certain information relating to the tenancies at the ExchangeRight Properties:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/ S&P)(1) | Number of Properties | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF | Annual U/W Base Rent | % of Total Annual U/W Base Rent | Lease Expiration Date |
| Major Tenants | ||||||||
| Tractor Supply | NR/NR/NR | 3 | 58,291 | 22.1% | $13.92 | $811,271 | 21.1% | Various(2) |
| Hobby Lobby | NR/NR/NR | 1 | 55,000 | 20.9% | $8.00 | $440,000 | 11.4% | 4/30/2032(3) |
| Dollar General | NR/Baa2/BBB | 6 | 54,518 | 20.7% | $12.01 | $654,518 | 17.0% | Various(4) |
| Walgreens | BBB/Baa2/BBB | 3 | 44,574 | 16.9% | $18.13 | $807,955 | 21.0% | Various(5) |
| Fresenius Medical Care | BBB-/Baa3/BBB- | 3 | 23,746 | 9.0% | $30.08 | $714,362 | 18.5% | Various(6) |
| Napa Auto Parts | NR/NR/NR | 2 | 14,000 | 5.3% | $13.63 | $190,800 | 5.0% | 4/5/2038(7) |
| Advance Auto Parts | NR/Baa2/BBB- | 1 | 7,000 | 2.7% | $18.89 | $132,250 | 3.4% | 5/31/2032(8) |
| O’Reilly Auto Parts | NR/Baa1/BBB | 1 | 6,500 | 2.5% | $15.56 | $101,129 | 2.6% | 4/14/2028(9) |
| Occupied Collateral Total | 20 | 263,629 | 100.0% | $14.61 | $3,852,285 | 100.0% | ||
| Vacant Space | 0 | 0.0% | ||||||
| Collateral Total | 263,629 | 100.0% | ||||||
| (1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
| (2) | Tractor Supply is a tenant at three of the ExchangeRight Properties and leases 20,097 square feet at the Tractor Supply - Hollywood property under a lease that expires on March 1, 2028 and has four, five-year renewal options; 19,097 square feet at the Tractor Supply - Chesapeake property under a lease that expires on April 30, 2028 and has four, five-year renewal options and 19,097 square feet at the Tractor Supply - Scott property under a lease that expires on October 20, 2032 and has four, five-year renewal options. |
| (3) | Hobby Lobby has three, five-year renewal options. |
| (4) | Dollar General is a tenant at six of the ExchangeRight Properties and leases 12,406 square feet at the Dollar General - Harvey property under a lease that expires on April 30, 2028 and has four, five-year renewal options; 9,026 square feet at the Dollar General – Amherst property under a lease that expires on January 31, 2033 and has four, five-year renewal options; 9,026 square feet at the Dollar General – Louisville property under a lease that expires on November 30, 2032 and has four, five-year renewal options; 9,026 square feet at the Dollar General – Mandeville property under a lease that expires on September 30, 2027 and has three, five-year renewal options; 7,545 square feet at the Dollar General – Warren property under a lease that expires on January 31, 2033 and has four, five-year renewal options and 7,489 square feet at the Dollar General - Reynoldsburg property under a lease that expires on January 31, 2033 and has four, five-year renewal options. |
| (5) | Walgreens is a tenant at three of the ExchangeRight Properties and leases 15,930 square feet at the Walgreens – Valrico property under a lease that expires on November 30, 2029 and has seven, five-year renewal options; 14,739 square feet at the Walgreens - Yorktown property under a lease that expires on May 31, 2033 and has eight, five-year renewal options and 13,905 square feet at the Walgreens – Huber Heights property under a lease that expires on June 30, 2028 and has seven, five-year renewal options. |
| (6) | Fresenius Medical Care is a tenant at three of the ExchangeRight Properties and leases 9,396 square feet at the Fresenius Medical Care - Chicago property under a lease that expires on December 31, 2032 and has three, five-year renewal options; 7,516 square feet at the Fresenius Medical Care – Belpre property under a lease that expires on November 30, 2032 and has three, five-year renewal options and 6,834 square feet at the Fresenius Medical Care - Hammond property under a lease that expires on September 30, 2027 and has two, five-year renewal options. |
| (7) | Napa Auto Parts has four, five-year renewal options under each of the Napa Auto Parts – Crystal Lake property lease and the Napa Auto Parts – McHenry property lease. |
| (8) | Advance Auto Parts has three, five-year renewal options. |
| (9) | O’Reilly Auto Parts has two, five-year renewal options. |
| A-3-42 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
The following table presents certain information relating to the lease rollover schedule at the ExchangeRight Properties:
Lease Expiration Schedule(1)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2018 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2019 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2020 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2021 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2022 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2023 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2024 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2025 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2026 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2027 | 2 | 15,860 | 6.0% | 15,860 | 6.0% | $268,646 | 7.0% | $16.94 |
| 2028 | 5 | 72,005 | 27.3% | 87,865 | 33.3% | $1,006,393 | 26.1% | $13.98 |
| Thereafter | 13 | 175,764 | 66.7% | 263,629 | 100.0% | $2,577,246 | 66.9% | $14.66 |
| Vacant | 0 | 0 | 0.0% | 263,629 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 20 | 263,629 | 100.0% | $3,852,285 | 100.0% | $14.61 |
| (1) | Information obtained from the underwritten rent roll. |
The following table presents historical occupancy percentages at the ExchangeRight Properties:
Historical Occupancy
12/31/2014(1) | 12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 7/1/2018(2) |
| NAV | NAV | NAV | NAV | 100.0% |
| (1) | The ExchangeRight Properties were acquired by ExchangeRight between December 2017 and April 2018. According to ExchangeRight, the sellers of the ExchangeRight Properties did not provide historical operating statements to ExchangeRight. |
| (2) | Information obtained from the underwritten rent roll. |
| A-3-43 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the underwritten net cash flow at the ExchangeRight Properties:
Cash Flow Analysis(1)
| U/W | % of U/W Effective Gross Income | U/W $/SF | ||||
| Base Rent(2) | $3,852,285 | 95.7% | $14.61 | |||
| Grossed Up Vacant Space | 0 | 0.0 | 0.00 | |||
| Total Reimbursables(3) | 273,397 | 6.8 | 1.04 | |||
| Other Income(4) | 14,000 | 0.3 | 0.05 | |||
| Less Vacancy(5) | (115,424) | (2.9) | (0.44) | |||
| Effective Gross Income | $4,024,258 | 100.0% | $15.26 | |||
| Total Operating Expenses | $381,942 | 9.5% | $1.45 | |||
| Net Operating Income | $3,642,316 | 90.5% | $13.82 | |||
| TI/LC(6) | 51,210 | 1.3 | 0.19 | |||
| Replacement Reserves(7) | 11,107 | 0.3 | 0.04 | |||
| Net Cash Flow | $ 3,580,000 | 89.0% | $13.58 | |||
| NOI DSCR | 2.23x | |||||
| NCF DSCR | 2.19x | |||||
| NOI DY | 9.6% | |||||
| NCF DY | 9.5% | |||||
| (1) | According to ExchangeRight, the sellers of the ExchangeRight Properties did not provide historical operating statements to ExchangeRight. |
| (2) | U/W Base Rent is inclusive of $42,028 of straight-line rent for Fresenius Medical Care - Chicago, Fresenius Medical Care - Hammond, Fresenius Medical Care - Belpre, Dollar General - Mandeville and O’Reilly Auto Parts – Knoxville and $7,664 of rent steps schedule to occur by October 2018. |
| (3) | Total Reimburseables are underwritten based on tenant leases and discussions with ExchangeRight. There are no reimbursements at ten of the properties as the tenants pay for their respective property expenses directly. The remaining ten tenants reimburse either property taxes, insurance or operating expenses or some combination of the three. |
| (4) | Other Income consists of billboard income for the Fresenius Medical Care – Chicago property. |
| (5) | The underwritten economic vacancy is 5.0% at the property level except for nine properties which are underwritten to a 0.0% economic vacancy. The nine properties are 100.0% occupied by investment grade tenants with at least 11 years remaining on the initial lease term and a fully extended expiration date of 2042 or later. The overall underwritten blended economic vacancy is 2.8%. The ExchangeRight Properties are 100.0% physically occupied as of July 1, 2018. |
| (6) | U/W TI/LC is inclusive of a straight-line credit for the upfront TI/LC Reserve equal to $50,000, which is 10.0% of the upfront TI/LC Reserve of $500,000. |
| (7) | U/W Replacement Reserves is inclusive of a straight-line credit equal to $24,446, which is 10.0% of the upfront Replacement Reserves of $244,457. |
Appraisal. The ExchangeRight Properties were valued individually, with the individual values reflecting a cumulative “as-is” appraised value of $61,230,000. The appraisals are dated from January 22, 2018 to March 23, 2018. Additionally, each appraisal provided a corresponding “go-dark” value which equates to a cumulative “go-dark” appraised value of $36,160,000 for the ExchangeRight Properties.
Environmental Matters. According to the Phase I environmental site assessments, dated from January 10, 2018 to March 28, 2018, there were no recognized environmental conditions at any of the ExchangeRight Properties.
The Borrower. The borrower is ExchangeRight Net Leased Portfolio 21 DST, a Delaware Statutory Trust (the “ExchangeRight Borrower”). At loan origination, the ExchangeRight Properties were conveyed and assumed from ExchangeRight Net Leased Portfolio 21, LLC to and by the ExchangeRight Borrower. The ExchangeRight Borrower has master leased the ExchangeRight Properties to a master lessee affiliated with the sponsors. The master lessee is structured as a special purpose entity. The master lessee’s interest in all tenant rents are assigned to the ExchangeRight Borrower, which in turn assigned its interest to the lender. The lender has the ability to cause the ExchangeRight Borrower to terminate the master lease. The sponsors have a 100% ownership interest in the master lessee. The master lease is subordinate to the ExchangeRight Mortgage Loan. There is one independent director for the borrowing entity and one independent director for the master lessee. Legal counsel to the ExchangeRight Borrower delivered a non-consolidation opinion in connection with the origination of the ExchangeRight Mortgage Loan. David Fisher, Joshua Ungerecht and Warren Thomas, all of whom are managing members of ExchangeRight Real Estate, LLC, are the guarantors of certain nonrecourse carveouts under the ExchangeRight Mortgage Loan. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Delaware Statutory Trusts” in the Preliminary Prospectus.
The Borrower Sponsor. The borrower sponsor is ExchangeRight Real Estate (“ExchangeRight”). ExchangeRight has more than $1.1 billion of assets and more than 10 million square feet under management. ExchangeRight has more than 400 investment-grade retail and class B/B+ multifamily properties located across 28 states. Warren Thomas was involved in a foreclosure in 2013 unrelated to the ExchangeRight Properties. See “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” in the Preliminary Prospectus.
| A-3-44 |
EXCHANGERIGHT NET LEASED PORTFOLIO #21
Escrows. The ExchangeRight Mortgage Loan documents provide for upfront reserves in the amount of $500,000 for future TI/LC reserves, $244,457 for replacement reserves, $68,033 for real estate taxes, $52,133 for deferred maintenance, and $1,728 for insurance reserves.
The ExchangeRight Mortgage Loan documents require monthly deposits for (a) real estate taxes in an amount equal to one-twelfth of an amount which would be sufficient to pay the taxes payable during the next ensuing twelve months, initially $13,633, (b) TI/LC reserves in an amount equal to $15,378, (c) insurance premiums in an amount equal to one-twelfth of an amount which would be sufficient to pay the insurance premiums payable during the next ensuing twelve months, initially $1,728 and (d) replacement reserves in an amount equal to $1,409. The ExchangeRight Borrower will not be required to make monthly deposits for real estate taxes for any of the individual ExchangeRight Properties provided (i) no Cash Sweep Event (as defined below) has occurred and is continuing, (ii) no default exists under the applicable lease of the tenant at such individual property, (iii) the tenant under such lease remains liable for paying all taxes directly to the applicable taxing authorities and (iv) the ExchangeRight Borrower has provided written evidence that all such taxes for such individual property have been paid in full at least 15 days prior to the due date of such taxes.
Lockbox and Cash Management. The ExchangeRight Mortgage Loan is structured with a hard lockbox and springing cash management. The ExchangeRight Borrower was required at origination to deliver letters to the tenants at the ExchangeRight Properties directing them to pay all rents directly into a lender-controlled lockbox account. Additionally, all revenues and other monies received by the ExchangeRight Borrower or property manager relating to the ExchangeRight Properties are required to be deposited into the lockbox account within two business days upon receipt. During the occurrence and continuance of a Cash Sweep Event (as defined below), all funds are required to be swept each business day into the cash management account controlled by the lender and disbursed on each payment date in accordance with the ExchangeRight Mortgage Loan documents, with all excess cash flow to be held as additional security for the ExchangeRight Mortgage Loan.
A “Cash Sweep Event” will occur:
| (i) | upon the occurrence and continuance of an event of default; |
| (ii) | upon the net operating income (as defined in the ExchangeRight Mortgage Loan documents) debt service coverage ratio being less than 1.45x; or |
| (iii) | on the date that is 36 months prior to the maturity date. |
A “Cash Sweep Event” will end upon the earlier of the following:
| (a) | the payment date next occurring following: |
| (x) | with regard to clause (i) above, the cure of such event of default; |
| (y) | with regard to clause (ii) above, the net operating income flow debt service coverage ratio being equal to or greater than 1.45x for any two consecutive calendar quarters; or |
| (z) | with regard to clause (iii) above, the occurrence of a qualified transfer under the ExchangeRight Mortgage Loan documents, provided that the approved transferee: (a) must maintain a minimum net worth of at least $200,000,000 and total assets of at least $400,000,000, (b) must execute and deliver a full recourse guaranty guaranteeing payment of the entire amount of the debt, (c) must at all times own no less than 100% of the legal and beneficial ownership interests in the ExchangeRight Borrower, (d) must not be a Delaware statutory trust and (e) will cause the ExchangeRight Borrower to convert to a limited liability company. |
| (b) | The payment in full of all principal and interest on the ExchangeRight Mortgage Loan and all other amounts payable under the ExchangeRight Mortgage Loan documents. |
Property Management. The ExchangeRight Properties are managed by an affiliate of the ExchangeRight Borrower.
Assumption. The ExchangeRight Borrower has the right to transfer all of the ExchangeRight Properties provided that certain conditions are satisfied, including: (i) no event of default has occurred and is continuing, (ii) the ExchangeRight Borrower has provided the lender with at least 60 days prior written notice, (iii) the proposed transferee qualifies as a qualified transferee under the ExchangeRight Mortgage Loan documents, (iv) the delivery of a REMIC opinion, an insolvency opinion and other opinions required by the lender, (v) the lender has received confirmation from DBRS, Fitch and Moody’s that such assumption will not result in a downgrade of the respective ratings assigned to the WFCM 2018-C45 certificates and (vi) other conditions set forth in the ExchangeRight Mortgage Loan documents.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Ground Lease. None.
Right of First Refusal / Offer. Four tenants have rights of first refusal and one tenant has a right of first offer. See “Description of the Mortgage Pool— Purchase Options and Rights of First Refusal” in the Preliminary Prospectus.
Terrorism Insurance. The ExchangeRight Mortgage Loan documents require that the “all risk” insurance policy required to be maintained by the ExchangeRight Borrower provide coverage for terrorism in an amount equal to 100% of the full replacement cost of the ExchangeRight Properties. The ExchangeRight Mortgage Loan documents also require business interruption insurance covering no less than the 18-month period following the occurrence of a casualty event, together with a three-month extended period of indemnity.
| A-3-45 |
Mission Center
| A-3-46 |
Mission Center
| A-3-47 |
Mission Center
| A-3-48 |
Mission Center
| A-3-49 |
| No. 6 – Mission Center | ||||||
| Loan Information | Property Information | |||||
| Mortgage Loan Seller: | Wells Fargo Bank, National Association | Single Asset/Portfolio: | Single Asset | |||
| Property Type: | Office | |||||
| Original Principal Balance: | $29,750,000 | Specific Property Type: | Suburban | |||
| Cut-off Date Balance: | $29,750,000 | Location: | San Diego, CA | |||
| % of Initial Pool Balance: | 4.5% | Size: | 183,410 SF | |||
| Loan Purpose: | Acquisition | Cut-off Date Balance Per SF: | $162.20 | |||
| Borrower Names: | Omninet Mission Center, LLC; Omninet Mission Centerview, LLC | Year Built/Renovated: | 1973/2018 | |||
| Borrower Sponsors: | Neil Kadisha; Benjamin Nazarian | Title Vesting: | Fee | |||
| Mortgage Rate: | 4.2650% | Property Manager: | Self-managed | |||
| Note Date: | May 29, 2018 | 4th Most Recent Occupancy (As of): | 90.8% (12/31/2014) | |||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of)(3): | 90.2% (12/31/2015) | |||
| Maturity Date: | June 11, 2028 | 2nd Most Recent Occupancy (As of)(3): | 84.6% (12/31/2016) | |||
| IO Period: | (1) | Most Recent Occupancy (As of)(3): | 93.3% (12/31/2017) | |||
| Loan Term (Original): | 120 months | Current Occupancy (As of): | 94.6% (5/24/2018) | |||
| Seasoning: | 1 month | |||||
| Amortization Term (Original): | 360 months | |||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | |||||
| Interest Accrual Method: | Actual/360 | Underwriting and Financial Information: | ||||
| Call Protection: | L(25),D(91),O(4) | 4th Most Recent NOI(4): | NAV | |||
| Lockbox Type: | Soft/Springing Cash Management | 3rd Most Recent NOI(4): | NAV | |||
| Additional Debt: | None | 2nd Most Recent NOI (As of)(4): | $1,896,281 (12/31/2016) | |||
| Additional Debt Type: | NAP | Most Recent NOI (As of)(4): | $2,515,160 (Annualized 8 8/31/2017) | |||
| U/W Revenues: | $4,967,665 | |||||
| U/W Expenses: | $1,684,476 | |||||
| Escrows and Reserves(2): | U/W NOI(4): | $3,283,188 | ||||
| U/W NCF: | $2,958,306 | |||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI DSCR: | 1.87x | |
| Taxes | $121,395 | $40,465 | NAP | U/W NCF DSCR: | 1.68x | |
| Insurance | $0 | Springing | NAP | U/W NOI Debt Yield: | 11.0% | |
| HVAC Improvement Project | $632,500 | $0 | NAP | U/W NCF Debt Yield: | 9.9% | |
| Replacement Reserve | $0 | $3,821 | $137,545 | As-Is Appraised Value: | $43,500,000 | |
| TI/LC Reserve | $0 | $22,926 | $825,265 | As-Is Appraisal Valuation Date: | April 5, 2018 | |
| Existing TI/LC Obligations | $46,872 | $0 | NAP | Cut-off Date LTV Ratio: | 68.4% | |
| Rent Concession Reserve | $149,706 | $0 | NAP | LTV Ratio at Maturity or ARD(5): | 62.4% | |
| (1) | The Mission Center Mortgage Loan (as defined below) is structured with a 60-month interest only period. An additional 12-month interest only period (July 11, 2023 through June 11, 2024) is contingent upon satisfaction of the Debt Yield Condition (as defined in “The Mortgage Loan” section). If the Debt Yield Condition is not satisfied, the interest only period will remain at 60 months total and the loan will require payments of principal and interest based on a 30-year amortization schedule commencing July 11, 2023 through the end of the loan term. |
| (2) | See “Escrows” section. |
| (3) | See “Historical Occupancy” table. |
| (4) | See “Cash Flow Analysis” section. |
| (5) | The LTV Ratio at Maturity or ARD reflects an interest only period of 60 months. Assuming a 72-month interest only period, the LTV Ratio at Maturity or ARD is 63.7%. |
The Mortgage Loan. The mortgage loan (the “Mission Center Mortgage Loan”) is evidenced by a single promissory note secured by a first mortgage encumbering the fee interest in a three-building suburban office complex located in San Diego, California (the “Mission Center Property”). The Mission Center Mortgage Loan was originated on May 29, 2018 by Wells Fargo Bank, National Association. The Mission Center Mortgage Loan had an original principal balance of $29,750,000, has an outstanding principal balance as of the Cut-off Date of $29,750,000 and accrues interest at an interest rate of 4.265% per annum. The Mission Center Mortgage Loan had an initial term of 120 months, has a remaining term of 119 months as of the Cut-off Date and requires interest-only payments for the first 60 months following origination (provided, however, that interest-only payments are required for an additional 12 months (for a potential total interest-only period of 72 months) as long as the net cash flow debt yield is equal to or greater than 10.5% as of June 11, 2023 (the “Debt Yield Condition”)) and, thereafter, requires payments of principal and interest based on a 30-year amortization schedule. The Mission Center Mortgage Loan matures on June 11, 2028.
Following the lockout period, the borrower has the right to defease the Mission Center Mortgage Loan in whole, but not in part, on any date before March 11, 2028. In addition, the Mission Center Mortgage Loan is prepayable without penalty on or after March 11, 2028. The lockout period will expire on the earlier to occur of (i) two years after the closing date of the securitization trust and (ii) July 11, 2021.
| A-3-50 |
Mission Center
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $29,750,000 | 73.3% | Purchase price(1) | $39,275,000 | 96.8% | |||
| Borrower sponsor’s new cash contribution | 10,828,862 | 26.7 | Upfront reserves | 950,473 | 2.3 | |||
| Closing costs | 353,389 | 0.9 | ||||||
| Total Sources | $40,578,862 | 100.0% | Total Uses | $40,578,862 | 100.0% | |||
| (1) | The borrower acquired the Mission Center Property in an all cash transaction on December 8, 2017 for $39,275,000. |
The Property. The Mission Center Property is a three-building suburban office complex totaling 183,410 square feet of rentable area located in San Diego, San Diego County, California. Originally constructed between 1973 and 1976 and renovated in 2005, 2016 and 2018, the Mission Center Property is situated on a 6.7-acre parcel of land in the suburban business district of Mission Valley. During the 2016 renovation, the Mission Center Property underwent an approximately $7.0 million capital improvement project to install exterior patios, replace roof areas, repair asphalt pavement, and upgrade exterior walkways, landscaping, lobbies, restrooms and other common areas. In addition, the borrower is currently upgrading the heating, ventilation and air conditioning (“HVAC”) systems at all three buildings, including the installation of new 40-ton rooftop cooling units, new heating systems, a replacement boiler and digital control mechanisms ($632,500 reserved at origination; see “Escrows” section).
The Mission Center Property is occupied by tenants from the education, government, engineering, healthcare, legal, and technology sectors. Amenities at the Mission Center Property include outdoor atrium style courtyards equipped with seating and dining areas and a workout facility with showers and grab-and-go bikes for tenant use. The site also includes three pad buildings occupied by Carl’s Jr., Del Taco, and InCahoots, which are not part of the collateral for the Mission Center Mortgage Loan but do contribute to the CAM reimbursements for parking lot maintenance and repairs. The Mission Center Property features 768 surface parking spaces indicating a parking ratio of 4.2 spaces per 1,000 square feet of net rentable area. As of May 24, 2018, the Mission Center Property was 94.6% occupied by 21 tenants. The Mission Center Property has averaged 90.7% occupancy since 2014 and 88.7% since 2009. Approximately 54.7% of the net rentable area and 60.6% of underwritten base rent at the Mission Center Property is attributed to investment grade tenants.
The largest tenant at the Mission Center Property by underwritten base rent is Azusa Pacific (“APU”), a private, not-for-profit university headquartered in Azusa, California, approximately 25.3 miles northeast of downtown Los Angeles (rated Baa3 by Moody’s; 25.8% of net rentable area; 31.9% of underwritten base rent). APU offers more than 100 associate’s, bachelor’s, master’s and doctoral programs on campus, online and at six regional centers across Southern California, including, San Diego, Los Angeles, Orange County, Murrieta, San Bernardino and Victorville. The Mission Center Property regional center includes programs for accelerated bachelor’s degrees, teaching credentials and master’s degrees in education, leadership, nursing, psychology and theology. In 2017 APU expanded its space at the Mission Center Property from 30,846 square feet to 47,234 square feet and extended its lease by 10 years and nine months through March 2028. The tenant has been at the Mission Center Property since 2007.
The second largest tenant at the Mission Center Property by underwritten base rent is the County of San Diego (rated AA+/Aa1/AA+ by Fitch/Moody’s/S&P; 28.9% of net rentable area; 28.7% of underwritten base rent). The County of San Diego has been at the Mission Center Property since 1973 and exercised an early 5-year renewal option in December 2016 to extend its lease term until May 2026. The Mission Center Property serves as an office for the Health and Human Services Agency (one of five divisions of the San Diego County government). The Health and Human Services Agency’s mission is to provide a range of health and social services, promoting wellness, self-sufficiency and a better quality of life for residents of San Diego County. The Health and Human Services Agency provides approximately 300 programs and services and employs approximately 6,000 people. The County of San Diego occupies the entire 7947 Mission Center Court building at the Mission Center Property.
Other than APU and the County of San Diego, no tenant accounts for more than 5.4% of the net rentable area or 4.6% of underwritten base rent at the Mission Center Property.
| A-3-51 |
Mission Center
The following table presents certain information relating to the tenancy at the Mission Center Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/ S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(2) | Annual U/W Base Rent(2) | % of Total Annual U/W Base Rent | Lease Expiration Date |
| Major Tenants | |||||||
| Azusa Pacific | NR/Baa3/NR | 47,234 | 25.8% | $34.08(3)(4) | $1,609,830(3)(4) | 31.9% | 3/31/2028(5) |
| County of San Diego | AA+/Aa1/AA+ | 53,006 | 28.9% | $27.29(6) | $1,446,526(6) | 28.7% | 5/31/2026(7) |
| Haley & Aldrich | NR/NR/NR | 9,910 | 5.4% | $23.64 | $234,272 | 4.6% | 12/31/2022(8) |
| American Cancer Society | NR/NR/NR | 6,653 | 3.6% | $24.84 | $165,261 | 3.3% | 1/31/2022 |
| Blue Sky Network | NR/NR/NR | 5,649 | 3.1% | $28.68 | $162,013 | 3.2% | 7/31/2022(9) |
| Total Major Tenants | 122,452 | 66.8% | $29.55 | $3,617,902 | 71.8% | ||
| Non-Major Tenants | 50,963 | 27.8% | $27.91 | $1,422,501 | 28.2% | ||
| Occupied Collateral Total | 173,415 | 94.6% | $29.07 | $5,040,403 | 100.0% | ||
| Vacant Space | 9,995 | 5.4% | |||||
| Collateral Total | 183,410 | 100.0% | |||||
| (1) | The ratings shown represent those of the entities on the respective tenant leases. |
| (2) | Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent steps through June 2019 for 18 tenants totaling $66,868 and straight-line rent averaging for investment grade tenants over the remaining lease term for APU and the County of San Diego totaling $374,203. |
| (3) | APU’s Annual U/W Base Rent PSF and Annual U/W Base Rent are based on the tenant’s average rental rate over the remaining lease term. APU currently pays rent of $29.64 per square foot. APU’s base rent is scheduled to increase by approximately 3.0% annually. |
| (4) | APU is currently in a 50% rent abatement period through September 2018. All remaining rent credits and abatements were reserved at the origination of the Mission Center Mortgage Loan (see ��Escrows” section). |
| (5) | APU has one, 5-year renewal option, with 270 days’ notice, at fair market rental rate. |
| (6) | The County of San Diego’s Annual U/W Base Rent PSF and Annual U/W Base Rent are based on the tenant’s average rental rate over the remaining lease term. The County of San Diego currently pays rent of $24.19 per square foot. The County of San Diego’s base rent is scheduled to increase by 3.0% annually. |
| (7) | The County of San Diego has one, 5-year renewal option, with nine months’ notice, at 95% of the fair market rental rate. |
| (8) | Haley & Aldrich has one, 5-year renewal option, with nine months’ notice, at the fair market rental rate. |
| (9) | Blue Sky Network has one, 5-year renewal option, with eight months’ notice, at the fair market rental rate. |
The following table presents certain information relating to the lease rollover schedule at the Mission Center Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent(3) | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF(3) |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2018 | 1 | 3,171 | 1.7% | 3,171 | 1.7% | $81,816 | 1.6% | $25.80 |
| 2019 | 2 | 9,879 | 5.4% | 13,050 | 7.1% | $271,900 | 5.4% | $27.52 |
| 2020 | 6 | 13,179 | 7.2% | 26,229 | 14.3% | $381,627 | 7.6% | $28.96 |
| 2021 | 3 | 8,943 | 4.9% | 35,172 | 19.2% | $233,663 | 4.6% | $26.13 |
| 2022 | 5 | 27,597 | 15.0% | 62,769 | 34.2% | $717,230 | 14.2% | $25.99 |
| 2023 | 3 | 10,406 | 5.7% | 73,175 | 39.9% | $297,812 | 5.9% | $28.62 |
| 2024 | 0 | 0 | 0.0% | 73,175 | 39.9% | $0 | 0.0% | $0.00 |
| 2025 | 0 | 0 | 0.0% | 73,175 | 39.9% | $0 | 0.0% | $0.00 |
| 2026 | 1 | 53,006 | 28.9% | 126,181 | 68.8% | $1,446,526 | 28.7% | $27.29 |
| 2027 | 0 | 0 | 0.0% | 126,181 | 68.8% | $0 | 0.0% | $0.00 |
| 2028 | 5 | 47,234 | 25.8% | 173,415 | 94.6% | $1,609,830 | 31.9% | $34.08 |
| Thereafter | 0 | 0 | 0.0% | 173,415 | 94.6% | $0 | 0.0% | $0.00 |
| Vacant | 0 | 9,995 | 5.4% | 183,410 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 26 | 183,410 | 100.0% | $5,040,403 | 100.0% | $29.07 |
| (1) | Information obtained from the underwritten rent roll. |
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and that are not considered in the Lease Expiration Schedule. |
| (3) | Weighted Average Annual U/W Base Rent PSF and Total Annual U/W Base Rent exclude vacant space. |
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Mission Center
The following table presents historical occupancy percentages at the Mission Center Property:
Historical Occupancy
12/31/2014(1) | 12/31/2015(1) | 12/31/2016(1)(2) | 12/31/2017(1)(3) | 5/24/2018(4) |
| 90.8% | 90.2% | 84.6% | 93.3% | 94.6% |
| (1) | Information obtained from a third-party market research provider. |
| (2) | The decrease in occupancy from 12/31/2015 to 12/31/2016 can be attributed in part to two tenants vacating: Tele-Consultants (approximately 11,682 square feet and 6.4% of net rentable area) and Technology Associates (approximately 5,540 square feet and 3.0% of net rentable area). |
| (3) | The increase in occupancy from 12/31/2016 to 12/31/2017 can be attributed to new leases with Blue Sky Network (5,649 square feet, 3.1% of net rentable area) signed in March 2017 and Labor Ready Southwest (1,862 square feet, 1.0% of net rentable area) signed in November 2017, along with APU’s expansion from 30,846 square feet to 47,234 square feet (expansion of approximately 9.0% of net rentable area) in July 2017. |
| (4) | Information obtained from the underwritten rent roll. |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and underwritten net cash flow at the Mission Center Property:
Cash Flow Analysis(1)(2)
| 2016 | Annualized 8 8/31/2017(3) | U/W(4) | % of U/W Effective Gross Income | U/W $ per SF | |||||||
| Base Rent | $3,277,482 | $3,873,465 | $5,040,403 | 101.5% | $27.48 | ||||||
| Grossed Up Vacant Space | 0 | 0 | 275,862 | 5.6 | 1.50 | ||||||
| Total Recoveries | 86,140 | 175,242 | 183,025 | 3.7 | 1.00 | ||||||
| Other Income | 2,774 | 55,661 | 0 | 0.0 | 0.00 | ||||||
| Less Vacancy & Credit Loss | 0 | 0 | (531,627)(5) | (10.7) | (2.90) | ||||||
| Effective Gross Income | $3,366,396 | $4,104,368 | $4,967,665 | 100.0% | $27.09 | ||||||
| Total Operating Expenses | 1,470,115 | 1,589,208 | 1,684,476 | 33.9% | 9.18 | ||||||
| Net Operating Income | $1,896,281 | $2,515,160 | $3,283,188 | 66.1% | $17.90 | ||||||
| TI/LC | 0 | 0 | 279,029 | 5.6 | 1.52 | ||||||
| Capital Expenditures | 0 | 0 | 45,853 | 0.9 | 0.25 | ||||||
| Net Cash Flow | $1,896,281 | $2,515,160 | $2,958,306 | 59.6% | $16.13 | ||||||
| NOI DSCR | 1.08x | 1.43x | 1.87x | ||||||||
| NCF DSCR | 1.08x | 1.43x | 1.68x | ||||||||
| NOI DY | 6.4% | 8.5% | 11.0% | ||||||||
| NCF DY | 6.4% | 8.5% | 9.9% |
| (1) | The borrower acquired the Mission Center Property on December 8, 2017 and was not provided with financials prior to 2016. |
| (2) | Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent steps through June 2019 for 18 tenants totaling $66,868 and straight-line rent averaging for investment grade tenants over the remaining lease term for APU and the County of San Diego totaling $374,203. |
| (3) | The increase in Base Rent and Net Operating Income from 2016 to Annualized 8 8/31/2017 was driven partly by (i) seven new leases totaling 21.6% of underwritten base rent signed from February 2016 to July 2017 and (ii) nine renewal leases totaling 36.0% of underwritten base rent signed from May 2016 to July 2017. |
| (4) | The increase in Base Rent and Net Operating Income from Annualized 8 8/31/2017 to U/W was driven by (i) six new leases totaling 16.7% of underwritten base rent and eight renewal leases totaling 29.9% of underwritten base rent signed since March 2017, (ii) the inclusion of contractual rent escalations through June 2019 for 18 tenants totaling $66,868 and (iii) straight-line rent averaging for investment grade tenants over the remaining lease term for APU and the County of San Diego totaling $374,203. |
| (5) | The underwritten economic vacancy is 10.0%. The Mission Center Property was 94.6% physically occupied as of May 24, 2018. |
Appraisal. As of the appraisal valuation date of April 5, 2018, the Mission Center Property had an “as-is” appraised value of $43,500,000.
Environmental Matters. According to the Phase I environmental report dated April 13, 2018, there was no evidence of any recognized environmental conditions at the Mission Center Property.
Market Overview and Competition. The Mission Center Property is located in San Diego, San Diego County, California, approximately 0.8 miles east of state route 163, 0.9 miles northwest of Interstate 8 and 1.2 miles west of interstate 805. The Mission Center Property is located approximately 5.2 miles northeast of downtown San Diego and 6.8 miles northeast of San Diego International Airport. Surrounding development along Interstate 8 comprises big box retail and entertainment options including Westfield Mission Valley (0.6 miles southeast of the Mission Center Property), which features a 24 Hour Fitness, Bed Bath & Beyond, Target, Nordstrom Rack, Buffalo Wild Wings and an AMC Theatre. Fashion Valley, a Simon-owned 1.8 million square foot open-air mall anchored by Neiman Marcus, Bloomingdales, Nordstrom and Macy’s, is located approximately 1.4 miles west of the Mission Center Property. Fashion Valley also has dining options including Cheesecake Factory, California Pizza Kitchen, True Food Kitchen and P.F. Chang’s China Bistro, as well as an AMC Theatre. According to a third party market research provider, the estimated 2018 population within a three- and five-mile radius of the Mission Center Property was 221,249 and 533,036, respectively; and the estimated 2018 average household income within the same radii was $86,520 and $84,560, respectively.
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Mission Center
The residential base in the Mission Valley submarket encompasses apartments, condos and townhomes totaling over 22,000 units with approximately 5,000 units planned or in development. Currently in development is Civita, a 230-acre transit-oriented development which is planned to include approximately 4,780 residences, 67 acres of parks and open space and 900,000 square feet of retail, office, hospitality and civic space. Civita, located approximately 1.4 miles northeast of the Mission Center Property, is currently expected to be fully built-out in approximately 10 years.
The San Diego Trolley Green Line extends from Santee Town Center (approximately 16.1 miles northeast of the Mission Center Property) into downtown San Diego and traverses Mission Valley with 10 stops between Old Town on the western border of the valley (approximately 4.2 miles southwest of the Mission Center Property) to San Diego County Credit Union Stadium on the east end (approximately 2.4 miles northeast of the Mission Center Property). The Mission Center Property is located approximately 0.3 miles northeast of the Hazard Center Station Trolley Green Line stop and approximately 0.5 miles northwest of the Mission Valley Center Station Trolley Green Line stop.
Per a third-party market research report, the Mission Center Property is situated within the Mission Valley office submarket of the San Diego office market. As of year-end 2017, the submarket reported a total inventory of 7.2 million square feet with a 9.7% vacancy rate and average asking rents of $28.52 per square foot.
The following table presents certain information relating to comparable office leases for the Mission Center Property:
Comparable Leases(1)
| Property Name/Location | Total GLA (SF) | Total Property Occupancy | Distance from Subject | Lease Date/ Term(2) | Lease Area (SF)(2) | Annual Base Rent PSF(2) | Lease Type |
Fountain View Business Park 3530-3570 N. Camino Del Rio, San Diego, CA | 89,319 | 89.0% | 2.7 miles | Jun. 2017 / 5.4 Yrs | 1,841 | $26.40 | Gross plus Utilities |
Mission Courtyard 5030 Camino De La Siesta, San Diego, CA | 85,409 | 79.0% | 1.0 mile | Oct. 2017 – Apr. 2018 / 3.0 – 7.6 Yrs | 1,423 – 12,287 | $24.00 - $28.80 | Gross plus Utilities |
Rio Vista Plaza I 8989 Rio San Diego Drive, San Diego, CA | 78,388 | 96.0% | 1.3 miles | Jan. 2017 – May 2018 / 3.2 – 7.4 Yrs | 2,513 – 20,088 | $27.00 - $29.40 | FSG |
Rio Vista Plaza 8885 Rio San Diego Drive, San Diego, CA | 108,550 | 83.0% | 1.3 miles | Apr. 2017 – Aug. 2017 / 2.1 – 5.5 Yrs | 1,120 – 2,595 | $25.80 - $27.00 | Gross plus Utilities |
Hotel Circle Plaza 1660 Hotel Circle North, San Diego, CA | 106,844 | 91.0% | 2.2 miles | Jul. 2017 – Apr. 2018 / 5.3 Yrs | 792 – 4,418 | $22.80 - $25.20 | FSG |
Friars Office Park 7801 Mission Center Ct, San Diego, CA | 37,633 | 100.0% | 0.3 miles | Jun. 2017 – Aug. 2017 / 2.1 – 5.0 Yrs | 994 – 4,664 | $24.00 - $24.60 | FSG |
| (1) | Information obtained from the appraisal and third party reports. |
| (2) | The appraiser provided multiple comparable leases for five of the six properties shown on the table above (excluding Fountain View Business Park). The information shown, as available, represents the ranges of such leases. |
The Borrower. The borrower for the Mission Center Mortgage Loan comprises two tenants in common: Omninet Mission Center, LLC and Omninet Mission Centerview, LLC, each a Delaware limited liability company and single purpose entity. Neil Kadisha and Benjamin Nazarian are the guarantors of certain nonrecourse carveouts under the Mission Center Mortgage Loan.
The Borrower Sponsor. The borrower sponsors are Neil Kadisha and Benjamin Nazarian, each a managing partner of Omninet Capital, LLC (“Omninet”), a diversified investment firm that owns approximately 7.6 million square feet of office, industrial and retail space in Arizona, California, Colorado, Nevada, New Mexico and Texas. Omninet seeks value-added opportunities in income producing commercial real estate by leveraging the principals’ operating experience in stabilizing properties. Mr. Kadisha disclosed a civil judgment from 2011 in connection with the misappropriation of trust assets, which was ultimately satisfied and paid in full in 2011. See “Description of the Mortgage Pool— Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” in the Preliminary Prospectus.
Escrows. The loan documents provide for upfront reserves of $121,395 for real estate taxes, $632,500 for ongoing HVAC improvements, $149,706 for outstanding rent concessions related to APU ($116,668), Concentra Urgent Care ($25,780), David Green PhD ($2,848) and Michael Wax ($4,410) and $46,872 for outstanding tenant improvements and leasing commissions (“TI/LC”) related to Concentra Urgent Care. The loan documents also provide for ongoing monthly reserves of $40,465 for real estate taxes, $3,821 for replacement reserves (subject to a cap of $137,545 so long as no event of default is continuing and the Mission Center Property is being adequately maintained as determined by lender based on annual inspections) and $22,926 for general TI/LCs (subject to a cap of $825,265, inclusive of any termination fees required to be deposited with the lender pursuant to the loan documents).
The loan documents do not require ongoing monthly escrows for insurance premiums as long as (i) no event of default has occurred and is continuing; (ii) the borrower provides the lender with evidence that the Mission Center Property’s insurance coverage is
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Mission Center
included in a blanket policy and such policy is in full force and effect; and (iii) the borrower pays all applicable insurance premiums and provides the lender with evidence of renewals.
Lockbox and Cash Management. The Mission Center Mortgage Loan is structured with a soft lockbox and springing cash management. Prior to the occurrence of a Cash Trap Event Period (as defined below), the loan documents require that the borrower or the property manager deposit all rents into the lockbox account within three business days of receipt. Upon the occurrence and during the continuance of a Cash Trap Event Period, the borrower will be required to direct all tenants to deposit all rents directly into the lockbox account. All funds in the lockbox account will then be required to be swept each business day into the cash management account controlled by the lender and disbursed on each payment date in accordance with the loan documents. During a Cash Trap Event Period, all excess cash flow after payment of all sums due and payable under the loan documents and monthly operating expenses will be retained in a lender-controlled subaccount (provided, however, any excess cash flow swept solely in accordance with a Major Tenant Event Period (as defined below) will be deposited into a separate Major Tenant Reserve subaccount subject to the Major Tenant Sweep Cap (as defined below)).
A “Cash Trap Event Period” will commence upon the earlier of the following:
| (i) | the occurrence of an event of default; |
| (ii) | the amortizing net cash flow debt service coverage ratio falling below 1.15x at the end of any calendar quarter; or |
| (iii) | the occurrence of a Major Tenant Event Period. |
A Cash Trap Event Period will end upon the occurrence of the following:
| ● | with regard to clause (i), the cure of such event of default; |
| ● | with regard to clause (ii), the earlier of (a) the amortizing net cash flow debt service coverage ratio being equal to or greater than 1.20x for two consecutive calendar quarters or (b) the excess cash flow held by lender equalling $2,500,000; or |
| ● | with regard to clause (iii), a Major Tenant Event Period Cure (as defined below). |
A “Major Tenant Event Period” will commence upon the earlier of the following, so long as the net cash flow debt yield is below 9.75% (excluding rent for any tenant which has failed to extend or renew during a lease option notice period or for which less than 180 days remain under its lease term (120 days for tenants occupying less than 4,000 square feet)):
| (i) | any Major Tenant (as defined below) going dark, vacating, failing to occupy its space or giving notice of its intent to commence any of the foregoing; or |
| (ii) | any Major Tenant providing notice of its intention not to renew its lease or failing to extend its lease prior to the earlier of (x) nine months prior to the end of its lease term or (y) the date on which a renewal notice must be given under its lease; |
A “Major Tenant Event Period Cure” will occur upon the following:
| ● | with regard to clause (i), any of (x) a Major Tenant Re-Tenanting Event (as defined below) having occurred, (y) such Major Tenant having resumed occupancy of, and resumed its normal business operations in, its space for two consecutive calendar quarters or (z) the net cash flow debt yield being and continuing to be at least 9.75%; |
| ● | with regard to clause (ii), any of (x) a Major Tenant Re-Tenanting Event having occurred, (y) Lender having received satisfactory evidence (including a tenant estoppel certificate reasonably satisfactory to lender) that such Major Tenant has exercised its renewal or extension option pursuant to the terms of its lease or otherwise on terms and conditions reasonably satisfactory to lender or (z) the net cash flow debt yield being and continuing to be at least 9.75%; or |
| ● | an amount equal to the Major Tenant Sweep Cap having been deposited into the Major Tenant Reserve subaccount. |
A “Major Tenant” means, individually or collectively, APU and County of San Diego, their successors and assigns, and any replacement tenant that enters into a lease for at least 25,000 square feet of the space currently occupied by APU or County of San Diego.
A “Major Tenant Re-Tenanting Event” will occur upon one or more replacement tenants satisfactory to lender executing leases covering an applicable portion of the space leased to such Major Tenant with (i) such replacement tenants having taken occupancy of such space and conducting normal business operations therein and paying full unabated rent or any such abatement has been reserved; (ii) all TI/LCs having been paid or reserved; and (iii) such replacement tenants having delivered a satisfactory estoppel certificate affirming the foregoing conditions.
“Major Tenant Sweep Cap” means an amount equal to the product obtained by multiplying (x) $35.00 by (y) the number of square feet of Major Tenant space that is the subject of any ongoing Major Tenant Event Period (which, for the avoidance of doubt, excludes any portion thereof that has been re-tenanted pursuant to a Major Tenant Re-Tenanting Event).
Property Management. The Mission Center Property is managed by an affiliate of the borrower.
Assumption. The borrower has the five-time right, commencing 12 months after loan origination, to transfer the Mission Center Property, provided that certain conditions are satisfied, including (i) no event of default has occurred and is continuing; (ii) the lender has reasonably determined that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration the transferee’s experience, financial strength and general business standing; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 certificates.
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Mission Center
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Ground Lease. None.
Terrorism Insurance. The loan documents require that the “all risk” insurance policy required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the Mission Center Property. The loan documents also require business interruption insurance covering no less than the 12-month period following the occurrence of a casualty event, together with a six-month extended period of indemnity.
Earthquake Insurance. The loan documents do not require earthquake insurance. The seismic report indicated a probable maximum loss for the entire Mission Center Property of 11.0%.
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Center Pointe Plaza II
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Center Pointe Plaza II
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Center Pointe Plaza II
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| No. 7 – Center Pointe Plaza II | ||||||
| Loan Information | Property Information | |||||
| Mortgage Loan Seller: | Barclays Bank PLC | Single Asset/Portfolio: | Single Asset | |||
| Property Type: | Retail | |||||
| Original Principal Balance: | $28,270,000 | Specific Property Type: | Anchored | |||
| Cut-off Date Balance: | $28,270,000 | Location: | Newark, DE | |||
| % of Initial Pool Balance: | 4.3% | Size: | 187,900 SF | |||
| Loan Purpose: | Refinance | Cut-off Date Balance Per SF: | $150.45 | |||
| Borrower Names(1): | Centerpointcap I, LLC; Centerpointcap II, LLC; Centerpointcap III, LLC; Christiana Pit, L.L.C. | Year Built/Renovated: | 2006/NAP | |||
| Sponsors: | Louis Capano, III & Louis Capano Jr. | Title Vesting: | Fee | |||
| Mortgage Rate: | 4.6550% | Property Manager: | Self-managed | |||
| Note Date: | April 20, 2018 | 4th Most Recent Occupancy (As of)(3): | 94.4% (12/31/2014) | |||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of)(3)(4): | 96.6% (12/31/2015) | |||
| Maturity Date: | May 6, 2028 | 2nd Most Recent Occupancy (As of)(3)(4): | 88.4% (12/31/2016) | |||
| IO Period: | 24 months | Most Recent Occupancy (As of)(3): | 88.9% (12/31/2017) | |||
| Loan Term (Original): | 120 months | Current Occupancy (As of)(3): | 85.2% (3/1/2018) | |||
| Seasoning: | 2 months | |||||
| Amortization Term (Original): | 360 months | Underwriting and Financial Information: | ||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | |||||
| Interest Accrual Method: | Actual/360 | 4th Most Recent NOI (As of)(5): | $3,634,910 (12/31/2015) | |||
| Call Protection: | L(26),D(90),O(4) | 3rd Most Recent NOI (As of)(5): | $3,757,254 (12/31/2016) | |||
| Lockbox Type: | Hard/Springing Cash Management | 2nd Most Recent NOI (As of)(5): | $3,439,346 (12/31/2017) | |||
| Additional Debt: | None | Most Recent NOI (As of)(5): | $3,404,914 (TTM 2/28/2018) | |||
| Additional Debt Type: | NAP | |||||
| U/W Revenues: | $4,580,308 | |||||
| U/W Expenses: | $876,945 | |||||
| Escrows and Reserves(2): | U/W NOI(5): | $3,703,363 | ||||
| U/W NCF: | $3,503,620 | |||||
| U/W NOI DSCR: | 2.12x | |||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF DSCR: | 2.00x | |
| Taxes | $194,163 | $24,270 | NAP | U/W NOI Debt Yield: | 13.1% | |
| Insurance | $53,798 | Springing | NAP | U/W NCF Debt Yield: | 12.4% | |
| Replacement Reserve | $0 | $2,349 | NAP | As-Is Appraised Value: | $48,825,000 | |
| TI/LC Reserve | $270,000 | $11,744 | $270,000 | As-Is Appraisal Valuation Date: | March 15, 2018 | |
| Janosik Rent Abatement/CAM Reserve | $295,516 | $0 | NAP | Cut-off Date LTV Ratio: | 57.9% | |
| Existing TI/LC Reserve | $107,000 | $0 | NAP | LTV Ratio at Maturity or ARD: | 49.7% | |
| (1) | See “Borrowers” section. |
| (2) | See “Escrows” section. |
| (3) | See “Historical Occupancy” section. |
| (4) | The decline in occupancy from 2015 to 2016 is a result of Eastern Mountain Sport’s parent company filing for bankruptcy and the tenant consequently vacating the Center Pointe Plaza II Property |
| (5) | See “Cash Flows” section. |
The Mortgage Loan. The mortgage loan (the “Center Pointe Plaza II Mortgage Loan”) is evidenced by a single promissory note secured by a first mortgage encumbering the fee interest in an anchored retail shopping center located in Newark, Delaware (the “Center Pointe Plaza II Property”). The Center Pointe Plaza II Mortgage Loan was originated on April 20, 2018 by Barclays Bank PLC. The Center Pointe Plaza II Mortgage Loan had an original principal balance of $28,270,000, has an outstanding principal balance as of the Cut-off Date of $28,270,000 and accrues interest at an interest rate of 4.6550% per annum. The Center Pointe Plaza II Mortgage Loan had an initial term of 120 months, has a remaining term of 118 months as of the Cut-off Date and requires interest-only payments for the first 24 payments following origination and, thereafter, requires payments of principal and interest based on a 30-year amortization schedule. The Center Pointe Plaza II Mortgage Loan matures on May 6, 2028.
Following the lockout period, on any date before February 6, 2028, the borrowers have the right to defease the Center Pointe Plaza II Mortgage Loan in whole, but not in part. In addition, the Center Pointe Plaza II Mortgage Loan is prepayable without penalty on or after February 6, 2028.
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Center Pointe Plaza II
Sources and Uses
| Sources | Uses | |||||||
| Original Loan amount | $28,270,000 | 100.0% | Loan payoff: | $22,674,528 | 80.2% | |||
| Return of equity: | 4,157,144 | 14.7 | ||||||
| Upfront reserves: | 920,476 | 3.3 | ||||||
| Closing costs: | 517,851 | 1.8 | ||||||
| Total Sources | $28,270,000 | 100.0% | Total Uses | $28,270,000 | 100.0% |
The Property. The Center Pointe Plaza II Property consists of a 187,900 square foot anchored retail center located in Newark, Delaware, approximately two miles from the Christiana Mall and across the street from Christiana Hospital. The Center Pointe Plaza II Property is located within a retail corridor on Churchman’s Road and State Route 7. The borrower sponsors developed the Center Pointe Plaza II Property in 2006 alongside the adjacent Center Pointe Plaza I property, which they also own. The Center Pointe Plaza II Property is anchored by Johnny Janosik, PetSmart, La-Z-Boy and Golf Galaxy. Additionally, the Center Pointe Plaza II Property is shadow anchored by a Home Depot and TJ Maxx, which are located at the adjacent Center Pointe Plaza I property. The Center Pointe Plaza II Property contains 953 parking spaces, resulting in a parking ratio of 5.1 spaces per 1,000 square feet of rentable area.
As of March 1, 2018, the Center Pointe Plaza II Property was 85.2% leased to 26 tenants. The largest tenant at the Center Pointe Plaza II Property is Johnny Janosik (15.3% of the U/W base rent). Johnny Janosik is a Delaware-based furniture store established in 1953 and has over 270 employees. In 2016, Johnny Janosik was ranked in the Top 100 furniture stores by Furniture Today and was ranked #2 as a “Large Independent” furniture store by Home Furnishings Business. In addition to the store at the Center Pointe Plaza II Property, Johnny Janosik has three retail locations in Dover and Laurel, Delaware. Johnny Janosik backfilled the space that was originally occupied by Best Buy, which left the Center Pointe Plaza II Property in January 2018 due to size constraints. The second largest tenant is PetSmart (10.8% of the U/W base rent) and has been at the Center Pointe Plaza II Property since 2006 and recently extended its lease in June 2017. The third largest tenant is La-Z-Boy Incorporated (13.3% of the U/W base rent) and has been in at the Center Pointe Plaza II Property since 2005.
The following table presents certain information relating to the tenancy at the Center Pointe Plaza II Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/ S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(2) | Annual U/W Base Rent(2) | % of Total Annual U/W Base Rent | Sales | Occupancy Cost | Lease Expiration Date |
| Major Tenants | |||||||||
| Johnny Janosik | NR/NR/NR | 30,000 | 16.0% | $20.00 | $600,000 | 15.3% | NAV | NAV | 5/14/2028(3) |
| PetSmart, Inc. | NR/Caa3/CCC+ | 20,063 | 10.7% | $21.00 | $421,323 | 10.8% | NAV | NAV | 5/31/2027(4) |
| La-Z-Boy Incorporated | NR/NR/NR | 18,000 | 9.6% | $29.00 | $522,000 | 13.3% | NAV | NAV | 3/31/2021(5) |
| Golf Galaxy | NR/NR/NR | 15,000 | 8.0% | $22.84 | $342,600 | 8.7% | NAV | NAV | 1/31/2021(6) |
| Firebirds of Wilmington | NR/NR/NR | 7,952 | 4.2% | $27.84 | $221,414 | 5.6% | NAV | NAV | 6/30/2023(7) |
| Total Major Tenants | 91,015 | 48.4% | $23.15 | $2,107,337 | 53.8% | ||||
| Non-Major Tenants | 69,076 | 36.8% | $26.23 | $1,811,939 | 46.2% | ||||
| Occupied Collateral Total | 160,091 | 85.2% | $24.48 | $3,919,276 | 100.0% | ||||
| Vacant Space | 27,809 | 14.8% | |||||||
| Collateral Total | 187,900 | 100.0% | |||||||
| (1) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (2) | Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent steps totaling $42,628 through March 1, 2019. |
| (3) | Johnny Janosik has four, five-year renewal options. Johnny Janosik has a rent abatement period of five months and a CAM abatement period of six months. At loan closing, $295,516 was deposited into the Rent Abatement/CAM Reserve Account, representing the outstanding rent abatement and CAM abatement due to the largest tenant. |
| (4) | Petsmart has one, five-year renewal option. |
| (5) | La-Z-Boy Incorporated has two, five-year renewal options. |
| (6) | Golf Galaxy has one, five-year renewal option. |
| (7) | Firebirds of Wilmington has three, five-year renewal options. |
| A-3-63 |
Center Pointe Plaza II
The following table presents certain information relating to the lease rollover schedule at the Center Pointe Plaza II Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent(3) | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF(3) |
| MTM | 1 | 1,921 | 1.0% | 1,921 | 1.0% | $46,984 | 1.2% | $24.46 |
| 2018 | 2 | 6,000 | 3.2% | 7,921 | 4.2% | $129,000 | 3.3% | $21.50 |
| 2019 | 2 | 6,191 | 3.3% | 14,112 | 7.5% | $143,345 | 3.7% | $23.15 |
| 2020 | 3 | 6,000 | 3.2% | 20,112 | 10.7% | $130,000 | 3.3% | $21.67 |
| 2021 | 8 | 60,800 | 32.4% | 80,912 | 43.1% | $1,694,700 | 43.2% | $27.87 |
| 2022 | 4 | 12,578 | 6.7% | 93,490 | 49.8% | $317,267 | 8.1% | $25.22 |
| 2023 | 2 | 9,952 | 5.3% | 103,442 | 55.1% | $263,414 | 6.7% | $26.47 |
| 2024 | 1 | 1,768 | 0.9% | 105,210 | 56.0% | $45,029 | 1.1% | $25.47 |
| 2025 | 0 | 0 | 0.0% | 105,210 | 56.0% | $0 | 0.0% | $0.00 |
| 2026 | 1 | 4,000 | 2.1% | 109,210 | 58.1% | $128,214 | 3.3% | $32.05 |
| 2027 | 1 | 20,063 | 10.7% | 129,273 | 68.8% | $421,323 | 10.8% | $21.00 |
| 2028 | 1 | 30,000 | 16.0% | 159,273 | 84.8% | $600,000 | 15.3% | $20.00 |
| Thereafter(4) | 0 | 818 | 0.4% | 160,091 | 85.2% | $0 | 0.0% | $0.00 |
| Vacant | 0 | 27,809 | 14.8% | 187,900 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 26 | 187,900 | 100.0% | $3,919,276 | 100.0% | $24.48 |
| (1) | Information obtained from the underwritten rent roll. |
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and that are not considered in the Lease Expiration Schedule. |
| (3) | Weighted Average Annual U/W Base Rent PSF and Total Annual U/W Base Rent exclude vacant space. |
| (4) | Expiring NRSF after 2028 includes 818 square feet of sprinkler rooms. |
The following table presents historical occupancy percentages at the Center Pointe Plaza II Property:
Historical Occupancy
12/31/2014(1) | 12/31/2015(1) | 12/31/2016(1)(2) | 12/31/2017(1) | 3/1/2018(3) |
| 94.4% | 96.6% | 88.4% | 88.9% | 85.2% |
| (1) | Information obtained from the borrowers. |
| (2) | The decline in occupancy from 2015 to 2016 is a result of Eastern Mountain Sport’s parent company filing for bankruptcy and the tenant consequently vacating the Center Pointe Plaza II Property. |
| (3) | Information obtained from the underwritten rent roll. |
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 Center Pointe Plaza II Property:
Cash Flow Analysis
| 2015 | 2016(2) | 2017(2) | TTM 2/28/2018(3) | U/W(3) | % of U/W Effective Gross Income | U/W $ per SF | |||||||||
| Base Rent(1) | $3,857,932 | $3,993,878 | $3,713,372 | $3,716,177 | $3,919,276 | 85.6% | $20.86 | ||||||||
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | 622,582 | 13.6 | 3.31 | ||||||||
| Total Reimbursables | 571,029 | 522,384 | 539,433 | 543,414 | 661,033 | 14.4 | 3.52 | ||||||||
| Other Income | 2,471 | 2,966 | 2,465 | 0 | 0 | 0.0 | 0.00 | ||||||||
| Less Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (622,582)(4) | (13.6) | (3.31) | ||||||||
| Effective Gross Income | $4,431,432 | $4,519,228 | $4,255,270 | $4,259,591 | $4,580,308 | 100.0% | $24.38 | ||||||||
| Total Operating Expenses | $796,522 | $761,974 | $815,924 | $854,677 | $876,945 | 19.1% | $4.67 | ||||||||
| Net Operating Income | $3,634,910 | $3,757,254 | $3,439,346 | $3,404,914 | $3,703,363 | 80.9% | $19.71 | ||||||||
| TI/LC | 0 | 0 | 0 | 0 | 171,558(5) | 3.7 | 0.91 | ||||||||
| Capital Expenditures | 0 | 0 | 0 | 0 | 28,185 | 0.6 | 0.15 | ||||||||
| Net Cash Flow | $3,634,910 | $3,757,254 | $3,439,346 | $3,404,914 | $3,503,620 | 76.5% | $18.65 | ||||||||
| NOI DSCR | 2.08x | 2.15x | 1.97x | 1.95x | 2.12x | ||||||||||
| NCF DSCR | 2.08x | 2.15x | 1.97x | 1.95x | 2.00x | ||||||||||
| NOI DY | 12.9% | 13.3% | 12.2% | 12.0% | 13.1% | ||||||||||
| NCF DY | 12.9% | 13.3% | 12.2% | 12.0% | 12.4% |
| (1) | Historical Base Rent is inclusive of free rent adjustments of $119,464 in 2015, $51,410 in 2016 and $269,168 in 2017. |
| (2) | The decline in Base Rent and Net Operating Income from 2016 to 2017 was driven partly by Eastern Mountain Sport vacating the Center Pointe Plaza II Property in 2016. |
| (3) | The increase in Net Operating Income from TTM 2/28/2018 to U/W was driven by (i) Johnny Janosik commencing its lease on May 15, 2018 and (ii) the inclusion of contractual rent steps totaling $42,628 through March 2019. |
| (4) | The underwritten economic vacancy is 12.0%. The Center Pointe Plaza II Property was 85.2% leased as of March 1, 2018. |
| (5) | UW TI/LC is inclusive of a TI/LC credit equivalent to one-tenth of the upfront TI/LC reserve of $270,000. |
| A-3-64 |
Center Pointe Plaza II
Appraisal. The appraiser concluded to an “as-is” value for the Center Pointe Plaza II Property of $48,825,000 as of March 15, 2018. The appraiser also concluded to an “as-stabilized” value for the Center Pointe Plaza II Property of $52,375,000 as of April 1, 2019.
Environmental Matters. According to a Phase I environmental site assessment dated March 16, 2018, there was no evidence of any recognized environmental conditions at the Center Pointe Plaza II Property.
Market Overview and Competition. The Center Pointe Plaza II Property is located in Newark, Delaware, approximately 10.2 miles southwest of Wilmington, Delaware, 40.8 miles southwest of Philadelphia, Pennsylvania and 6.1 miles west of the Wilmington Airport. The Center Pointe Plaza II Property is located directly west of an interchange of Interstate 95 and Route 7, within a retail corridor on Churchman’s Road, which has a traffic count of 23,000 to 25,900 vehicles per day, and State Route 7, which has a traffic count of 48,000 vehicles per day. Center Pointe Plaza II is located across the street from Christiana Hospital, and is approximately two miles north of Christiana Mall. In addition to the retail centers, there are various multi-family developments and office parks. According to the appraisal, the 2017 estimated average household income within a three- and five-mile radius of the Center Pointe Plaza II Property was $73,593 and $77,812, respectively, and the estimated 2017 population within a three- and five-mile radius of the Center Pointe Plaza II Property was 72,314 and 209,736, respectively.
According to a third party market research report, the Center Pointe Plaza II Property is situated within the South New Castle County retail submarket of the overall Philadelphia retail market. As of fourth quarter 2017, the submarket reported total inventory of approximately 15.9 million square feet with a 5.4% vacancy rate and an average asking net rental rate of $16.57 per square foot. Based on recent leasing at the Center Pointe Plaza II Property as well as comparable rentals in the market, the appraiser concluded market rents that range from $22.00 per square foot to $35.00 per square foot depending on the tenant category.
The table below presents certain information relating to five comparable properties to the Center Pointe Plaza II Property identified by the appraiser:
Competitive Set(1)
Center Pointe (Subject) | Christiana Center | Center Pointe Plaza I | Christiana Fashion Center | Christiana Town Center | University Plaza | |
| Location | Newark, DE | Newark, DE | Newark, DE | Newark, DE | Newark, DE | Newark, DE |
| Distance from Subject | -- | 2.4 miles | 0.0 miles | 2.4 miles | 3.4 miles | 3.0 miles |
| Property Type | Anchored | Power Center | Anchored | Power Center | Anchored | Anchored |
| Year Built/Renovated | 2006/NAP | 1998/2004 | 2006/NAP | 2015/NAP | 2004/NAP | 1971/1989 |
| Anchors | Johnny Janosik, PetSmart, La-Z-Boy | Costco, Dicks, PETCO | Home Depot, Modell’s, T.J. Maxx | Best Buy, Marshalls/Home Goods, Raymour & Flanigan | Boscov’s, Bed Bath & Beyond, Staples | Burlington Coat Factory, Acme Market, Harbor Freight Tools |
| Total GLA | 187,900 SF | 302,779 SF | 44,264 SF | 113,821 SF | 131,570 SF | 91,211 SF |
| Total Occupancy | 85.2%(2) | 98.0% | 100.0% | 76.0% | 91.0% | 100.0% |
| (1) | Information obtained from the appraisal. |
| (2) | Information obtained from underwritten rent roll. |
The Borrowers. The borrowers for the Center Pointe Plaza II Mortgage Loan are Centerpointcap I, LLC, Centerpointcap II, LLC, Centerpointcap III, LLC and Christiana Pit, L.L.C., each a Delaware limited liability company and single purpose entity. The managing member of each borrower is a newly-formed, special purpose entity with one independent director. The Centerpointcap I, LLC, Centerpointcap II, LLC and Centerpointcap III, LLC borrowers own the Center Pointe Plaza II Property (excluding the Red Lobster) as tenants-in-common. Such borrowers have waived their respective rights of partition. The three tenant-in-common entities are owned and controlled by two individuals. Legal counsel to the borrowers delivered a non-consolidation opinion in connection with the origination of the Center Pointe Plaza II Mortgage Loan. Louis J. Capano, III and Louis J. Capano, Jr. have jointly and severally guaranteed certain nonrecourse carveouts under the Center Pointe Plaza II Mortgage Loan.
The Borrower Sponsors. The borrower sponsors are Louis Capano, III and Louis Capano, Jr., who are the owners of Capano Management Company, founded in 1947. Capano Management Company predominantly develops residential and commercial real estate in Delaware and Florida. Capano Management and its affiliated companies own and manage over 2 million square feet of retail and office space and over 4,800 multifamily units with an additional 1,089 multifamily units under development. The borrower sponsor, Louis J. Capano, III was one of several partners involved in a land development project, where the unrelated loan was subject to a discounted payoff. The borrower sponsor, Louis J. Capano, Jr. had a loan modification for an unrelated property in 2013. See “Description of the Mortgage Pool— Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings and Litigation and Other Considerations” in the Preliminary Prospectus.
Escrows. The Center Pointe Plaza II Mortgage Loan documents provide for upfront reserves of $194,163 for real estate taxes, $53,798 for insurance, $270,000 for tenant improvements and leasing commissions (“TI/LC”), $295,516 for rent abatements and CAM abatements relating to the Johnny Janosik lease and $107,000 for outstanding leasing commissions for Johnny Janosik. The Center Pointe Plaza II Mortgage Loan documents also provide for ongoing monthly reserves of $24,270 for real estate taxes, $2,349 for replacement reserves and $11,744 for general TI/LC (subject to a cap of $270,000).
| A-3-65 |
Center Pointe Plaza II
Lockbox and Cash Management. The Center Pointe Plaza II Mortgage Loan is structured with a hard lockbox and springing cash management. The borrowers were required at origination to deliver letters to all tenants at the Center Pointe Plaza II Property directing them to pay all rents directly into a lender-controlled lockbox account. All other funds received by the borrowers or manager are required to be deposited in the lockbox account within one business day following receipt. During the occurrence and continuance of a Trigger Period (as defined below), all funds are required to be swept each business day into the cash management account controlled by the lender and disbursed on each payment date in accordance with the Center Pointe Plaza II Mortgage Loan documents, with all excess cash flow to be deposited to an excess cash reserve to be held as additional security for the Center Pointe Plaza II Mortgage Loan.
A “Trigger Period” will commence upon the earlier of the following:
| (i) | the occurrence of an event of default; or |
| (ii) | the amortizing net cash flow debt service coverage ratio falling below 1.20x. |
A Trigger Period will end upon the occurrence of the following:
| ● | with regard to clause (i), the cure of such event of default; or |
| ● | with regard to clause (ii), the amortizing net cash flow debt service coverage ratio being equal to or greater than 1.25x for one calendar quarter. |
Property Management. The Center Pointe Plaza II Property is managed by Capano Management Company, an affiliate of the borrowers.
Assumption. The borrowers have the one-time right to transfer the Center Pointe Plaza II Property, provided that certain conditions are satisfied, including (i) no event of default has occurred and is continuing; (ii) the lender has reasonably determined that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration the transferee’s experience, financial strength and general business standing; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 certificates.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Ground Lease. None.
Terrorism Insurance. The Center Pointe Plaza II Mortgage Loan documents require that the “all risk” insurance policies required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the Center Pointe Plaza II Property. The Center Pointe Plaza II Mortgage Loan documents also require business interruption insurance covering no less than the 18-month period following the occurrence of a casualty event, together with a 12-month extended period of indemnity.
| A-3-66 |
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| A-3-67 |
Addison Ridge Apartments - Phase II |
| A-3-68 |
Addison Ridge Apartments - Phase II |
| A-3-69 |
| No. 8 – Addison Ridge Apartments - Phase II | ||||||||
| Loan Information | Property Information | |||||||
| Mortgage Loan Seller: | Rialto Mortgage Finance, LLC | Single Asset/Portfolio: | Single Asset | |||||
| Property Type: | Multifamily | |||||||
| Original Principal Balance: | $25,000,000 | Specific Property Type: | Garden | |||||
| Cut-off Date Principal Balance: | $25,000,000 | Location: | Fayetteville, NC | |||||
| % of Initial Pool Balance: | 3.8% | Size: | 214 Units | |||||
| Loan Purpose: | Refinance | Cut-off Date Principal Balance Per Unit: | $116,822 | |||||
| Borrower Name: | Santa Fe Properties II SPE, LLC | Year Built/Renovated: | 2016/NAP | |||||
| Borrower Sponsor: | Charles F. Weber | Title Vesting: | Fee | |||||
| Mortgage Rate: | 5.3600% | Property Manager: | Self-managed | |||||
| 4th Most Recent Occupancy (As of)(2): | NAV | |||||||
| Note Date: | May 16, 2018 | 3rd Most Recent Occupancy (As of)(2): | NAV | |||||
| Anticipated Repayment Date: | NAP | 2nd Most Recent Occupancy (As of)(2): | NAV | |||||
| Maturity Date: | June 6, 2028 | Most Recent Occupancy (As of)(2): | NAV | |||||
| IO Period: | 48 months | Current Occupancy (As of): | 98.1% (5/31/2018) | |||||
| Loan Term (Original): | 120 months | |||||||
| Seasoning: | 1 month | Underwriting and Financial Information: | ||||||
| Amortization Term (Original): | 360 months | 4th Most Recent NOI (As of)(2): | NAV | |||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | 3rd Most Recent NOI (As of)(2): | NAV | |||||
| Interest Accrual Method: | Actual/360 | 2nd Most Recent NOI (As of)(2): | NAV | |||||
| Call Protection: | L(25),D(91),O(4) | Most Recent NOI (As of): | $1,856,564 (TTM 5/31/2018) | |||||
| Lockbox Type: | Springing | |||||||
| Additional Debt: | None | U/W Revenues: | $3,212,219 | |||||
| Additional Debt Type: | NAP | U/W Expenses: | $890,227 | |||||
| U/W NOI: | $2,321,992 | |||||||
| U/W NCF: | $2,279,192 | |||||||
| U/W NOI DSCR: | 1.38x | |||||||
| Escrows and Reserves(1): | U/W NCF DSCR: | 1.36x | ||||||
| U/W NOI Debt Yield: | 9.3% | |||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF Debt Yield: | 9.1% | |||
| Taxes | $122,848 | $19,500 | NAP | As-Is Appraised Value: | $35,800,000 | |||
| Insurance | $18,894 | $3,599 | NAP | As-Is Appraisal Valuation Date: | March 27, 2018 | |||
| Replacement Reserves | $0 | $3,567 | NAP | Cut-off Date LTV Ratio: | 69.8% | |||
| LTV Ratio at Maturity or ARD: | 63.6% | |||||||
| (1) | See “Escrows” section. |
| (2) | Historical occupancy, operating and financial information is unavailable as the Addison Ridge Apartments – Phase II Property (as defined below) was constructed in 2016-2017. |
The Mortgage Loan. The mortgage loan (the “Addison Ridge Apartments - Phase II Mortgage Loan”) is evidenced by a single promissory note that is secured by a first mortgage encumbering an eight building, garden-style multifamily property located in Fayetteville, North Carolina (the “Addison Ridge Apartments - Phase II Property”). The Addison Ridge Apartments - Phase II Mortgage Loan was originated on May 16, 2018 by Rialto Mortgage Finance, LLC. The Addison Ridge Apartments - Phase II Mortgage Loan 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 accrues interest at an interest rate of 5.3600% per annum. The Addison Ridge Apartments - Phase II Mortgage Loan had an initial term of 120 months, has a remaining term of 119 months as of the Cut-off Date and requires payments of interest-only for the first 48 months followed by payments of principal and interest based on a 30-year amortization schedule. The Addison Ridge Apartments - Phase II Mortgage Loan matures on June 6, 2028.
Following the lockout period, the borrower has the right to defease the Addison Ridge Apartments - Phase II Mortgage Loan in whole, but not in part, on any date before March 6, 2028. In addition, the Addison Ridge Apartments – Phase II Mortgage Loan is prepayable without penalty on or after March 6, 2028.
| A-3-70 |
Addison Ridge Apartments - Phase II |
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $25,000,000 | 100.0% | Loan Payoff | $20,052,548 | 80.2% | |||
| Closing Costs | 344,782 | 1.4 | ||||||
| Reserves | 141,743 | 0.6 | ||||||
| Return of Equity | 4,460,927 | 17.8 | ||||||
| Total Sources | $25,000,000 | 100.0% | Total Uses | $25,000,000 | 100.0% |
The Property. The Addison Ridge Apartments - Phase II Property is an eight building, three- and four-story, 214 unit Class A+ garden style multifamily property located in Fayetteville, North Carolina. The Addison Ridge Apartments - Phase II Property was constructed in 2016-2017 and is situated on a 21.3-acre site. The Addison Ridge Apartments - Phase II Property’s residential unit mix includes 73 one-bedroom units, 113 two-bedroom units, and 28 three-bedroom units, with an average unit size of 1,110 square feet. The Addison Ridge Apartments - Phase II Property offers certain “all inclusive” units whereby the landlord pays for electricity and water/sewer charges in exchange for an additional rent premium of $225 to $250 per month. The Addison Ridge Apartments - Phase II Property also offers certain fully-furnished “corporate” units whereby landlord pays for all utilities, including cable and internet in exchange for an additional rent premium of $900 to $1,000 per month. As of March 27, 2018, the Addison Ridge Apartments - Phase II Property had 33 all-inclusive units and 9 corporate units. According to the sponsor, approximately 53.7% of tenants at the Addison Ridge Apartments - Phase II Property are either active or retired members of the military. See “Description of the Mortgage Pool—Mortgage Pool Characteristics – Property Types - Multifamily Properties” in the Prospectus.
Community amenities include a clubhouse which includes a fitness center with on-site personal trainer, laundry room, business center, conference room, game room, coffee lounge, 30 seat movie theater, yoga studio, a pool and the leasing office. The community amenities, including the existing leasing office which is located in the clubhouse (collectively, the “Common Facilities”), are located in Phase I of Addison Ridge, which is not part of the Addison Ridge Apartments - Phase II Mortgage Loan collateral. All amenities, including the clubhouse, are available to the tenants of the Addison Ridge Apartments - Phase II Property pursuant to recorded perpetual easement agreements (collectively, the “Easements”), which provide for, among other things, access to the Addison Ridge Apartments - Phase II Property and Common Facilities, use of the Common Facilities and sharing of expenses relating thereto. The Easements also grant borrower the access and use of the leasing office, which is a part of the Common Facilities. Pursuant to an amendment, the Easements require the three owners of Phases I-III to enter into a common management agreement to provide for the management and operation of the Common Facilities. A form of common management has been prepared and approved by the three property owners and the loan documents require the borrower to use its best efforts to enter into the agreement within one year of closing after final approval is received from the Phase I lender. Any foreclosing lender on any one of the three phases of Addison Ridge will have a veto right over the selection of the manager of the Common Facilities. The loan documents and the common management agreement for the Common Facilities each require the borrower to cause the leasing of the three phases of Addison Ridge to occur in an unbiased manner and to use its good faith and commercially reasonable efforts to keep the occupancy levels at each phase substantially the same. The documents also contain non-poaching/steering language.
Unit amenities include 9 foot ceilings, fully-equipped kitchens with granite countertops and a stainless steel appliance packages, ceiling fans, walk-in closets, linen closets, washer/dryer connections, balconies and patios; select units have pantries. The Addison Ridge Apartments - Phase II Property also features approximately 402 parking spaces (1.9 spaces per unit), of which 12 are detached garages. As of May 31, 2018, the Addison Ridge Apartments - Phase II Property was 98.1% occupied.
The borrower acquired the land as vacant in 2011 for $2.4 million, and subsequently invested approximately $28.3 million to develop the Addison Ridge Apartments - Phase II Property. This included approximately $25.0 million in hard costs and $3.0 million in soft costs. The total cost basis of approximately $30.0 million excluded $600,000 paid to a borrower sponsor-affiliate as a development fee. The Addison Ridge Apartments - Phase II Property is part of a larger multi-phase apartment community that added the Addison Ridge Phase I in 2014, which included 211 units, and the Addison Ridge Apartments - Phase II Property in 2016. Additionally, the borrower has plans to develop Addison Ridge Phase III, which is expected to include 210 units.
The following table presents certain information relating to the unit mix of the Addison Ridge Apartments - Phase II Property:
Apartment Unit Summary(1)
| Unit Type | No. of Units | % of Total Units | Average Unit Size (SF) | Average Monthly Rent per Unit |
| One Bedroom / One Bath | 73 | 34.1% | 942 | $1,041 |
| Two Bedroom / Two Bath | 113 | 52.8% | 1,154 | $1,228 |
| Three Bedroom / Two Bath | 28 | 13.1% | 1,373 | $1,460 |
| Total/Weighted Average | 214 | 100.0% | 1,110 | $1,195 |
| (1) | Information obtained from the underwritten rent roll. |
| A-3-71 |
Addison Ridge Apartments - Phase II |
The following table presents historical occupancy percentages at the Addison Ridge Apartments - Phase II Property:
Historical Occupancy
12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 5/31/2018(2) |
| NAP | NAP | NAP | 98.1% |
| (1) | The Addison Ridge Apartments - Phase II Property (as defined below) was constructed in 2016-2017; therefore, no historical occupancy is available. |
| (2) | Information obtained from the underwritten rent roll. |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and Underwritten Net Cash Flow at the Addison Ridge Apartments - Phase II Property:
Cash Flow Analysis
| TTM 5/31/2018(1) | U/W | % of U/W Effective Gross Income | U/W $ per Unit | |
| Base Rent | $2,425,485 | $3,005,781 | 93.6% | $14,046 |
| Grossed Up Vacant Space | 647,456 | 63,030 | 2.0 | 295 |
| Concessions | (45,838) | (43,235) | (1.3) | (202) |
| Other Income(2) | 303,763 | 418,614 | 13.0 | 1,956 |
| Less Vacancy & Credit Loss(3) | (647,782) | (231,970) | (7.2) | (1,084) |
| Effective Gross Income | $2,683,083 | $3,212,219 | 100.0% | $15,010 |
| Total Operating Expenses(4) | $826,520 | $890,227 | 27.7% | $4,160 |
|
|
|
| |
| Net Operating Income | $1,856,564 | $2,321,992 | 72.3% | $10,850 |
| Capital Expenditures | 0 | 42,800 | 1.3 | 200 |
| Net Cash Flow | $1,856,564 | $2,279,192 | 71.0% | $10,650 |
| NOI DSCR | 1.11x | 1.38x | ||
| NCF DSCR | 1.11x | 1.36x | ||
| NOI DY | 7.4% | 9.3% | ||
| NCF DY | 7.4% | 9.1% |
| (1) | The Addison Ridge Apartments - Phase II Property was developed in 2016 so there is no historical financial information. |
| (2) | Other income includes corporate and all-inclusive rent premiums, application fees, administrative/amenity fees, cable income, termination fees, pet fees, trash reimbursement, short-term premiums and laundry income. |
| (3) | The underwritten economic vacancy is 9.0%. The Addison Ridge Apartments - Phase II Property was 98.1% occupied as of May 31, 2018. |
| (4) | Total Operating Expenses include expenses related to the Common Facilities. |
Appraisal. As of the appraisal valuation date of March 27, 2018, the Addison Ridge Apartments - Phase II Property had an “as-is” appraised value of $35,800,000.
Environmental Matters. According to a Phase I environmental assessment dated April 13, 2018, there was no evidence of any recognized environmental conditions at the Addison Ridge Apartments - Phase II Property.
Market Overview and Competition. The Addison Ridge Apartments - Phase II Property is located in Fayetteville, Cumberland County, North Carolina, within the Fayetteville metropolitan statistical area (the “Fayetteville MSA”). The Fayetteville MSA economy is driven by Fort Bragg, a major U.S. Army installation. Encompassing more than 160,000 acres (500 square miles) in northwest Fayetteville, Fort Bragg is the nation’s largest army installation, home to the U.S. Army’s 82nd Airborne Division, Special Operation Command, Forces Command, and Reserve Command. Fort Bragg employs approximately 15,500 civilians, has an annual payroll of $3.5 billion, and an annual economic impact estimated at $13 billion. There are 48,000 active duty, 12,500 reserve and temporary duty members, and 99,000 military retirees residing in the surrounding area, plus 63,000+ family members. The Fayetteville area has a large and growing defense industry and was ranked in the Top 5 defense industry development areas in the US for 2010. Eight of the ten top American defense contractors are located in the area, including Lockheed Martin, Boeing, Northrop Grumman, General Dynamics, and L-3 Communications. Other major employers include Cape Fear Valley Health System, Cumberland County Board of Education, Wal-Mart Associates Inc., and Cumberland County Government. As of October 2017, the Fayetteville MSA unemployment rate was 5.2%, in comparison to the state and national unemployment rate of 4.1%.
Access to the region is provided by major thoroughfares which include Martin Luther King Jr. Freeway, Interstate 95, Interstate 95 Business, Interstate 295 (partially completed), and State Highway 24. The neighborhood is comprised of a mix of residential and commercial development. The major thoroughfares are generally lined with retail, office, and other commercial uses. The major super regional mall in the area is Cross Creek Mall, which is anchored by Belk, JCPenney, Macy’s, and Sears and includes over 150 specialty retailers. The mall is located in the main commercial artery at the intersection of Morganton Road and Skibo Road, All-American Expressway and between Interstate 95 and Fort Bragg with numerous big box stores in close proximity, which include Sam’s Club, Walmart Supercenter, Lowe’s Home Improvement, Target, Barnes and Nobles, The Home Depot, Best Buy, and AMC Market Fair 15.
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Addison Ridge Apartments - Phase II |
According to a third party market research report, the 2018 estimated population within a one-, three- and five-mile radius of the Addison Ridge Apartments - Phase II Property is 5,223, 49,933 and 135,864, respectively, with an average household income within a one-, three- and five-mile radius of the Addison Ridge Apartments - Phase II Property of approximately $59,826, $55,619 and $56,683, respectively.
According to a third party market research report the Addison Ridge Apartments - Phase II Property is located within the Fayetteville multifamily market, which reported a vacancy rate of 6.8% as of fourth quarter 2017, with an average asking rental rate of $777 per unit.
The following table presents certain information relating to some comparable multifamily properties for the Addison Ridge Apartments - Phase II Property:
Competitive Set(1)
| Average Rent (per unit) | |||||||||
| Location | Distance to Subject | Property Type | Number of Units | 1 BR | 2 BR | 3 BR | Overall Average PSF | Total Occupancy | |
| Addison Ridge Apartments – Phase II (Subject) | Fayetteville, NC | -- | Garden | 214 | $1,041 | $1,228 | $1,460 | $1.08 | 98.1% |
| Westlake at Morganton | Fayetteville, NC | 2.7 miles | Garden | 327 | $960 | $1,081 | $1,205 | $0.91 | 98.0% |
| Plantation at Fayetteville | Fayetteville, NC | 0.3 miles | Garden | 360 | $875 | $1,025 | $1,150 | $0.85 | 95.0% |
Addison Ridge I | Fayetteville, NC | 0.0 miles | Garden | 211 | $1,009 | $1,194 | $1,450 | $1.05 | 96.0% |
| Preserve at Grand Oaks | Fayetteville, NC | 2.7 miles | Garden | 315 | $887 | $1,028 | $1,150 | $0.81 | 97.0% |
| Jamestown Commons | Fayetteville, NC | 2.4 miles | Garden | 216 | $829 | $952 | $999 | $0.88 | 98.0% |
| (1) | Information obtained from the appraisal and the underwritten rent roll. |
The Borrower. The borrower is Santa Fe Properties II SPE, LLC, a single purpose Delaware limited liability company with two independent directors. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Addison Ridge Apartments - Phase II Mortgage Loan. The borrower is wholly owned by sole member Santa Fe Properties II, LLC which is owned by Charles F. Weber (50.1%, managing member), and Betty A. Weber, LLC (49.9%). Betty A. Weber, LLC is wholly owned by Betty A. Weber. Charles F. Weber is the guarantor of certain nonrecourse carveouts under the Addison Ridge Apartments – Phase II Mortgage Loan.
The Borrower Sponsor. The borrower sponsor, Charles F. Weber, has over 20 years’ experience in the commercial and multifamily real estate industry. Mr. Weber is a local owner and operator in Fayetteville and is the only developer of Class A+ apartment communities in the area.
Escrows. The loan documents provided for upfront reserve in the amount of $122,848 for real estate taxes, and $18,894 for insurance premiums. The loan documents require ongoing monthly deposits of $19,500 for real estate taxes, $3,599 for insurance premiums and $3,567 for replacement reserves.
Lockbox and Cash Management. Upon the occurrence of a Cash Management Trigger Event (as defined below) the borrower will be required to establish a lender-controlled lockbox account and instruct each tenant to deposit rents into such lockbox account. Additionally, all revenues received by the borrower or the property manager relating to Addison Ridge Apartments – Phase II Property are required to be deposited into the lockbox account within two business days of receipt. Other than during a Cash Sweep Event (as defined below), all excess funds on deposit are disbursed to the borrower.
A “Cash Management Trigger Event” will commence upon:
| (i) | an event of default; |
| (ii) | the borrower’s second late debt service payment in a twelve (12) month period; |
| (iii) | any bankruptcy action of the borrower, the guarantor or property manager; or |
| (iv) | a Cash Management DSCR Trigger Event (as defined below). |
A Cash Management Trigger Event will end:
| (a) | with respect to clause (i) above, when a cure of such event of default has been accepted or waived by lender; |
| (b) | with respect to clause (ii) above, when the borrower makes twelve (12) consecutive timely monthly debt service payments; |
| (c) | with respect to clause (iii) above, when such bankruptcy petition has been discharged, stayed, or dismissed within 30 days of such filing among other conditions for the borrower or guarantor and within 120 days for the property manager among other conditions or, with respect to a bankruptcy action of the manager, the borrower replacing the manager with a qualified manager acceptable to the lender; and |
| (d) | with respect to clause (iv) above, the amortizing debt service coverage ratio based upon the trailing 12-month period immediately preceding the date of such determination is greater than 1.05x for two consecutive quarters. |
A “Cash Management DSCR Trigger Event” occurs upon any date the amortizing debt service coverage ratio based on the trailing 12-month period immediately preceding the date of such determination, is less than 1.05x.
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Addison Ridge Apartments - Phase II |
A “Cash Sweep Event” will commence upon:
| (i) | an event of default; |
| (ii) | any bankruptcy action of the borrower, the guarantor or property manager; or |
| (iii) | a Cash Sweep DSCR Trigger Event (as defined below). |
A Cash Sweep Event will end:
| (a) | with respect to clause (i) above, when a cure of such event of default has been accepted or waived by lender; |
| (b) | with respect to clause (ii) above, when such bankruptcy petition has been discharged, stayed, or dismissed within 30 days of such filing among other conditions for the borrower or guarantor and within 120 days for the property manager among other conditions or, with respect to a bankruptcy action of the manager, the borrower replacing the manager with a qualified manager acceptable to the lender; and |
| (c) | with respect to clause (iii) above, the amortizing debt service coverage ratio based upon the trailing 12-month period immediately preceding the date of such determination is greater than 1.05x for two consecutive calendar quarters. |
A “Cash Sweep DSCR Trigger Event” occurs upon any date the debt service coverage ratio based on the trailing 12-month period immediately preceding the date of such determination is less than 1.05x.
Property Management. The Addison Ridge Apartments - Phase II Property is managed by an affiliate of the borrower.
Assumption. The borrower has the right to transfer the Addison Ridge Apartments – Phase II Property on or before the earlier to occur of the first anniversary following the origination or the 60th day following securitization of the Addison Ridge Apartments – Phase II Mortgage Loan, provided that no event of default has occurred and is continuing and certain other conditions are satisfied, including (i) the lender’s reasonable determination that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration transferee experience, financial strength and general business standing; (ii) execution of a recourse guaranty and an environmental indemnity by an affiliate of the transferee; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 Certificates.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Terrorism Insurance. The loan documents require that the “all risk” insurance policy required to be maintained by the borrower provides coverage for terrorism in an amount equal to the full replacement cost of the Addison Ridge Apartments – Phase II Property, as well as business interruption insurance covering no less than the 18-month period following the occurrence of a casualty event, together with a 6-month extended period of indemnity.
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Citadel Self Storage
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Citadel Self Storage
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| No. 9 – Citadel Self Storage | ||||||||
| Loan Information | Property Information | |||||||
| Mortgage Loan Seller: | Rialto Mortgage Finance, LLC | Single Asset/Portfolio: | Single Asset | |||||
| Property Type: | Self Storage | |||||||
| Original Principal Balance: | $25,000,000 | Specific Property Type: | Self Storage | |||||
| Cut-off Date Principal Balance: | $25,000,000 | Location: | Thousand Oaks, CA | |||||
| % of Initial Pool Balance: | 3.8% | Size: | 143,754 SF | |||||
| Loan Purpose: | Refinance | Cut-off Date Principal Balance Per Unit: | $173.91 | |||||
| Borrower Name: | Citadel Storage Delaware, LLC | Year Built/Renovated: | 2002/NAP | |||||
| Borrower Sponsor: | Raubi Sundher; Kabir Sundher | Title Vesting: | Fee | |||||
| Mortgage Rate: | 5.5800% | Property Manager: | Self-managed | |||||
| 4th Most Recent Occupancy (As of): | NAV | |||||||
| Note Date: | May 18, 2018 | 3rd Most Recent Occupancy (As of): | 96.3% (12/31/2015) | |||||
| Anticipated Repayment Date: | NAP | 2nd Most Recent Occupancy (As of): | 89.0% (12/31/2016) | |||||
| Maturity Date: | June 6, 2028 | Most Recent Occupancy (As of): | 81.6% (12/31/2017) | |||||
| IO Period: | 36 months | Current Occupancy (As of): | 96.3% (5/4/2018) | |||||
| Loan Term (Original): | 120 Months | |||||||
| Seasoning: | 1 month | Underwriting and Financial Information: | ||||||
| Amortization Term (Original): | 360 months | 4th Most Recent NOI (As of): | $1,829,205 (12/31/2015) | |||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | 3rd Most Recent NOI (As of): | $1,816,090 (12/31/2016) | |||||
| Interest Accrual Method: | Actual/360 | 2nd Most Recent NOI (As of): | $2,020,302 (12/31/2017) | |||||
| Call Protection: | L(25),D(91),O(4) | Most Recent NOI (As of): | $2,136,329 (TTM 3/31/2018) | |||||
| Lockbox Type: | Springing | |||||||
| Additional Debt: | None | U/W Revenues: | $3,224,874 | |||||
| Additional Debt Type: | NAP | U/W Expenses: | $1,051,844 | |||||
| U/W NOI: | $2,173,030 | |||||||
| U/W NCF: | $2,151,467 | |||||||
| U/W NOI DSCR: | 1.26x | |||||||
| Escrows and Reserves(1): | U/W NCF DSCR: | 1.25x | ||||||
| U/W NOI Debt Yield: | 8.7% | |||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF Debt Yield: | 8.6% | |||
| Taxes | $25,291 | $8,265 | NAP | As-Is Appraised Value: | $41,720,000 | |||
| Insurance | $29,892 | $2,847 | NAP | As-Is Appraisal Valuation Date: | April 11, 2018 | |||
| Replacement Reserves | $0 | $1,797 | NAP | Cut-off Date LTV Ratio: | 59.9% | |||
| LTV Ratio at Maturity or ARD: | 53.7% | |||||||
| (1) | See “Escrows” section. |
The Mortgage Loan. The mortgage loan (the “Citadel Self Storage Mortgage Loan”) is evidenced by a single promissory note that is secured by a first mortgage encumbering a self storage property located in Thousand Oaks, California (the “Citadel Self Storage Property”). The Citadel Self Storage Mortgage Loan was originated on May 18, 2018 by Rialto Mortgage Finance, LLC. The Citadel Self Storage Mortgage Loan 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 accrues interest at an interest rate of 5.5800% per annum. The Citadel Self Storage Mortgage Loan had an initial term of 120 months, has a remaining term of 119 months as of the Cut-off Date and requires payments of interest only for the first 36 months followed by payments of principal and interest based on a 30-year amortization schedule. The Citadel Self Storage Mortgage Loan matures on June 6, 2028.
Following the lockout period, the borrower has the right to defease the Citadel Self Storage Mortgage Loan in whole, but not in part, on any date before March 6, 2028. In addition, the Citadel Self Storage Mortgage Loan is prepayable without penalty on or after March 6, 2028.
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $25,000,000 | 100.0% | Loan Payoff | $12,699,934 | 50.8% | |||
| Closing Costs | 308,786 | 1.2 | ||||||
| Upfront Reserves | 55,182 | 0.2 | ||||||
| Return of Equity | 11,936,098 | 47.7 | ||||||
| Total Sources | $25,000,000 | 100.0% | Total Uses | $25,000,000 | 100.0% |
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Citadel Self Storage
The Property. The Citadel Self Storage Property is a 143,754 square foot self storage facility located in Thousand Oaks, California. The Citadel Self Storage Property was completed in two phases in 2002 and 2005 and is situated on a 4.5 acre site. The Citadel Self Storage Property is comprised of four single-story buildings, one two-story building, and one three-story building. The Citadel Self Storage Property has a total of 1,788 self storage units including 1,605 traditional self storage units, 97 climate controlled wine storage units, 17 vault units and 69 safety deposit boxes. The unit mix is comprised of 929 climate controlled units (52.0% of total units) and 859 non-climate controlled units (48.0% of total units). Property amenities include a post office, 24 hour camera security system, an electronic gate, keypad entry, perimeter fencing, exterior lighting, two elevators, security alarms, a leasing office, and an on-site manager. In 2016, the guarantor redeveloped building 3 at the Citadel Self Storage Property adding approximately 20,721 square feet of self storage space at a cost of approximately $2.2 million. The redevelopment included the addition of two concrete floors and two elevators and created 484 climate controlled self storage units which were absorbed throughout 2017. As of May 4, 2018, the Citadel Self Storage Property was 96.3% occupied.
The following table presents historical occupancy percentages at the Citadel Self Storage Property:
Historical Occupancy
12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 5/4/2018(2) |
| 96.3% | 89.0% | 81.6% | 96.3% |
| (1) | Information obtained from the borrower. |
| (2) | Information obtained from the underwritten rent roll. |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and Underwritten Net Cash Flow at the Citadel Self Storage Property:
Cash Flow Analysis
| 2015 | 2016 | 2017 | TTM 3/31/2018 | U/W | % of U/W Effective Gross Income | U/W $ per Room(1) | |
| Base Rent | $2,448,785 | $2,542,002 | $2,785,578 | $2,926,872 | $3,352,056 | 103.9% | $23.32 |
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | 140,892(1) | 4.4 | 0.98 |
| Other Income(2) | 77,449 | 78,262 | 105,327 | 114,922 | 114,922 | 3.6 | 0.80 |
| Less Vacancy & Credit Loss | (12,480) | (10,015) | (17,997) | (15,684) | (382,996)(3) | (11.9) | (2.66) |
| Effective Gross Income | $2,513,754 | $2,610,249 | $2,872,908 | $3,026,110 | $3,224,874 | 100.0% | $22.43 |
| Total Operating Expenses | $684,549 | $794,159 | $852,606 | $889,781 | $1,051,844 | 32.6% | $7.32 |
| Net Operating Income | $1,829,205 | $1,816,090 | $2,020,302 | $2,136,329 | $2,173,030 | 67.4% | $15.12 |
| Capital Expenditures | 0 | 0 | 0 | 0 | 21,563 | 0.7 | 0.15 |
| Net Cash Flow | $1,829,205 | $1,816,090 | $2,020,302 | $2,136,329 | $2,151,467 | 66.7% | $14.97 |
| NOI DSCR | 1.06x | 1.06x | 1.18x | 1.24x | 1.26x | ||
| NCF DSCR | 1.06x | 1.06x | 1.18x | 1.24x | 1.25x | ||
| NOI DY | 7.3% | 7.3% | 8.1% | 8.5% | 8.7% | ||
| NCF DY | 7.3% | 7.3% | 8.1% | 8.5% | 8.6% |
| (1) | Gross up vacant space is based on actual vacant space as of May 4, 2018. |
| (2) | Other income includes liens, late fees, administration fees, insurance commission, and USPS income. |
| (3) | The underwritten economic vacancy is 11.0%. Underwritten adjustment is based on the T-3 Effective Gross Income. In 2016, the sponsors redeveloped one of the buildings at the Citadel Self Storage Property, adding 20,721 square feet of self storage. The new self storage units became available for leasing in January 2017 and were absorbed throughout 2017. The Citadel Self Storage Property was 96.3% physically occupied as of May 4, 2018. |
Appraisal. As of the appraisal valuation date of April 11, 2018, the Citadel Self Storage Property had an “as-is” appraised value of $41,720,000.
Environmental Matters. According to a Phase I environmental assessment dated February 26, 2018, there was no evidence of any recognized environmental conditions at the Citadel Self Storage Property.
Market Overview and Competition. The Citadel Self Storage Property is located in Thousand Oaks, Ventura County, California, within the Oxnard-Thousand Oaks-Ventura, CA metropolitan statistical area (“Thousand Oaks MSA”). Ventura has hundreds of miles of national and state parks and forestland, with the Los Padres National Forest making up most of the northern half of the county. Ventura has evolved into an employment center with the growth of the technology corridor that stretches along U.S. Route 101 from Woodland Hills to Camarillo. Major employers with the Thousand Oaks MSA include Naval Construction Battalion, Amgen Inc., Naval Air Warfare Center Weapons, the Air National Guard and St. John’s Regional Medical Center.
The Citadel Self Storage Property is located along Old Conejo Road in the southeastern portion of Ventura at the center of Conejo Valley which is bordered by Simi Valley to the north, Westlake Village to the east, Hidden Valley and the Santa Monica Mountains to the south, and Camarillo to the west. Access to the neighborhood is provided by U.S. Route 101, and State Route 23. Development in the neighborhood consists of office, retail and industrial uses along the major arterials with multifamily and single family development removed from arterials.
| A-3-79 |
Citadel Self Storage
According to the appraisal, the Citadel Self Storage Property is located in the San Fernando Valley-West self storage submarket of the Los Angeles self storage market. As of 2017, the San Fernando Valley-West self storage submarket reported a vacancy rate of 7.3%. Asking rentals rates were $182.93 for 10x10 non-climate controlled units and $214.87 for 10x10 climate controlled units for 2017. The Los Angeles self storage market reported a vacancy rate of 7.7% for 2017. Asking rental rates of $184.58 for 10x10 non-climate controlled units and $210.53 for 10x10 climate controlled units were quoted for the Los Angeles self storage market as of 2017.
The following table presents certain information relating to some comparable self storage properties for the Citadel Self Storage Property:
Competitive Set(1)
| Citadel Self Storage (Subject) | StorCal Self Storage | Ventu Park Self Storage | Extra Space Self Storage | Newbury Park Self Storage | Hollywood Storage Center | |
| Location | Thousand Oaks, CA | Newbury Park, CA | Newbury Park, CA | Newbury Park, CA | Newbury Park, CA | Newbury Park, CA |
| Distance to Subject | -- | 1.1 miles | 2.5 miles | 0.4 miles | 2.0 miles | 0.1 miles |
| Property Type | Self Storage | Self Storage | Self Storage | Self Storage | Self Storage | Self Storage |
| Year Built/Renovated | 2002/NAP | 1981/NAP | 2002/NAP | 2001/NAP | 1992/NAP | 1982/NAP |
| Total Units | 1,788 | 280 | 616 | 427 | 320 | 1,412 |
| Total Occupancy | 96.3%(2) | 92.0% | 90.0% | 90.0% | 90.1% | 90.0% |
| (1) | Information obtained from the appraisal. |
| (2) | Information obtained from the underwritten rent roll |
The Borrower. The borrower is Citadel Storage Delaware, LLC , a single purpose Delaware limited liability company, with one independent director. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the Citadel Self Storage Mortgage Loan. Citadel Storage Delaware, LLC is wholly owned by Citadel Storage, LLC, which is owned by Raubi Sundher (36.0%), Kabir Singh Sundher (29.7%), Jehlam (Jay) Sundher (24.3%), and S. Tej Sundher (10.0%). Raubi Sundher and Kabir Sundher are the guarantors of certain nonrecourse carveouts under the Citadel Self Storage Mortgage Loan on a joint and several basis.
The Borrower Sponsors. The borrower sponsors of the borrower are Raubi Sundher and Kabir Singh Sundher. Raubi Sundher has over 30 years of real estate experience and is a founding member of the Hollywood Business Improvement District. Since 1987, Mr. Sundher has led Kuvera Partners, a privately held corporation which focuses on the development and construction of multiple properties in the entertainment and the self storage industry. Kabir Singh Sundher joined Kuvera Partners in 1996 after working as an attorney and as in-house counsel for the real estate developer C. L. Development, Inc. Kabir Singh Sundher is responsible for legal, financial and technological affairs for Kuvera Partners.
Escrows. The loan documents provided for upfront reserves in the amount of $25,291 for real estate taxes and $29,892 for insurance premiums. The loan documents require ongoing monthly deposits of $8,265 for real estate taxes, $2,847 for insurance premiums and $1,797 for replacement reserves.
Lockbox and Cash Management. Upon the occurrence of a Cash Management Trigger Event (as defined below) the borrower will be required to establish a lender-controlled lockbox account and instruct each tenant to deposit rents into such lockbox account. Additionally, all revenues received by the borrowers or the property manager relating to Citadel Self Storage Property are required to be deposited into the lockbox account within one business day of receipt. Other than during a Cash Sweep Event (as defined below), all excess funds on deposit are disbursed to the borrower.
A “Cash Management Trigger Event” will commence upon:
| (i) | an event of default; |
| (ii) | the borrower’s second late debt service payment within a twelve (12) month period; |
| (iii) | any bankruptcy action of the borrower, guarantors or property manager; or |
| (iv) | a Cash Management DSCR Trigger Event (as defined below). |
A Cash Management Trigger Event will end:
| (a) | with respect to clause (i) above, when a cure of such event of default has been accepted or waived by lender; |
| (b) | with respect to clause (ii) above, the timely payment of the monthly debt service payments on twelve (12) consecutive payment dates; |
| (c) | with respect to clause (iii) above, when such bankruptcy action has been discharged, stayed, or dismissed within 30 days for the borrower or guarantors and 120 days for the property manager, among other conditions or, with respect to a bankruptcy action of the property manager, the borrower has replaced the manager with a qualified manager acceptable to the lender; and |
| (d) | with respect to clause (iv), upon the termination of the Cash Management DSCR Trigger Event as set forth below. |
A “Cash Management DSCR Trigger Event” will commence upon any date the amortizing debt service coverage ratio based on the trailing 12-month period immediately preceding the date of such determination is less than 1.15x, and will end if the amortizing debt
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Citadel Self Storage
service coverage ratio based upon the trailing 12-month period immediately preceding the date of such determination is greater than 1.15x for two consecutive calendar quarters.
A “Cash Sweep Event” means:
| (i) | an event of default; |
| (ii) | any bankruptcy action of the borrowers, guarantors or property manager; or |
| (iii) | a Cash Sweep DSCR Trigger Event (as defined below). |
A Cash Sweep Event will end:
| (a) | with respect to clause (i) above, when a cure of such event of default has been accepted or waived by lender; |
| (b) | with respect to clause (ii) above, when such bankruptcy action has been discharged, stayed, or dismissed, within 30 days for the borrowers or guarantors and 120 days for the property manager, among other conditions or, with respect to a bankruptcy action of the property manager, the borrower has replaced the property manager with a qualified manager acceptable to the lender; and |
| (c) | with respect to clause (iii) above, upon the termination of the Cash Sweep DSCR Trigger Event as set forth below. |
A “Cash Sweep DSCR Trigger Event” occurs upon any date the amortizing debt service coverage ratio based on the trailing 12-month period immediately preceding the date of such determination is less than 1.10x and will end once the amortizing debt service coverage ratio based upon the trailing 12-month period immediately preceding the date of such determination is greater than 1.10x for two consecutive quarters.
Property Management. The Citadel Self Storage Property is managed by an affiliate of the borrower.
Assumption. The borrower has the right to transfer the Citadel Self Storage Property on or before the earlier to occur of the first anniversary following the origination of the Citadel Self Storage Mortgage Loan or the 60th day following securitization of the Citadel Self Storage Mortgage Loan, provided that no event of default has occurred and is continuing and certain other conditions are satisfied, including (i) the lender’s reasonable determination that the proposed transferee and guarantor satisfy the lender’s credit review and underwriting standards, taking into consideration transferee experience, financial strength and general business standing; (ii) execution of a recourse guaranty and an environmental indemnity by an affiliate of the transferee; and (iii) if required by the lender, rating agency confirmation from DBRS, Fitch and Moody’s that the transfer will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 Certificates.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Terrorism Insurance. The loan documents require that the “all risk” insurance policy required to be maintained by the borrowers provide coverage for terrorism in an amount equal to the full replacement cost of the Citadel Self Storage Property, as well as business interruption insurance covering no less than the 18-month period following the occurrence of a casualty event, together with a 12-month extended period of indemnity.
Earthquake Insurance. The loan documents do not require earthquake insurance. The property is located in Seismic Zone 4. The seismic report indicated scenario expected loss for the property is 11%.
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| 181 FREMONT STREET |
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| 181 FREMONT STREET |
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| No. 10 – 181 Fremont Street | ||||||||
| Loan Information | Property Information | |||||||
| Mortgage Loan Seller: | Barclays Bank PLC | Single Asset/Portfolio: | Single Asset | |||||
| Property Type: | Office | |||||||
| Specific Property Type: | CBD | |||||||
| Original Principal Balance(1): | $20,000,000 | Location: | San Francisco, CA | |||||
| Cut-off Date Balance(1): | $20,000,000 | Size: | 436,332 SF | |||||
| % of Initial Pool Balance: | 3.0% | Cut-off Date Balance Per SF(1): | $572.96 | |||||
| Loan Purpose: | Refinance | Year Built/Renovated: | 2018/NAP | |||||
| Borrower Name: | 181 Fremont Office LLC | Title Vesting: | Fee | |||||
| Borrower Sponsor: | Joseph K. Paul | Property Manager: | Self-managed | |||||
| Mortgage Rate: | 3.7086% | 4th Most Recent Occupancy (As of)(5): | NAP | |||||
| Note Date: | March 29, 2018 | 3rd Most Recent Occupancy (As of)(5): | NAP | |||||
| Anticipated Repayment Date: | April 6, 2028 | 2nd Most Recent Occupancy (As of)(5): | NAP | |||||
| Maturity Date: | April 6, 2031 | Most Recent Occupancy (As of)(5): | NAP | |||||
| IO Period: | 120 months | Current Occupancy (As of): | 100.0% (7/1/2018) | |||||
| Loan Term (Original): | 120 months | |||||||
| Seasoning: | 3 months | |||||||
| Amortization Term (Original): | NAP | Underwriting and Financial Information: | ||||||
| Loan Amortization Type: | Interest-only, ARD | 4th Most Recent NOI (As of)(5): | NAP | |||||
| Interest Accrual Method: | Actual/360 | 3rd Most Recent NOI (As of)(5): | NAP | |||||
| Call Protection(2): | L(23),GRTR 1% or YM(4),GRTR 1% | 2nd Most Recent NOI (As of)(5): | NAP | |||||
| or YM or D(86),O(7) | Most Recent NOI (As of)(5): | NAP | ||||||
| Lockbox Type: | Hard/Upfront Cash Management | |||||||
| Additional Debt(1): | Yes | |||||||
| Additional Debt Type(1)(3): | Pari Passu; Mezzanine | U/W Revenues: | $43,664,053 | |||||
| U/W Expenses: | $14,094,390 | |||||||
| U/W NOI: | $29,569,663 | |||||||
| U/W NCF: | $29,482,397 | |||||||
| Escrows and Reserves(4): | U/W NOI DSCR(1): | 3.15x | ||||||
| U/W NCF DSCR(1): | 3.14x | |||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI Debt Yield(1): | 11.8% | |||
| Taxes | $0 | $509,418 | NAP | U/W NCF Debt Yield(1): | 11.8% | |||
| Insurance | $0 | Springing | NAP | Appraised Value(6): | $632,000,000 | |||
| Replacement Reserves | $0 | Springing | NAP | Appraisal Valuation Date(6): | March 1, 2021 | |||
| Rent Concessions Reserve | $68,379,092 | $0 | NAP | Cut-off Date LTV Ratio(1): | 39.6% | |||
| TI/LC Reserve | $42,717,266 | $0 | NAP | LTV Ratio at ARD(1): | 39.6% | |||
| (1) | See “The Mortgage Loan” section. All statistical information related to balance per square foot, loan-to-value ratios, debt service coverage ratios and debt yields are based on the 181 Fremont Street Whole Loan (as defined below). The Cut-off Date LTV Ratio, LTV Ratio at ARD, U/W NCF DSCR and U/W NOI Debt Yield based on the 181 Fremont Street Whole Loan and the 181 Fremont Street Mezzanine Loans (as defined below) (together, the “181 Fremont Street Total Debt”), are 75.2%, 75.2%, 1.38x and 6.2%, respectively. |
| (2) | Defeasance of the 181 Fremont Street Mortgage Loan (as defined below) is permitted at any time after the earlier to occur of (i) two years after the closing date of the securitization that includes the last note to be securitized or (ii) March 29, 2021. The assumed lockout period applicable to defeasance of 27 payments is based on the expected WFCM 2018-C45 securitization trust closing date in July 2018. |
| (3) | See “Subordinate and Mezzanine Indebtedness” section. |
| (4) | See “Escrows” section. |
| (5) | Historical occupancy, operating and financial information is unavailable as the 181 Fremont Street Property (as defined below) was built in 2018. |
| (6) | See “Appraisal” section. The appraised value shown is a prospective market value that assumes the 181 Fremont Street Property is complete and/or achieves stabilization as of March 1, 2021, the date upon which all free rent burns off. The As-Is Appraised Value is $461,000,000 as of February 28, 2018 and is inclusive of deductions for free rent, tenant improvement and leasing commission (“TI/LC”) obligations, equating to a Cut-off Date LTV Ratio and LTV Ratio at ARD of 54.2%.The borrower deposited upfront reserves totaling $111,096,358 for such contractual TI/LC obligations and free rent (see “Escrows” section). |
The Mortgage Loan. The mortgage loan (the “181 Fremont Street Mortgage Loan”) is part of a whole loan (the “181 Fremont Street Whole Loan”) evidenced by seven pari passu notes secured by a first mortgage encumbering the fee simple interest in the Class A office condominium portion of 181 Fremont Street in San Francisco, California (the “181 Fremont Street Property”). The 181 Fremont Street Whole Loan was co-originated on March 29, 2018 by Barclays Bank PLC and Deutsche Bank AG, acting through its New York Branch. The 181 Fremont Street Whole Loan had an original principal balance of $250,000,000, has an outstanding principal balance as of the Cut-off Date of $250,000,000 and accrues interest at an interest rate of 3.70860% per annum (the “Initial Interest Rate”) through the anticipated repayment date (the “ARD”). The ARD is April 6, 2028 and the final maturity date is April 6, 2031. In the event that the 181 Fremont Street Whole Loan is not repaid in full on or prior to the ARD, the 181 Fremont Street Whole Loan will accrue interest at a per annum rate equal to the greater of (a) the Initial Interest Rate plus 1.5000%, (b) the swap rate as determined in the 181 Fremont Street Whole Loan documents on the ARD plus 2.4146% or (c) when applicable, the default rate as defined in the 181 Fremont Street Whole Loan documents (the “Adjusted Interest Rate”); however, interest accrued at the excess of the Adjusted Interest Rate over the Initial Interest Rate (the “Accrued Interest”) will be deferred. In addition, from and
| A-3-84 |
| 181 FREMONT STREET |
after the ARD, all excess cash flow from the 181 Fremont Street Property after the payment of reserves, interest calculated at the Initial Interest Rate, debt service on the 181 Fremont Street Mezzanine Loans and operating expenses will be applied (i) first to repay the principal balance of the 181 Fremont Street Whole Loan and (ii) second to the payment of Accrued Interest. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans—the 181 Fremont Street Whole Loan” and “Pooling and Servicing Agreement” in the Preliminary Prospectus.
Note A-6-2, which will be contributed to the WFCM 2018-C45 Trust, had an original principal balance of $20,000,000, has an outstanding principal balance as of the Cut-off Date of $20,000,000 and represents a non-controlling interest in the 181 Fremont Street Whole Loan. The non-controlling Note A-2 had an original principal balance of $58,000,000, has an outstanding principal balance as of the Cut-off Date of $58,000,000 and was contributed to the BANK 2018-BNK12 Trust. The non-controlling Note A-3 had an original principal balance of $22,000,000, has an outstanding principal balance as of the Cut-off Date of $22,000,000, is currently held by Wells Fargo Bank, N.A. and is expected to be contributed to one or more future securitizations. The non-controlling Note A-6-1 had an original principal balance of $30,000,000, has an outstanding principal balance as of the Cut-off Date of $30,000,000 and was contributed to the WFCM 2014-C44 Trust. The controlling Note A-1 and the non-controlling Notes A-4 and A-5 had an aggregate original principal balance of $120,000,000, have an aggregate outstanding principal balance as of the Cut-off Date of $120,000,000, are currently held by Deutsche Bank AG, New York Branch and are expected to be contributed to one or more future securitizations. The mortgage loans evidenced by Notes A-1, A-2, A-3, A-4, A-5 and A-6-1 are collectively referred to herein as the “181 Fremont Street Companion Loans”. The lender provides no assurances that any non-securitized notes will not be split further. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Pari Passu Whole Loans” in the Preliminary Prospectus.
Note Summary(1)
| Notes | Original Balance | Note Holder | Controlling Interest | |
| A-1 | $50,000,000 | Deutsche Bank AG, New York Branch | Yes | |
| A-2 | $58,000,000 | BANK 2018-BNK12 | No | |
| A-3 | $22,000,000 | Wells Fargo Bank, N.A. | No | |
| A-4 | $30,000,000 | Deutsche Bank AG, New York Branch | No | |
| A-5 | $40,000,000 | Deutsche Bank AG, New York Branch | No | |
| A-6-1 | $30,000,000 | WFCM 2018-C44 | No | |
| A-6-2 | $20,000,000 | WFCM 2018-C45 | No | |
| Total | $250,000,000 |
| (1) | The lender provides no assurances that any non-securitized pari passu note will not be split further. |
Following the earlier to occur of (i) two years after the closing date of the securitization that includes the last note to be securitized or (ii) March 29, 2021, on any date before October 6, 2027, the borrower has the right to defease the 181 Fremont Street Whole Loan in whole, but not in part. On April 6, 2020 and on any business day thereafter, the borrower has the right to prepay the 181 Fremont Street Whole Loan in whole, provided that the borrower pays the greater of a yield maintenance premium or a prepayment premium equal to 1.0% of the principal amount being prepaid. The 181 Fremont Street Whole Loan is prepayable without penalty on or after October 6, 2027.
Sources and Uses
| Sources | Uses | |||||||
| Original whole loan amount | $250,000,000 | 52.6% | Loan payoff | $362,943,921 | 76.3% | |||
| Mezzanine loans | 225,000,000 | 47.3 | Reserves | 111,096,358 | 23.4 | |||
| Borrower sponsors’ new cash contribution | 695,692 | 0.1 | Closing costs | 1,655,413 | 0.3 | |||
| Total Sources | $475,695,692 | 100.0% | Total Uses | $475,695,692 | 100.0% |
The Property. The 181 Fremont Street Property comprises the office condominium portion of a 57-story Class A, LEED Platinum tower constructed in 2018 and located in downtown San Francisco, California (see “Condominium” section below). The 181 Fremont Street tower consists of 654,698 square feet of total gross building area, with 436,332 square feet allocated to office space on the first 38 stories (collateral for the 181 Fremont Street Whole Loan) and 120,457 square feet of space allocated to 67 luxury market rate residential units on floors 39 to 57 (non-collateral). The 181 Fremont Street tower is over 800 feet tall and offers unobstructed views of the San Francisco Bay and the waterfront. As of July 1, 2018, the 181 Fremont Street Property was 100.0% leased to Facebook, Inc. (“Facebook”) on a triple-net basis through February 2031, with two, five-year extension options and no early termination options.
The 181 Fremont Street Property is located in the South Financial District, three blocks from the San Francisco Bay and within two blocks of Market Street. According to the appraisal, the San Francisco Financial District is the most concentrated employment center in northern California with an employment base that supports a wide variety of commercial use. The 181 Fremont Street Property offers direct access to the new Transbay Transit Center and its elevated 5.4 acre park via a 7th floor skybridge. The new public transportation hub is expected to connect eight Bay Area counties through 11 transit systems, expected to open by 2019. The first phase of the project includes the five-story structure, active bus terminal, elevated park and over 100,000 square feet of retail space including dining, shopping and entertainment.
| A-3-85 |
| 181 FREMONT STREET |
As of the origination date, Facebook has taken possession of the 181 Fremont Street Property and commenced the build out of its space. Outstanding rent concessions and tenant improvement allowances related to the Facebook lease were deposited into escrow by the borrower on the origination date (See “Escrows” section). According to the borrower sponsor, Facebook is expected to occupy the 181 Fremont Street Property in three phases with floors five through 13 being occupied in February 2019, floors 14 through 25 being occupied in March 2020 and floors 26 through 38 being occupied in March 2021. Floors two and three are partially open to the first floor and also consist of residential storage and security offices. The fourth floor features bicycle storage, showers, storage and laundry areas.
Facebook is a technology company whose platforms allow users to communicate with family, friends and coworkers. Facebook currently shuttles thousands of employees to its Silicon Valley headquarters and is now adding a San Francisco footprint, as other technology companies have done, including Google and Apple. The 181 Fremont Street Property will be Facebook’s first outpost in San Francisco, housing between 2,000 and 3,000 employees by 2021 to support its growth. One of Facebook’s fast-growing divisions, Instagram, will be one of the groups to move a team into the 181 Fremont Street Property. Daily and monthly active users across Facebook’s platforms were up approximately 14.0% in 2017 year-over-year. As of December 2017, there were 2.1 billion active users on Facebook each month, as of January 2018 there were 1.5 billion active users on WhatsApp (owned by Facebook) each month, and as of September 2017 there were 800 million active users on Instagram each month. Facebook reported 2017 revenue of approximately $40.7 billion, up approximately 47.1% over 2016, which is primarily attributable to approximately $39.9 billion of advertising revenue. Additionally, Facebook reported net income of approximately $15.9 billion in 2017, up approximately 56.0% from 2016.
The following table presents certain information relating to the tenancy at the 181 Fremont Street Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/S&P) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(1)(2) | Annual U/W Base Rent(1)(2) | % of Total Annual U/W Base Rent(1)(2) | Lease Expiration Date |
| Major Tenant | |||||||
| Facebook, Inc. | NR/NR/NR | 436,332 | 100.0% | $72.22 | $31,511,897 | 100.0% | 2/28/2031(3) |
| Total Major Tenant | 436,332 | 100.0% | $72.22 | $31,511,897 | 100.0% | ||
| Vacant Space | 0 | 0.0% | |||||
| Collateral Total | 436,332 | 100.0% | |||||
| (1) | Annual U/W Base Rent PSF and Annual U/W Base Rent include $4,546,579 of straight-line rent through the maturity date of the Facebook lease. |
| (2) | Facebook has rent abatements through 2021, all of which were deposited into escrow on the origination date. |
| (3) | Facebook has two, five-year lease renewal options. |
The following table presents certain information relating to the lease rollover schedule at the 181 Fremont Street Property:
Lease Expiration Schedule(1)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent(2) | % of Annual U/W Base Rent(2) | Annual U/W Base Rent PSF(2) |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2018 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2019 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2020 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2021 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2022 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2023 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2024 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2025 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2026 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2027 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2028 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| Thereafter | 1 | 436,332 | 100.0% | 436,332 | 100.0% | $31,511,897 | 100.0% | $72.22 |
| Vacant | 0 | 0 | 0.0% | 436,332 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 1 | 436,332 | 100.0% | $31,511,897 | 100.0% | $72.22 |
| (1) | Information obtained from the underwritten rent roll. |
| (2) | Annual U/W Base Rent, % of Annual U/W Base Rent and Annual U/W Base Rent PSF include $4,546,579 of straight-line rent through the maturity date of the Facebook lease. |
| A-3-86 |
| 181 FREMONT STREET |
The following table presents historical occupancy percentages at the 181 Fremont Street Property:
Historical Occupancy
12/31/2014(1) | 12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 7/1/2018(2) |
| NAP | NAP | NAP | NAP | 100.0% |
| (1) | Historical Occupancy prior to 7/1/2018 is not applicable as the 181 Fremont Street Property was built in 2018. |
| (2) | Information obtained from the underwritten rent roll. |
Underwritten Net Cash Flow. The following table presents certain information relating to the underwritten net cash flow at the 181 Fremont Street Property:
Cash Flow Analysis(1)
| U/W | % of U/W Effective Gross Income | U/W $ per SF | |
| Base Rent(2) | $31,511,897 | 72.2% | $72.22 |
| Grossed Up Vacant Space | 0 | 0.0 | 0.00 |
| Total Reimbursables | 13,502,591 | 30.9 | 30.95 |
| Less Vacancy & Credit Loss(3) | (1,350,435) | (3.1) | (3.09) |
| Effective Gross Income | $43,664,053 | 100.0% | $100.07 |
| Total Operating Expenses | $14,094,390 | 32.3% | $32.30 |
| Net Operating Income | $29,569,663 | 67.7% | $67.77 |
| TI/LC | 0 | 0.0 | 0.00 |
| Capital Expenditures | 87,266 | 0.2 | 0.20 |
| Net Cash Flow | $29,482,397 | 67.5% | $67.57 |
| NOI DSCR(4) | 3.15x | ||
| NCF DSCR(4) | 3.14x | ||
| NOI DY(4) | 11.8% | ||
| NCF DY(4) | 11.8% |
| (1) | Historical Cash Flows are not available as the 181 Fremont Street Property was built in 2018. |
| (2) | U/W Base Rent includes $4,546,579 of straight-line rent through the maturity date of the Facebook lease. |
| (3) | The underwritten economic vacancy is 3.0%. The 181 Fremont Street Property was 100.0% leased as of July 1, 2018. |
| (4) | Debt service coverage ratios and debt yields are based on the 181 Fremont Street Whole Loan. |
Appraisal. The appraiser concluded to an appraised value of $632,000,000 with a valuation date of March 1, 2021 which assumes the 181 Fremont Street Property is complete and/or achieves stabilization. Facebook is expected to be in full occupancy of their leased space by March 2021. As of the appraisal valuation date of February 28, 2018 the 181 Fremont Street Property had an “as-is” appraised value of $461,000,000 and is inclusive of deductions for free rent, tenant improvement and leasing commission (“TI/LC”) obligations. The borrower deposited upfront reserves totaling $111,096,358 for such contractual TI/LC obligations and free rent (see “Escrows” section). The appraiser also concluded to a “hypothetical go dark” appraised value of $522,000,000, equating to a Cut-off Date LTV Ratio and LTV Ratio at ARD of 47.9%.
Environmental Matters. According to a Phase I environmental site assessment dated March 7, 2018, there was no evidence of any recognized environmental conditions at the 181 Fremont Street Property.
Market Overview and Competition. The 181 Fremont Street Property is located in the South Financial District of downtown San Francisco, California, three blocks from the San Francisco Bay and within two blocks of Market Street. According to the appraisal, the area immediately surrounding the 181 Fremont Street Property is approximately 98% built up, predominantly consisting of mid- and high-rise office and residential buildings, with few redevelopment sites available for re-use. Immediately north of the 181 Fremont Street Property is the Transbay Terminal, which is currently under construction and expected to open by 2019. Once complete, the Transbay Terminal is expected to be the bus and rail transportation hub of the Bay Area and has been proposed to be the termination point for the high-speed rail system planned between San Francisco and Los Angeles.
According to the appraisal, the 181 Fremont Street Property is located within the South Financial District office submarket. The South Financial District office submarket had fourth quarter 2017 inventory of approximately 15,384,000 square feet with a 7.6% vacancy rate and average asking rents of $72.94 PSF, as compared to the broader San Francisco office market which had a 9.8% vacancy rate and average asking rents of $56.66 PSF for the same period. The estimated 2017 population within a 1.0-, 3.0- and 5.0-mile radius around the 181 Fremont Street Property was 66,410, 369,991 and 636,799, respectively, reflective of a population compound growth rate from 2010 to 2017 of 1.6%, 1.5% and 1.3%, respectively. The estimated 2017 median household income within the same radii was $59,179, $78,089 and $82,936, respectively.
| A-3-87 |
| 181 FREMONT STREET |
The following table presents certain information relating to comparable leases to the 181 Fremont Street Property:
Comparable Leases(1)
| Property Name/Location | Year Built | Stories | Total GLA (SF) | Tenant Name | Lease Date/Term | Lease Area (SF) | Annual Base Rent PSF | Lease Type |
Salesforce Tower San Francisco, CA | 2018 | 61 | 1,400,000 | Accenture | March 2017 / 61 Months | 100,630 | $52.00 | Net |
Two Rincon San Francisco, CA | 1989 | 6 | 326,001 | March 2017 / 132 Months | 166,460 | $52.00 | Net | |
Foundry Square IV San Francisco, CA | 2003 | 10 | 247,238 | Slack | January 2017 / 120 Months | 228,998 | $56.50 | Net |
Charles Schwab Plaza San Francisco, CA | 1973 | 17 | 417,266 | Charles Schwab | December 2016 / 120 Months | 359,000 | $50.00 | Net |
First Market Tower San Francisco, CA | 1973 | 39 | 1,034,329 | Merrill Lynch | December 2016 / 72 Months | 121,000 | $40.00 | Net |
350 Bush San Francisco, CA | 2018 | 19 | 386,907 | Twitch | November 2017 / 120 Months | 178,000 | $62.00 | Net |
| Confidential | May 2018 / 136 Months | 145,217 | $67.00 | Net | ||||
| Confidential | October 2018 / 128 Months | 52,880 | $69.00 | Net |
| (1) | Information obtained from the appraisal. |
The Borrower. The borrower for the 181 Fremont Street Whole Loan is 181 Fremont Office LLC, a Delaware limited liability company and a special purpose entity with two independent directors. Legal counsel to the borrower delivered a non-consolidation opinion in connection with the origination of the 181 Fremont Street Whole Loan. Paul Guarantor LLC, a Delaware limited liability company, is the guarantor of certain nonrecourse carveouts under the 181 Fremont Street Whole Loan (the “181 Fremont Street Guarantor”). The 181 Fremont Street Guarantor is wholly owned by the Jay Paul Revocable Living Trust, of which Jay Paul is trustee and grantor. The 181 Fremont Street Guarantor will be required to maintain a minimum net worth, excluding its interest in the 181 Fremont Street Property, of $475,000,000 and liquidity of at least $15,000,000.
The Borrower Sponsor. The borrower sponsor is Joseph K. Paul, the founder of the Jay Paul Company, a privately held, opportunity-driven real estate firm based in San Francisco, California. Founded in 1975, the Jay Paul Company concentrates on the acquisition, development, and management of commercial properties throughout California. The Jay Paul Company has developed over 11.0 million square feet of institutional quality space with an additional 6.0 million square feet of space in their development pipeline. The Jay Paul Company has built projects for Google, Apple, Amazon, Motorola, Microsoft, Northrop Grumman, HP, Ariba, Synopsys, Rambus, Nokia and Dreamworks, among others.
Escrows. The 181 Fremont Street Whole Loan documents provide for upfront reserves in the amount of $68,379,092 for outstanding rent concessions due under the Facebook lease and $42,717,266 for outstanding tenant improvements and leasing commissions relating to the Facebook space.
The 181 Fremont Street Whole Loan documents require monthly reserve deposits for real estate taxes in an amount equal to one-twelfth of the real estate taxes that the lender estimates will be payable during the next twelve months (initially $509,418). The 181 Fremont Street Whole Loan documents do not require ongoing monthly escrows for insurance premiums as long as the borrower provides the lender with evidence that the 181 Fremont Street Property is insured via an acceptable blanket insurance policy or insured under the condominium association policy, and in either case, such policy is in full force and effect. During the continuance of a Trigger Period (as defined below), the 181 Fremont Street Whole Loan documents require monthly reserve deposits for capital expenditures equal to $7,272 and the monthly amount due for common charges due to the condominium association.
Lockbox and Cash Management. The 181 Fremont Street Whole Loan is structured with a hard lockbox and an upfront cash management. The borrower was required at origination to deliver letters to all tenants at the 181 Fremont Street Property directing them to pay all rents directly into a lender-controlled lockbox account. All funds received by the borrower or the manager are required to be deposited in the lockbox account within one business day following receipt. Funds on deposit in the lockbox account are required to be swept on each business day into a lender-controlled cash management account and applied on each payment date to the payment of debt service, the funding of required reserves, budgeted monthly operating expenses, debt service on the 181 Fremont Street Mezzanine Loans (as defined below) and, during a Lease Sweep Period (as defined below), to the payment of an amount equal to $636,318 to fund a lease sweep reserve account (the “Lease Sweep Reserve Account”) until the aggregate funds swept in the Lease Sweep Reserve Account during such lease sweep equals the Lease Sweep Reserve Threshold (as defined below) and then to the debt service reserve account until the aggregate funds transferred to the Lease Sweep Reserve Account and the debt service reserve account during such lease sweep equals the Lease Sweep and Debt Service Reserve Cap (as defined below). Provided no Trigger Period (as defined below) is continuing, excess cash in the deposit account will be disbursed to the borrower in accordance with the 181 Fremont Street Whole Loan documents. If a Trigger Period is continuing (other than a Trigger Period due to a Lease Sweep Period), excess cash in the deposit account will be transferred to an account (the “Cash Collateral Account”) held by the lender as additional collateral for the 181 Fremont Street Whole Loan.
| A-3-88 |
| 181 FREMONT STREET |
A “Trigger Period” will commence upon the earlier of the following:
| (i) | the ARD; |
| (ii) | an event of default under the 181 Fremont Street Whole Loan; |
| (iii) | as of the last day of any calendar quarter during the term of the 181 Fremont Street Whole Loan (a) the 181 Fremont Street Property not being fully leased to either Facebook or an investment grade tenant pursuant to a lease that is substantially on the same or better terms as the Facebook lease and (b) the debt service coverage ratio falling below 2.84x based on the 181 Fremont Street Whole Loan or 1.25x based on the 181 Fremont Street Total Debt (a “Low Debt Service Period”); |
| (iv) | the commencement of a Lease Sweep Period; or |
| (v) | an event of default under the 181 Fremont Street Mezzanine Loans. |
A Trigger Period will end:
| (a) | with regard to clause (i) above, upon the 181 Fremont Street Whole Loan being repaid in full, |
| (b) | with regard to clause (ii) and (v) above, upon the cure of such event of default; |
| (c) | with regard to clause (iii) above, upon the date that the debt service coverage ratio is at least 2.84x based on the 181 Fremont Street Whole Loan and 1.25x based on the 181 Fremont Street Total Debt for two consecutive calendar quarters; and |
| (d) | with regard to clause (iv) above, upon the ending of such Lease Sweep Period. |
A “Lease Sweep Period” will commence following the earliest to occur of any of the following (each a “Lease Sweep Trigger”):
| (i) | the date on which, with respect to any Lease Sweep Lease (as defined below), (a) a Lease Sweep Tenant Party (as defined below) cancels or terminates its Lease Sweep Lease with respect to all or a Material Termination Portion (as defined below) of the Lease Sweep Space (as defined below) subject to such Lease Sweep Lease prior to the then current expiration date under such Lease Sweep Lease, or (b) a Lease Sweep Tenant Party delivers to the borrower notice that it is canceling or terminating its Lease Sweep Lease with respect to all or a Material Termination Portion of the Lease Sweep Space subject to such Lease Sweep Lease (the affected space being the “Terminated Space”); provided, however, no Lease Sweep Period will commence pursuant to this clause (i) if, in connection with such termination or cancellation (or delivery of notice of termination or cancellation), the borrower simultaneously enters into a replacement lease with an entity or a wholly-owned subsidiary of an entity rated “BBB-” or equivalent by at least two of Fitch, Moody’s and S&P (an “Investment Grade Entity”) covering the Terminated Space, provided that such replacement lease is a qualified lease and the occupancy conditions, as specified in the 181 Fremont Street Whole Loan documents, are satisfied with respect to such replacement lease on or prior to the date of such termination or cancellation (or delivery of notice of termination or cancellation); |
| (ii) | the date on which, with respect to any Lease Sweep Lease, a Lease Sweep Tenant Party ceases operating its business (i.e., “goes dark”) at 20.0% or more of its Lease Sweep Space on a rentable square foot basis (a “Dark Period Event” and the affected space, the “Dark Space”), provided, however, that if the Lease Sweep Tenant Party either (a) is Facebook, (b) is an Investment Grade Entity or (c) has subleased the Dark Space portion of its premises to an Investment Grade Entity who has accepted delivery thereof (i.e., the lease has commenced) and is paying unabated rent at a contract rate no less than the contract rate required under the Lease Sweep Lease, such Lease Sweep Tenant Party will not be deemed to have “gone dark” for purposes of this clause (ii) and no Lease Sweep Period will commence pursuant to this clause (ii); |
| (iii) | an event of default under a Lease Sweep Lease by the tenant thereunder that continues beyond any applicable notice and cure period; |
| (iv) | a Lease Sweep Tenant Party being subject to an insolvency proceeding; or |
| (v) | the date on which Facebook becomes rated by at least two of Fitch, Moody’s and S&P and thereafter is no longer rated as an Investment Grade Entity (a “Facebook Downgrade Event”). |
A Lease Sweep Period (other than a Lease Sweep Period triggered by clause (iv) above) will not be triggered (or, if already triggered, may be terminated) if the borrower delivers to the lender an acceptable letter of credit in an amount equal to the applicable Lease Sweep and Debt Service Reserve Cap (as defined below).
A Lease Sweep Period will end on the earliest of the applicable of the following to occur:
| (a) | with regard to clauses (i) above, the date on which, with respect to each applicable Lease Sweep Space, one or more replacement tenants acceptable to the lender (in its sole but good faith discretion) execute and deliver replacement lease(s) covering the Requisite Lease Sweep Space (as defined below), provided that such replacement lease(s) are qualified leases and the occupancy conditions, as specified in the 181 Fremont Street Whole Loan documents, are satisfied; |
| (b) | with regard to clauses (ii) and (v) above, the date on which either (1) one or more replacement tenants acceptable to the lender (in its sole but good faith discretion) execute and deliver replacement lease(s) covering the Requisite Lease Sweep Space, provided that such replacement tenant(s) and lease(s) are qualified leases and the occupancy conditions, as specified in the 181 Fremont Street Whole Loan documents, are satisfied or (2) for a Dark Period Event or a Facebook Downgrade Event, Facebook is restored as an Investment Grade Entity or the entirety of the Lease Sweep Space has been sublet to an Investment Grade Entity who has accepted delivery thereof (i.e., the lease has commenced) and is paying unabated rent at a contract rate no less than the contract rate required under the Lease Sweep Lease; |
| A-3-89 |
| 181 FREMONT STREET |
| (c) | with regard to clause (iii) above, the date on which the event of default has been cured and no other event of default under such Lease Sweep Lease occurs for a period of three consecutive months following such cure; |
| (d) | with regard to clause (iv) above, the Lease Sweep Tenant Party insolvency proceeding having terminated and the applicable Lease Sweep Lease having been affirmed, assumed or assigned in a manner satisfactory to the lender; and |
| (e) | with regard to clauses (i), (ii), (iii), and (v) above, the date on which the aggregate amount of funds transferred into the Lease Sweep Reserve Account and the debt service reserve account equals the applicable Lease Sweep and Debt Reserve Cap (as defined below) and if a Lease Sweep Period is continuing due to the occurrence of more than one Lease Sweep Trigger, the aggregate amount of funds required to be transferred over the course of the Lease Sweep Period will be equal to the amount of the largest Lease Sweep and Debt Service Reserve Cap applicable to all then-continuing Lease Sweep Periods, such that each Lease Sweep Period will be treated as concurrent and not duplicative or independent of another. |
The “Lease Sweep Reserve Threshold” means (a) with respect to a Lease Sweep Period continuing solely pursuant to clauses (iii) and/or (v) above, $15,271,620 ($35.00 per square foot) or (b) with respect to a Lease Sweep Period continuing solely pursuant to clause (i) and/or (ii) above, $35.00 per square foot of the Dark Space or Terminated Space.
The “Lease Sweep and Debt Service Reserve Cap” means (a) with respect to a Lease Sweep Period continuing solely pursuant to clause (iii) above, $15,271,620 ($35.00 per square foot), (b) with respect to a Lease Sweep Period continuing solely pursuant to clause (i) above, $35.00 per square foot of the Terminated Space, (c) with respect to a Lease Sweep Period continuing pursuant to clause (ii) above, whether or not a Lease Sweep Period pursuant to clauses (i) and/or (iii) above is concurrently continuing, $50.00 per square foot of Dark Space or (d) with respect to clause (v) above, whether or not a Lease Sweep Period pursuant to clauses (i), (ii) and/or (iii) above is concurrently continuing, $21,816,600 ($50.00 per square foot).
The “Lease Sweep Space” means the space demised under a Lease Sweep Lease.
A “Lease Sweep Lease” is the Facebook lease or any replacement lease or leases which cover at least 75.0% of the rentable square feet demised under the Facebook lease (the “Requisite Lease Sweep Space”).
A “Lease Sweep Tenant Party” means any tenant under a Lease Sweep Lease or its direct or indirect parent company.
A “Material Termination Portion” is, with respect to any space under a Lease Sweep Lease, if the tenant under a Lease Sweep Lease cancels or terminates its Lease Sweep Lease with respect to at least 20,000 square feet of space (or, if a full floor of space is less than 20,000 square feet, a full floor of space) but less than the entirety of the space under such Lease Sweep Lease, the portion of space under the Lease Sweep Lease affected by such cancellation or termination.
Property Management. The 181 Fremont Street Property is managed by an affiliate of the borrower.
Assumption. The borrower has, at any time following the securitization of the 181 Fremont Street Whole Loan and prior to the ARD, the right to transfer the 181 Fremont Street Property (no more than twice through the term of the 181 Fremont Street Whole Loan), provided that certain conditions are satisfied, including: (i) no event of default under the 181 Fremont Street Whole Loan documents or mezzanine loan documents has occurred and is continuing, (ii) the borrower has provided the lender with 60 days’ prior written notice, (iii) the proposed transferee qualifies as a qualified transferee under the 181 Fremont Street Whole Loan documents and (iv) the lender has received rating agency confirmation that such assumption will not result in a downgrade of the respective ratings assigned to the Series WFCM 2018-C45 certificates and similar confirmations from each rating agency rating any securities backed by any of the 181 Fremont Street Companion Loans.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Barclays Bank PLC and Deutsche Bank AG, acting through its New York Branch funded $225,000,000 of mezzanine debt (the “181 Fremont Street Mezzanine Loans”). The 181 Fremont Street Mezzanine Loans consist of a $175,000,000 senior mezzanine loan and a $50,000,000 junior mezzanine loan. The senior mezzanine loan has a 4.8800% coupon and the junior mezzanine loan has a 6.5000% coupon. The 181 Fremont Street Mezzanine Loans are interest-only for the full term of the loans and are coterminous with the 181 Fremont Street Whole Loan. Including the 181 Fremont Street Mezzanine Loans, the cumulative cut-off date LTV, cumulative UW NCF DSCR and cumulative UW NOI Debt Yield are 75.2%, 1.38x and 6.2%, respectively. The mortgage lenders and the mezzanine lenders have entered into an intercreditor agreement. The 181 Fremont Street Mezzanine Loans have been or are expected to be sold to institutional investors. The rights of the lender of the 181 Fremont Street Mezzanine Loans are further described under “Description of the Mortgage Pool—Additional Indebtedness—Mezzanine Indebtedness” in the Preliminary Prospectus.
Ground Lease. None.
Condominium. The 181 Fremont Street Property is subject to a condominium regime. The 181 Fremont Street Property consists of a two-parcel condominium; with the commercial parcel owned by the borrower as collateral for the 181 Fremont Street Whole Loan. The commercial parcel consists of the five basement levels, floors 1 through 38, the bridge connecting 181 Fremont to the Transbay Terminal Rooftop Park and the roof of the 181 Fremont Street tower. The residential parcel, inclusive of the 67 luxury market rate residential units on floors 39 to 57, is not owned by the borrower and is not collateral for the 181 Fremont Street Whole Loan. The owner of the commercial parcel will have 140 votes out of 200 votes in the condominium association and the owner of the residential
| A-3-90 |
| 181 FREMONT STREET |
parcel will have 60 votes out of the 200 votes in the condominium association. See “Description of the Mortgage Pool — Mortgage Pool Characteristics — Condominium Interest” in the Preliminary Prospectus.
Terrorism Insurance. The 181 Fremont Street Whole Loan documents require that the “all risk” insurance policy required to be maintained by the borrower provide coverage for terrorism in an amount equal to the full replacement cost of the 181 Fremont Street Property, or that if the Terrorism Risk Insurance Program Reauthorization Act is no longer in effect and such policies contain an exclusion for acts of terrorism, the borrower will obtain, to the extent available, a stand-alone policy that provides the same coverage as the policies would have if such exclusion did not exist.
Earthquake Insurance. The loan documents require earthquake insurance. The property is located in Seismic Zone 4. The seismic report indicated scenario expected loss for the property is 12%.
| A-3-91 |
| No. 11 – CoolSprings Galleria | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Wells Fargo Bank, National Association | Single Asset/Portfolio: | Single Asset | ||||
| Property Type: | Retail | |||||
| Original Principal Balance(1): | $20,000,000 | Specific Property Type: | Super Regional Mall | ||||
| Cut-off Date Balance(1): | $19,950,390 | Location: | Franklin, TN | ||||
| % of Initial Pool Balance: | 3.0% | Size(3): | 640,176 SF | ||||
| Loan Purpose: | Refinance | Cut-off Date Balance Per SF(1): | $241.52 | ||||
| Borrower Name: | CoolSprings Mall, LLC | Year Built/Renovated: | 1991/2017 | ||||
| Borrower Sponsors: | CBL & Associates Limited Partnership; CBL & Associates Properties, Inc.; Teachers Insurance and Annuity Association of America; APG Asset Management US Inc. | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.8390% | Property Manager: | Self-managed | ||||
| Note Date: | April 30, 2018 | 4th Most Recent Occupancy (As of): | 97.8% (12/31/2014) | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of): | 97.2% (12/31/2015) | ||||
| Maturity Date: | May 11, 2028 | 2nd Most Recent Occupancy (As of): | 99.1% (12/31/2016) | ||||
| IO Period: | 0 months | Most Recent Occupancy (As of): | 96.8% (12/31/2017) | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of)(4)(5): | 96.2% (4/24/2018) | ||||
| Seasoning: | 2 months | ||||||
| Amortization Term (Original): | 360 months | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Amortizing Balloon | ||||||
| Interest Accrual Method: | 30/360 | 4th Most Recent NOI (As of): | $17,755,019 (12/31/2014) | ||||
| Call Protection: | L(26),GRTR 1% or YM or D(90),O(4) | 3rd Most Recent NOI (As of): | $18,016,611 (12/31/2015) | ||||
| Lockbox Type: | Hard/Springing Cash Management | 2nd Most Recent NOI (As of): | $20,300,157 (12/31/2016) | ||||
| Additional Debt(1): | Yes | Most Recent NOI (As of): | $20,678,073 (12/31/2017) | ||||
| Additional Debt Type(1): | Pari Passu | U/W Revenues(4): | $30,554,183 | ||||
| U/W Expenses: | $10,828,665 | ||||||
| U/W NOI: | $19,725,518 | ||||||
| U/W NCF: | $18,729,081 | ||||||
| Escrows and Reserves(2): | U/W NOI DSCR(1): | 2.01x | |||||
| U/W NCF DSCR(1): | 1.91x | ||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI Debt Yield(1): | 12.8% | ||
| Taxes: | $702,515 | $234,171 | NAP | U/W NCF Debt Yield(1): | 12.1% | ||
| Insurance: | $0 | Springing | NAP | As-Is Appraised Value: | $322,000,000 | ||
| Replacements Reserves: | $0 | $10,907 | 392,643 | As-Is Appraisal Valuation Date: | March 23, 2018 | ||
| General TI/LC Reserves: | $3,000,000 | $54,534 | (2) | Cut-off Date LTV Ratio(1): | 48.0% | ||
| Existing TI/LC Reserves: | $2,107,816 | $0 | NAP | LTV Ratio at Maturity(1): | 39.0% | ||
| (1) | See “The Mortgage Loan” Section. All statistical information related to balances per square foot, loan-to-value ratio, debt service coverage ratio and debt yield are based on the CoolSprings Galleria Whole Loan (as defined below). |
| (2) | See “Escrows” section. |
| (3) | The size shown represents the space that serves as collateral for the CoolSprings Galleria Whole Loan. Including non-collateral anchors, the total square footage of the CoolSprings Galleria Mall (as defined below) is 1,146,121 square feet. |
| (4) | See “Historical Occupancy” and “Operating History and Underwritten Net Cash Flow” below for discussion of various tenants included in Most Recent Occupancy and underwritten base rent. |
| (5) | The occupancy rates shown represent the portion of the CoolSprings Galleria Mall that serves as collateral for the CoolSprings Galleria Whole Loan. Including the non-collateral anchor stores, Most Recent Occupancy for the CoolSprings Galleria Mall was 97.9% as of April 24, 2018. |
The Mortgage Loan. The mortgage loan (the “CoolSprings Galleria Mortgage Loan”) is part of a whole loan (the “CoolSprings Galleria Whole Loan”) that is evidenced by four pari passu promissory notes in the aggregate original principal amount of $155,000,000. The CoolSprings Galleria Whole Loan is secured by a first priority fee mortgage encumbering a super-regional mall located in Franklin, Tennessee (the “CoolSprings Galleria Property”). The CoolSprings Galleria Whole Loan was originated on April 30, 2018 by Wells Fargo Bank, National Association. The CoolSprings Galleria Whole Loan had an original principal balance of $155,000,000, has an outstanding principal balance as of the Cut-off Date of $154,615,523 and accrues interest at an interest rate of 4.8390% per annum. The CoolSprings Galleria Whole Loan had an initial term of 120 months, has a remaining term of 118 months as of the Cut-off Date and requires payments of interest and principal based on a 30-year amortization schedule through the loan term. The CoolSprings Galleria Mortgage Loan matures on May 11, 2028.
Note A-3, which will be contributed to the WFCM 2018-C45 securitization trust, had an original principal balance of $20,000,000 and has an outstanding principal balance as of the Cut-off Date of $19,950,390 and represents a non-controlling interest in the CoolSprings Galleria Center Whole Loan. The controlling Note A-1 had an original principal balance of $75,000,000, has an outstanding principal balance as of the Cut-off Date of $74,813,963 and was contributed to the BANK 2018-BNK12 trust. The non-controlling Note A-2 had an original principal balance of $15,000,000, has an outstanding principal balance as of the Cut-off Date of
| A-3-92 |
COOLSPRINGS GALLERIA
$14,962,793 and was contributed to the BANK 2018-BNK12 trust. The non-controlling Note A-4 had an original principal balance of $45,000,000, has an outstanding principal balance as of the Cut-off Date of $44,888,378 and is expected to be contributed to one or more future securitizations. The mortgage loans evidenced by Notes A-1, A-2 and A-4 are collectively referred to herein as the “CoolSprings Galleria Companion Loans”. See “Description of the Mortgage Pool—The Whole Loans—The Non-Serviced Whole Loans” and “Pooling and Servicing Agreement” in the Preliminary Prospectus.
Note Summary
| Notes | Original Balance | Note Holder | Controlling Interest | |
| A-1 | $75,000,000 | BANK 2018-BNK12 | Yes | |
| A-2 | $15,000,000 | BANK 2018-BNK12 | No | |
| A-3 | $20,000,000 | WFCM 2018-C45 | No | |
| A-4 | $45,000,000 | Wells Fargo Bank, N.A. | No | |
| Total | $155,000,000 |
At any time after the earlier of (i) April 30, 2021 and (ii) two years from the closing date of the securitization that includes the last pari passu note of the CoolSprings Galleria Whole Loan to be securitized, the CoolSprings Galleria Borrower (as defined below) has the right to either (a) on any date before February 11, 2028, defease the CoolSprings Galleria Whole Loan in whole, but not in part, or (b) prepay the CoolSprings Galleria Whole Loan in whole, but not in part, provided that the CoolSprings Galleria Borrower pays the greater of a yield maintenance premium or a prepayment premium equal to 1.0% of the principal amount being prepaid. No prepayment premium shall apply on or after February 11, 2028. The assumed lockout period of 26 payments is based on the closing date of this transaction in July 2018.
Sources and Uses
| Sources | Uses | |||||||
| Original Whole Loan amount | $155,000,000 | 100.0% | Loan payoff | $98,015,151 | 63.2% | |||
| Return of Equity | $50,401,732 | 32.5 | ||||||
| Upfront Reserves | $5,810,331 | 3.7 | ||||||
| Closing costs | $772,787 | 0.5 | ||||||
| Total Sources | $155,000,000 | 100.0% | Total Uses | $155,000,000 | 100.0% |
The Property. The CoolSprings Galleria Property comprises 640,176 square feet of a two-level super-regional mall totaling 1,146,121 square feet (the “CoolSprings Galleria Mall”) located in Franklin, Tennessee, approximately 16 miles south of the Nashville central business district. Built in 1991 and most recently renovated in 2017, the CoolSprings Galleria Mall is anchored by Belk, Dillard’s, Macy’s, JC Penney, and Belk Men’s and Kid’s (only Belk and Belk Men’s and Kid’s serves as collateral for the CoolSprings Galleria Whole Loan). Since 2014, the CoolSprings Galleria Sponsors have spent approximately $78.6 million in renovations at the CoolSprings Galleria Property, which included the completion of (a) from 2014 to 2016, an approximately $64.6 million redevelopment of the former Sears box and parking lot into approximately 209,000 square feet of multi-tenant space (now occupied by tenants including American Girl, Ulta Beauty, Kona Grill and H&M; see property layout above); and (b) in 2017, approximately $14.0 million of renovations throughout the property, including new entrances, painting, tile flooring, restrooms, and lighting.
As of April 24, 2018, the CoolSprings Galleria Property was 96.2% occupied by 124 tenants, excluding the three non-collateral anchor stores, and 97.9% occupied including non-collateral anchors. As of December 31, 2017, the comparable sales and occupancy cost for inline tenants (less than 10,000 square feet (excluding Apple)) were approximately $438 per square foot and 14.3%, respectively, while including Apple, the comparable sales and occupancy cost for inline tenants (less than 10,000 square feet) were approximately $526 per square foot and 11.9%, respectively. Comparable in-line sales (less than 10,000 square feet and excluding Apple) have increased by approximately 11.5% since 2013, and the 2017 estimated total gross sales for the CoolSprings Galleria Mall were approximately $246.0 million ($212.9 million excluding the non-collateral anchors). In addition to the tenants listed on the “Tenant Summary” table below, notable tenants at the CoolSprings Galleria Property include Apple (2017 sales of $3,849 per square foot; 1.6% occupancy cost), American Girl (2017 sales of $679 per square foot; 7.2% occupancy cost), Sephora (2017 sales of $1,187 per square foot; 7.9% occupancy cost), The Cheesecake Factory (2017 sales of $880 per square foot; 5.9% occupancy cost) and Chick-Fil-A (2017 sales of $2,265 per square foot; 8.8% occupancy cost). The overall CoolSprings Galleria Mall contains 5,525 surface parking spaces, resulting in a parking ratio of 4.8 spaces per 1,000 square feet of rentable area; while the CoolSprings Galleria Property contains 2,528 surface parking spaces, resulting in a parking ratio of 3.9 spaces per 1,000 square feet of rentable area.
The following table presents a summary of historical comparable in-line sales and occupancy costs at the CoolSprings Galleria Property.
Historical In-Line Sales and Occupancy Cost Summary(1)
| 2013 | 2014 | 2015 | 2016 | 2017 | |
| In-Line Sales PSF | $455 | $474 | $546 | $543 | $526 |
| Occupancy Costs | 13.3% | 13.3% | 11.6% | 11.3% | 11.9% |
| In-Line Sales PSF (excluding Apple) | $393 | $403 | $465 | $462 | $438 |
| Occupancy Costs (excluding Apple) | 15.4% | 15.7% | 13.6% | 13.3% | 14.3% |
| (1) | Comparable In-line Tenant Sales PSF and Comparable In-line Tenant Occupancy Cost reflect comparable in-line tenants that are less than 10,000 square feet with at least 12 months of sales data. Sales PSF are as of December 31 unless otherwise indicated. |
| A-3-93 |
COOLSPRINGS GALLERIA
The following table presents certain information relating to the tenancy at CoolSprings Galleria Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/ S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF | Annual U/W Base Rent | % of Total Annual U/W Base Rent | Sales PSF(2) | Occupancy Cost(2) | Lease Expiration Date |
| Anchor Tenants (non-collateral) | |||||||||
| Dillard’s | BBB-/Baa3/BB+ | 207,700 | NAV | NAV | NAV | NAV | NAV | NAV | |
| Macy’s | BBB/Baa3/BBB- | 194,700 | NAV | NAV | NAV | NAV | $120 | NAV | |
| JC Penney | B+/B1/B+ | 103,545 | NAV | NAV | NAV | NAV | NAV | NAV | |
| Anchor Tenants | |||||||||
| Belk | NR/B2/B- | 132,621 | 20.7% | $6.85 | $908,619 | 5.0% | NAV | NAV | 1/31/2030(3) |
| Belk Men’s and Kid’s | NR/B2/B- | 50,458 | 7.9% | $7.50 | $378,435 | 2.1% | $111 | 8.6% | 1/31/2030(4) |
| Total Anchor Tenants | 183,079 | 28.6% | $7.03 | $1,287,054 | 7.0% | ||||
| Major Tenants | |||||||||
| Forever 21 | NR/NR/NR | 18,015 | 2.8% | $48.93 | $881,491 | 4.8% | $181 | 27.0% | 11/30/2020(5)(6) |
| H&M | NR/NR/NR | 23,644 | 3.7% | $30.30 | $716,315 | 3.9% | $244 | 12.4% | 1/31/2026(7)(8) |
| Kings Bowl | NR/NR/NR | 22,678 | 3.5% | $25.12 | $569,671 | 3.1% | $195 | 16.2% | 1/31/2026(9) |
| Victoria’s Secret | BB+/Baa1/BB+ | 12,785 | 2.0% | $42.00 | $536,970 | 2.9% | $525 | 12.3% | 1/31/2027 |
| Altar’d State(10) | NR/NR/NR | 10,197(10) | 1.6% | $48.89(10) | $498,490(10) | 2.7% | NAV | NAV | 4/30/2027(11) |
| Ulta Beauty | NR/NR/NR | 10,044 | 1.6% | $47.04 | $472,470 | 2.6% | $634 | 8.8% | 11/30/2025(12) |
| Pottery Barn | NR/NR/NR | 11,000 | 1.7% | $35.23 | $387,500 | 2.1% | $423 | 10.0% | 1/31/2026 |
| A’GACI(13) | NR/NR/NR | 12,237 | 1.9% | (13) | (13) | (13) | $113 | 8.0% | 1/31/2026(14)(15) |
| Total Major Tenants | 120,600 | 18.8% | $33.69 | $4,062,907 | 22.2% | ||||
| Other In Place Tenants | 311,947 | 48.7% | $41.40 | $12,913,904 | 70.7% | ||||
| Occupied Collateral Total | 615,626 | 96.2% | $29.67 | $18,263,865 | 100.0% | ||||
| Vacant Space | 24,550 | 3.8% | |||||||
| Collateral Total | 640,176 | 100.0% | |||||||
| (1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
| (2) | Sales PSF and Occupancy Costs are for the trailing 12 months as of December 31, 2017 |
| (3) | Belk has three, 5-year extension options with 12-months’ notice. |
| (4) | Belk Men’s and Kid’s has three, 5-year extension options with 180-days’ notice. |
| (5) | Forever 21 has one, 5-year extension option with 180-days’ notice. |
| (6) | Forever 21 previously had the right to terminate its lease if gross sales were less than $4,000,000 for the trailing 12-month period ending December 1, 2017. Forever 21 did not exercise this option, and it has since expired. |
| (7) | H&M has three, 5-year extension options with 180-days’ notice. |
| (8) | H&M has the right to terminate its lease with 180 days’ notice if gross sales are less than $4,000,000 for the trailing 12-month period ending May 1, 2020. |
| (9) | Kings Bowl has two, 5-year extension options with 12-months’ notice. |
| (10) | Altar’d State currently occupies a 5,952 square feet space (0.9% of NRA), has executed a lease to expand into a 10,197 square feet space (1.6% of NRA) and is anticipated to take occupancy and begin paying rent on the new space in August 2018. |
| (11) | Altar’d State has the right to terminate its lease 180 days’ notice if gross sales are less than $2,400,000 for the trailing 12-month period ending April 30, 2022. |
| (12) | Ulta Beauty has two, 5-year extension options with 210-days’ notice. |
| (13) | A’GACI is currently in bankruptcy and expected to shift from its current annual rent of $416,058 ($34.00 per square foot) to a percent-in-lieu rental rate equal to 8.0% of annual gross sales. The tenant was underwritten to $111,086 ($9.08 per square foot), which was included in underwritten Other Income and equates to 8.0% of its 2017 gross sales. |
| (14) | A’GACI has one, 5-year extension option with 180-days’ notice. |
| (15) | A’GACI has the right to terminate its lease with 60 days’ notice if gross sales are less than $3,000,000 for the trailing 12-month period ending April 30, 2020. |
| A-3-94 |
COOLSPRINGS GALLERIA
The following table presents certain information relating to the lease rollover schedule at CoolSprings Galleria Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF(3) |
| MTM | 2 | 2,810 | 0.4% | 2,810 | 0.4% | $203,708 | 1.1% | $72.49 |
| 2018 | 9 | 19,535 | 3.1% | 22,345 | 3.5% | $212,420 | 1.2% | $10.87 |
| 2019 | 13 | 19,035 | 3.0% | 41,380 | 6.5% | $941,392 | 5.2% | $49.46 |
| 2020 | 18 | 57,954 | 9.1% | 99,334 | 15.5% | $2,448,904 | 13.4% | $42.26 |
| 2021 | 8 | 23,520 | 3.7% | 122,854 | 19.2% | $1,000,572 | 5.5% | $42.54 |
| 2022 | 9 | 28,184 | 4.4% | 151,038 | 23.6% | $1,450,282 | 7.9% | $51.46 |
| 2023 | 16 | 36,495 | 5.7% | 187,533 | 29.3% | $1,449,815 | 7.9% | $39.73 |
| 2024 | 6 | 15,265 | 2.4% | 202,798 | 31.7% | $778,233 | 4.3% | $50.98 |
| 2025 | 8 | 28,551 | 4.5% | 231,349 | 36.1% | $1,270,356 | 7.0% | $44.49 |
| 2026 | 19 | 128,724 | 20.1% | 360,073 | 56.2% | $4,297,752 | 23.5% | $33.39 |
| 2027 | 10 | 50,887 | 7.9% | 410,960 | 64.2% | $2,177,247 | 11.9% | $42.79 |
| 2028 | 2 | 9,288 | 1.5% | 420,248 | 65.6% | $313,080 | 1.7% | $33.71 |
| Thereafter | 4 | 195,378 | 30.5% | 615,626 | 96.2% | $1,720,104 | 9.4% | $8.80 |
| Vacant | 0 | 24,550 | 3.8% | 640,176 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 124 | 640,176 | 100.0% | $18,263,865 | 100.0% | $29.67 |
| (1) | Information obtained from the underwritten rent roll. |
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the related lease and are not considered in the rollover schedule. |
| (3) | Weighted Average UW Rent PSF Rolling excludes vacant space. |
The following table presents historical occupancy percentages at CoolSprings Galleria Property:
Historical Occupancy
12/31/2013(1) | 12/31/2014(1) | 12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 4/24/2018(2) |
| 99.7 % | 97.8% | 97.2% | 99.1% | 96.8 | 96.2% |
| (1) | Information obtained from the borrower. |
| (2) | Most Recent Occupancy includes Altar’d State, which currently occupies a 5,952 square feet space (0.9% of NRA), has executed a lease to expand into a 10,197 square feet space (1.6% of NRA) and is expected to take occupancy and begin paying rent on the new space in August 2018 (occupancy reflects the tenant’s expansion space). In addition, Most Recent Occupancy includes three tenants totaling 1.6% of NRA that have executed new leases, but are not yet in occupancy or paying rent: California Pizza Kitchen (4,504 square feet, 0.7% of NRA, expected to take occupancy and begin paying rent in August 2018); Kristals Cosmetics (802 square feet, 0.1% of NRA, expected to take occupancy and begin paying rent in June 2018); Look Dental and Optical (4,784 square feet, 0.7% of NRA, expected to take occupancy and begin paying rent in October 2018). In addition, Most Recent Occupancy includes A’GACI (12,237 square feet, 1.9% of NRA) that has filed for bankruptcy but is currently in-place and is expected to shift from its current annual rent of $416,058 ($34.00 per square foot) to a percent-in-lieu rental rate equal to 8.0% of annual gross sales. The tenant was underwritten to $111,086 ($9.08 per square foot), which is included in underwritten other income and equates to 8.0% of its 2017 gross sales. |
| A-3-95 |
COOLSPRINGS GALLERIA
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 CoolSprings Galleria Property:
Cash Flow Analysis
| 2014 | 2015(1) | 2016(1) | 2017 | U/W | % of U/W Effective Gross Income | U/W $ per SF | ||||||||||
| Base Rent | $14,113,937 | $14,547,535 | $17,010,323 | $17,995,515 | $18,263,865(2) | 59.8 | % | $28.53 | ||||||||
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | 1,398,448 | 4.6 | 2.18 | |||||||||
| Total Reimbursables | 8,647,286 | 8,604,749 | 9,340,443 | 9,585,193 | 9,203,936 | 30.1 | 14.38 | |||||||||
| Percentage Rent | 701,251 | 872,072 | 905,549 | 899,539 | 937,321 | 3.1 | 1.46 | |||||||||
| Other Income | 2,730,985 | 3,064,750 | 3,220,791 | 2,710,540 | 2,149,061 | 7.0 | 3.36 | |||||||||
| Less Vacancy & Credit Loss | 0 | 0 | 0 | 0 | ($1,398,448)(3) | (4.6 | ) | (2.18) | ||||||||
| Effective Gross Income | $26,193,459 | $27,089,106 | $30,477,106 | $31,190,786 | $30,554,183 | 100.0 | % | $47.73 | ||||||||
| Total Operating Expenses | $8,438,440 | $9,072,495 | $10,176,949 | $10,512,713 | $10,828,665 | 35.4 | % | $16.92 | ||||||||
| Net Operating Income | $17,755,019 | $18,016,611 | $20,300,157 | $20,678,073 | $19,725,518 | 64.6 | % | $30.81 | ||||||||
| Capital Expenditures | 0 | 0 | 0 | 0 | 128,035 | 0.4 | 0.20 | |||||||||
| TI/LC | 0 | 0 | 0 | 0 | 868,402 | 2.8 | 1.36 | |||||||||
| Net Cash Flow | $17,755,019 | $18,016,611 | $20,300,157 | $20,678,073 | $18,729,081 | 61.3 | % | $29.26 | ||||||||
| NOI DSCR(4) | 1.81x | 1.84x | 2.07x | 2.11x | 2.01x | |||||||||||
| NCF DSCR(4) | 1.81x | 1.84x | 2.07x | 2.11x | 1.91x | |||||||||||
| NOI DY(4) | 11.5% | 11.7% | 13.1% | 13.4% | 12.8% | |||||||||||
| NCF DY(4) | 11.5% | 11.7% | 13.1% | 13.4% | 12.1% | |||||||||||
| (1) | The increase in Base Rent and Net Operating Income from 2015 to 2016 was driven partly by the completion of the Sears renovation into multi-tenant space (see “The Property” section above), including the tenants Kings Bowl, H&M and Ulta Beauty, which account for 8.8% of NRA and 9.6% of underwritten base rent. |
| (2) | Underwritten Base Rent includes Altar’d State, which currently occupies a 5,952 square feet space, has executed a lease to expand into a 10,197 square feet space and is expected to take occupancy and begin paying rent on the new space in August 2018 (tenant was underwritten to its expansion space, reflecting 2.7% of underwritten base rent). In addition, Underwritten Base Rent includes three tenants totaling 2.3% of underwritten base rent that have executed new leases, but are not yet in occupancy or paying rent: California Pizza Kitchen (4,504 square feet, 1.2% of underwritten base rent, expected to take occupancy and begin paying rent in August 2018); Kristals Cosmetics (802 square feet, 0.6% of underwritten base rent, expected to take occupancy and begin paying rent in June 2018); Look Dental and Optical (4,784 square feet, 0.5% of underwritten base rent, expected to take occupancy and begin paying rent in October 2018). In addition, Underwritten Base Rent includes A’GACI (12,237 square feet) that has filed for bankruptcy but is currently in-place and paying rent and is expected to shift from its current annual rent of $416,058 ($34.00 per square foot) to a percent-in-lieu rental rate equal to 8.0% of annual gross sales. The tenant was underwritten to $111,086 ($9.08 per square foot), which is included in underwritten Other Income and equates to 8.0% of its 2017 gross sales. |
| (3) | The underwritten economic vacancy is 7.1%. The CoolSprings Galleria Property was 96.2% physically occupied as of April 24, 2018. |
| (4) | The debt service coverage ratios and debt yields are based on the CoolSprings Galleria Whole Loan. |
Appraisal. As of the appraisal valuation date of March 23, 2018, the CoolSprings Galleria Property had an “as-is” appraised value of $322,000,000.
Environmental Matters. According to a Phase I environmental site assessment dated March 21, 2018, there was no evidence of any recognized environmental conditions at the CoolSprings Galleria Property.
Market Overview and Competition. The CoolSprings Galleria Property is located in Franklin, Tennessee, within Williamson County in the Nashville Metropolitan Statistical Area (“MSA”). The CoolSprings Galleria Property is situated adjacent to Interstate 65, which connects the Nashville MSA with Birmingham, Alabama to the south and Louisville, Kentucky to the north, and has an average daily traffic count of approximately 112,000 vehicles near the CoolSprings Galleria Property. Nashville serves as the state’s capital, and is a major hub for the healthcare, music, publishing, banking and transportation industries. The CoolSprings Galleria Property benefits from its access to 18 colleges and universities within the Nashville region, including Vanderbilt University (total 2017 enrollment of 12,592; approximately 14.6 miles north of the CoolSprings Galleria Property) and Middle Tennessee State University (total 2017 enrollment of 19,693; approximately 31.5 miles southeast of the CoolSprings Galleria Property).
According to the appraisal, the estimated 2017 population within a five-, ten- and fifteen- mile radius of the CoolSprings Galleria Property was 97,298, 278,884 and 657,650, respectively, and the estimated 2017 average household income within the same radii was $158,041, $137,906 and $103,580, respectively. The area has experienced considerable population growth, with population increases across the same radii of 45.0%, 50.9% and 42.7%, respectively, from 2000 to 2017. The average household income in the primary trade area in 2017 was approximately $137,906, which compares to the Nashville MSA and state averages of $81,499 and $67,809, respectively. According to a news publication, as of 2017, Williamson County was the seventh richest county in America, with a median household income of approximately $104,367. Williamson County also benefits from the lowest county tax in the Nashville region, no state income tax, and a highly educated population with over half of the 489,250 residents being college educated.
According to the appraisal, the CoolSprings Galleria Property is located within the South/Southwest Nashville retail submarket of the Nashville retail market. As of the fourth quarter of 2017, the submarket reported total inventory of approximately 6.7 million square feet (33.3% of the broader Nashville retail market inventory) with a vacancy rate of 4.2%, as compared to the Nashville retail market, which reported total inventory of approximately 20.2 million square feet with a vacancy rate of 8.3%. In addition, there is approximately 10.9 million square feet of office space within a five-mile radius of the CoolSprings Galleria Property. The appraiser concluded to the following market rents for the CoolSprings Galleria Property: $32.50 per square foot for spaces from 5,000 to 10,000 square feet; $35.00 per square foot for spaces from 2,500 to 4,999 square feet; $45.00 per square foot for spaces from 1,000 to 2,499 per square foot; $85.00 per square foot for spaces less than 1,000 square feet; and $95.00 per square foot for jewelry tenants.
| A-3-96 |
COOLSPRINGS GALLERIA
The following table presents certain information relating to comparable properties the CoolSprings Galleria Property:
Comparable Properties(1)
CoolSprings Galleria (Subject) | The Mall at Green Hills | The Avenue Murfreesboro | Stones River Town Centre | |
| Location | Franklin, TN | Nashville, TN | Murfreesboro, TN | Murfreesboro, TN |
| Distance from Subject | -- | 10.3 miles | 21.7 miles | 23.2 miles |
| Property Type | Regional Center | Regional Center | Lifestyle Center | Super-Regional Center |
| Year Built/Renovated | 1991/2017 | 1956/2005-2011 | 2007 | 1992/2008 |
| Anchors | Belk, Belk Men’s and Kid’s, Dillards, JC Penney, Macy’s | Dillard’s, Macy’s, Nordstrom | Belk, Dick’s, Best Buy, Haverty’s, Barnes & Noble, Bed Bath & Beyond, Michael’s, Off Broadway Shoes, Old Navy, Cost Plus | Dillard’s, JC Penney, Sears, AMC Theatre |
| Total GLA | 1,146,121 SF(2) | 865,428 SF | 803,730 SF | 613,975 SF |
| Total Occupancy | 97.9%(2) | 94.0% | 90.0% | 77.0% |
| Comparable In-Line Sales PSF(3) | $526 | $675 | NAP | $375 |
| (1) | Information obtained from the appraisal. |
| (2) | The size and occupancy rate shown represent the entire CoolSprings Galleria Mall, including non-collateral anchor spaces. Excluding non-collateral anchor spaces, the CoolSprings Galleria Property contains 640,176 square feet with a 96.2% occupancy rate as of April 24, 2018. |
| (3) | Sales shown on the table are inclusive of Apple for the CoolSprings Galleria Property and The Mall at Green Hills. Excluding Apple, the CoolSprings Galleria Property reported in-line sales of $438 per square feet as of year-end 2017. |
The Borrower. The borrower is CoolSprings Mall, LLC (the “CoolSprings Galleria Borrower”), a single-purpose Delaware limited liability company with two independent directors. The CoolSprings Galleria Borrower is 100.0% directly owned by CBL/T-C, LLC, which is indirectly 50% owned by CBL & Associates Limited Partnership and CBL & Associates Properties, Inc. (collectively, “CBL”) and directly 50% owned by T-C Midwest Retail LLC, which is indirectly 51% owned by Teachers Insurance and Annuity Association of America (“TIAA”) and indirectly 49% owned by APG Asset Management US Inc. (“APG”). Legal counsel to the CoolSprings Galleria Borrower delivered a non-consolidation opinion in connection with the origination of the CoolSprings Galleria Whole Loan, and CBL/T-C, LLC is the guarantor of certain nonrecourse carveouts under the CoolSprings Galleria Whole Loan.
The Borrower Sponsors. The borrower sponsors are CBL, TIAA and APG (collectively, the “CoolSprings Galleria Sponsors”). CBL is a self-managed, self-administered, real estate investment trust in the United States with ownership or management interests in 119 properties including 63 malls, outlet centers, office buildings and associated centers. As of March 2018, CBL’s properties were located in 27 states, primarily in the southeastern and mid-western United States.
TIAA is a Fortune 100 financial services organization that serves over 5 million active and retired employees participating at more than 15,000 institutions. As of December 2017, TIAA had approximately $1 trillion in combined assets under management and offices in 19 countries.
APG Group NV, the parent company of APG, is a financial services provider in the collective pensions market that offers consultancy, asset management, administration and communication support. As of December 2017, APG serviced approximately 25,000 employers, administering pensions for one in four people in the Netherlands (approximately 4.5 million participants), and managed approximately €470 billion in pension assets.
Escrows. The loan documents provide for upfront reserves of $702,515 for real estate taxes, $3,000,000 for general tenant improvements and leasing commissions (“TI/LC”), and $2,107,816 for existing TI/LC related to AERIE ($143,160), Altar’d State ($671,750), California Pizza Kitchen ($1,075,000), Club Champion ($112,906), and Look Dental and Optical ($105,000). The loan documents also provide for ongoing monthly reserves of $234,171 for real estate taxes, $10,907 for replacement reserves (subject to a cap of $392,643 if no event of default has occurred or is continuing) and $54,534 for general TI/LC (subject to the Leasing Reserve Cap Amount (as defined below)). The CoolSprings Galleria Borrower has the right to replace the initial $3,000,000 TI/LC reserve deposit with a letter of credit, which may be reduced quarterly (provided no event of default exists) to an amount equal to the initial TI/LC reserve less aggregate disbursements from such reserve.
The loan documents do not require ongoing monthly escrows for insurance premiums as long as (i) no event of default has occurred and is continuing; (ii) the borrower provides the lender with evidence that the CoolSprings Galleria Property’s insurance coverage is included in a blanket policy and such policy is in full force and effect; and (iii) the borrower provides the lender with evidence of renewals and paid receipts for the applicable premiums.
“Leasing Reserve Cap Amount” means an amount equal to the greater of (i) $2,500,000 and (ii) the positive difference (if any) equal to (A) $5,500,000 minus (B) the aggregate amount of all disbursements of general TI/LC funds made to the CoolSprings Galleria Borrower.
| A-3-97 |
COOLSPRINGS GALLERIA
Lockbox and Cash Management. The CoolSprings Galleria Whole Loan is structured with a hard lockbox and springing cash management. The CoolSprings Galleria Borrower is required to direct tenants to pay rent directly into a lender-controlled lockbox account and all cash revenues relating to the CoolSprings Galleria Property and all other money received by the CoolSprings Galleria Borrower or the property manager are required to be deposited into such lockbox account or cash management account within one business day. Prior to the occurrence of a Trigger Event Period (as defined below), all funds are required to be distributed to the CoolSprings Galleria Borrower. During a Trigger Event Period, the CoolSprings Galleria Borrower will be required to establish a lender-controlled cash management account.
During a Trigger Event Period, all excess funds are required to be swept to an excess cash flow subaccount controlled by the lender; provided, however, that during a Trigger Event Period caused solely by a Single Dark Anchor Trigger Event Period (as defined below), only 50.0% of excess cash flow is required to be swept to an excess cash flow subaccount controlled by the lender (subject to a cap of an amount equal to $10,000,000 minus the amount of excess cash flow disbursed to the CoolSprings Galleria Borrower during the then-outstanding Single Dark Anchor Trigger Event Period).
A “Trigger Event Period” will commence upon the earlier of the following:
| (i) | the occurrence of an event of default; |
| (ii) | the net operating income debt yield being less than or equal to 9.0% at the end of any calendar quarter; |
| (iii) | the occurrence of a Single Dark Anchor Trigger Event Period; or |
| (iv) | the occurrence of a Multiple Dark Anchor Trigger Event Period (as defined below). |
A Trigger Event Period will end upon the occurrence of the following:
| ● | with regard to clause (i), the cure of such event of default; |
| ● | with regard to clause (ii), the net operating income debt yield being greater than 9.0% for two consecutive calendar quarters; |
| ● | with regard to clause (iii), the occurrence of a Single Dark Anchor Trigger Event Period Cure (as defined below); or |
| ● | with regard to clause (iv), the occurrence of a Multiple Dark Anchor Trigger Event Period Cure (as defined below). |
A “Single Dark Anchor Trigger Event Period” will commence upon the date on which there is one (and only one) Dark Anchor (as defined below), provided that, if Belk Men’s and Kid’s is the only Dark Anchor, no Single Dark Anchor Trigger Event Period will be deemed to exist.
A “Single Dark Anchor Trigger Event Period Cure” will occur upon the earlier of (i) the date on which there are no Dark Anchors and (ii) the date on which (A) at least 24 months have passed since the applicable Dark Anchor ceased operations (and such Dark Anchor has not re-opened) and (B) the Replacement Anchor Financial Criteria (as defined below) have been satisfied.
A “Multiple Dark Anchor Trigger Event Period” will commence upon the date on which there are two or more Dark Anchors; provided that Belk Men’s and Kid’s will not be deemed to be a Dark Anchor unless the failure of Belk Men’s and Kid’s to be open and operating in its space (together with the failure of any other Dark Anchor to be open and operating in its space) would permit tenants under then-existing leases to terminate such leases and/or reduce the rent payable under such leases, and such potential termination and/or rent reduction would reasonably be expected to result in the loss of at least $1,000,000 in gross rent.
A “Multiple Dark Anchor Trigger Ever Period Cure” will occur upon the date on which there are fewer than two Dark Anchors.
“Dark Anchor” means an Anchor (as defined below) that has ceased operations for a period of more than 30 days. An Anchor will no longer be considered to be a Dark Anchor if (A) a replacement anchor that satisfies the Replacement Anchor Financial Criteria (as determined on the date that is 24 months following the date upon which such replacement anchor is open and operating) (1) is in actual physical possession of its space and open for business and (2) only for space related to an Actual Anchor, executes a replacement lease acceptable to lender and has commenced paying unabated rent (or any such rent has been reserved), as evidenced by an estoppel reasonably acceptable to lender; or (B) the formerly Dark Anchor re-opens for business and is operating for 30 consecutive days, as evidenced by an estoppel reasonably acceptable to lender.
An “Anchor” means, (i) Belk and/or Belk Men’s and Kid’s (each an “Actual Anchor”) or (ii) Macy’s, Dillard’s and/or J.C. Penney (each a “Shadow Anchor”).
“Replacement Anchor Financial Criteria” means each of the following:
| (i) | no Trigger Event Period (other than the applicable Single Dark Anchor Trigger Event Period or Multiple Dark Anchor Trigger Event Period) and/or event of default has occurred and is outstanding; |
| (ii) | the net operating income debt yield (with such calculation being based on the original balance of the CoolSprings Galleria Whole Loan) as of the date of determination is greater than 12.45%; |
| (iii) | average in-line sales at the CoolSprings Galleria Property (exclusive of Apple) are greater than or equal to average in-line sales at the CoolSprings Galleria Property (exclusive of Apple) as of origination of the CoolSprings Galleria Whole Loan; and |
| (iv) | replacement of the Dark Anchor with such proposed replacement anchor (and/or the failure of the Dark Anchor to be open and operating in the relevant dark space, as applicable) is permitted pursuant to the terms of each reciprocal easement agreement and/or lease without reduction of assessments, rent, other amounts or other obligations thereunder (including, without limitation, due to a termination of such reciprocal easement agreement and/or lease), or materially increase any obligation, or reduce any right of the CoolSprings Galleria Borrower thereunder. |
| A-3-98 |
COOLSPRINGS GALLERIA
Property Management. The CoolSprings Galleria Property is managed by an affiliate of the borrower.
Assumption. Following the date which is 12 months after origination of the CoolSprings Galleria Whole Loan, provided that certain conditions are satisfied as outlined in the loan documents, the CoolSprings Galleria Borrower has the right to transfer the CoolSprings Galleria Property to a transferee that (i) has sponsorship that satisfies the Ownership Net Worth Criteria (as defined below) and (ii) either (A) is an experienced owner and/or operator of retail shopping mall properties in similar submarkets to the CoolSprings Galleria Property and satisfies the Ownership Experience Criteria (as defined below) or (B) will retain a qualified manager that is an experienced owner and/or operator of retail shopping mall properties in similar submarkets to the CoolSprings Galleria Property and satisfies the Ownership Experience Criteria.
“Ownership Net Worth Criteria” means that such person or entity has (i) total assets of at least $1 billion and (ii) net worth of at least $500 million as calculated in accordance with generally accepted accounting principles; provided that if such entity is a publicly traded entity which has common stock listed on the New York Stock Exchange or another nationally recognized exchange, then such entity’s net worth will be determined based on the lesser of its (x) then current market capitalization based solely on its common stock (i.e., exclusive of any preferred stock outstanding) and (y) shareholder’s equity value.
“Ownership Experience Criteria” means that such person or entity (i) has at least 10 years’ experience owning and/or operating properties comparable to the CoolSprings Galleria Property in major metropolitan areas, (ii) is regularly engaged in the business of owning and/or operating properties comparable to the CoolSprings Galleria Property in major metropolitan areas and (iii) owns and/or operates, together with such person or entity’s affiliates, as of the applicable date of determination, at least 12 super regional malls (of at least 500,000 square feet each) containing comparable retail space totaling at least 10 million square feet in the aggregate.
Partial Release. Not permitted.
Real Estate Substitution. Not permitted.
Subordinate and Mezzanine Indebtedness. Not permitted.
Ground Lease. None.
Terrorism Insurance. The CoolSprings Galleria Whole Loan documents require that the “all risk” insurance policy required to be maintained by the CoolSprings Galleria Borrower provide coverage for terrorism in an amount equal to the full replacement cost of the CoolSprings Galleria Property. The CoolSprings Galleria Whole Loan documents also require business interruption insurance covering no less than the 18 month period following the occurrence of a casualty event, together with a six month extended period of indemnity.
| A-3-99 |
| No. 12 – Pueblo MHC Portfolio | ||||||||
| Loan Information | Property Information | |||||||
| Mortgage Loan Seller: | Rialto Mortgage Finance, LLC | Single Asset/Portfolio: | Portfolio | |||||
| Property Type: | Manufactured Housing Community | |||||||
| Original Principal Balance: | $18,400,000 | Specific Property Type: | Manufactured Housing Community | |||||
| Cut-off Date Principal Balance: | $18,400,000 | Location: | Pueblo, Colorado | |||||
| % of Initial Pool Balance: | 2.8% | Size: | 697 Pads | |||||
| Loan Purpose: | Refinance | Cut-off Date Principal
Balance Per Pad:
| $26,399 | |||||
| Borrower Names(1): | Various | Year Built/Renovated(3): | Various - See Table | |||||
| Borrower Sponsor: | Ben Braband; Geoff Rosenhain | Title Vesting: | Fee | |||||
| Mortgage Rate: | 5.3200% | Property Manager: | Self-managed | |||||
| 4th Most Recent Occupancy (As of): | NAV | |||||||
| Note Date: | May 9, 2018 | 3rd Most Recent Occupancy (As of): | 71.2% (12/31/2016) | |||||
| Anticipated Repayment Date: | NAP | 2nd Most Recent Occupancy (As of): | 69.7.% (12/31/2017) | |||||
| Maturity Date: | May 6, 2028 | Most Recent Occupancy (As of): | 71.2% (TTM 2/28/2018) | |||||
| IO Period: | 24 months | Current Occupancy (As of): | 71.2% (4/6/2018) | |||||
| Loan Term (Original): | 120 months | |||||||
| Seasoning: | 2 months | Underwriting and Financial Information: | ||||||
| Amortization Term (Original): | 360 months | 4th Most Recent NOI (As of): | NAV | |||||
| Loan Amortization Type: | Interest-only, Amortizing Balloon | 3rd Most Recent NOI (As of): | $1,671,993 (12/31/2016) | |||||
| Interest Accrual Method: | Actual/360 | 2nd Most Recent NOI (As of): | $1,683,125 (12/31/2017) | |||||
| Call Protection(2): | L(26),D(90),O(4) | Most Recent NOI (As of): | $1,701,269 (TTM 2/28/2018) | |||||
| Lockbox Type: | Springing | |||||||
| Additional Debt: | None | U/W Revenues: | $2,746,743 | |||||
| Additional Debt Type: | NAP | U/W Expenses: | $958,197 | |||||
| U/W NOI: | $1,788,546 | |||||||
| U/W NCF: | $1,753,696 | |||||||
| U/W NOI DSCR: | 1.46x | |||||||
| Escrows and Reserves: | U/W NCF DSCR: | 1.43x | ||||||
| U/W NOI Debt Yield: | 9.7% | |||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF Debt Yield: | 9.5% | |||
| Taxes | $0 | $3,226 | NAP | As-Is Appraised Value: | $31,950,000 | |||
| Insurance | $34,346 | $4,673 | NAP | As-Is Appraisal Valuation Date: | March 30, 2018 | |||
| Replacement Reserves | $0 | $2,904 | NAP | Cut-off Date LTV Ratio: | 57.6% | |||
| Home Purchase Reserve | $600,000 | $0 | NAP | LTV Ratio at Maturity or ARD: | 50.2% | |||
| Titling Reserve | $13,965 | $0 | NAP | |||||
| (1) | The borrowers are Sunset Country MHP LLC, Meadowbrook MHP LLC, Oasis MHP, LLC and Rapid City Financial LLC. Each of the borrowers is a Colorado limited liability company and single purpose entity with one independent director. Ben Braband and Geoff Rosenhain are the guarantors, on a joint and several basis, of certain non-recourse carveouts under the Pueblo MHC Portfolio Mortgage Loan. |
| (2) | Following the lockout period and prior to February 6, 2028, the borrowers are permitted to obtain the release of one or more individual properties in connection with a partial defeasance, subject to the satisfaction of certain conditions, including, among other things, (i) partial defeasance of 125.0% of the released property’s original allocated loan balance; (ii) the amortizing debt service coverage ratio (based upon the trailing 12-month period immediately preceding the date of such determination) with respect to the remaining properties is no less than the greater of (a) 1.43x and (b) the amortizing debt service coverage ratio immediately prior to the release; (iii) the loan to value ratio with respect to the remaining properties is no greater than the lesser of (a) 57.8%, and (b) the loan to value ratio immediately prior to the release; and (v) the occupancy of the portfolio of remaining properties is at least 80% occupancy. |
| (3) | See “Property Information” table. |
The Pueblo MHC Portfolio Mortgage Loan is evidenced by a single promissory note that is secured by a first mortgage encumbering three manufactured housing community properties located in Pueblo, Colorado (the “Pueblo MHC Portfolio Properties”). The Pueblo MHC Portfolio Properties consist of three manufactured housing communities containing 697 pads all located in Pueblo, Colorado. The Pueblo MHC Portfolio Mortgage Loan also includes 226 park-owned homes (also collateral for the Pueblo MHC Portfolio Mortgage Loan) across the Pueblo MHC Portfolio Properties, which are owned by the co-borrower, Rapid City Financial, LLC. The park-owned homes were manufactured between 1970 and 2013. With respect to the park-owned homes, each tenant is required to sign a separate lease for the pad and a separate lease for the related park-owned home. The tenants at 109 of the 226 park-owned homes have purchase options with the co-borrower, with terms that vary based on the length and history of the contract. The Pueblo MHC Portfolio Mortgage Loan documents permit the release of any park-owned home that is subject to a purchase option from the lien of the collateral in the event the related tenant satisfies the conditions in the purchase option contract and the borrower satisfies certain conditions in the loan documents. With respect to the remaining park-owned homes, 113 are under home rental agreements, without any purchase options, two are under notes and two are vacant. In addition to the permitted release of the park-owned homes that are subject to a purchase option contract, the other park-owned homes may be released as collateral for the Pueblo MHC Portfolio Mortgage Loan upon a sale of the park-owned homes subject to terms and conditions set forth in the loan documents.
| A-3-100 |
PUEBLO MHC PORTFOLIO
Sunset Country MHC
The Sunset Country MHC property is a 198-pad, all-age manufactured housing community developed in 1970 and is situated on a 28.6-acre site. The Sunset Country property includes 97 park-owned homes. Amenities include a clubhouse, pool, and RV storage. Since acquisition, a total of approximately $2.1 million has been invested into the Sunset Country MHC property for the purchase of new homes, home restoration, road repairs, sewage systems, landscaping, sub-meter installation and clubhouse & amenities.
Oakwood Estates MHC
The Oakwood Estates MHC property is a 339-pad, all-age manufactured housing community developed in 1974 and is situated on a 61.1-acre site. The Oakwood Estates MHC Property includes 101 park-owned homes. Amenities include a clubhouse, pool, basketball court, playground, exercise facilities and RV storage. Since acquisition, approximately $1.5 million has been invested into the Oakwood Estates MHC property for the purchase of new homes, home restoration, sewage systems, clubhouse & amenities, transaction & soft costs, sub-meter installation, sidewalks & curbing, and signage & lighting.
Oasis MHC
The Oasis MHC property is a 160-pad, 55+ manufactured housing community developed in 1970 and is situated on a 20.0-acre site. The Oasis MHC property includes 28 park-owned homes. Amenities include a clubhouse. Since acquisition, a total of $539,000 has been invested into the Oasis MHC property for the purchase of new homes, home restoration, road repairs, sub-meter installation, and landscaping.
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $18,400,000 | 100.0% | Loan payoff | $16,236,586 | 88.2% | |||
| Closing Costs | 397,190 | 2.2 | ||||||
| Reserves | 648,311 | 3.5 | ||||||
| Return of Equity | 1,117,913 | 6.1 | ||||||
| Total Sources | $18,400,000 | 100.0% | Total Uses | $18,400,000 | 100.0% |
Property Information
| Property Name | City, State | Allocated Cut-off Date Balance | % of Portfolio Cut-off Date Balance | Occupancy | Year Built/ Renovated | Pads | As-Is Appraised Value | Allocated Cut-off Date LTV |
| Sunset Country MHC | Pueblo, CO | $6,700,000 | 36.4% | 81.3% | 1970/NAP | 198 | $10,200,000 | 65.7% |
| Oakwood Estates MHC | Pueblo, CO | $6,000,000 | 32.6% | 57.2% | 1974/NAP | 339 | $13,300,000 | 45.1% |
| Oasis MHC | Pueblo, CO | $5,700,000 | 31.0% | 88.1% | 1970/NAP | 160 | $8,450,000 | 67.5% |
| Total/Weighted Average | $18,400,000 | 100.0% | 71.2% | 697 | $31,950,000 | 57.6% |
The following table presents historical occupancy percentages at the Pueblo MHC Portfolio Properties:
Historical Occupancy
12/31/2016(1) | 12/31/2017(1) | 4/6/2018(2) |
| 71.2% | 69.7% | 71.2% |
| (1) | Information obtained from the borrower. |
| (2) | Information obtained from the underwritten rent roll. |
| A-3-101 |
PUEBLO MHC PORTFOLIO
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and Underwritten Net Cash Flow at the Pueblo MHC Portfolio Properties:
Cash Flow Analysis
| 2016 | 2017 | TTM 2/28/2018 | U/W | % of U/W Effective Income | U/W $ per Pad | |||||||||||||
| Base Rent(1) | $2,201,583 | $2,180,392 | $2,197,562 | $2,295,840 | 83.6 | % | $3,294 | |||||||||||
| Grossed Up Vacant Space | 0 | 0 | 0 | 916,800 | 33.4 | 1,315 | ||||||||||||
| Concessions | (4,736 | ) | (900 | ) | (700 | ) | (700 | ) | (0.0 | ) | (1 | ) | ||||||
| Other Income(2) | 412,408 | 454,784 | 451,603 | 451,603 | 16.4 | 648 | ||||||||||||
| Less Vacancy & Credit Loss | 0 | 0 | 0 | (916,800 | )(3) | (33.4 | ) | (1,315 | ) | |||||||||
| Effective Gross Income | $2,609,255 | $2,634,276 | $2,648,465 | $2,746,743 | 100.0 | % | $3,941 | |||||||||||
| Total Operating Expenses | $937,262 | $951,151 | $947,196 | $958,197 | 34.9 | % | $1,375 | |||||||||||
| Net Operating Income | $1,671,993 | $1,683,125 | $1,701,269 | $1,788,546 | 65.1 | % | $2,566 | |||||||||||
| Capital Expenditures | 0 | 0 | 0 | 34,850 | 1.3 | 50 | ||||||||||||
| Net Cash Flow | $1,671,993 | $1,683,125 | $1,701,269 | $1,753,696 | 63.8 | % | $2,516 | |||||||||||
| NOI DSCR | 1.36x | 1.37x | 1.38x | 1.46x | ||||||||||||||
| NCF DSCR | 1.36x | 1.37x | 1.38x | 1.43x | ||||||||||||||
| NOI DY | 9.1% | 9.1% | 9.2% | 9.7% | ||||||||||||||
| NCF DY | 9.1% | 9.1% | 9.2% | 9.5% | ||||||||||||||
| (1) | Base Rent includes income from park owned homes. |
| (2) | Other Income includes RUBS income, application fees, late fees, pet fees and miscellaneous income. |
| (3) | The underwritten economic vacancy is 28.6%. The Pueblo MHC Portfolio Properties were 71.2% physically occupied as of April 6, 2018. |
| A-3-102 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
| A-3-103 |
| No. 13 – Roseville Corporate Center | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Wells Fargo Bank, National Association | Single Asset/Portfolio: | Single Asset | ||||
| Property Type: | Office | ||||||
| Original Principal Balance: | $16,000,000 | Specific Property Type: | Suburban | ||||
| Cut-off Date Principal Balance: | $16,000,000 | Location: | Roseville, CA | ||||
| % of Initial Pool Balance: | 2.4% | Size: | 109,234 SF | ||||
| Loan Purpose: | Acquisition |
Cut-off Date Balance Per SF: | $146.47 | ||||
| Borrower Name: | Roseville Corporate Center, LLC | Year Built/Renovated: | 1999/NAP | ||||
| Sponsors: | Stephen B. Dwelle; Walter A. Dwelle; Thomas A. Dwelle; David W. Dwelle | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.7100% | Property Manager: | RPI Property Management, Inc. | ||||
| Note Date: | June 1, 2018 | 4th Most Recent Occupancy (As of)(5): | 69.9% (12/31/2014) | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of)(5): | 77.0% (12/31/2015) | ||||
| Maturity Date: | June 11, 2028 | 2nd Most Recent Occupancy (As of)(5): | 93.8% (12/31/2016) | ||||
| IO Period: | 120 months | Most Recent Occupancy (As of)(5): | 93.8% (12/31/2017) | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of): | 90.8% (5/23/2018) | ||||
| Seasoning: | 1 month | ||||||
| Amortization Term (Original): | NAP | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Interest-only, Balloon | 4th Most Recent NOI (As of)(6): | $1,193,866 (12/31/2015) | ||||
| Interest Accrual Method: | Actual/360 | 3re Most Recent NOI (As of)(6): | $1,341,057 (12/31/2016) | ||||
| Call Protection: | L(25),D(91),O(4) | 2nd Most Recent NOI (As of)(6): | $1,397,023 (12/31/2017) | ||||
| Lockbox Type: | Springing | Most Recent NOI (As of)(6): | $1,853,452 (Annualized 6 3/31/2018) | ||||
| Additional Debt: | None | ||||||
| Additional Debt Type: | NAP | U/W Revenues: | $2,770,885 | ||||
| U/W Expenses: | $896,651 | ||||||
| U/W NOI: | $1,874,235 | ||||||
| Escrows and Reserves: | U/W NCF: | $1,640,567 | |||||
| U/W NOI DSCR : | 2.45x | ||||||
| Type: | Initial | Monthly | Cap(If Any) | U/W NCF DSCR : | 2.15x | ||
| Taxes | $88,104 | $22,026 | NAP | U/W NOI Debt Yield : | 11.7% | ||
| Insurance | $0 | Springing(1) | NAP | U/W NCF Debt Yield : | 10.3% | ||
| Deferred Maintenance | $41,185 | $0 | NAP | As-Is Appraised Value: | $24,100,000 | ||
| Replacement Reserve | $0 | $3,018 | $108,648(2) | As-Is Appraisal Valuation Date: | April 25, 2018 | ||
| TI/LC Reserve | $0 | $11,379 | $500,000(3) | Cut-off Date LTV Ratio: | 66.4% | ||
| Revionics TI/LC Reserve(4) | $204,544 | $0 | NAP | LTV Ratio at Maturity or ARD: | 66.4% | ||
| (1) | The loan documents do not require ongoing monthly escrows for insurance premiums as long as (i) no event of default has occurred and is continuing; (ii) the borrower provides the lender with evidence that the Roseville Corporate Center Property’s (as defined below) insurance coverage is included in a blanket policy and such policy is in full force and effect; and (iii) the borrower pays all applicable insurance premiums and provides the lender with evidence of renewals. |
| (2) | The Replacement Reserve account will be capped at $108,648 as long as (i) no event of default is continuing and (ii) the Roseville Corporate Center Property is being adequately maintained as determined by lender based on annual inspections. |
| (3) | The Leasing Reserve account will be capped at $500,000 as long as (i) no event of default exists; (ii) the office building located at the Roseville Corporate Center Property maintains a minimum physical and economic occupancy of at least 79.0% (as determined by lender in its reasonable discretion); (iii) the net cash flow debt service coverage ratio does not fall below 1.15x; and (iv) the net cash flow debt yield is not less than 7.10%. |
| (4) | The tenant Revionics has a lease expiration date of November 30, 2018. At origination of the Roseville Corporate Center Mortgage Loan (as defined below), lender escrowed $204,544 for potential tenant improvement and leasing commission costs (“TI/LCs”) associated with the re-tenanting of Revionics’ space. The lender will release the escrowed funds to borrower if Revionics (a) extends or renews its lease in accordance with the terms thereof or otherwise on terms reasonably satisfactory to lender in accordance with the loan documents or (b)(i) enters into a new lease for the space at the Roseville Corporate Center Property currently known as “suite 230” upon terms and conditions reasonably satisfactory to lender and/or in accordance with the loan documents and (ii) lender receives reasonably satisfactory evidence that Revionics is in occupancy of its space and has commenced payment of full, unabated rent under its lease. In the event that these conditions are not satisfied, borrower may enter into a replacement lease for the Revionics space in accordance with the loan documents, and lender will disburse amounts from the Revionics Reserve to borrower for TI/LCs incurred in connection with such replacement lease as if the same were funds in the Leasing Reserve. |
| (5) | See “Historical Occupancy” table. |
| (6) | See “Cash Flow Analysis” section. |
The mortgage loan (the “Roseville Corporate Center Mortgage Loan”) is evidenced by a single promissory note that is secured by a first mortgage encumbering the borrower’s fee interest in a 109,234 square foot, class A, three-story suburban office building located in Roseville, California (the “Roseville Corporate Center Property”). The Roseville Corporate Center Property was developed in 1999 and is situated on a 10.9-acre site with 442 surface parking spaces resulting in a parking ratio of 4.0 spaces per 1,000 square feet of rentable area. As of May 23, 2018 the Roseville Corporate Center Property was 90.8% occupied by 13 tenants. Approximately 46.7% of the net rentable area and 53.8% of underwritten base rent at the Roseville Corporate Center Property is attributed to investment grade tenants.
| A-3-104 |
ROSEVILLE CORPORATE CENTER
The largest tenant at the Roseville Corporate Center Property is Umpqua Bank (rated BBB+ by Fitch), which accounts for 14.8% of net rentable area and 18.0% of underwritten base rent with a February 2025 lease expiration. Umpqua Bank has been a tenant at the Roseville Corporate Center Property since 2005, expanded its space by 3,225 square feet in November 2010 and recently extended its lease by 7 years and 11 months in 2017. Umpqua Bank has one 5-year renewal option, with nine months’ notice, at the fair market rental rate.
The second largest tenant at the Roseville Corporate Center Property is Philadelphia Insurance/Maguire Insurance (“Philadelphia Insurance”), which accounts for 12.9% of net rentable area and 14.5% of underwritten base rent with a December 2024 lease expiration. Philadelphia Insurance signed a lease in July 2016 and its lease term commenced in March 2017. Philadelphia Insurance has one 5-year renewal option, with nine months’ notice, at the fair market rental rate.
The third largest tenant at the Roseville Corporate Center Property is Merrill, Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”, rated A+/NR/A+ by Fitch/Moody’s/S&P), which accounts for 11.4% of net rentable area and 11.8% of underwritten base rent with an August 2022 lease expiration. Merrill Lynch signed a lease in June 2011 and its lease term commenced in October 2011. Merrill Lynch has two 5-year renewal options, with nine months’ notice, at the fair market rental rate.
Other than Umpqua Bank, Philadelphia Insurance and Merrill Lynch, no tenant accounts for more than 9.4% of the net rentable area or 11.0% of underwritten base rent at the Roseville Corporate Center Property.
The Roseville Corporate Center Property is located approximately 1.9 miles east of Interstate 80, 3.4 miles southeast of downtown Roseville, 19.5 miles northeast of downtown Sacramento and 25.7 miles northeast of the Sacramento International Airport. Westfield Galleria at Roseville, a 1.1 million square foot Unibail-Rodamco-Westfield -owned regional mall anchored by JCPenney, Nordstrom and Macy’s, is located approximately 3.3 miles northwest of the Roseville Corporate Center Property. According to the appraisal, as of 2017, the Sacramento-Roseville-Arden-Arcade metropolitan statistical area had an estimated population of approximately 2.3 million people with an estimated average household income of $88,639. According to a third-party market research report, the estimated 2018 population within a three- and five-mile radius of the Roseville Corporate Center Property was approximately 81,593, and 239,960, respectively; while the 2018 estimated average household income within the same radii was $111,004, and $101,255, respectively.
Per a third party market research provider, as of year-end 2017, the Roseville/Rocklin office submarket reported a total inventory of approximately 12.9 million square feet with an 8.7% vacancy rate. The appraiser concluded to market rents for the Roseville Corporate Center Property ranging from $26.40 to $28.80 per square foot, full service gross.
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $16,000,000 | 67.3% | Purchase price(1) | $23,340,000 | 98.2% | |||
| Borrower sponsor’s new cash equity | 7,768,940 | 32.7 | Upfront reserves | 333,833 | 1.4 | |||
| Closing costs | 95,107 | 0.4 | ||||||
| Total Sources | $23,768,940 | 100.0% | Total Uses | $23,768,940 | 100.0% |
| (1) | The borrower acquired the Roseville Corporate Center Property in a transaction on October 6, 2017 for $23,340,000. |
| A-3-105 |
ROSEVILLE CORPORATE CENTER
The following table presents certain information relating to the tenancy at the Roseville Corporate Center Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/Moody’s/ S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(2) | Annual U/W Base Rent(2) | % of Total Annual U/W Base Rent | Lease Expiration Date |
| Major Tenants | |||||||
| Umpqua Bank | BBB+/NR/NR | 16,162 | 14.8% | $30.40 | $491,396 | 18.0% | 2/28/2025(3) |
| Philadelphia Insurance | NR/NR/NR | 14,119 | 12.9% | $27.96 | $394,767 | 14.5% | 12/31/2024(4)(5) |
| Merrill Lynch | A+/NR/A+ | 12,442 | 11.4% | $25.80 | $321,004 | 11.8% | 8/31/2022(6) |
| Prudential Insurance Company | A/Baa1/A | 9,984 | 9.1% | $30.00 | $299,520 | 11.0% | 2/28/2021(7) |
| Bank of America | A/A3/A- | 10,242 | 9.4% | $28.50(8) | $291,927 | 10.7% | Various(9)(10) |
| Total Major Tenants | 62,949 | 57.6% | $28.57 | $1,798,614 | 66.0% | ||
| Non-Major Tenants | 36,284 | 33.2% | $25.49 | $925,010 | 34.0% | ||
| Occupied Collateral Total(11) | 99,233 | 90.8% | $27.45 | $2,723,624 | 100.0% | ||
| Vacant Space | 10,001 | 9.2% | |||||
| Collateral Total | 109,234 | 100.0% | |||||
| (1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
| (2) | Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent steps through March 2019 for eight tenants totalling $38,758 and straight-line rent averaging for investment grade tenants over the remaining lease term for Umpqua Bank, JP Morgan Chase Bank, Merrill Lynch and the 4,164 square foot Bank of America space totalling $64,464. Umpqua Bank, JP Morgan Chase Bank, Merrill Lynch and the 4,164 square foot Bank of America space have current annual base rent per square foot of $27.72, $27.84, $24.60 and $27.48, respectively. |
| (3) | Umpqua Bank has one 5-year renewal option, with nine months’ notice, at the fair market rental rate. |
| (4) | Philadelphia Insurance has one 5-year renewal option, with nine months’ notice, at the fair market rental rate. |
| (5) | Philadelphia Insurance has a one-time right to terminate its lease effective August 31, 2022 if the company shuts down its operations in Sacramento and Placer County or the company’s business needs require it to expand operations beyond borrower’s ability to accommodate the company at the Roseville Corporate Center Property or any of borrower’s other properties in Roseville, California. With respect to the termination option, Philadelphia Insurance is required to provide 12 months’ notice, not be in default under its lease at the time of notice or termination and pay a termination fee of the sum of (i) the $186,371 base rent abatement amount, plus (ii) the unamortized improvement costs, leasing commissions, moving allowance and test-fit allowance. |
| (6) | Merrill Lynch has two 5-year renewal options, with nine months’ notice, at the fair market rental rate. |
| (7) | Prudential Insurance Company has one 5-year renewal option, with 10 months’ notice, at the fair market rental rate. |
| (8) | Bank of America leases two spaces: 6,078 square feet with an Annual U/W Base Rent PSF of $28.32 and Lease Expiration Date of January 31, 2020; and 4,164 square feet with an Annual U/W Base Rent PSF of $28.77 and Lease Expiration Date of November 30, 2021. |
| (9) | Bank of America has two 5-year renewal options for its 6,078 square foot space, with 10 months’ notice, at the fair market rental rate. Bank of America has two 3-year renewal options for its 4,164 square foot space, with ten months’ notice, at the fair market rental rate. |
| (10) | Bank of America has a one-time right to terminate the lease for its 4,164 square foot space effective January 31, 2020, with nine months’ notice and payment of all unamortized improvement costs, rent abatements and leasing commissions. Bank of America does not have any remaining termination options for its 6,078 square foot space. Bank of America expanded its space by 4,164 square feet in December 2016. |
| (11) | Includes 3,176 square feet of conference room and health club space, which has no lease and no attributed Annual U/W Base Rent. |
The following table presents certain information relating to the lease rollover schedule at the Roseville Corporate Center Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent(4) | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF(4) |
| MTM(3) | 1 | 3,176 | 2.9% | 3,176 | 2.9% | $0(3) | 0.0% | $0.00(3) |
| 2018 | 1 | 7,411 | 6.8% | 10,587 | 9.7% | $204,544 | 7.5% | $27.60 |
| 2019 | 3 | 19,892 | 18.2% | 30,479 | 27.9% | $555,966 | 20.4% | $27.95 |
| 2020 | 1 | 6,078 | 5.6% | 36,557 | 33.5% | $172,129 | 6.3% | $28.32 |
| 2021 | 4 | 18,854 | 17.3% | 55,411 | 50.7% | $553,250 | 20.3% | $29.34 |
| 2022 | 2 | 13,541 | 12.4% | 68,952 | 63.1% | $351,572 | 12.9% | $25.96 |
| 2023 | 0 | 0 | 0.0% | 68,952 | 63.1% | $0 | 0.0% | $0.00 |
| 2024 | 1 | 14,119 | 12.9% | 83,071 | 76.0% | $394,767 | 14.5% | $27.96 |
| 2025 | 4 | 16,162 | 14.8% | 99,233 | 90.8% | $491,396 | 18.0% | $30.40 |
| 2026 | 0 | 0 | 0.0% | 99,233 | 90.8% | $0 | 0.0% | $0.00 |
| 2027 | 0 | 0 | 0.0% | 99,233 | 90.8% | $0 | 0.0% | $0.00 |
| 2028 | 0 | 0 | 0.0% | 99,233 | 90.8% | $0 | 0.0% | $0.00 |
| Thereafter | 0 | 0 | 0.0% | 99,233 | 90.8% | $0 | 0.0% | $0.00 |
| Vacant | 0 | 10,001 | 9.2% | 109,234 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 17 | 109,234 | 100.0% | $2,723,624 | 100.0% | $27.45 |
| (1) | Information obtained from the underwritten rent roll. |
| A-3-106 |
ROSEVILLE CORPORATE CENTER
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and that are not considered in the Lease Expiration Schedule. |
| (3) | MTM includes 3,176 square feet of conference room and health club space, which has no lease and no attributed Annual U/W Base Rent. |
| (4) | Weighted Average Annual U/W Base Rent PSF and Total Annual U/W Base Rent exclude vacant space. |
The following table presents historical occupancy percentages at the Roseville Corporate Center Property:
Historical Occupancy
12/31/2014(1) | 12/31/2015(1)(2) | 12/31/2016(1)(2) | 12/31/2017(1) | 5/23/2018(3) |
| 69.9% | 77.0% | 93.8% | 93.8% | 90.8% |
| (1) | Information obtained from a third-party market research provider. |
| (2) | The increase in occupancy from 12/31/2015 to 12/31/2016 can be attributed in part to the new lease with Philadelphia Insurance (14,119 square feet, 12.9% of net rentable area) signed in July 2016 (with its lease term commencing in March 2017) along with Bank of America’s expansion from 6,078 square feet to 10,242 square feet (expansion of approximately 3.8% of net rentable area) signed in June 2016 (with its lease term commencing in December 2016). |
| (3) | Information obtained from the underwritten rent roll. |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and underwritten net cash flow at the Roseville Corporate Center Property:
Cash Flow Analysis(1)
| 2015(2) | 2016(2) | 2017(3) | Annualized 6 3/31/2018(3) | U/W | % of U/W Effective Gross Income | U/W $ per SF | |
| Base Rent | $1,937,538 | $2,109,012 | $2,162,035 | $2,605,067 | $2,723,624 | 98.3% | $24.93 |
| Grossed Up Vacant Space | 0 | 0 | 0 | 0 | $276,027 | 10.0 | 2.53 |
| Total Reimbursement | 1,740 | 2,968 | 11,105 | 34,757 | 67,598 | 2.4 | 0.62 |
| Other Income(4) | 1,005 | 376 | 2,145 | 3,784 | 3,600 | 0.1 | 0.03 |
| Less Vacancy & Credit Loss | 0 | 0 | 0 | 0 | (299,965)(5) | (10.8) | (2.75) |
| Effective Gross Income | $1,940,284 | $2,112,356 | $2,175,284 | $2,643,607 | $2,770,884 | 100.0% | $25.37 |
| Total Operating Expenses | $746,418 | $771,300 | $778,261 | $790,155 | $896,651 | 32.4% | $8.21 |
|
|
|
|
|
|
| |
| Net Operating Income | $1,193,866 | $1,341,057 | $1,397,023 | $1,853,452 | $1,874,233 | 67.6% | $17.16 |
| Replacement Reserves | 0 | 0 | 0 | 0 | 36,047 | 1.3 | 0.33 |
| TI/LC | 0 | 0 | 0 | 0 | 197,621 | 7.1 | 1.81 |
| Net Cash Flow | $1,193,866 | $1,341,057 | $1,397,023 | $1,853,452 | $1,640,565 | 59.2% | $15.02 |
| NOI DSCR | 1.56x | 1.76x | 1.83x | 2.43x | 2.45x | ||
| NCF DSCR | 1.56x | 1.76x | 1.83x | 2.43x | 2.15x | ||
| NOI DY | 7.5% | 8.4% | 8.7% | 11.6% | 11.7% | ||
| NCF DY | 7.5% | 8.4% | 8.7% | 11.6% | 10.3% |
| (1) | Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent steps through March 2019 for eight tenants totalling $38,758 and straight-line rent averaging for investment grade tenants over the remaining lease term for Umpqua Bank, JP Morgan Chase Bank, Merrill Lynch and the 4,164 square foot Bank of America space totalling $64,464. |
| (2) | The increase in Base Rent and Net Operating Income from 2015 to 2016 was driven by (i) one new lease totalling 6.3% of underwritten base rent signed in February 2015 and (ii) two renewal leases totalling 5.9% of underwritten base rent signed from July 2015 to August 2016. |
| (3) | The increase in Base Rent and Net Operating Income from 2017 to Annualized 6 3/31/2018 was driven by (i) one new lease totalling 14.5% of underwritten base rent signed in March 2017 and (ii) seven renewal leases totalling 37.7% of underwritten base rent signed from March 2017 to December 2017. |
| (4) | Other Income includes kiosk income from a small café space on the ground floor and antennae use income by Prudential Insurance Company. |
| (5) | The underwritten economic vacancy is 10.0%. The Roseville Corporate Center Property was 90.8%% physically occupied as of May 23, 2018. |
| A-3-107 |
| No. 14 – Montclair East |
| Loan Information | Property Information | |||||
| Mortgage Loan Seller: | Rialto Mortgage Finance, LLC | Single Asset/Portfolio: | Single Asset | |||
| Property Type: | Retail | |||||
| Original Principal Balance: | $14,700,000 | Specific Property Type: | Anchored | |||
| Cut-off Date Principal Balance: | $14,700,000 | Location: | Montclair, CA | |||
| % of Initial Pool Balance: | 2.2% | Size: | 135,603 SF | |||
| Loan Purpose: | Refinance | Cut-off Date Principal Balance Per SF: | $108.40 | |||
| Borrower Name: | Montclair Plaza Partners, LLC | Year Built/Renovated: | 1992/NAP | |||
| Sponsor: | Behnam “Benny” Kohanteb; Benjamin Donel | Title Vesting: | Fee | |||
| Mortgage Rate: | 5.1200% | Property Manager: | Self-managed | |||
| 4th Most Recent Occupancy (As of)(2): | NAV | |||||
| Note Date: | June 13, 2018 | 3rd Most Recent Occupancy (As of)(2): | NAV | |||
| Anticipated Repayment Date: | NAP | 2nd Most Recent Occupancy (As of)(2): | NAV | |||
| Maturity Date: | July 6, 2028 | Most Recent Occupancy (As of): | 47.3% (12/31/2017) | |||
| IO Period: | 120 months | Current Occupancy (As of): | 98.8% (5/11/2018) | |||
| Loan Term (Original): | 120 months | |||||
| Seasoning: | 0 months | Underwriting and Financial Information: | ||||
| Amortization Term (Original): | NAP | 4th Most Recent NOI (As of)(2): | NAV | |||
| Loan Amortization Type: | Interest Only, Balloon | 3rd Most Recent NOI (As of)(2): | NAV | |||
| Interest Accrual Method: | Actual/360 | 2nd Most Recent NOI (As of): | $633,715 (12/31/2017) | |||
| Call Protection: | L(24),GRTR 1% or YM(92),O(4) | Most Recent NOI (As of): | $606,157 (TTM 3/31/2018) | |||
| Lockbox Type: | Springing | |||||
| Additional Debt: | None | U/W Revenues: | $1,847,613 | |||
| Additional Debt Type: | NAP | U/W Expenses: | $474,097 | |||
| U/W NOI: | $1,373,516 | |||||
| U/W NCF: | $1,285,374 | |||||
| Escrows and Reserves: | U/W NOI DSCR: | 1.80x | ||||
| U/W NCF DSCR: | 1.68x | |||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NOI Debt Yield: | 9.3% | |
| Taxes | $60,818 | $14,480 | NAP | U/W NCF Debt Yield: | 8.7% | |
| Insurance | $2,061 | $654 | NAP | As-Is Appraised Value: | $25,200,000 | |
| Replacement Reserves | $0 | $1,695 | NAP | As-Is Appraisal Valuation Date: | March 23, 2018 | |
| TI/LC Reserve | $500,000 | Springing | NAP | Cut-off Date LTV Ratio: | 58.3% | |
| Other Reserves(1) | $1,745,976 | $0 | NAP | LTV Ratio at Maturity or ARD: | 58.3% | |
| (1) | Other Reserves include a $1,500,000 new tenant reserve and a $245,976 rent concession reserve. The $1,500,000 new tenant reserve consists of (a) $842,493 for Hair Beauty Secret and (b) $657,507 for USA Furniture. Amounts in the new tenant reserve may be released to the borrower provided that (i) no event of default exists and (ii) the debt yield is not less than 8.7% (as determined by the lender) and (iii) the borrower delivers to the lender an executed estoppel certificate stating the respective tenant is open for business and paying full, unabated rent and common area maintenance reimbursements in accordance with its lease. The $245,976 free rent reserve consists of (a) $150,000 for Ross Stores and (b) $95,975 for dd’s Discount Stores. The free rent reserve may be released to the borrower provided that no event of default exists and the borrower provides an executed estoppel certificate stating that the respective tenant is in occupancy, open for business and paying full, unabated rent and common area maintenance reimbursements in accordance with the its lease. |
| (2) | Historical occupancy, operating and financial information prior to 2016 is not available as the borrower acquired the Montclair East Property as an REO property in May 2016. Since acquisition the borrower has leased the Montclair East Property up to its current occupancy rate of 98.8%. |
The mortgage loan is evidenced by a single promissory note that is secured by a first mortgage encumbering the fee interest in an 135,603 square foot anchored retail property located in Montclair, California (the “Montclair East Property”), approximately 35 miles east of the Los Angeles central business district. The Montclair East Property consists of two single story retail buildings which were constructed in 1992 and are situated on a 9.6 acre site. The Montclair East Property is anchored by Ross Stores, dd’s Discounts, Fallas Discount Stores, Five Below, and Dollar Tree. The Montclair East Property contains 509 surface parking spaces, resulting in a parking ratio of 3.8 spaces per 1,000 square feet. As of May 11, 2018, the Montclair East Property was 98.8% occupied by 14 national, regional and local tenants.
The Montclair East Property is located at the southeast corner of Central Avenue and Moreno Street in Montclair, California. Montclair is located in the western portion of San Bernardino County, on the border of Los Angeles County. The Montclair East Property neighborhood is accessed by the San Bernardino (10) and Pomona (60) freeways. Location and proximity to the freeway system gives the Montclair East Property neighborhood access to the major employment centers in Inland Empire, northern Orange County and Los Angeles County. The Montclair East Property is located within a major retail cluster, with an unanchored retail strip center located to the north, a freestanding retail building located to the east, McDonalds, Chipotle, Petco, Harbor Freight Tools, Chase Bank, and El Pollo Loco located to the west and the San Bernardino freeway located to the south. According to a third party market
| A-3-108 |
MONTCLAIR EAST
research report, the 2018 estimated population within a one, three, and five-mile radius of the Montclair East Property is 19,303, 184,911, and 456,363. The 2018 average household income within the same radii is $62,119, $78,734, and $82,585.
According to the appraisal, the Montclair East Property is located within the Inland Empire retail market, which contained 117.7 million square feet of inventory as of the fourth quarter of 2017. The Inland Empire retail market reported an overall vacancy rate of 8.0% with an average quoted rental rate of $25.20 per square foot. As of the fourth quarter of 2017, the Inland Empire market reported positive net absorption of 531,118 square feet, with 103,000 square feet of retail space being delivered and 421,725 square feet under construction.
According to the appraisal, the Montclair East Property is located within the West End retail submarket, which contained 27.7 million square feet of retail space as of the fourth quarter of 2017. The West End retail market reported an overall vacancy rate of 7.7% with an average quoted rental rate of $27.48 per square foot. As of the fourth quarter of 2017, the West End submarket reported positive net absorption of 22,260 square feet, with 50,000 square feet being delivered and 234,135 square feet under construction.
Sources and Uses
| Sources | Uses | |||||||
| Original loan amount | $14,700,000 | 100.0% | Loan payoff | $11,895,927 | 80.9% | |||
| Reserves | 2,308,855 | 15.7 | ||||||
| Return of Equity | 333,316 | 2.3 | ||||||
| Closing Costs | 161,902 | 1.1 | ||||||
| Total Sources | $14,700,000 | 100.0% | Total Uses | $14,700,000 | 100.0% |
The following table presents certain information relating to the tenancies at the Montclair East Property:
Major Tenants
| Tenant Name | Credit Rating (Fitch/ Moody’s/ S&P)(1) | Tenant NRSF | % of NRSF | Annual U/W Base Rent PSF(2) | Annual U/W Base Rent(2) | % of Total Annual U/W Base Rent | Sales PSF(3) | Occupancy Cost(3) | Lease Expiration Date |
| Anchor Tenants | |||||||||
| Ross Stores | NR/A3/A- | 41,623 | 30.7% | $8.65 | $360,000 | 24.5% | NAV | NAV | 2/28/2028(4) |
| dd’s Discounts | NR/A3/A- | 24,000 | 17.7% | $12.00 | $287,928 | 19.6% | $541 | 2.8% | 1/31/2024(5) |
| Fallas Discount Stores | NR/NR/NR | 22,500 | 16.6% | $7.40 | $166,500 | 11.3% | NAV | NAV | 1/31/2023(6) |
| Five Below, Inc. | NR/NR/NR | 12,652 | 9.3% | $12.95 | $163,808 | 11.1% | NAV | NAV | 12/31/2027(7) |
| Dollar Tree | NR/Baa3/NR | 10,385 | 7.7% | $10.00 | $103,850 | 7.1% | NAV | NAV | 9/30/2020(8) |
| Total Anchor Tenants | 111,160 | 82.0% | $9.73 | $1,082,086 | 73.6% | ||||
| Major Tenants | |||||||||
| Hair Beauty Secret, LLC | NR/NR/NR | 6,615 | 4.9% | $14.00 | $92,610 | 6.3% | NAV | NAV | 8/31/2023(9) |
| Total Major Tenants | 6,615 | 4.9% | $14.00 | $92,610 | 6.3% | ||||
| Non-Major Tenants | 16,225 | 12.0% | $18.24 | $295,884 | 20.1% | ||||
| Occupied Collateral Total | 134,000 | 98.8% | $10.97 | $1,470,581 | 100.0% | ||||
| Vacant Space | 1,603 | 1.2% | |||||||
| Collateral Total | 135,603 | 100.0% | |||||||
| (1) | Certain ratings are those of the parent company whether or not the parent guarantees the lease. |
| (2) | Unless otherwise noted, Annual U/W Base Rent PSF and Annual U/W Base Rent include contractual rent escalations through February 2019. |
| (3) | Sales PSF and Occupancy Costs are for the trailing 12-month period ending January 31, 2018. |
| (4) | Ross Stores will pay abated rent for 120 days upon the delivery of the space in order to facilitate relocation to the space. The borrower reserved $150,000 with the lender related to this period. The tenant has four, 5-year renewal options remaining under its lease. |
| (5) | dd’s Discounts will pay abated rent for 120 days upon the delivery of the space in order to facilitate relocation to the space. The borrower reserved $95,975 with the lender related to this period. The tenant has four, 5-year renewal options remaining under its lease. |
| (6) | Fallas Discount Stores has two, 5-year renewal options remaining. |
| (7) | Five Below, Inc. has two, 5-year renewal options remaining. Five Below, Inc. has one termination option effective on the last day of the 60th full calendar month with a 90-day notice period and a termination fee equal 50% of the unamortized tenant improvement allowance. |
| (8) | Dollar Tree has three, 5-year renewal options remaining. |
| (9) | Hair Beauty Secret, LLC has one, 5-year renewal option remaining. |
| A-3-109 |
MONTCLAIR EAST
The following table presents certain information relating to the lease rollover schedule at the Montclair East Property:
Lease Expiration Schedule(1)(2)
| Year Ending December 31, | No. of Leases Expiring | Expiring NRSF | % of Total NRSF | Cumulative Expiring NRSF | Cumulative % of Total NRSF | Annual U/W Base Rent | % of Total Annual U/W Base Rent | Annual U/W Base Rent PSF(3) |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2018 | 0 | 0 | 0.0% | 0 | 0.0% | $0 | 0.0% | $0.00 |
| 2019 | 2 | 4,695 | 3.5% | 4,695 | 3.5% | $100,676 | 6.8% | $21.44 |
| 2020 | 2 | 12,345 | 9.1% | 17,040 | 12.6% | $133,406 | 9.1% | $10.81 |
| 2021 | 0 | 0 | 0.0% | 17,040 | 12.6% | $0 | 0.0% | $0.00 |
| 2022 | 0 | 0 | 0.0% | 17,040 | 12.6% | $0 | 0.0% | $0.00 |
| 2023 | 6 | 37,425 | 27.6% | 54,465 | 40.2% | $400,623 | 27.2% | $10.70 |
| 2024 | 1 | 24,000 | 17.7% | 78,465 | 57.9% | $287,928 | 19.6% | $12.00 |
| 2025 | 0 | 0 | 0.0% | 78,465 | 57.9% | $0 | 0.0% | $0.00 |
| 2026 | 0 | 0 | 0.0% | 78,465 | 57.9% | $0 | 0.0% | $0.00 |
| 2027 | 1 | 12,652 | 9.3% | 91,117 | 67.2% | $163,808 | 11.1% | $12.95 |
| 2028 | 2 | 42,883 | 31.6% | 134,000 | 98.8% | $384,139 | 26.1% | $8.96 |
| Thereafter | 0 | 0 | 0.0% | 134,000 | 98.8% | $0 | 0.0% | $0.00 |
| Vacant | 0 | 1,603 | 1.2% | 135,603 | 100.0% | $0 | 0.0% | $0.00 |
| Total/Weighted Average | 14 | 135,603 | 100.0% | $1,470,581 | 100.0% | $10.97 |
| (1) | Information obtained from the underwritten rent roll. |
| (2) | Certain tenants may have lease termination options that are exercisable prior to the originally stated expiration date of the subject lease and that are not considered in the Lease Expiration Schedule. |
| (3) | Weighted Average Annual U/W Base Rent PSF excludes vacant space. |
The following table presents historical occupancy percentages at the Montclair East Property:
Historical Occupancy
12/31/2015(1) | 12/31/2016(1) | 12/31/2017(1) | 5/11/2018(2) | |||
| NAP | NAP | 47.3% | 98.8% |
| (1) | Information obtained from the borrower. The borrower acquired the Montclair East Property, which at the time was an REO property in May 2016; therefore, occupancy is not available prior to 2016. Since acquisition the borrower has leased up to Montclair East Property to its current occupancy of 98.8%. |
| (2) | Information obtained from the underwritten rent roll. |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and Underwritten Net Cash Flow at the Montclair East Property:
Cash Flow Analysis(1)
| 2017 | TTM 3/31/2018 | U/W | % of U/W Effective Gross Income | U/W $ per SF | ||||||
| Base Rent | $816,411 | $810,002 | $1,463,349 | 79.2% | $10.79 | |||||
| Rent Steps | 0 | 0 | 7,231 | 0.4 | 0.05 | |||||
| Straight Line Rent(2) | 0 | 0 | 13,500 | 0.7 | 0.10 | |||||
| Grossed Up Vacant Space | 0 | 0 | 33,663 | 1.8 | 0.25 | |||||
| Total Reimbursements | 252,979 | 224,440 | 420,047 | 22.7 | 3.10 | |||||
| Other Income(3) | 5,890 | 6,712 | 6,712 | 0.4 | 0.05 | |||||
| Less Vacancy & Credit Loss(4) | 0 | 0 | (96,890) | (5.2) | (0.71) | |||||
| Effective Gross Income | $1,075,280 | $1,041,153 | $1,847,613 | 100.0% | $13.63 | |||||
| Total Operating Expenses | $441,565 | $434,997 | $474,097 | 25.7% | $3.50 | |||||
| Net Operating Income(5) | $633,715 | $606,157 | $1,373,516 | 74.3% | $10.13 | |||||
| TI/LC | 0 | 0 | 67,802 | 3.7 | 0.50 | |||||
| Capital Expenditures | 0 | 0 | 20,340 | 1.1 | 0.15 | |||||
| Net Cash Flow | $633,715 | $606,157 | $1,285,374 | 69.6% | $9.48 | |||||
| NOI DSCR | 0.83x | 0.79x | 1.80x | |||||||
| NCF DSCR | 0.83x | 0.79x | 1.68x | |||||||
| NOI DY | 4.3% | 4.1% | 9.3% | |||||||
| NCF DY | 4.3% | 4.1% | 8.7% |
| (1) | Historical operating and financial information prior to 2017 is not available as the borrower acquired the Montclair East Property as an REO property in May 2016. |
| (2) | Straight Line Rent is attributed to Ross Stores. |
| (3) | Other Income consists of late fees. |
| (4) | The underwritten economic vacancy is 5.0%. The Montclair East Property was 98.8% physically occupied as of May 11, 2018. |
| (5) | The UW NOI increased more than 10% compared to the TTM NOI because 8 tenants totalling 70,460 square feet started or extended their leases in 2018. This includes the largest tenant, Ross Stores, which accounts for 30.7% of the total net rentable area of the Montclair East Property. |
| A-3-110 |
MONTCLAIR EAST
The following table presents certain information relating to comparable retail properties for Montclair East Property:
Competitive Set(1)
Property Name/Location | Year Built/Renovated | Total GLA (SF) | Total Occupancy | Distance from Subject | Tenant Name | Lease Area (SF) | Annual Base Rent PSF | Lease Type |
Montclair East (subject) Montclair, CA | 1992/NA | 135,603 | 98.8% | - | Ross Stores | 41,623 | $7.40 - $24.04 | NNN |
Montclair Village Plaza Montclair, CA | 1985/NA | 48,565 | 81% | 0.4 miles | Agustin A. Barrios | 1,377 | $18.00 - $22.00 | MG/NNN |
Upland Freeway Center Upland, CA | 1987/NA | 116,092 | 86% | 0.8 miles | Barbeques Galore | 8,200 | $13.20 | NNN |
Upland Square Upland, CA | 1965/2003 | 103,763 | 92% | 2.8 miles | Pet Supplies Plus | 7,993 | $17.04 - $26.40 | NNN |
Upland Plaza Upland, CA | 1975/NA | 65,220 | 95% | 2.9 miles | Ruben Bernal | 975 | $15.00 - $18.60 | NNN |
Foothill Town Center Upland, CA | 2004/NA | 96,380 | 100% | 3.5 miles | Arigato Sushi | 1,692 | $21.00 - $27.00 | NNN |
Chino Towne Center Chino, CA | 1981/NA | 117,419 | 91% | 4.5 miles | H&R Block | 1,800 | $15.00 - $18.00 | NNN |
Village Grove Shopping Center Upland, CA | 1980/NA | 156,556 | 90% | 4.5 miles | Biomat USA, Inc. | 13,800 | $15.00 - $30.00 | NNN |
| (1) | Information obtained from the appraisal dated June 7, 2018 and the underwritten rent roll. |
| A-3-111 |
| No. 15 – Embassy Suites Tucson, AZ | |||||||
| Loan Information | Property Information | ||||||
| Mortgage Loan Seller: | Barclays Bank PLC | Single Asset/Portfolio: | Single Asset | ||||
| Property Type: | Hospitality | ||||||
| Original Principal Balance: | $14,000,000 | Specific Property Type: | Select Service | ||||
| Cut-off Date Balance: | $13,983,135 | Location: | Tucson, AZ | ||||
| % of Initial Pool Balance: | 2.1% | Size: | 119 Rooms | ||||
| Loan Purpose: | Refinance | Cut-off Date Balance Per Room: | 117,505 | ||||
| Borrower Name: | LDK Tucson, LLC | Year Built/Renovated: | 2007/2017 | ||||
| Borrower Sponsor: | Lodging Dynamics | Title Vesting: | Fee | ||||
| Mortgage Rate: | 4.9860% | Property Manager: | Self-managed | ||||
| Note Date: | June 6, 2018 | 4th Most Recent Occupancy (As of): | 85.7% (12/31/2014) | ||||
| Anticipated Repayment Date: | NAP | 3rd Most Recent Occupancy (As of): | 84.3% (12/31/2015) | ||||
| Maturity Date: | June 6, 2028 | 2nd Most Recent Occupancy (As of)(4): | 82.4% (12/31/2016) | ||||
| IO Period: | 0 months | Most Recent Occupancy (As of)(4): | 82.0% (12/31/2017) | ||||
| Loan Term (Original): | 120 months | Current Occupancy (As of): | 83.7% (4/30/2018) | ||||
| Seasoning: | 1 month | ||||||
| Amortization Term (Original): | 360 months | Underwriting and Financial Information: | |||||
| Loan Amortization Type: | Amortizing Balloon | ||||||
| Interest Accrual Method: | Actual/360 | 4th Most Recent NOI (As of): | $1,705,358 (12/31/2015) | ||||
| Call Protection: | L(25),D(91),O(4) | 3rd Most Recent NOI (As of): | $1,616,818 (12/31/2016) | ||||
| Lockbox Type: | Hard/Springing Cash Management | 2nd Most Recent NOI (As of): | $1,845,636 (12/31/2017) | ||||
| Additional Debt(1): | Yes | Most Recent NOI (As of): | $2,069,720 (TTM 4/30/2018) | ||||
| Additional Debt Type(1): | Permitted Future Mezzanine | ||||||
| U/W Revenues: | $6,080,718 | ||||||
| U/W Expenses: | $3,994,549 | ||||||
| U/W NOI: | $2,086,169 | ||||||
| U/W NCF: | $1,842,940 | ||||||
| U/W NOI DSCR: | 2.32x | ||||||
| Escrows and Reserves: | U/W NCF DSCR: | 2.05x | |||||
| U/W NOI Debt Yield: | 14.9% | ||||||
| Type: | Initial | Monthly | Cap (If Any) | U/W NCF Debt Yield: | 13.2% | ||
| Taxes | $56,039 | $18,680 | NAP | As-Is Appraised Value: | $22,000,000 | ||
| Insurance(2) | $0 | Springing | NAP | As-Is Appraisal Valuation Date: | April 27, 2018 | ||
| FF&E Reserve(3) | $0 | Springing | NAP | Cut-off Date LTV Ratio: | 63.6% | ||
| PIP Reserve | $297,323 | $0 | NAP | LTV Ratio at Maturity or ARD: | 52.3% | ||
| (1) | The loan documents permit mezzanine financing subject to certain conditions, including: (i) no event of default has occurred and is continuing; (ii) the mezzanine financing is obtained simultaneously with the closing of a permitted transfer of the Embassy Suites Tucson, AZ Property; (iii) the combined loan-to-value ratio is not greater than the loan-to-value ratio at origination; (iv) the combined amortizing debt service coverage ratio is not less than the amortizing debt service coverage ratio at origination; and (v) receipt of rating agency confirmation from each of Fitch, DBRS and Moody’s that the mezzanine financing will not result in a downgrade, withdrawal or qualification of the respective ratings assigned to the Series WFCM 2018-C45 certificates. |
| (2) | Ongoing monthly reserves for insurance are not required as long as (i) no event of default has occurred and is continuing; (ii) the Embassy Suites Tucson, AZ Property (as defined below) is insured via an acceptable blanket insurance policy; and (iii) the borrower provides the lender with evidence of renewal of the insurance policies and timely proof of payment of insurance premiums. |
| (3) | On the 13th payment date and on each payment date thereafter, the borrower shall deposit one-twelfth of the greater of (x) 4.0% of the projected annual gross income from operations of the Embassy Suites Tucson, AZ Property and (y) the amount required for FF&E under the franchise agreement. |
| (4) | According to the appraisal, 2016 and 2017 occupancy declined because of a $1.6 million PIP renovation completed at the Embassy Suites Tucson, AZ Property. |
The Embassy Suites Tucson, AZ mortgage loan is evidenced by a single promissory note that is secured by a first mortgage encumbering the borrower’s fee interest in a two-story, 119-room select service hotel located in Tucson, Arizona (the “Embassy Suites Tucson, AZ Property”). The Embassy Suites Tucson, AZ Property, which opened in 2007, is comprised of 119 rooms, 2,667 square feet of meeting space, a breakfast dining area, an outdoor pool, a fitness room, a lobby workstation, a market pantry, a guest laundry room, a courtyard and vending areas. Other amenities include daily complimentary made to order hot full breakfast, an evening social with complimentary drinks and snacks, business center internet access, and a complimentary shuttle service within a 5-mile radius. The area surrounding the Embassy Suites Tucson, AZ Property features the University of Arizona, local golf courses, shopping and dining in downtown Tucson and hiking trails in Sabino Canyon and Saguaro National Park. The Embassy Suites Tucson, AZ Property operates under the flag of Embassy Suites by Hilton pursuant to a franchise agreement that extends through July 2030. The Embassy Suites Tucson, AZ Property benefits from the franchise in large part due to the extensive reservations system (HHonors®) of the Hilton umbrella of hotels.
| A-3-112 |
EMBASSY SUITES TUCSON, AZ
The Embassy Suites Tucson, AZ Property is situated on Skyline Drive in Tucson, Pima County, Arizona, with primary regional access provided by east/west Interstate 10, which extends to Las Cruces, New Mexico to the east and Phoenix, Arizona to the northwest. The surrounding area is served by the Tucson International Airport, approximately 12.0 miles to the south of the Embassy Suites Tucson, AZ Property. The Embassy Suites Tucson, AZ Property is nestled in the foothills of Santa Catalina Mountains, offering a view over Tucson. The hotel’s demand drivers are the University of Arizona, Mount Lemmon, La Encantada Shopping area, Sabino Canyon, and local corporate clients. According to the appraisal, the 2018 estimated population within a one-, three- and five-mile radius of the Embassy Suites Tucson, AZ Property was 4,525, 30,276 and 129,916, respectively; while the 2018 estimated average household income within the same radii was $148,545, $119,180 and $73,721, respectively.
Sources and Uses
| Sources | Uses | |||||||
| Original whole loan amount | $14,000,000 | 100.0% | Loan payoff | $10,283,824 | 73.5% | |||
| Return of equity | 3,056,215 | 21.8 | ||||||
| Reserves | 353,362 | 2.5 | ||||||
| Closing costs | 306,600 | 2.2 | ||||||
| Total Sources | $14,000,000 | 100.0% | Total Uses | $14,000,000 | 100.0% |
Operating History and Underwritten Net Cash Flow. The following table presents certain information relating to the historical operating performance and underwritten net cash flow at the Embassy Suites Tucson, AZ Property:
Cash Flow Analysis
| 2015 | 2016 | 2017 | TTM 4/30/2018 | U/W | % of U/W Total Revenue | U/W $ per Room | |
| Occupancy | 84.3% | 82.4% | 82.0% | 83.7% | 83.7% | ||
| ADR | $131.67 | $138.57 | $152.77 | $156.45 | $156.45 | ||
| RevPAR | $107.75 | $114.17 | $125.27 | $130.95 | $130.95 | ||
| Room Revenue | $4,820,603 | $4,972,577 | $5,441,020 | $5,687,745 | $5,687,755 | 93.5% | $47,796 |
| F&B Revenue | 268,973 | 195,111 | 294,496 | 328,742 | 328,742 | 5.4 | 2,763 |
| Other Revenue(1) | 49,971 | 44,349 | 72,440 | 64,221 | 64,221 | 1.1 | 540 |
| Total Revenue | $5,139,547 | $5,212,037 | $5,807,956 | $6,080,708 | $6,080,718 | 100% | $51,098 |
| Total Operating Expenses | 3,434,189 | 3,595,219 | 3,962,320 | 4,010,988 | 3,994,549 | 65.7 | 33,568 |
| Net Operating Income | $1,705,358 | $1,616,818 | $1,845,636 | $2,069,720 | $2,086,169 | 34.3% | $17,531 |
| FF&E | 0 | 0 | 0 | 0 | 243,229 | 4.0 | 2,044 |
| Net Cash Flow | $1,705,358 | $1,616,818 | $1,845,636 | $2,069,720 | $1,842,940 | 30.3% | $15,487 |
| NOI DSCR | 1.89x | 1.80x | 2.05x | 2.30x | 2.32x | ||
| NCF DSCR | 1.89x | 1.80x | 2.05x | 2.30x | 2.05x | ||
| NOI DY | 12.2% | 11.6% | 13.2% | 14.8% | 14.9% | ||
| NCF DY | 12.2% | 11.6% | 13.2% | 14.8% | 13.2% | ||
| (1) | Other Revenue consists primarily of food and beverage revenue, vending machine sales, laundry, and conference room rental revenue. |
The following table presents certain information relating to the Embassy Suites Tucson, AZ Property’s competitive set:
Subject and Market Historical Occupancy, ADR and RevPAR(1)
Competitive Set | Embassy Suites Tucson | Penetration Factor | |||||||
Year | Occupancy | ADR | RevPAR | Occupancy | ADR | RevPAR | Occupancy | ADR | RevPAR |
| TTM 12/31/2017 | 65.0% | $108.91 | $70.77 | 82.0% | $152.77 | $125.27 | 126.2% | 140.3% | 177.0% |
| TTM 12/31/2016 | 65.0% | $108.49 | $70.54 | 82.4% | 138.57 | $114.17 | 126.7% | 127.7% | 161.8% |
| TTM 12/31/2015 | 65.3% | $105.19 | $68.65 | 84.3% | $131.67 | $107.75 | 129.2% | 125.2% | 157.0% |
| (1) | Information obtained from a third party hospitality report dated January 18, 2018. Competitive set includes the following hotels: Embassy Suites Tucson Paloma Village, DoubleTree Tucson@ Reid Park, DoubleTree Suites Tucson Williams Center, Radisson Suites Tucson, Wyndham Westward Look Grand Resort & Spa, Tucson Hotel, and Holiday Inn Express & Suites North Tucson Mall. |
| A-3-113 |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX B
FORM OF DISTRIBUTION DATE STATEMENT
B-1
(THIS PAGE INTENTIONALLY LEFT BLANK)
 | Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| DISTRIBUTION DATE STATEMENT | ||||||||
| Table of Contents | ||||||||
| STATEMENT SECTIONS | PAGE(s) | |||||||
| Certificate Distribution Detail | 2 | |||||||
| Certificate Factor Detail | 3 | |||||||
| Reconciliation Detail | 4 | |||||||
| Other Required Information | 5 | |||||||
| Cash Reconciliation Detail | 6 | |||||||
| Current Mortgage Loan and Property Stratification Tables | 7 - 9 | |||||||
| Mortgage Loan Detail | 10 | |||||||
| NOI Detail | 11 | |||||||
| Principal Prepayment Detail | 12 | |||||||
| Historical Detail | 13 | |||||||
| Delinquency Loan Detail | 14 | |||||||
| Specially Serviced Loan Detail | 15 - 16 | |||||||
| Advance Summary | 17 | |||||||
| Modified Loan Detail | 18 | |||||||
| Historical Liquidated Loan Detail | 19 | |||||||
| Historical Bond / Collateral Loss Reconciliation | 20 | |||||||
| Interest Shortfall Reconciliation Detail | 21 - 22 | |||||||
| Supplemental Reporting | 23 | |||||||
| Depositor | Master Servicer | Special Servicer | Asset Representations Reviewer/Operating Advisor | |||||||||||||||
| Wells Fargo Commercial Mortgage Securities, Inc. | Wells Fargo Bank, National Association | LNR Partners, LLC | Park Bridge Lender Services LLC | |||||||||||||||
| 301 South College St | Three Wells Fargo, MAC D1050-084 | 600 Third Avenue | ||||||||||||||||
| Charlotte, NC 28288-0166 | 401 S. Tryon Street, 8th Floor | 1601 Washington Avenue | 40th Floor | |||||||||||||||
Charlotte, NC 28202 | Suite 700 | New York, NY 10022 | ||||||||||||||||
| Miami Beach, FL 33139 | ||||||||||||||||||
| Contact: ream_investorrelations@wellsfargo.com | Contact: REAM_InvestorRelations@wellsfargo.com | Contact: lnr.cmbs.notices@lnrproperty.com | Contact: David Rodgers | |||||||||||||||
| Phone Number: (704) 374-6161 | Phone Number: (305) 695-5600 | Phone Number: (212) 310-9821 | ||||||||||||||||
This report is compiled by Wells Fargo Bank, N.A. from information provided by third parties. Wells Fargo Bank, N.A. has not independently confirmed the accuracy of the information.
Please visit www.ctslink.com for additional information and if applicable, any special notices and any credit risk retention notices. In addition, certificateholders may register online for email notification when special notices are posted. For information or assistance please call 866-846-4526. | ||||||||||||||||||
Page 1 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Certificate Distribution Detail | ||||||||||||||||||||||||||
| Class | CUSIP | Pass-Through Rate | Original Balance | Beginning Balance | Principal Distribution | Interest Distribution | Prepayment Premium | Realized Loss/ Additional Trust Fund Expenses | Total Distribution | Ending Balance | Current Subordination Level (1) | |||||||||||||||
| A-1 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-2 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-SB | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-3 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-4 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-S | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| B | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| C | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| D | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| E-RR | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| F-RR | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| G-RR | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| H-RR | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| J-RR | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| V | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| R | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| Totals | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||
| Class | CUSIP | Pass-Through Rate | Original Notional Amount | Beginning Notional Amount | Interest Distribution | Prepayment Premium | Total Distribution | Ending Notional Amount | ||||||||||||||||||
| X-A | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-B | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-D | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
(1) Calculated by taking (A) the sum of the ending certificate balance of all classes less (B) the sum of (i) the ending balance of the designated class and (ii) the ending certificate balance of all classes which are not subordinate to the designated class and dividing the result by (A).
| ||||||||||||||||||||||||||
Page 2 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Certificate Factor Detail | |||||||||
| Class | CUSIP | Beginning | Principal | Interest | Prepayment | Realized Loss/ | Ending | ||
| A-1 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-2 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-SB | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-3 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-4 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-S | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| B | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| C | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| D | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| E-RR | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| F-RR | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| G-RR | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| H-RR | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| J-RR | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| V | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| R | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| Class | CUSIP | Beginning Notional Amount | Interest Distribution | Prepayment Premium | Ending Notional Amount | ||||
| X-A | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-B | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-D | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
Page 3 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Reconciliation Detail | ||||||||||||||||||||||
| Principal Reconciliation | ||||||||||||||||||||||
| Stated Beginning Principal Balance | Unpaid Beginning Principal Balance | Scheduled Principal | Unscheduled Principal | Principal Adjustments | Realized Loss | Stated Ending Principal Balance | Unpaid Ending Principal Balance | Current Principal Distribution Amount | ||||||||||||||
| Total | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
| Certificate Interest Reconciliation | |||||||||||||||||||||||||
| Class | Accrual Dates | Accrual Days | Accrued Certificate Interest | Net Aggregate Prepayment Interest Shortfall | Distributable Certificate Interest | Distributable Certificate Interest Adjustment | WAC CAP Shortfall | Interest Shortfall/(Excess) | Interest Distribution | Remaining Unpaid Distributable Certificate Interest | |||||||||||||||
| A-1 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-2 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-SB | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-3 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-4 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-A | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-B | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-D | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-S | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| B | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| C | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| D | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| E-RR | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| F-RR | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| G-RR | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| H-RR | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| J-RR | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| Totals | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
Page 4 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Other Required Information | |||||||||||||||||||
| Available Distribution Amount (1) | 0.00 | ||||||||||||||||||
| Appraisal Reduction Amount | |||||||||||||||||||
| Loan Number | Appraisal | Cumulative | Most Recent | ||||||||||||||||
| Reduction | ASER | App. Reduction | |||||||||||||||||
| Effected | Amount | Date | |||||||||||||||||
| Total | |||||||||||||||||||
(1) The Available Distribution Amount includes any Prepayment Fees. | |||||||||||||||||||
Page 5 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Cash Reconciliation Detail | ||||||||
| Total Funds Collected | Total Funds Distributed | |||||||
| Interest: | Fees: | |||||||
| Scheduled Interest | 0.00 | Master Servicing Fee - Wells Fargo Bank, N.A. | 0.00 | |||||
| Interest reductions due to Nonrecoverability Determinations | 0.00 | Trustee Fee - Wilmington Trust, N.A. | 0.00 | |||||
| Interest Adjustments | 0.00 | Certificate Administrator Fee - Wells Fargo Bank, N.A. | 0.00 | |||||
| Deferred Interest | 0.00 | CREFC® Intellectual Property Royalty License Fee | 0.00 | |||||
| ARD Interest | 0.00 | Operating Advisor Fee - Park Bridge Lender Services LLC | 0.00 | |||||
| Default Interest and Late Payment Charges | 0.00 | Asset Representations Reviewer Fee - Park Bridge Lender Services LLC | 0.00 | |||||
| Net Prepayment Interest Shortfall | 0.00 | Total Fees | 0.00 | |||||
| Net Prepayment Interest Excess | 0.00 | |||||||
| Extension Interest | 0.00 | |||||||
| Interest Reserve Withdrawal | 0.00 | |||||||
| Total Interest Collected | 0.00 | Additional Trust Fund Expenses: | ||||||
| Reimbursement for Interest on Advances | 0.00 | |||||||
| Principal: | ASER Amount | 0.00 | ||||||
| Scheduled Principal | 0.00 | Special Servicing Fee | 0.00 | |||||
| Unscheduled Principal | 0.00 | Attorney Fees & Expenses | 0.00 | |||||
| Principal Prepayments | 0.00 | Bankruptcy Expense | 0.00 | |||||
| Collection of Principal after Maturity Date | 0.00 | Taxes Imposed on Trust Fund | 0.00 | |||||
| Recoveries from Liquidation and Insurance Proceeds | 0.00 | Non-Recoverable Advances | 0.00 | |||||
| Excess of Prior Principal Amounts paid | 0.00 | Workout-Delayed Reimbursement Amounts | 0.00 | |||||
| Curtailments | 0.00 | Other Expenses | 0.00 | |||||
| Negative Amortization | 0.00 | Total Additional Trust Fund Expenses | 0.00 | |||||
| Principal Adjustments | 0.00 | |||||||
| Total Principal Collected | 0.00 | Interest Reserve Deposit | 0.00 | |||||
| Payments to Certificateholders & Others: | ||||||||
| Other: | Interest Distribution | 0.00 | ||||||
| Prepayment Penalties/Yield Maintenance Charges | 0.00 | Principal Distribution | 0.00 | |||||
| Repayment Fees | 0.00 | Prepayment Penalties/Yield Maintenance Charges | 0.00 | |||||
| Borrower Option Extension Fees | 0.00 | Borrower Option Extension Fees | 0.00 | |||||
| Excess Liquidation Proceeds | 0.00 | Net Swap Counterparty Payments Received | 0.00 | |||||
| Net Swap Counterparty Payments Received | 0.00 | Total Payments to Certificateholders & Others | 0.00 | |||||
| Total Other Collected | 0.00 | Total Funds Distributed | 0.00 | |||||
| Total Funds Collected | 0.00 | |||||||
Page 6 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
Current Mortgage Loan and Property Stratification Tables Aggregate Pool | ||||||||||||||||
| Scheduled Balance | State (3) | |||||||||||||||
| Scheduled Balance | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | State | # of Props. | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| See footnotes on last page of this section. | ||||||||||||||||
Page 7 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Current Mortgage Loan and Property Stratification Tables Aggregate Pool | ||||||||||||||||
| Debt Service Coverage Ratio | Property Type (3) | |||||||||||||||
| Debt Service Coverage Ratio | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Property Type | # of Props. | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| Note Rate | Seasoning | |||||||||||||||
| Note Rate | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Seasoning | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| See footnotes on last page of this section. | ||||||||||||||||
Page 8 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Current Mortgage Loan and Property Stratification Tables Aggregate Pool | ||||||||||||||||
| Anticipated Remaining Term (ARD and Balloon Loans) | Remaining Stated Term (Fully Amortizing Loans) | |||||||||||||||
| Anticipated Remaining Term (2) | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Remaining Stated Term | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| Remaining Amortization Term (ARD and Balloon Loans) | Age of Most Recent NOI | |||||||||||||||
| Remaining Amortization Term | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Age of Most Recent NOI | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures become available from borrowers on an asset level. In all cases the most current DSCR provided by the Servicer is used. To the extent that no DSCR is provided by the Servicer, information from the offering document is used. The Trustee makes no representations as to the accuracy of the data provided by the borrower for this calculation. | ||||||||||||||||
(2) Anticipated Remaining Term and WAM are each calculated based upon the term from the current month to the earlier of the Anticipated Repayment Date, if applicable, and the Maturity Date. | ||||||||||||||||
(3) Data in this table was calculated by allocating pro-rata the current loan information to the properties based upon the Cut-Off Date balance of each property as disclosed in the offering document. | ||||||||||||||||
| The Scheduled Balance Totals reflect the aggregate balances of all pooled loans as reported in the CREFC Loan Periodic Update File. To the extent that the Scheduled Balance Total figure for the “State” and “Property” stratification tables is not equal to the sum of the scheduled balance figures for each state or property, the difference is explained by loans that have been modified into a split loan structure. The “State” and “Property” stratification tables do not include the balance of the subordinate note (sometimes called the B-piece or a “hope note”) of a loan that has been modified into a split-loan structure. Rather, the scheduled balance for each state or property only reflects the balance of the senior note (sometimes called the A-piece) of a loan that has been modified into a split-loan structure. | ||||||||||||||||
| Note: There are no Hyper-Amortization Loans included in the Mortgage Pool. | ||||||||||||||||
Page 9 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Mortgage Loan Detail | |||||||||||||||||||
| Loan Number | ODCR | Property Type (1) | City | State | Interest Payment | Principal Payment | Gross Coupon | Anticipated Repayment Date | Maturity Date | Neg. Amort (Y/N) | Beginning Scheduled Balance | Ending Scheduled Balance | Paid Thru Date | Appraisal Reduction Date | Appraisal Reduction Amount | Res. Strat. (2) | Mod. Code (3) | ||
| Totals | |||||||||||||||||||
| (1) Property Type Code | (2) Resolution Strategy Code | (3) Modification Code | ||||||||||||||||||||
| MF | - | Multi-Family | SS | - | Self Storage | 1 | - | Modification | 7 | - | REO | 11 | - | Full Payoff | 1 | - | Maturity Date Extension | 6 | - | Capitalization on Interest | ||
| RT | - | Retail | 98 | - | Other | 2 | - | Foreclosure | 8 | - | Resolved | 12 | - | Reps and Warranties | 2 | - | Amortization Change | 7 | - | Capitalization on Taxes | ||
| HC | - | Health Care | SE | - | Securities | 3 | - | Bankruptcy | 9 | - | Pending Return | 13 | - | TBD | 3 | - | Principal Write-Off | 8 | - | Other | ||
| IN | - | Industrial | CH | - | Cooperative Housing | 4 | - | Extension | to Master Servicer | 98 | - | Other | 4 | - | Blank | 9 | - | Combination | ||||
| MH | - | Mobile Home Park | WH | - | Warehouse | 5 | - | Note Sale | 10 | - | Deed in Lieu Of | 5 | - | Temporary Rate Reduction | 10 | - | Forbearance | |||||
| OF | - | Office | ZZ | - | Missing Information | 6 | - | DPO | Foreclosure | |||||||||||||
MU | - | Mixed Use | SF | - | Single Family | |||||||||||||||||
LO | - | Lodging | ||||||||||||||||||||
Page 10 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| NOI Detail | |||||||||||
| Loan Number | ODCR | Property Type | City | State | Ending Scheduled Balance | Most Recent Fiscal NOI (1) | Most Recent NOI (1) | Most Recent NOI Start Date | Most Recent NOI End Date | ||
| Total | |||||||||||
(1) The Most Recent Fiscal NOI and Most Recent NOI fields correspond to the financial data reported by the Master Servicer. An NOI of 0.00 means the Master Servicer did not report NOI figures in their loan level reporting. | |||||||||||
Page 11 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Principal Prepayment Detail | ||||||||
| Loan Number | Loan Group | Offering Document | Principal Prepayment Amount | Prepayment Penalties | ||||
| Cross-Reference | Payoff Amount | Curtailment Amount | Prepayment Premium | Yield Maintenance Charge | ||||
| Totals | ||||||||
Page 12 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Historical Detail | |||||||||||||||||||||
| Delinquencies | Prepayments | Rate and Maturities | |||||||||||||||||||
| Distribution | 30-59 Days | 60-89 Days | 90 Days or More | Foreclosure | REO | Modifications | Curtailments | Payoff | Next Weighted Avg. | WAM | |||||||||||
| Date | # | Balance | # | Balance | # | Balance | # | Balance | # | Balance | # | Balance | # | Amount | # | Amount | Coupon | Remit | |||
| Note: Foreclosure and REO Totals are excluded from the delinquencies. | |||||||||||||||||||||
Page 13 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Delinquency Loan Detail | |||||||||||||||
| Loan Number | Offering Document Cross-Reference | # of Months Delinq. | Paid Through Date | Current P & I Advances | Outstanding P & I Advances ** | Status of Loan (1) | Resolution Strategy Code (2) | Servicing Transfer Date | Foreclosure Date | Actual Principal Balance | Outstanding Servicing Advances | Bankruptcy Date | REO Date | ||
| Totals | |||||||||||||||
| (1) Status of Mortgage Loan | (2) Resolution Strategy Code | |||||||||||||||||||
| A | - | Payment Not Received | 0 | - Current | 4 | - | Performing Matured Balloon | 1 | - | Modification | 7 | - | REO | 11 | - | Full Payoff | ||||
| But Still in Grace Period | 1 | - 30-59 Days Delinquent | 5 | - | Non Performing Matured Balloon | 2 | - | Foreclosure | 8 | - | Resolved | 12 | - | Reps and Warranties | ||||||
| Or Not Yet Due | 2 | - 60-89 Days Delinquent | 6 | - | 121+ Days Delinquent | 3 | - | Bankruptcy | 9 | - | Pending Return | 13 | - | TBD | ||||||
| B | - | Late Payment But Less | 3 | - 90-120 Days Delinquent | 4 | - | Extension | to Master Servicer | 98 | - | Other | |||||||||
| Than 30 Days Delinquent | 5 | - | Note Sale | 10 | - | Deed In Lieu Of | ||||||||||||||
| 6 | - | DPO | Foreclosure | |||||||||||||||||
| ** Outstanding P & I Advances include the current period advance. | ||||||||||||||||||||
Page 14 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Specially Serviced Loan Detail - Part 1 | ||||||||||||||||
| Loan Number | Offering Document Cross-Reference | Servicing Transfer Date | Resolution Strategy Code (1) | Scheduled Balance | Property Type (2) | State | Interest Rate | Actual Balance | Net Operating Income | DSCR Date | DSCR | Note Date | Maturity Date | Remaining Amortization Term | ||
| (1) Resolution Strategy Code | (2) Property Type Code | ||||||||||||||
| 1 | - Modification | 7 | - | REO | 11 | - | Full Payoff | MF | - | Multi-Family | SS | - | Self Storage | ||
| 2 | - Foreclosure | 8 | - | Resolved | 12 | - | Reps and Warranties | RT | - | Retail | 98 | - | Other | ||
| 3 | - Bankruptcy | 9 | - | Pending Return | 13 | - | TBD | HC | - | Health Care | SE | - | Securities | ||
| 4 | - Extension | to Master Servicer | 98 | - | Other | IN | - | Industrial | CH | - | Cooperative Housing | ||||
| 5 | - Note Sale | 10 | - | Deed in Lieu Of | MH | - | Mobile Home Park | WH | - | Warehouse | |||||
| 6 | - DPO | Foreclosure | OF | - | Office | ZZ | - | Missing Information | |||||||
MU | - | Mixed Use | SF | - | Single Family | ||||||||||
LO | - | Lodging | |||||||||||||
Page 15 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Specially Serviced Loan Detail - Part 2 | ||||||||||
| Loan Number | Offering Document Cross-Reference | Resolution Strategy Code (1) | Site Inspection Date | Phase 1 Date | Appraisal Date | Appraisal Value | Other REO Property Revenue | Comment from Special Servicer | ||
| (1) Resolution Strategy Code | (2) Property Type Code | ||||||||||||||
| 1 | - Modification | 7 | - | REO | 11 | - | Full Payoff | MF | - | Multi-Family | SS | - | Self Storage | ||
| 2 | - Foreclosure | 8 | - | Resolved | 12 | - | Reps and Warranties | RT | - | Retail | 98 | - | Other | ||
| 3 | - Bankruptcy | 9 | - | Pending Return | 13 | - | TBD | HC | - | Health Care | SE | - | Securities | ||
| 4 | - Extension | to Master Servicer | 98 | - | Other | IN | - | Industrial | CH | - | Cooperative Housing | ||||
| 5 | - Note Sale | 10 | - | Deed in Lieu Of | MH | - | Mobile Home Park | WH | - | Warehouse | |||||
| 6 | - DPO | Foreclosure | OF | - | Office | ZZ | - | Missing Information | |||||||
MU | - | Mixed Use | SF | - | Single Family | ||||||||||
LO | - | Lodging | |||||||||||||
Page 16 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Advance Summary | ||||||
| Loan Group | Current P&I Advances | Outstanding P&I Advances | Outstanding Servicing Advances | Current Period Interest on P&I and Servicing Advances Paid | ||
| Totals | 0.00 | 0.00 | 0.00 | 0.00 | ||
Page 17 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Modified Loan Detail | |||||||||
| Loan Number | Offering Document Cross-Reference | Pre-Modification Balance | Post-Modification Balance | Pre-Modification Interest Rate | Post-Modification Interest Rate | Modification Date | Modification Description | ||
| Totals | |||||||||
Page 18 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Historical Liquidated Loan Detail | ||||||||||||||
| Distribution Date | ODCR | Beginning Scheduled Balance | Fees, Advances, and Expenses * | Most Recent Appraised Value or BPO | Gross Sales Proceeds or Other Proceeds | Net Proceeds Received on Liquidation | Net Proceeds Available for Distribution | Realized Loss to Trust | Date of Current Period Adj. to Trust | Current Period Adjustment to Trust | Cumulative Adjustment to Trust | Loss to Loan with Cum Adj. to Trust | ||
| Current Total | ||||||||||||||
| Cumulative Total | ||||||||||||||
| * Fees, Advances and Expenses also include outstanding P & I advances and unpaid fees (servicing, trustee, etc.). | ||||||||||||||
Page 19 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Historical Bond/Collateral Loss Reconciliation Detail | |||||||||||||||||||||||||||||||||||
| Distribution Date | Offering Document Cross-Reference | Beginning Balance at Liquidation | Aggregate Realized Loss on Loans | Prior Realized Loss Applied to Certificates | Amounts Covered by Credit Support | Interest (Shortages)/ Excesses | Modification /Appraisal Reduction Adj. | Additional (Recoveries) /Expenses | Realized Loss Applied to Certificates to Date | Recoveries of Realized Losses Paid as Cash | (Recoveries)/ Losses Applied to Certificate Interest | ||||||||||||||||||||||||
| Totals | |||||||||||||||||||||||||||||||||||
Page 20 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Interest Shortfall Reconciliation Detail - Part 1 | ||||||||||||||||||||||||||||||||
| Offering Document Cross- Reference | Stated Principal Balance at Contribution | Current Ending Scheduled Balance | Special Servicing Fees | ASER | (PPIS) Excess | Non-Recoverable (Scheduled Interest) | Interest on Advances | Modified Interest Rate (Reduction) /Excess | ||||||||||||||||||||||||
| Monthly | Liquidation | Work Out | ||||||||||||||||||||||||||||||
| Totals | ||||||||||||||||||||||||||||||||
Page 21 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Interest Shortfall Reconciliation Detail - Part 2 | ||||||||
| Offering Document Cross-Reference | Stated Principal Balance at Contribution | Current Ending Scheduled Balance | Reimb of Advances to the Servicer | Other (Shortfalls)/ Refunds | Comments | |||
| Current Month | Left to Reimburse Master Servicer | |||||||
| Totals | ||||||||
| Interest Shortfall Reconciliation Detail Part 2 Total | 0.00 | |||||||
| Interest Shortfall Reconciliation Detail Part 1 Total | 0.00 | |||||||
| Total Interest Shortfall Allocated to Trust | 0.00 | |||||||
Page 22 of 23
| Wells Fargo Commercial Mortgage Trust 2018-C45 Commercial Mortgage Pass-Through Certificates Series 2018-C45 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | Distribution Date: | 8/17/18 | |
| Corporate Trust Services | Record Date: | 7/31/18 | |
| 8480 Stagecoach Circle | Determination Date: | 8/13/18 | |
| Frederick, MD 21701-4747 | |||
| Supplemental Reporting | ||
| ||
| ||
Page 23 of 23
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX C
FORM OF OPERATING ADVISOR ANNUAL REPORT1
Report Date: This report will be delivered annually no later than [INSERT DATE], pursuant to the terms and conditions of the Pooling and Servicing Agreement, dated as of July 1, 2018 (the “Pooling and Servicing Agreement”).
Transaction: Wells Fargo Commercial Mortgage Trust 2018-C45, Commercial Mortgage Pass-Through Certificates Series 2018-C45
Operating Advisor: Park Bridge Lender Services LLC
Special Servicer: LNR Partners, LLC
Directing Certificateholder: Prime Finance Long Duration (B-Piece) II Holdco I, L.P.
| I. | I. Population of Mortgage Loans that Were Considered in Compiling this Report |
| 1. | The Special Servicer has notified the Operating Advisor that [●] Specially Serviced Loans were transferred to special servicing in the prior calendar year [INSERT YEAR]. |
| (a) | [●] of those Specially Serviced Loans are still being analyzed by the Special Servicer as part of the development of an Asset Status Report. |
| (b) | [Final] Asset Status Reports were issued with respect to [●] of such Specially Serviced Loans. This report is based only on the Specially Serviced Loans in respect of which an Asset Status Report has been issued. The Asset Status Reports may not yet be fully implemented. |
| 2. | Prior to an Operating Advisor Consultation Event, if one Mortgage Loan is in special servicing and if the Special Servicer has subsequently completed a Major Decision with respect to such Specially Serviced Loan, the Special Servicer has provided the applicable fully executed Major Decision Reporting Package approved or deemed approved by the Directing Holder to the Operating Advisor concurrently with delivery to the Directing Holder. |
| 3. | After an Operating Advisor Consultation Event, the Special Servicer has provided to the Operating Advisor: |
| (a) | with respect to each Major Decision for the following non-Specially Serviced Loans, the related Major Decision Reporting Package and the opportunity to consult with respect to such Major Decision and recommended action: |
| 1 | This report is an indicative report and does not reflect the final form of annual report to be used in any particular year. The Operating Advisor will have the ability to modify or alter the organization and content of any particular report, subject to the compliance with the terms of the Pooling and Servicing Agreement, including, without limitation, provisions relating to Privileged Information. |
C-1
| (b) | with respect to following Specially Serviced Loans, each related Asset Status Report and the opportunity to consult with respect to such recommended action: |
| II. | Executive Summary |
Based on the requirements and qualifications set forth in the Pooling and Servicing Agreement, as well as the items listed below, the Operating Advisor (in accordance with the Operating Advisor’s analysis requirements outlined in the Pooling and Servicing Agreement) has undertaken a limited review of the Special Servicer’s reported actions under the Pooling and Servicing Agreement on the loans identified in this report. Based solely on such limited review and subject to the assumptions, limitations and qualifications set forth herein, the Operating Advisor believes, in its sole discretion exercised in good faith, that the Special Servicer [is/is not] operating in compliance with the Servicing Standard with respect to its performance of its duties under the Pooling and Servicing Agreement during the prior calendar year on a “trust level basis”. [The Operating Advisor believes, in its sole discretion exercised in good faith, that the Special Servicer has failed to materially comply with the Servicing Standard as a result of the following material deviations.]
| ● | [LIST OF MATERIAL DEVIATION ITEMS] |
In addition, the Operating Advisor notes the following: [PROVIDE SUMMARY OF ANY ADDITIONAL MATERIAL INFORMATION].
| ● | [ADD RECOMMENDATION OF REPLACEMENT OF SPECIAL SERVICER, IF APPLICABLE] |
| III. | List of Items that were Considered in Compiling this Report |
In rendering the assessment set forth in this report, the Operating Advisor examined and relied upon the accuracy and the completion of the items listed below:
| 1. | Any Major Decision Reporting Package that is delivered or made available to the Operating Advisor by the Special Servicer pursuant to the Pooling and Servicing Agreement. |
| 2. | Reports by the Special Servicer made available to Privileged Persons that are posted on the certificate administrator’s website that is relevant to the Operating Advisor’s obligations under the Pooling and Servicing Agreement, each Asset Status Report (after an Operating Advisor Consultation Event), and each Final Asset Status Report, in each case, delivered or made available to the Operating Advisor pursuant to the terms of the Pooling and Servicing Agreement. |
| 3. | The Special Servicer’s assessment of compliance report, attestation report by a third party regarding the Special Servicer’s compliance with its obligations and net present value calculations and Appraisal Reduction Amount calculations delivered or made available to the Operating Advisor pursuant to the terms of the Pooling and Servicing Agreement. |
| 4. | [LIST OTHER REVIEWED INFORMATION]. |
C-2
| 5. | [INSERT IF AFTER AN OPERATING ADVISOR CONSULTATION EVENT: Consulted with the Special Servicer as provided under the Pooling and Servicing Agreement on Asset Status Reports for a Specially Serviced Loan delivered or made available to the Operating Advisor pursuant to the terms of the Pooling and Servicing Agreement and with respect to Major Decisions processed by the Special Servicer.] |
NOTE: The Operating Advisor’s review of the above materials should be considered a limited review and not be considered a full or limited audit , legal review or legal conclusion. For instance, we did not review each page of the Special Servicer’s policy and procedure manuals (including amendments and appendices), review underlying lease agreements or similar underlying documents, re-engineer the quantitative aspects of their net present value calculator, visit any related property, visit the Special Servicer, visit the Directing Holder or interact with any borrower. In addition, our review of the net present value calculations and Appraisal Reduction calculations is limited to the mathematical accuracy of the calculations and the corresponding application of the non-discretionary portions of the applicable formulas, and as such, does not take into account the reasonableness of the discretionary portions of such formulas.
| IV. | Assumptions, Qualifications Related to the Work Product Undertaken and Opinions Related to this Report |
| 1. | As provided in the Pooling and Servicing Agreement, the Operating Advisor is not required to report on instances of non-compliance with, or deviations from, the Servicing Standard or the special servicer’s obligations under the Pooling and Servicing Agreement that the Operating Advisor determines, in its sole discretion exercised in good faith, to be immaterial. |
| 2. | In rendering our assessment herein, we have assumed that all executed factual statements, instruments, and other documents that we have relied upon in rendering this assessment have been executed by persons with legal capacity to execute such documents. |
| 3. | Other than the receipt of any Major Decision Reporting Package or any Asset Status Report that is delivered or made available to the Operating Advisor pursuant to the terms of the Pooling and Servicing Agreement, the Operating Advisor did not participate in, or have access to, the Special Servicer’s and Directing Certificateholder’s discussion(s) regarding any Specially Serviced Loan. The Operating Advisor does not have authority to speak with the Directing Certificateholder directly. As such, the Operating Advisor generally relied upon the information delivered to it by the Special Servicer as well as its interaction with the Special Servicer, if any, in gathering the relevant information to generate this report. The services that we perform are not designed and cannot be relied upon to detect fraud or illegal acts should any exist. |
| 4. | The Special Servicer has the legal authority and responsibility to service any Specially Serviced Loans pursuant to the Pooling and Servicing Agreement. The Operating Advisor has no responsibility or authority to alter the standards set forth therein or direct the actions of the Special Servicer. |
| 5. | Confidentiality and other contractual limitations limit the Operating Advisor’s ability to outline the details or substance of any communications held between it and the Special Servicer regarding any Specially Serviced Loans and certain information it reviewed in connection with its duties under the Pooling and Servicing Agreement. |
C-3
| As a result, this report may not reflect all the relevant information that the Operating Advisor is given access to by the Special Servicer. |
| 6. | There are many tasks that the Special Servicer undertakes on an ongoing basis related to Specially Serviced Loans. These include, but are not limited to, assumptions, ownership changes, collateral substitutions, capital reserve changes, etc. The Operating Advisor does not participate in any discussions regarding such actions. As such, Operating Advisor has not assessed the Special Servicer’s operational compliance with respect to those types of actions. |
| 7. | The Operating Advisor is not empowered to speak with any investors directly. If the investors have questions regarding this report, they should address such questions to the certificate administrator through the certificate administrator’s website. |
| 8. | This report does not constitute recommendations to buy, sell or hold any security, nor does the Operating Advisor take into account market prices of securities or financial markets generally when performing its limited review of the Special Servicer as described above. The Operating Advisor does not have a fiduciary relationship with any Certificateholder or any other party or individual. Nothing is intended to or should be construed as creating a fiduciary relationship between the Operating Advisor and any Certificateholder, party or individual. |
Terms used but not defined herein have the meaning set forth in the Pooling and Servicing Agreement.
C-4
ANNEX D-1
MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
Each sponsor will make, as of the date specified in the MLPA 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 D-2 to this prospectus. Capitalized terms used but not otherwise defined in this Annex D-1 will have the meanings set forth in this prospectus or, if not defined in this prospectus, in the related MLPA.
Each MLPA, 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. The representations, warranties and exceptions have been provided to you for informational purposes only and prospective investors should not rely on the representations, warranties and exceptions as a basis for any investment decision. For disclosure regarding the characteristics, risks and other information regarding the Mortgage Loans, Mortgaged Properties and the certificates, you should read and rely solely on the prospectus. None of the depositor or the underwriters or their respective affiliates makes any representation regarding the accuracy or completeness of the representations, warranties and exceptions.
1. Intentionally Omitted.
2. Whole Loan; Ownership of Mortgage Loans. Except with respect to a Mortgage Loan that is part of a Whole Loan, each Mortgage Loan is a whole loan and not a participation interest in a mortgage loan. At the time of the sale, transfer and assignment to the depositor, no Mortgage Note or Mortgage was subject to any assignment (other than assignments to the Mortgage Loan Seller or (with respect to any Non-Serviced Mortgage Loan) to the related Non-Serviced Trustee for the related non-serviced securitization trust), participation (it being understood that a Mortgage Loan that is part of a Whole Loan does not constitute a participation) or pledge, and the Mortgage Loan Seller had good title to, and was the sole owner of, each Mortgage Loan free and clear of any and all liens, charges, pledges, encumbrances, participations (other than with respect to agreements among noteholders with respect to a Whole Loan), any other ownership interests and other interests on, in or to such Mortgage Loan other than any servicing rights appointment, subservicing or similar agreement. The Mortgage Loan Seller has full right and authority to sell, assign and transfer each Mortgage Loan, and the assignment to the 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.
3. 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
D-1-1
applicable, and is enforceable in accordance with its terms, except as such enforcement may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law and except that certain provisions in such Mortgage Loan documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment premium/yield maintenance charge) may be further limited or rendered unenforceable by applicable law, but (subject to the limitations set forth above) such limitations or unenforceability will not render such Mortgage 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 Mortgage Loan documents, including, without limitation, any such valid offset, defense, counterclaim or right based on intentional fraud by Mortgage Loan Seller in connection with the origination of the Mortgage Loan, that would deny the Mortgagee the principal benefits intended to be provided by the Mortgage Note, Mortgage or other Mortgage Loan documents.
4. Mortgage Provisions. The Mortgage Loan documents for each Mortgage Loan, together with applicable state law, contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the principal benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, non-judicial foreclosure subject to the limitations set forth in the Standard Qualifications.
5. Intentionally Omitted.
6. Mortgage Status; Waivers and Modifications. Since origination and except by written instruments set forth in the related Mortgage File or as otherwise provided in the related Mortgage Loan documents (a) the material terms of such Mortgage, Mortgage Note, Mortgage Loan guaranty and related Mortgage 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 Mortgagor nor the guarantor has been released from its material obligations under the Mortgage Loan. With respect to each Mortgage Loan, except as contained in a written document included in the Mortgage File, there have been no modifications, amendments or waivers, that could be reasonably expected to have a material adverse effect on such Mortgage Loan consented to by the Mortgage Loan Seller on or after the Cut-off Date.
7. Lien; Valid Assignment. Subject to the Standard Qualifications, each endorsement or assignment of Mortgage and assignment of Assignment of Leases from the Mortgage Loan Seller or its affiliate is in recordable form (but for the insertion of the name of the assignee and any related recording information which is not yet available to the Mortgage Loan Seller) and constitutes a legal, valid and binding endorsement or assignment from the Mortgage Loan Seller, or its affiliate, as applicable. 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
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identified on the Mortgage Loan Schedule, 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 8 below (each such exception, a “Title Exception”)), except as the enforcement thereof may be limited by the Standard Qualifications. Such Mortgaged Property (subject to Permitted Encumbrances and Title Exceptions) as of origination and, to the Mortgage Loan Seller’s knowledge, as of the Cut-off Date, is free and clear of any recorded mechanics’ or materialmen’s liens and other recorded encumbrances that would be prior to or equal with the lien of the related Mortgage (which lien secures the related Whole Loan, in the case of a Mortgage Loan that is part of a Whole Loan), except those which are bonded over, escrowed for or insured against by the applicable Title Policy (as described below), and as of origination and, to the Mortgage Loan Seller’s knowledge, as of the Cut-off Date, 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 the applicable Title Policy. 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 to effect such perfection.
8. 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 or a “marked up” commitment, in each case with escrow instructions and 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 secures the related Whole Loan, in the case of a Mortgage Loan that is part of a Whole Loan), which lien is subject only to (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record specifically identified in the Title Policy; (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; (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 of Mortgage Loans, and (g) condominium declarations of record and identified in such Title Policy, provided that none of clauses (a) through (g), individually or in the aggregate, materially and adversely interferes with the value or principal use of the Mortgaged Property, the security intended to be provided by such Mortgage, or the current ability of the related Mortgaged Property to generate net cash flow sufficient to service the related Mortgage Loan or the Mortgagor’s ability to pay its obligations when they become due (collectively, the “Permitted Encumbrances”). For purposes of clause (a) of the immediately preceding sentence, any such taxes, assessments and other charges shall not be considered due and payable until the date on which interest and/or penalties would be payable thereon. Except as contemplated by clause (f) of the second 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
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claims have been made by the Mortgage Loan Seller thereunder and no claims have been paid thereunder. Neither the Mortgage Loan Seller, nor to the Mortgage Loan Seller’s knowledge, any other holder of the Mortgage Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy. Each Title Policy contains no exclusion for, or affirmatively insures (except for any Mortgaged Property located in a jurisdiction where such affirmative insurance is not available in which case such exclusion may exist), (a) that the Mortgaged Property shown on the survey is the same as the property legally described in the Mortgage and (b) to the extent that the Mortgaged Property consists of two or more adjoining parcels, such parcels are contiguous.
9. 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, as of the Cut-off Date there are no subordinate mortgages or junior mortgage liens encumbering the related Mortgaged Property other than Permitted Encumbrances, mechanics’ or materialmen’s liens (which are the subject of the representation in paragraph (7) above), and equipment and other personal property financing. The Mortgage Loan Seller has no knowledge of any mezzanine debt secured directly by interests in the related Mortgagor other than as set forth on Schedule D-1 to this Annex D-1.
10. 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 Title Exceptions (and, in the case of a Mortgage Loan that is part of a Whole Loan, subject to the related Assignment of Leases constituting security for the entire Whole Loan), 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 and the Standard Qualifications, provides that, upon an event of default under the Mortgage Loan, a receiver may 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.
11. Financing Statements. Subject to the Standard Qualifications, each Mortgage Loan or related security agreement establishes a valid security interest in, and a UCC-1 financing statement has been filed and/or recorded (or, in the case of fixtures, the Mortgage constitutes a fixture filing) in all places necessary at the time of the origination of the Mortgage Loan (or, if not filed and/or recorded, has submitted or caused to be submitted in proper form for filing and/or recording) to perfect a valid security interest in, the personal property (creation and perfection of which is governed by the UCC) owned by the Mortgagor and necessary to operate such Mortgaged Property in its current use other than (1) non-material personal property, (2) personal property subject to purchase money security interests and (3) personal property that is leased equipment. Each UCC-1 financing statement, if any, filed with respect to personal property constituting a part of the related Mortgaged Property and each UCC-3 assignment, if any, filed with respect to such financing statement was in suitable form for filing in the filing office in which such financing statement was filed. 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 to effect such perfection.
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12. Condition of Property. The Mortgage Loan Seller or the originator of the Mortgage Loan inspected or caused to be inspected each related Mortgaged Property within six months of origination of the Mortgage Loan and within twelve months of the Cut-off Date.
An engineering report or property condition assessment was prepared in connection with the origination of each Mortgage Loan no more than twelve months prior to the Cut-off Date. To the Mortgage Loan Seller’s knowledge, based solely upon due diligence customarily performed in connection with the origination of comparable mortgage loans, as of the Closing Date, each related Mortgaged Property was free and clear of any material damage (other than (i) deferred maintenance for which escrows were established at origination and (ii) any damage fully covered by insurance) that would affect materially and adversely the use or value of such Mortgaged Property as security for the Mortgage Loan.
13. Taxes and Assessments. As of the date of origination and, to the Mortgage Loan Seller’s knowledge, as of the Cut-off Date, all taxes, governmental assessments and other outstanding governmental charges (including, without limitation, water and sewage charges) due with respect to the Mortgaged Property (excluding any related personal property) securing a Mortgage Loan that is or could become a lien on the related Mortgaged Property that became due and owing prior to the Cut-off Date with respect to each related Mortgaged Property have been paid, or, if the appropriate amount of such taxes or charges is being appealed or is otherwise in dispute, the unpaid taxes or charges are covered by an escrow of funds or other security sufficient to pay such tax or charge and reasonably estimated interest and penalties, if any, thereon. For purposes of this representation and warranty, any such taxes, assessments and other charges shall not be considered due and payable until the date on which interest and/or penalties would be payable thereon.
14. Condemnation. As of the date of origination and to the Mortgage Loan Seller’s knowledge as of the Cut-off Date, there is no proceeding pending and, to the Mortgage Loan Seller’s knowledge as of the date of origination and as of the Cut-off Date, there is no proceeding threatened for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the value, use or operation of the Mortgaged Property.
15. Actions Concerning Mortgage Loan. To the Mortgage Loan Seller’s knowledge, based on evaluation of the Title Policy (as defined in paragraph 8), an engineering report or property condition assessment as described in paragraph 12, applicable local law compliance materials as described in paragraph 26, and the ESA (as defined in paragraph 43), as of origination 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.
16. Escrow Deposits. All escrow deposits and escrow payments currently required to be escrowed with the Mortgagee pursuant to each Mortgage Loan (including capital improvements and environmental remediation reserves) are in the possession, or under the control, of the Mortgage Loan Seller or its servicer, and there are no delinquencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required under the related Mortgage Loan documents are being conveyed by the Mortgage Loan Seller to the depositor or its servicer (or, in the
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case of a Non-Serviced Mortgage Loan, to the related depositor under the Non-Serviced PSA or Non-Serviced Master Servicer for the related non-serviced securitization trust).
17. No Holdbacks. The principal amount of the Mortgage Loan stated on the Mortgage Loan Schedule 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, occupancy, performance or other matters with respect to the related Mortgaged Property, the Mortgagor or other considerations determined by the Mortgage Loan Seller to merit such holdback).
18. 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 Mortgage Loan documents and having a claims-paying or financial strength rating meeting the Insurance Rating Requirements (as defined below), in an amount (subject to customary deductibles) 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 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.
“Insurance Ratings Requirements” means either (1) 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 S&P Global Ratings or (2) the Syndicate Insurance Ratings Requirements. “Syndicate Insurance Ratings Requirements” means insurance provided by a syndicate of insurers, as to which (i) if such syndicate consists of 5 or more members, at least 60% of the coverage is provided by insurers that meet the Insurance Ratings Requirements (under clause (1) of the definition of such term) and up to 40% of the coverage is provided by insurers that have a claims paying or financial strength rating of at least “BBB-” by S&P Global Ratings, and (ii) if such syndicate consists of 4 or fewer members, at least 75% of the coverage is provided by insurers that meet the Insurance Ratings Requirements (under clause (1) of the definition of such term) and up to 25% of the coverage is provided by insurers that have a claims paying or financial strength rating of at least “BBB-” by S&P Global Ratings.
Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Mortgage Loan documents, by business interruption or rental loss insurance which (subject to a customary deductible) covers a period of not less than 12 months (or with respect to each Mortgage Loan on a single asset with a principal balance of $50 million or more, 18 months).
If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the related Mortgagor is required to maintain insurance in an amount equal to the maximum amount available under the National Flood Insurance Program, plus such additional excess flood coverage in an amount as is generally required by prudent institutional commercial mortgage lenders originating mortgage loans for securitization.
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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, in an amount 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 by an insurer meeting the Insurance Rating Requirements.
The Mortgaged Property is covered, and required to be covered pursuant to the related Mortgage Loan documents, by a commercial general liability insurance policy issued by an insurer meeting the Insurance Rating Requirements including coverage for property damage, contractual damage and personal injury (including bodily injury and death) in amounts as are generally required by the Mortgage Loan Seller for similar commercial and multifamily loans intended for securitization, and in any event not less than $1 million per occurrence and $2 million in the aggregate.
An architectural or engineering consultant has performed an analysis of each of the Mortgaged Properties located in seismic zones 3 or 4 in order to evaluate the seismic condition of such property, for the sole purpose of assessing the probable maximum loss or scenario expected loss (“PML”) for the Mortgaged Property in the event of an earthquake. In such instance, the PML 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 PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated at least “A:VIII” by A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-” by S&P Global Ratings in an amount not less than 100% of the PML.
The Mortgage Loan documents require insurance proceeds (or an amount equal to such 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, 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 that are required by the Mortgage Loan documents 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 (or, in the case of a Non-Serviced Mortgage Loan, the applicable Non-Serviced 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 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
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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 Mortgage Loan Seller.
19. Access; Utilities; Separate Tax Parcels. Based solely on evaluation of the Title Policy (as defined in paragraph 8) and survey, if any, an engineering report or property condition assessment as described in paragraph 12, applicable local law compliance materials as described in paragraph 26, and the ESA (as defined in paragraph 43), each Mortgaged Property (a) is located on or adjacent to a public road and has direct legal access to such road, or has permanent access from a recorded easement or right of way permitting ingress and egress to/from a public road, (b) is served by or has access rights to public or private water and sewer (or well and septic) and other utilities necessary for the current use of the Mortgaged Property, all of which are adequate 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 made or is required to be made to the applicable governing authority for creation of separate tax parcels (or the Mortgage Loan documents so require such application in the future), 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 parcels are created.
20. No Encroachments. To the Mortgage Loan Seller’s knowledge based solely on surveys obtained in connection with origination and the Title Policy obtained in connection with the origination of each Mortgage Loan, and except for encroachments that do not materially and adversely affect the current marketability or principal use of the Mortgaged Property: (a) 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 for encroachments that are insured against by the applicable Title Policy; (b) no material improvements on adjoining parcels encroach onto the related Mortgaged Property except for encroachments that are insured against by the applicable Title Policy; and (c) no material improvements encroach upon any easements except for encroachments that are insured against by the applicable Title Policy.
21. No Contingent Interest or Equity Participation. No Mortgage Loan has a shared appreciation feature, any other contingent interest feature or a negative amortization feature (except that an ARD Loan may provide for the accrual of the portion of interest in excess of the rate in effect prior to the Anticipated Repayment Date) or an equity participation by the Mortgage Loan Seller.
22. 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 permanently affixed buildings and distinct structural components, such as wiring, plumbing systems and central heating and air-conditioning systems, that are integrated into such buildings, serve such buildings in their passive functions and do not produce or contribute to the production of income other than consideration for the use or occupancy of space, but excluding personal property) having a fair market value (i) at the date the Mortgage Loan was originated at least equal to 80% of the adjusted issue price of the Mortgage Loan (together with any related Pari Passu Companion Loans) on such date or
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(ii) at the Closing Date at least equal to 80% of the adjusted issue price of the Mortgage Loan (together with any related Pari Passu Companion Loans) 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 premiums 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.
23. Compliance with Usury Laws. The mortgage rate (exclusive of any default interest, late charges, yield maintenance charge or prepayment premium) 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.
24. Authorized to do Business. To the extent required under applicable law, as of the Cut-off Date or as of the date that such entity held the Mortgage Note, each holder of the Mortgage Note was authorized to transact and do business in the jurisdiction in which each related Mortgaged Property is located, or the failure to be so authorized does not materially and adversely affect the enforceability of such Mortgage Loan by the Trust.
25. Trustee under Deed of Trust. With respect to each Mortgage which is a deed of trust, as of the date of origination and, to the Mortgage Loan Seller’s knowledge, as of the Closing Date, a trustee, duly qualified under applicable law to serve as such, currently so serves and is named in the deed of trust or has been substituted in accordance with the Mortgage and applicable law or may be substituted in accordance with the Mortgage and applicable law by the related Mortgagee.
26. Local Law Compliance. To the Mortgage Loan Seller’s knowledge, based upon any of a letter from any governmental authorities, a legal opinion, an architect’s letter, a zoning consultant’s report, an endorsement to the related Title Policy, a survey, or other affirmative investigation of local law compliance consistent with the investigation conducted by the Mortgage Loan Seller for similar commercial and multifamily mortgage loans intended for securitization, the improvements located on or forming part of each Mortgaged Property securing a Mortgage Loan are in material compliance with applicable laws, zoning ordinances, rules, covenants, and restrictions (collectively “Zoning Regulations”) governing the occupancy, use, and operation of such Mortgaged Property or constitute a legal non-conforming use or structure and any non-conformity with zoning laws constitutes a legal non-conforming use or structure which does not materially and adversely affect the use, operation or value of such Mortgaged Property. In the event of casualty or destruction, (a) the Mortgaged Property may be restored or repaired to the full extent necessary to maintain the use of the structure immediately prior to such casualty or destruction, (b) law and ordinance insurance coverage has been obtained for the Mortgaged Property in amounts customarily required by the Mortgage Loan Seller for similar commercial and multifamily loans intended for securitization, (c) title insurance policy coverage has been
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obtained with respect to any non-conforming use or structure, or (d) the inability to restore the Mortgaged Property to the full extent of the use or structure immediately prior to the casualty would not materially and adversely affect the use or operation of such Mortgaged Property. The Mortgage Loan documents require the related Mortgagor to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located.
27. Licenses and Permits. Each Mortgagor covenants in the Mortgage Loan documents that it shall keep all material licenses, permits, franchises, certificates of occupancy and applicable governmental approvals necessary for the operation of the Mortgaged Property in full force and effect, and to the Mortgage Loan Seller’s knowledge based upon any of a letter from any government authorities, zoning consultant’s report or other affirmative investigation of local law compliance consistent with the investigation conducted by the Mortgage Loan Seller for similar commercial and multifamily mortgage loans intended for securitization; all such material licenses, permits, franchises, certificates of occupancy and applicable governmental approvals are in effect or the failure to obtain or maintain such material licenses, permits, franchises or certificates of occupancy and applicable governmental approvals does not materially and adversely affect the use and/or operation of the Mortgaged Property as it was used and operated as of the date of origination of the Mortgage Loan or the rights of a holder of the related Mortgage Loan. The Mortgage Loan documents require the related Mortgagor to comply in all material respects with all applicable regulations, zoning and building laws.
28. Recourse Obligations. The Mortgage Loan documents for each Mortgage Loan (a) provide that such Mortgage Loan becomes full recourse to the Mortgagor and guarantor (which is a natural person or persons, or an entity or entities distinct from the Mortgagor (but may be affiliated with the Mortgagor) that collectively, as of the date of origination of the related Mortgage Loan, have assets other than equity in the related Mortgaged Property that are not de minimis) in any of the following events (or negotiated provisions of substantially similar effect): (i) if any petition for bankruptcy, insolvency, dissolution or liquidation pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by, consented to, or acquiesced in by, the Mortgagor; (ii) the Mortgagor or guarantor shall have solicited or caused to be solicited petitioning creditors to cause an involuntary bankruptcy filing with respect to the Mortgagor or (iii) transfers of either the Mortgaged Property or controlling equity interests in the Mortgagor made in violation of the Mortgage Loan documents; and (b) contains provisions for recourse against the Mortgagor and guarantor (which is a natural person or persons, or an entity or entities distinct from the Mortgagor (but may be affiliated with the Mortgagor) that collectively, as of the date of origination of the related Mortgage Loan, have assets other than equity in the related Mortgaged Property that are not de minimis), for losses and damages resulting from the following (or negotiated provisions of substantially similar effect): (i) the Mortgagor’s misappropriation of rents after an event of default, security deposits, insurance proceeds, or condemnation awards; (ii) the Mortgagor’s fraud or intentional material misrepresentation; (iii) breaches of the environmental covenants in the Mortgage Loan documents; or (iv) the Mortgagor’s 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).
29. Mortgage Releases. The terms of the related Mortgage or related Mortgage Loan documents do not provide for release of any material portion of the Mortgaged Property from the lien of the Mortgage except (a) a partial release, accompanied by principal repayment, or partial defeasance (as described in paragraph 34) of not less than a specified percentage at least equal to 110% of the related allocated loan amount of such portion of the Mortgaged Property, (b) upon payment in full of such Mortgage Loan, (c) upon a
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Defeasance (defined in paragraph 34 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 of condemnation. 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 Mortgage 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), 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 (together with any related Pari Passu Companion Loans) 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.
In the case of any Mortgage Loan, in the event of a taking of any portion of a Mortgaged Property by a State or any political subdivision or authority thereof, whether by legal proceeding or by agreement, the Mortgagor can be required to pay down the principal balance of the Mortgage Loan (together with any related Pari Passu Companion Loans) in an amount not less than the amount required by the REMIC Provisions and, to such extent, the award from any such taking 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 (together with any related Pari Passu Companion Loans).
No such 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 a partial condemnation, other than in compliance with the REMIC Provisions.
30. Financial Reporting and Rent Rolls. Each Mortgage Loan requires the Mortgagor to provide the owner or holder of the Mortgage Loan with (a) quarterly (other than for single-tenant properties) and annual operating statements, (b) quarterly (other than for single-tenant properties) rent rolls (or maintenance schedules in the case of Mortgage Loans secured by residential cooperative properties) for properties that have any individual lease which accounts for more than 5% of the in-place base rent, and (c) annual financial statements.
31. Acts of Terrorism Exclusion. With respect to each Mortgage Loan over $20 million, and to the Mortgage Loan Seller’s knowledge with respect to each Mortgage Loan of $20 million or less, as of origination the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating
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Requirements) do not specifically exclude Acts of Terrorism, as defined in the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and the Terrorism Risk Insurance Program Reauthorization Act of 2015 (collectively referred to as “TRIPRA”), 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 Mortgage Loan documents do not expressly waive or prohibit the Mortgagee from requiring coverage for Acts of Terrorism, as defined in TRIPRA, or damages related thereto, except to the extent that any right to require such coverage may be limited by commercial availability on commercially reasonable terms, or as otherwise indicated on Annex D-2; provided, that if TRIPRA or a similar or subsequent statute is not in effect, then, provided that 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 on terrorism insurance coverage more than two times the amount of the insurance premium that is payable in respect of the property and business interruption/rental loss insurance required under the related Mortgage Loan documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at the time of the origination of the Mortgage Loan, and if the cost of terrorism insurance exceeds such amount, the Mortgagor is required to purchase the maximum amount of terrorism insurance available with funds equal to such amount.
32. 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 Mortgage Loan documents (which provide for transfers without the consent of the Mortgagee which are customarily acceptable to the Mortgage Loan Seller, including, but not limited to, 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 Mortgage 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 Mortgage Loan documents, (iii) transfers of less than, or other than, a controlling interest in a Mortgagor, (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific Person designated in the related Mortgage Loan documents or a Person satisfying specific criteria identified in the related Mortgage Loan documents, (v) transfers of common stock in publicly traded companies or (vi) a substitution or release of collateral within the parameters of paragraphs 29 and 34 herein, or (vii) by reason of any mezzanine debt that existed at the origination of the related Mortgage Loan as set forth on Schedule D-1 to this Annex D-1, or future permitted mezzanine debt as set forth on Schedule D-2 to this Annex D-1 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 Mortgage 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 Schedule D-3 to this Annex D-1 or (iv) Permitted Encumbrances. The Mortgage or other Mortgage 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 fees and expenses incurred by the Mortgagee relative to such transfer or encumbrance.
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33. 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. Each Mortgage Loan with a Cut-off Date Balance of $30 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 and the related Mortgage Loan documents (or if the Mortgage Loan has a Cut-off Date Balance equal to $10 million or less, its organizational documents or the related Mortgage 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 and prohibit it from engaging in any business unrelated to such Mortgaged Property or Mortgaged Properties, and whose organizational documents further provide, or which entity represented in the related Mortgage 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 Mortgaged Properties, or any indebtedness other than as permitted by the related Mortgage(s) or the other related Mortgage 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.
34. Defeasance. With respect to any Mortgage Loan that, pursuant to the Mortgage Loan documents, can be defeased (a “Defeasance”), (i) the Mortgage Loan documents provide for defeasance as a unilateral right of the Mortgagor, subject to satisfaction of conditions specified in the Mortgage 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 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 premium) or, if the Mortgage Loan is an ARD Loan, the entire principal balance outstanding on the 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 premium), 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 110% of the allocated loan amount for the real property to be released; (iv) the defeasance collateral is not permitted to be subject to prepayment, call, or early redemption; (v) 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 clause (iii) above; (vi) the defeased note and the defeasance collateral are required to be assumed by a Single-Purpose Entity; (vii) the Mortgagor is required to provide an opinion of counsel that the Trustee has a perfected security interest in such collateral prior to any other claim or interest; and (viii) 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 expenses associated with defeasance, including, but not limited to, accountant’s fees and opinions of counsel.
35. Fixed Interest Rates. Each Mortgage Loan bears interest at a rate that remains fixed throughout the remaining term of such Mortgage Loan, except in the case of ARD Loans and situations where default interest is imposed.
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36. Ground Leases. For purposes of this Annex D-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.
With respect to any Mortgage Loan where the Mortgage Loan is secured by a Ground Leasehold estate in whole or in part, and the related Mortgage does not also encumber the related lessor’s fee interest in such Mortgaged Property, based upon the terms of the Ground Lease and any estoppel or other agreement received from the ground lessor in favor of Mortgage Loan Seller, its successors and assigns (collectively, the “Ground Lease and Related Documents”), Mortgage Loan Seller represents and warrants that:
(a) The Ground Lease or a memorandum regarding such Ground Lease has been duly recorded or submitted for recordation in a form that is acceptable for recording in the applicable jurisdiction. The Ground Lease and Related Documents permit the interest of the lessee to be encumbered by the related Mortgage and do 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 its recordation, except by 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 and Related Documents) that the Ground Lease may not be amended, modified, canceled or terminated by agreement of lessor and lessee without the prior written consent of the Mortgagee and that any such action without such consent is not binding on the Mortgagee, its successors or assigns, provided that the Mortgagee has provided lessor with notice of its lien in accordance with the terms of the Ground Lease;
(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 the Mortgagor or the Mortgagee) that extends not less than 20 years beyond the stated maturity of the related Mortgage Loan, or 10 years past the stated maturity if such Mortgage Loan fully amortizes by the stated maturity (or with respect to a Mortgage Loan that accrues on an actual 360 basis, substantially amortizes);
(d) The Ground Lease either (i) is not subject to any interests, estates, 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 and Title Exceptions; or (ii) is the subject of a subordination, non-disturbance or attornment agreement or similar agreement to which the Mortgagee on the lessor’s fee interest is subject;
(e) Subject to the notice requirements of the Ground Lease and Related Documents, 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 (or, if such consent is required it either has been obtained or cannot be unreasonably withheld, provided that such Ground Lease has not been terminated and all amounts due thereunder have been paid), 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 the lessor (or, if such consent is required it either has been obtained or cannot be unreasonably withheld, provided that such Ground Lease has not been terminated and all amounts due thereunder have been paid);
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(f) The Mortgage Loan Seller has not received any written notice of material default under or notice of termination of such Ground Lease. To the Mortgage Loan Seller’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to the Mortgage Loan Seller’s knowledge, such Ground Lease is in full force and effect as of the Closing Date;
(g) The Ground Lease and Related Documents require the lessor to give to the Mortgagee written notice of any default, provided that no notice of default or termination is effective against the Mortgagee unless such notice is given to the Mortgagee;
(h) A 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 the Mortgage Loan Seller in connection with the origination of similar commercial or multifamily loans intended for securitization;
(j) Under the terms of the Ground Lease and Related Documents, any related insurance proceeds or the portion of the condemnation award allocable to the ground lessee’s interest (other than 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 Mortgage 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 and Related Documents, any related insurance proceeds, or portion of the condemnation award allocable to ground lessee’s interest in respect of a total or substantially total loss or taking of the related Mortgaged Property to the extent not applied to restoration, will be applied first to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest; and
(l) Provided that the 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.
37. Servicing. The servicing and collection practices used by the Mortgage Loan Seller with respect to the Mortgage Loan have been, in all respects legal and have met with customary industry standards for servicing of commercial loans for conduit loan programs.
38. Origination and Underwriting. The origination practices of the Mortgage Loan Seller (or the related originator if the Mortgage Loan Seller was not the originator) with respect to each Mortgage Loan have been, in all material respects, legal and as of the date of its origination, such Mortgage Loan and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the origination of such Mortgage Loan; provided that such representation and warranty does not
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address or otherwise cover any matters with respect to federal, state or local law otherwise covered in this Annex D-1.
39. Intentionally Omitted.
40. No Material Default; Payment Record. No Mortgage Loan has been more than 30 days delinquent, without giving effect to any grace or cure period, in making required payments in the prior 12 months (or since origination if such Mortgage Loan has been originated within the past 12 months), and as of Cut-off Date, no Mortgage Loan is delinquent (beyond any applicable grace or cure period) in making required payments. To the Mortgage Loan Seller’s knowledge, there is (a) no material default, breach, violation or event of acceleration existing under the related Mortgage Loan, or (b) no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, which default, breach, violation or event of acceleration in the case of either clause (a) or clause (b), materially and adversely affects the value of the Mortgage Loan or the value, use or operation of the related Mortgaged Property; provided, however, that this representation and warranty does not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by the Mortgage Loan Seller in this Annex D-1. No person other than the holder of such Mortgage Loan may declare any event of default under the Mortgage Loan or accelerate any indebtedness under the Mortgage Loan documents.
41. Bankruptcy. As of the date of origination of the related Mortgage Loan and to the Mortgage Loan Seller’s knowledge as of the Cut-off Date, 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 state or federal bankruptcy, insolvency or similar proceeding.
42. 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, 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 and other than as set forth on Schedule D-4 to this Annex D-1, no Mortgage Loan has a Mortgagor that is an Affiliate of a Mortgagor with respect to another Mortgage Loan. An “Affiliate” for purposes of this paragraph (42) means, a Mortgagor that is under direct or indirect common ownership and control with another Mortgagor.
43. Environmental Conditions. A Phase I environmental site assessment (or update of a previous Phase I and or Phase II environmental site assessment) and, with respect to certain Mortgage Loans, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements conducted by a reputable environmental consultant in connection with such Mortgage Loan within 12 months prior to its origination date (or an update of a previous ESA was prepared), and such ESA (i) did not identify the existence of recognized environmental conditions (as such term is defined in ASTM E1527-05 or its successor, hereinafter “Environmental Condition”) at the related Mortgaged Property or the need for further investigation, 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
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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 can reasonably be expected to mitigate the identified risk; (C) the Environmental Condition identified in the related environmental report was remediated or abated in all material respects prior to the date hereof, and, if and as appropriate, a no further action or closure letter was obtained from the applicable governmental regulatory authority (or the environmental 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 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., S&P Global Ratings, Fitch Ratings, Inc. and/or A.M. Best Company; (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 Mortgage Loan Seller’s knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property.
44. Intentionally Omitted.
45. Appraisal. The Mortgage File contains an appraisal of the related Mortgaged Property with an appraisal date within 6 months of the Mortgage Loan origination date, and within 12 months of the Cut-off Date. The appraisal is signed by an appraiser that (i) is a Member of the Appraisal Institute, and (ii) to the Mortgage Loan Seller’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.
46. Mortgage Loan Schedule. The information pertaining to each Mortgage Loan which is set forth in the Mortgage Loan Schedule attached as an exhibit to the related MLPA 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.
47. Cross-Collateralization. No Mortgage Loan is cross-collateralized or cross-defaulted with any other mortgage loan that is outside the Mortgage Pool, except in the case of a Mortgage Loan that is part of a Whole Loan.
48. Advance of Funds by the Mortgage Loan Seller. Except for loan proceeds advanced at the time of loan origination or other payments contemplated by the Mortgage Loan documents, no advance of funds has been made by the Mortgage Loan Seller to the related Mortgagor, and no funds have been received from any person other than the related Mortgagor or an affiliate, directly, or, to the knowledge of the Mortgage Loan Seller, indirectly for, or on account of, payments due on the Mortgage Loan. Neither the Mortgage Loan Seller 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.
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49. Compliance with Anti-Money Laundering Laws. The Mortgage Loan Seller has complied in all material respects with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 with respect to the origination of the Mortgage Loan.
For purposes of this Annex D-1, “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 this Annex D-1, “Mortgagor” means the obligor or obligors on a Mortgage Note, including without limitation, any person that has acquired the related Mortgaged Property and assumed the obligations of the original obligor under the Mortgage Note and including in connection with any Mortgage Loan that utilizes an indemnity deed of trust structure, the borrower and the Mortgaged Property owner/payment guarantor/mortgagor individually and collectively, as the context may require.
For purposes of this Annex D-1, 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 in each case without having conducted any independent inquiry into such matters and without any obligation to have done so (except (i) having sent to the servicers servicing the Mortgage Loans on behalf of the sponsor, if any, specific inquiries regarding the matters referred to and (ii) as expressly set forth in these representations and warranties). All information contained in documents which are part of or required to be part of a Mortgage File (to the extent such documents exist) shall be deemed within the sponsor’s knowledge.
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Schedule D-1 to Annex D-1
MORTGAGE LOANS WITH EXISTING MEZZANINE DEBT
Wells Fargo Bank, | Barclays Bank PLC | Rialto Mortgage | C-III Commercial |
| N/A | 181 Fremont Street (Loan No. 10) | N/A | Parkway Center (Loan No. 3) |
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Schedule D-2 to Annex D-1
MORTGAGE LOANS WITH RESPECT TO WHICH MEZZANINE DEBT
IS PERMITTED IN THE FUTURE
Wells Fargo Bank, | Barclays Bank PLC | Rialto Mortgage | C-III Commercial |
| N/A | Embassy Suites Tucson, AZ (Loan No. 15) | N/A | N/A |
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Schedule D-3 to Annex D-1
CROSS-COLLATERALIZED MORTGAGE LOANS
None.
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Schedule D-4 to Annex D-1
MORTGAGE LOANS WITH AFFILIATED BORROWERS
Wells Fargo Bank, | Barclays Bank PLC | Rialto Mortgage | C-III Commercial |
| N/A | N/A
| N/A | Whispering Pines (Loan No. 42) Cape Canaveral MHP (Loan No. 49) |
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ANNEX D-2
EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
| Wells Fargo Bank, National Association | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| (8) Permitted Liens; Title Insurance | Village at Leesburg (Loan No. 1) | The Mortgaged Property is comprised of two retail units (having a 58.06% voting rights interest) in each of (i) a condominium regime governing the common elements of the related mixed use buildings, and (ii) a master owners’ association regime governing the common areas within the related project, including parking garages and structures and private streets. The two retail units consist of the Wegmans leased fee parcel (excluding the improvements), and the remaining retail space within the related project, including the Cobb Theatres and LA Fitness buildings, four retail-only buildings and the first floor retail space of ten mixed- use buildings. In addition to its majority voting rights interest in both associations, the borrower has all of the Class A Member interests in the condominium and the power to appoint three of the five members of the related board of directors. The association board’s decisions are subject to a majority vote, with the exception of amendments to the condominium documents and approval of restoration plans following casualty, both of which require consent of unit owners having at least 2/3 of the total voting rights, among other things. The loan documents provide for springing full recourse to the borrower and guarantors resulting from the condominium regime’s being withdrawn or terminated, or the master owners’ association regime being terminated. |
| (8) Permitted Liens; Title Insurance | Westport Self Storage Portfolio (Loan No. 2) | With respect to the single property identified as 25300 and 28730 Interstate Highway 10 West located in San Antonio, TX, having an allocated loan amount of $9,437,217 or 19.5% of the original principal balance, Alamo Fireworks has Right of First Refusal (“ROFR”) to purchase an undeveloped parcel (Tract 2) tract if borrower is otherwise willing to accept an offer as to that parcel only. The ROFR is not extinguished by foreclosure; however, the ROFR does not apply to foreclosure or deed in lieu thereof |
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| (8) Permitted Liens; Title Insurance | 1801 L Street (Loan No. 4) | (i) Affordable Housing Allocation. The mortgaged property is subject to an Amended and Restated Regulatory Agreement, dated December 19, 2002, with The Redevelopment Agency of the City of Sacramento, as well as a Regulatory Agreement dated September 18, 2006, with the California Tax Credit Allocation Committee (collectively, the “Regulatory Agreement”) that impose affordable housing restrictions. The subject property is a 4-story mixed use apartment building that contains 176 apartment units and 10,649 sf of ground floor retail space. The Regulatory Agreement requires that 45 units be allocated to below-market renters, as follows: 36 “Very Low-Income Units” (for renters whose annual income is less than 50% of the Sacramento MSA area median income) and 9 “Moderate-Income Units” (for renters whose annual income is less than 110% of the Sacramento metropolitan statistical area median income). If there is an owner default on the affordable housing obligations that is not cured within a reasonable time period, the owner would be subject to remedies including, among other things, the disgorgement of excess rents collected over what the Regulatory Agreement would otherwise provide and replacement of the property manager. The current rent roll satisfies the affordable housing allocation requirements. The Regulatory Agreement’s restrictions expire in 2032 and 2057. (ii) Tax Exemption for Certain Affordable Housing Units. The 36 Very Low-Income Units qualify the subject property for a tax exemption of 20.45%. The tax exemption rate is fixed unless the Redevelopment Agency of the City of Sacramento further amends the Regulatory Agreement or such units are disqualified due to renter incomes exceeding the related limit (and the borrower’s being unable to allocate other below market renters to other units). The loan underwriting assumed the continuation of tax exemption. |
| (9) Junior Liens | 1801 L Street (Loan No. 4) | Existing secured subordinate debt, dated May 10, 2000, in the amount of $4,750,000 is payable to Housing Authority of City of Sacramento. The subordinate debt matures January 1, 2036 (the loan matures July 11, 2028). The subordinate lender has entered into a Subordination Agreement with the Mortgage Loan Seller, as senior lender, that provides for subordination of the subordinate lender’s lien and payment rights, as well as standstill protections for the senior lender in the event of a subordinate loan default. The senior lender has the right of notice and the right to cure for any defaults under the subordinate loan, and a subordinate loan default is also a default under the senior loan. |
| (15) Actions Concerning Mortgage Loan | Westport Self Storage Portfolio (Loan No. 2) | The sponsor and the non-member manager of each co-borrower (Westport Properties Inc.) is named defendant, among others, in a lawsuit by the ex-wife of the founder of Westport Properties, Inc. alleging rights to certain tenant protection income from properties named in the lawsuit (none of the subject properties nor the guarantor is named in the lawsuit), as well as a percentage of West port Properties Inc.’s gross revenue under an alleged “succession plan.” The lawsuit does not name any co-borrowers or guarantor, but the non-member manager can be removed in the event of an adverse judgment. Based on certain factors, including the borrower’s ability to replace the current manager with another qualified professional self-storage operator/ manager, the loan was approved notwithstanding such litigation |
D-2-2
| (18) Insurance | Village at Leesburg (Loan No. 1) | (i) Leased Fee. The Wegmans parcel is a leased fee, where the tenant or other non-borrower party constructed improvements and either maintains its own insurance or self-insures. Subject to applicable restoration obligations, casualty proceeds are payable to tenant or other non-borrower party and/or its leasehold mortgagee. (ii) Insurance Trustee Controls Disbursement of Casualty Proceeds. The Mortgaged Property is comprised of two retail units (having a 58.06% voting rights interest) in each of (i) a condominium regime governing the common elements of the related mixed use buildings, and (ii) a master owners’ association regime governing the common areas within the related project, including parking garages and structures and private streets. The two retail units consist of the Wegmans leased fee parcel (excluding the improvements), and the remaining retail space within the related project, including the Cobb Theatres and LA Fitness buildings, four retail-only buildings and the first floor retail space of ten mixed- use buildings. In the event of casualty in which proceeds are in an amount exceeding $100,000, the related condominium and association documents provide that disbursement of available insurance proceeds would be controlled by an insurance trustee (such insurance trustee has to be a (a) a depository institution or trust company insured by the Federal Deposit Insurance Corporation, (x) the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” (or its equivalent) from each of the applicable rating agencies in the case of accounts in which funds are held for thirty (30) days or less and (y) the senior unsecured debt obligations of which are rated at least “A” (or its equivalent) from the applicable rating agencies in the case of accounts in which funds are held for more than thirty (30) days or (b) such other depository institution otherwise approved by applicable rating agencies from time-to-time). |
| (18) Insurance | CoolSprings Galleria (Loan No. 11) | (i) Property Insurance Deductible. The Mortgaged Property is security for four senior pari passu loans aggregating $155,000,000. The Mortgage Loan documents permit that the property insurance provide for no deductible in excess of $100,000. (ii) Leased Fees. The Connor’s Steak & Seafood and Kona Grill outparcels are leased fees, where tenant or other non-borrower party constructed improvements and either maintains its own insurance or self-insures. Subject to applicable restoration obligations, casualty proceeds are payable to tenant or other non-borrower party and/or its leasehold mortgagee. |
| (18) Insurance | Roseville Corporate Center (Loan No. 13) | The loan documents permit a property insurance deductible of up to $80,000. The in-place property insurance deductible is $80,000. Based on property condition, credit metrics and the sponsor’s financial wherewithal, the lender approved the related insurance program |
D-2-3
| (26) Local Law Compliance | Westport Self Storage Portfolio (Loan No. 2) | With respect to the Fort Worth property, having an allocated loan amount of $5,407,616, or 11.2% of the original principal balance, the use is legally non-conforming. The zoning ordinance requires that rebuilding conform to current zoning if there is a threshold casualty of 75% or greater of building’s reasonable value. Law and ordinance coverage is required and in-place, but, following a threshold casualty, it is not expected that available insurance and land sale proceeds would be sufficient to pay-down the loan by the allocated loan amount for such property. The loan documents provide that that the borrower is required to pay-down the loan in an amount equal to 130% of the property’s allocated loan amount if property cannot be fully restored following threshold casualty, and that the borrower and guarantor have personal liability for the borrower’s failure to do so. |
| (27) Licenses and Permits | Hampton Inn Omaha West Dodge Road Old Mill (Loan No. 30) | The mortgaged property is a limited service hospitality property, and a franchise agreement, dated November 3, 2011, with Hampton Inns Franchise LLC, as franchisor, is in-place that expires on November 30, 2033 (the mortgage loan matures June 11, 2028). The borrower’s operating agreement provided that the project developer, Keith Sybrowsky (shown as manager of the borrower on the franchise documents) would manage the borrower during the development of the project, and that a new manager would be appointed when the project was fully operational as a hotel. As so contemplated, the manager of the borrower has since changed to another member of the ownership group, Keith Wilson, the loan sponsor and representative of largest voting shareholder, but prior consent for the change was not obtained as required under the franchise agreement. The lender has contacted the borrower’s representatives about pursuing the appropriate consents. Mr. Wilson has been involved in the hospitality industry since the 1990’s and has invested in more than 15 hospitality properties. Based on information available to the lender at loan origination, subject property RevPAR has been increasing from 2016 to the present, and the property ranks #3 of 9 in RevPAR in its competitive subset. The loan documents provide springing recourse to the borrower and the guarantor for any franchise agreement cancellation, termination or expiration unless agreement executed with replacement franchisor satisfactory to the lender. |
| (28) Recourse Obligations | All Wells Fargo Loans (Loans Nos 1, 2, 4, 6, 11, 13, 21, 22, 28, 30, 32, 33, 36 and 44) | With respect to actions or events triggering recourse to the borrower or guarantor, the loan documents may provide additional qualifications or limitations, or recast the effect of a breach from springing recourse to a losses carve-out, in circumstances where, apart from identified bad acts of the borrower or guarantor, the property cash flow is inadequate for debt service or other required payments, the effect of the exercise of lender remedies restricts the borrower’s access to adequate property cash flow for such purposes, inadequate property cash flow results in involuntary liens from other creditors, or there are lesser violations of the triggering actions or events, including transfer violations that do not result in a property transfer or a change in control of the borrower, related to the borrower’s inadvertent failure to provide adequate notice or timely or complete information otherwise required by the loan documents, or otherwise obtain necessary prior approval therefor. |
D-2-4
| (31) Acts of Terrorism Exclusion | All Wells Fargo Loans (Loans Nos 1, 2, 4, 6, 11, 13, 21, 22, 28, 30, 32, 33, 36 and 44) | To the extent exceptions have been taken to the Insurance representation (#18) for failure to provide required insurance, such as self-insurance and leased fee situations, such exceptions also apply to the Acts of Terrorism representation. |
| (34) Defeasance | Mission Center (Loan No. 6) | The loan documents provide for a definition of “U.S. Obligations” that includes FNMA securities, FMAC securities or FHLP securities subject to certain conditions, including that such securities are eligible defeasance collateral under the current guidelines of the credit rating agencies; however, the conditions do not expressly include that such securities not be subject to prepayment, call or early redemption. Certain FNMA securities, FMAC securities or FHLP securities may be callable for a period after initial issuance, but, based on customary defeasance practice, rating agencies would not be expected to permit a callable bond as eligible defeasance collateral. |
| (43) Environmental Conditions | The Shops at Vacaville Crossings (Loan No. 36) | In lieu of obtaining a Phase I environmental site assessment, the lender obtained a $4,377,500 group lender environmental collateral protection and liability-type environmental insurance policy with a $4,377,500 sublimit per claim from Steadfast Insurance Company, a member company of Zurich North America with a 10 year term (equal to the loan term) and a 3 year policy tail and having no deductible. The policy premium was pre-paid at closing. Zurich North America has an S & P rating of “AA-”. |
D-2-5
| Barclays Bank PLC | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| (8) Permitted Liens; Title Insurance | ExchangeRight Net Leased Portfolio #21 (Loan No. 5) | The sole tenant at each of the Walgreens – Yorktown and Walgreens – Valrico Mortgaged Properties has a right of first refusal to purchase the related Mortgaged Property. The tenant has agreed that such right of first refusal will not apply to a foreclosure or deed-in-lieu of foreclosure or any other enforcement action under the Mortgage Loan; provided, however, such right of first refusal shall apply to subsequent purchasers of the related Mortgaged Property. |
| (8) Permitted Liens; Title Insurance | ExchangeRight Net Leased Portfolio #21 (Loan No. 5) | The sole tenant at the Walgreens – Huber Heights Mortgaged Property has a right of first offer to purchase the Mortgaged Property. The tenant has agreed that such right of first refusal will not apply to a foreclosure or deed-in-lieu of foreclosure or any other enforcement action under the Mortgage Loan; provided, however, such right of first offer shall apply to subsequent purchasers of the Mortgaged Property. |
| (8) Permitted Liens; Title Insurance | ExchangeRight Net Leased Portfolio #21 (Loan No. 5) | The sole tenant at the Tractor Supply – Scott Mortgaged Property has a right of first refusal to purchase the Mortgaged Property. The tenant has agreed that such right of first refusal will be subordinate to the mortgage, and any amendment, supplement, modification, renewal, refinance or replacement thereof. |
| (8) Permitted Liens; Title Insurance | ExchangeRight Net Leased Portfolio #21 (Loan No. 5) | With respect to the Fresenius Medical Care – Chicago Mortgaged Property, Crown Castle Towers (“Crown”) has a right of first refusal to purchase that certain portion of approximately 600 square feet of the Mortgaged Property (the “Easement Area”) pursuant to that certain Grant of Easement and Assignment of Lease, dated February 11, 2013 (the “Grant of Easement”). If Crown fails or declines to exercise its right of first refusal, such right of first refusal will survive any sale and conveyance, and will remain effective with respect to any subsequent offer to purchase the Easement Area, whether separate or as part of a larger parcel of the Mortgaged Property. The title insurance received at origination specifically insures against the Grant of Easement. |
| (8) Permitted Liens; Title Insurance | 181 Fremont Street (Loan No. 10) | The sole tenant at the Mortgaged Property has a right of first refusal to purchase the Mortgaged Property if the landlord receives an offer to purchase the Mortgaged Property from a Facebook Competitor. Pursuant to the tenant’s lease, a Facebook Competitor is currently defined as (i) Alphabet Inc., (ii) Apple Inc. and (iii) Microsoft Inc. This list of Facebook Competitors may be updated once each calendar year; provided that (a) the list of Facebook Competitors may only provide up to three (3) entities at any time and (b) those entities must be in a similar industry which offers a similar product or service as the sole tenant. The sole tenant will not have any right of first refusal with respect to (a) a sale of the Mortgaged Property through a foreclosure by a trustee’s power of sale, judicially or by accepting a deed-in-lieu of foreclosure, or as a purchaser at a foreclosure sale or (b) a sale to any party other than a Facebook Competitor. |
| (8) Permitted Liens; Title Insurance | Amcor Industrial Center (Loan No. | The sole tenant at the related Mortgaged Property has a right of first offer to purchase the Mortgaged Property. The
|
D-2-6
| Barclays Bank PLC | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| 16) | tenant has agreed to recognize as its landlord each party acquiring legal title to the Mortgaged Property by foreclosure, deed-in-lieu of foreclosure, or other sale in or otherwise in satisfaction of the Mortgage Loan (“Successor Owner”). Additionally, the tenant has agreed that no Successor Owner will be liable or bound by any right of first refusal or option to purchase all or any portion of the Mortgaged Property. Finally, the tenant further covenanted that it has no right or option to purchase the Mortgaged Property, and to the extent that the tenant has had any such right or option, the same has been acknowledged to be subject and subordinate to the security instrument and is waived and released as against the lender. | |
| (18) Insurance | ExchangeRight Net Leased Portfolio #21 (Loan No. 5) | The Mortgage Loan documents provide that a tenant may provide all or a portion of the property damage coverages required pursuant to the Mortgage Loan, or such coverages acceptable to the lender in its sole and absolute discretion. |
| (18) Insurance | 181 Fremont Street (Loan No. 10) | The Mortgage Loan documents permit that the comprehensive all risk property insurance coverage provide for no deductible in excess of $100,000, with the exception of windstorm or earthquake, which may have deductibles not to exceed five percent (5%) of the total insurable value of the Mortgaged Property per occurrence.
The Mortgage Loan documents provide that the threshold at or above which the lender has the right to hold and disburse insurance proceeds in respect of a casualty loss is 1.25% of the original principal balance of the Mortgage Loan, rather than 5% of the then outstanding principal balance of the Mortgage Loan.
The Mortgage Loan documents permit the Mortgagor to satisfy the insurance coverage requirements thereunder by relying on the insurance policies obtained and maintained by the condominium association; to the extent such insurance satisfies the requirements under the Mortgage Loan documents. If, at any time and from time to time during the term of the Mortgage Loan, the insurance policies maintained by the condominium association do not fully comply with the requirements under the Mortgage Loan documents or are not otherwise acceptable to the lender in its sole discretion, then the Mortgagor will promptly notify the lender thereof in writing and either cause the condominium association to procure and maintain or at its sole cost and expense, procure and maintain itself either (a) “primary” insurance coverage in the event that the condominium association does not provide the insurance coverage required by the Mortgage Loan documents, or (b) “excess and contingent” insurance coverage over and above any other valid and collectible coverage then in existence, in the event that the condominium association does not have the sufficient insurance coverage required by the Mortgage Loan documents, as is necessary to bring the insurance coverage into full compliance with the insurance coverage requirements under the Mortgage Loan documents.
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D-2-7
| Barclays Bank PLC | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| (18) Insurance | Embassy Suites Tucson, AZ (Loan No. 15) | The Mortgage Loan documents require loss of rents and/or business interruption insurance coverage for a period continuing until the restoration of the Mortgaged Property is complete or 12 months, whichever occurs first, rather than for a period of 12 months. The insurance coverage must provide an extended period of indemnity endorsement, which provides that after the physical loss to the Mortgaged Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six months from the date that the Mortgaged Property is repaired or replaced and operations are resumed, whichever first occurs. |
| (18) Insurance | Amcor Industrial Center (Loan No. 16) | The Mortgage Loan documents permit a property insurance deductible of up to $250,000, with the exception of windstorm and earthquake, which may have a deductible of up to 5% of the total insured value. Additionally, the Mortgage Loan documents permit a commercial general liability deductible of up to $50,000 per occurrence, except for products and completed operations, which permit a deductible of up to $125,000 per occurrence. The Mortgage Loan documents are recourse to the Mortgagor for any losses arising out of any failure to pay a deductible with respect to property insurance or commercial general liability insurance; provided that any amount payable by the Mortgagor will not exceed $250,000 per occurrence.
|
| (18) Insurance | Shops at Cross Creek II (Loan No. 31) | The Mortgage Loan documents require loss of rents and/or business interruption insurance coverage for a period continuing until the restoration of the Mortgaged Property is complete or 12 months, whichever occurs first, rather than for a period of 12 months. The insurance coverage must provide a six month extended period of indemnity endorsement. |
| (26) Local Law Compliance | Evans Self Storage Portfolio (Loan No. 17) | All three Mortgaged Properties are legal nonconforming as to use. Pursuant to Section 90-132 of the applicable local county ordinance, a nonconforming use may not be reestablished, repaired, replaced or rebuilt after damage to the extent of 75% or more of its value. The Mortgage Loan is fully recourse to the Mortgagor following a casualty whereby any individual Mortgaged Property is damaged to an extent in excess of 75% of the replacement cost of such individual Mortgaged Property and the Mortgagor is not permitted by the applicable government authority to restore the affected Mortgaged Property to the use and condition existing immediately prior to such casualty, with the amount of recourse liability being equal to the allocated loan amount for each such affected individual Mortgaged Property (minus any insurance proceeds actually received by the lender for such affected individual Mortgaged Property and used to pay down the outstanding principal balance of the Mortgage Loan), provided that such recourse liability will not commence until the date which is six months after the date of such casualty. Additionally, (x) the appraisal concluded the land value ($1,500,000) and insurable value ($12,510,000) of the Mortgaged Properties exceeds the principal balance of the Mortgage Loan, and (y) the Mortgaged Properties are comprised of fifteen separate buildings, minimizing the probability of damage |
D-2-8
| Barclays Bank PLC | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| concentration at the Mortgaged Properties in the event of certain casualty events, should such events arise. | ||
| (28) Recourse Obligations | 181 Fremont Street (Loan No.10) | The Mortgage Loan is recourse to the Mortgagor for losses associated in connection with any intentional physical waste; provided however, that the failure of the Mortgagor to repair or maintain, or to pay any expense in connection with the repair or maintenance of, all or any portion of the mortgaged property shall not constitute waste if: (a) funds to prevent such waste were, at the time in question, held in a cash management account and available to be used for mortgaged property repairs or maintenance and the lender fails to pay (or make such funds available to pay) for such repairs or maintenance as a result of an event of default or otherwise or (b) there are insufficient rents, after payment of taxes, insurance premiums, or the monthly interest payment amount to pay for such repairs or maintenance. |
| (28) Recourse Obligations | Evans Self Storage Portfolio (Loan No. 17) | The Mortgage Loan documents provide for recourse obligations of the Mortgagor in connection with any intentional act of material waste by the Mortgagor, provided that such material waste occurs prior to the taking of sole legal possession of the Mortgaged Property by the lender or any receiver. |
D-2-9
| Rialto Mortgage Finance, LLC | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| (7) Lien; Valid Assignment | Flats at East Bank (Loan No. 18) | The Mortgaged Property is subject to an overlapping fee and leasehold security interest. The leasehold estate was created in connection with a transfer of the fee estate to the Cleveland-Cuyahoga Port Authority (the “Port Authority”) related to a sales tax savings plan with respect to construction costs. The Port Authority signed the Mortgage as fee owner. The Mortgagor has an option to purchase the fee interest on or after April 1, 2019 for $100 (plus all of the Port Authority’s costs associated with the termination of the ground lease). |
| (8) Permitted Liens; Title Insurance | Flats at East Bank (Loan No. 18) | See exception to Representation and Warranty #7 above. |
| (9) Junior Liens | Flats at East Bank (Loan No. 18) | The Mortgagor is an obligor on a $17,000,000 loan from Cuyahoga County, which loan was made in April 2014 to finance the development of the Mortgaged Property (the “Development Loan”). The Development Loan, which was made from the proceeds of Cuyahoga County’s issuance of bonds (the “IRB Bonds”). The IRB Bonds are allocated into three tranches of approximately $3.78M (at 4.5%), $8.865M (at 5.5%), and $6.355M (at 6.0%) and expire in 2024, 2033 and 2038, respectively. The Development Loan is secured by a subordinate mortgage on the Mortgaged Property (subject to a subordination agreement with the trustee for the holders of the IRB Bonds). |
| (19) Access; Utilities; Separate Tax Parcels | Flats at East Bank (Loan No. 18) | The Mortgaged Property does not have direct legal access to any public roads for ingress and egress. A wholly-owned subsidiary of the Mortgagor (the “Access Lease Tenant”) leases the necessary access roadways from the City of Cleveland (the “City”) pursuant to a 99-year lease expiring on October 1, 2114 (the “Access Lease”). The Access Lease requires that the roadways will remain at all times free and open to the general public as public roadways and sidewalks. Because the Access Lease is not assignable without the City’s consent, the Mortgagor pledged its equity in the Access Lease Tenant as additional collateral for the Mortgage Loan. In addition, the Access Lease Tenant has entered into a recorded estoppel and agreement with respect to the Access Lease for the benefit of Mortgagor and the lender, wherein the Access Lease Tenant agrees to maintain and use the access area as an open public roadway and ensure continuous access, as well as use commercially reasonable efforts to obtain an access easement from the City for the benefit of the Mortgaged Property as provided for in the Access Lease. |
| (26) Local Law Compliance | Tarheel MHC Portfolio (Loan No. 19) | A portion of the Lambeth property is located in an area zoned as highway business district (HB Zone). As such the current use of that portion of the Lambeth property as a manufactured housing community is a pre-existing legally non-conforming use, as the existence of manufactured homes is not a permitted use in the HB Zone under the current zoning laws. In the event of a casualty or destruction, the Lambeth property may be restored to its current use provided, among other conditions, a building permit is issued within one year of such casualty and a certificate of occupancy is issued within two years of the building permit. Additionally, the Lambeth property is zoned for 62 pad sites, but currently has 67 pad sites. |
D-2-10
| (26) Local Law Compliance | Citi Bank - Chicago (Loan No. 35) | The current use of the Mortgaged Property as a bank with an automated teller and drive through is a pre-existing legally non-conforming use, as the current use is not permitted under current zoning laws without a special use permit (which was not obtained). In the event of a casualty beyond the control of the Mortgagor, the Mortgaged Property may be restored to its current use (without obtaining a special use permit), provided such non-conforming use has not been discontinued for 18 continuous months or more. |
| (33) Single Purpose Entity | Flats at East Bank (Loan No. 18) | The Mortgagor also (i) owns an interest in, and is the sole member of, the Access Lease Tenant and (ii) is the obligor under the subordinate Development Loan that is secured by a subordinate mortgage on the Mortgaged Property. |
D-2-11
| C-III Commercial Mortgage LLC | ||
| Rep. No. on Annex D-1 | Mortgage Loan and Number as Identified on Annex A-1 | Description of Exception |
| (8) Permitted Liens; Title Insurance | Whispering Pines (Loan No. 42) | The related mobile home owners’ association has a right to purchase the related Mortgaged Property. Such right does not apply to any conveyance resulting from the foreclosure of a mortgage or any deed-in-lieu of foreclosure, pursuant to Florida Statute 723.071(4)(f). |
| (12) Condition of Property | Security Storage (Loan No. 46) | On April 8, 2018, a fire began in a storage unit located in one of the buildings of the related Mortgaged Property. The resulting damage was isolated to 4 or 5 units. The cost to repair the fire damage and bring the units back online is estimated to be $25,000, which the lender reserved at origination of the subject Mortgage Loan. As a result of the fire, the related Mortgagor has discontinued supplying electricity to the storage units. |
| (14) Condemnation | Economy SS Portfolio (Loan No. 45) | A portion of the Economy SS Clayton Mortgaged Property may be subject to a proposed future condemnation in connection with the widening of a major highway that is still in the development stages. |
| (18) Insurance | All C-III CM Mortgage Loans Requiring Terrorism Insurance (Loan Nos. 3, 26, 27, 29, 34, 37, 38, 39, 40, 41, 42, 43, 45, 46, 47, 48 and 49) | The related loan documents may provide for a terrorism insurance coverage cap equal to the amount of coverage available at a cost not in excess of two times the all risk insurance premium (without giving effect to terrorism insurance coverage and without giving effect to coverage for other catastrophe perils such as flood, windstorm and earthquake) either at the time of origination of the subject Mortgage Loan or at the time the terrorism insurance is to be obtained (as applicable for the subject Mortgage Loan), and regardless of whether TRIA or a similar or subsequent statute is or is not in place. |
| (18) Insurance | La Quinta Batavia (Loan No. 40) | The related Mortgagor is permitted to maintain coverage with Northern Security Insurance Company, Inc. as the insurer for the Property and General Liability policies and Vermont Mutual Insurance Company as the insurer for the Umbrella policy in their current participation amount and position as of the date of origination of the subject Mortgage Loan, provided that (x) the AM Best rating of Northern Security Insurance Company, Inc. and Vermont Mutual Insurance Company is not withdrawn or downgraded below its rating on the date of origination of the subject Mortgage Loan and (y) at renewal of the current policy term, the related Mortgagor will replace Northern Security Insurance Company, Inc. and Vermont Mutual Insurance Company with insurance companies meeting the rating requirements set forth in the related loan documents. |
| (18) Insurance | 5800 North Course Office (Loan No. 27) | The subject Mortgage Loan permits the related Mortgagor to rely on insurance provided by the sole tenant at the related Mortgaged Property. Pursuant to the terms of the related lease, the related tenant is responsible for maintaining insurance (e.g., liability and business interruption insurance). The insurance requirements under the related lease covering the related Mortgaged Property may not satisfy the requirements of Representation and Warranty No. 18. Such insurance may be issued by an insurance company with a financial strength rating of “A-:VII” from A.M. Best Company. |
D-2-12
| (19) Access; Utilities; Separate Tax Parcels | Rio Grande MHP (Loan No. 43) | Upon the earlier to occur of (i) any mobile home pad located at the related Mortgaged Property becoming vacated or (ii) for each mobile home pad, when required by the municipality or any governing agency having jurisdiction over the related Mortgaged Property, the related Mortgagor is required in each such case to upgrade the electrical system serving such mobile home to 100 amps (the “Electrical Upgrade”). |
| (26) Local Law Compliance | Security Storage
Juniper Hilltop MHP
Winding Creek MHC
Cape Canaveral MHP
| For each of the subject Mortgage Loans, the related Mortgaged Property constitutes (or, in the case of a portfolio of related Mortgaged Properties, one or more of the related Mortgaged Properties constitute) a legal non-conforming use and, following a casualty or destruction, may not be restored or repaired to the full extent necessary to maintain the pre-casualty/pre-destruction use of the subject structure/property if the replacement cost exceeds a specified threshold and/or the restoration or repair is not completed or the prior use is not resumed (or certain key steps in connection therewith are not taken) within a specified time frame. In each case, law and ordinance insurance coverage was obtained, but such insurance only covers (i) the loss to the subject structure when it must be demolished to comply with code requirements, (ii) the cost to demolish and clear the site of the undamaged portions of the covered structure, where the law requires its demolition, and (iii) increased cost of construction, to the extent such cost is a consequence of the enforcement of an ordinance or law. |
| (27) Licenses and Permits | Parkway Center (Loan No. 3) | Six tenants at the related Mortgaged Property have not filed a certificate of occupancy with the Borough of Green Tree, Pennsylvania. |
| (31) Acts of Terrorism Exclusion | All C-III CM Mortgage Loans Requiring Terrorism Insurance (Loan Nos. 3, 26, 27, 29, 34, 37, 38, 39, 40, 41, 42, 43, 45, 46, 47, 48 and 49) | The related loan documents may provide for a terrorism insurance coverage cap equal to the amount of coverage available at a cost not in excess of two times the all risk insurance premium (without giving effect to terrorism insurance coverage and without giving effect to coverage for other catastrophe perils such as flood, windstorm and earthquake) either at the time of origination of the subject Mortgage Loan or at the time the terrorism insurance is to be obtained (as applicable for the subject Mortgage Loan), and regardless of whether TRIA or a similar or subsequent statute is or is not in place. |
| (31) Acts of Terrorism Exclusion | 5800 North Course Office (Loan No. 27) | The subject Mortgage Loan permits the related Mortgagor to rely on insurance provided by the sole tenant at the related Mortgaged Property. Pursuant to the terms of the related lease, the related tenant is responsible for maintaining insurance (e.g., liability and business interruption insurance). The insurance requirements under the related lease covering the related Mortgaged Property may not satisfy the requirements of Representation and Warranty No. 31. Such insurance may be issued by an insurance company with a financial strength rating of “A-:VII” from A.M. Best Company. |
| (33) Single-Purpose Entity | Parkway Center
Shops at Waycross
| With respect to each of the subject Mortgage Loans, the related Mortgagor previously owned property that is not part of the collateral for the subject Mortgage Loan. |
D-2-13
| (34) Defeasance | All C-III CM Mortgage Loans that Permit Defeasance (Loan Nos. 3, 26, 27, 29, 34, 37, 38, 39, 40, 42, 43, 45, 46, 47, 48 and 49) | The related loan documents do not require that the defeased note be assumed by, or that the defeasance collateral be transferred to, a Single-Purpose Entity. However, in such cases, the successor borrower must be an entity established or designated by the lender or its designee. |
| (42) Organization of Mortgagor | Whispering Pines
Cape Canaveral MHP
| With respect to each of the subject Mortgage Loans, the related Mortgagor is affiliated with the Mortgagor under the other subject Mortgage Loan. |
| (43) Environmental Conditions | Steelbrook Plaza (Loan No. 38) | The former tenant of the related Mortgaged Property performed on-site dry cleaning from approximately 1962 to 2001 both in a prior building that has been demolished and in a still existing building, located on the southeastern part of the site. The former dry cleaning operations are considered a recognized environmental condition. The related Mortgaged Property was entered into the Connecticut Property Transfer Program due to the former dry cleaner. Regulatory closure has not been achieved.
Prior subsurface investigations identified soil and groundwater contamination. However, an environmental management and consulting firm engaged by the related Mortgagor or its affiliate in connection with the acquisition of the related Mortgaged Property in 2007: (i) over time determined that the groundwater contamination had naturally attenuated to below applicable criteria, and therefore, no groundwater remediation appears necessary; (ii) recommended the excavation and off-site disposal of the contaminated soils, which was completed in December 2010; and (iii) ultimately concluded that no further investigation or remediation was warranted.
In December 2017, the Mortgagor’s environmental consultant submitted its Final Verification Report to the Connecticut Department of Energy & Environmental Protection. Discussions with the Mortgagor’s environmental consultant indicate this is the last piece of information that needs to be filed with the State, and the process of obtaining a closure letter on this site can take as long as 2 years.
A premises environmental liability – commercial lenders policy was obtained from Great American E & S Insurance Company. The policy has a limit of $1 million per claim and in the aggregate and a $50,000 self-insured retention, and the policy period runs through May 3, 2031.
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D-2-14
ANNEX E
CLASS A-SB PLANNED PRINCIPAL BALANCE SCHEDULE
Distribution | Class A-SB Planned |
| August 2018 | 37,388,000.00 |
| September 2018 | 37,388,000.00 |
| October 2018 | 37,388,000.00 |
| November 2018 | 37,388,000.00 |
| December 2018 | 37,388,000.00 |
| January 2019 | 37,388,000.00 |
| February 2019 | 37,388,000.00 |
| March 2019 | 37,388,000.00 |
| April 2019 | 37,388,000.00 |
| May 2019 | 37,388,000.00 |
| June 2019 | 37,388,000.00 |
| July 2019 | 37,388,000.00 |
| August 2019 | 37,388,000.00 |
| September 2019 | 37,388,000.00 |
| October 2019 | 37,388,000.00 |
| November 2019 | 37,388,000.00 |
| December 2019 | 37,388,000.00 |
| January 2020 | 37,388,000.00 |
| February 2020 | 37,388,000.00 |
| March 2020 | 37,388,000.00 |
| April 2020 | 37,388,000.00 |
| May 2020 | 37,388,000.00 |
| June 2020 | 37,388,000.00 |
| July 2020 | 37,388,000.00 |
| August 2020 | 37,388,000.00 |
| September 2020 | 37,388,000.00 |
| October 2020 | 37,388,000.00 |
| November 2020 | 37,388,000.00 |
| December 2020 | 37,388,000.00 |
| January 2021 | 37,388,000.00 |
| February 2021 | 37,388,000.00 |
| March 2021 | 37,388,000.00 |
| April 2021 | 37,388,000.00 |
| May 2021 | 37,388,000.00 |
| June 2021 | 37,388,000.00 |
| July 2021 | 37,388,000.00 |
| August 2021 | 37,388,000.00 |
| September 2021 | 37,388,000.00 |
| October 2021 | 37,388,000.00 |
| November 2021 | 37,388,000.00 |
| December 2021 | 37,388,000.00 |
| January 2022 | 37,388,000.00 |
| February 2022 | 37,388,000.00 |
| March 2022 | 37,388,000.00 |
| April 2022 | 37,388,000.00 |
| May 2022 | 37,388,000.00 |
| June 2022 | 37,388,000.00 |
| July 2022 | 37,388,000.00 |
| August 2022 | 37,388,000.00 |
| September 2022 | 37,388,000.00 |
| October 2022 | 37,388,000.00 |
| November 2022 | 37,388,000.00 |
| December 2022 | 37,388,000.00 |
| January 2023 | 37,388,000.00 |
| February 2023 | 37,388,000.00 |
| March 2023 | 37,387,856.09 |
| April 2023 | 36,975,334.67 |
| May 2023 | 36,436,693.11 |
Distribution | Class A-SB Planned |
| June 2023 | 35,946,654.40 |
| July 2023 | 35,345,160.46 |
| August 2023 | 34,797,165.46 |
| September 2023 | 34,246,813.28 |
| October 2023 | 33,638,228.98 |
| November 2023 | 33,082,889.41 |
| December 2023 | 32,469,449.35 |
| January 2024 | 31,909,079.79 |
| February 2024 | 31,346,299.51 |
| March 2024 | 30,670,131.86 |
| April 2024 | 30,102,017.29 |
| May 2024 | 29,476,139.68 |
| June 2024 | 28,902,886.02 |
| July 2024 | 28,272,004.98 |
| August 2024 | 27,693,568.33 |
| September 2024 | 27,112,642.77 |
| October 2024 | 26,474,292.16 |
| November 2024 | 25,888,118.09 |
| December 2024 | 25,244,657.53 |
| January 2025 | 24,653,190.11 |
| February 2025 | 24,059,177.38 |
| March 2025 | 23,299,038.10 |
| April 2025 | 22,699,191.90 |
| May 2025 | 22,042,420.75 |
| June 2025 | 21,437,164.39 |
| July 2025 | 20,713,574.16 |
| August 2025 | 20,047,340.60 |
| September 2025 | 19,378,254.65 |
| October 2025 | 18,646,118.69 |
| November 2025 | 17,971,031.87 |
| December 2025 | 17,233,054.42 |
| January 2026 | 16,551,915.74 |
| February 2026 | 15,867,860.50 |
| March 2026 | 15,001,705.59 |
| April 2026 | 14,311,007.85 |
| May 2026 | 13,557,834.67 |
| June 2026 | 12,860,952.40 |
| July 2026 | 12,101,758.96 |
| August 2026 | 11,398,639.59 |
| September 2026 | 10,692,509.00 |
| October 2026 | 9,924,312.71 |
| November 2026 | 9,211,866.43 |
| December 2026 | 8,437,522.21 |
| January 2027 | 7,718,706.58 |
| February 2027 | 6,996,812.12 |
| March 2027 | 6,096,160.32 |
| April 2027 | 5,367,311.85 |
| May 2027 | 4,577,001.69 |
| June 2027 | 3,841,644.43 |
| July 2027 | 3,044,998.38 |
| August 2027 | 2,303,077.00 |
| September 2027 | 1,557,977.25 |
| October 2027 | 751,847.34 |
| November 2027 | 100.65 |
December 2027 and thereafter | 0.00 |
E-1
(THIS PAGE INTENTIONALLY LEFT BLANK)
No dealer, salesman or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
| Summary of Certificates | 3 |
| Important Notice Regarding the Offered Certificates | 16 |
| Important Notice About Information Presented in this Prospectus | 17 |
| Summary of Terms | 23 |
| Risk Factors | 56 |
| Description of the Mortgage Pool | 145 |
| Transaction Parties | 232 |
| Credit Risk Retention | 289 |
| Description of the Certificates | 304 |
| Description of the Mortgage Loan Purchase Agreements | 345 |
| Pooling and Servicing Agreement | 355 |
| Certain Legal Aspects of Mortgage Loans | 470 |
| Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties | 489 |
| Pending Legal Proceedings Involving Transaction Parties | 491 |
| Use of Proceeds | 492 |
| Yield and Maturity Considerations | 492 |
| Material Federal Income Tax Considerations | 506 |
| Certain State and Local Tax Considerations | 520 |
| Method of Distribution (Underwriter) | 521 |
| Incorporation of Certain Information by Reference | 524 |
| Where You Can Find More Information | 524 |
| Financial Information | 525 |
| Certain ERISA Considerations | 525 |
| Legal Investment | 530 |
| Legal Matters | 531 |
| Ratings | 532 |
| Index of Defined Terms | 535 |
Dealers will be required to deliver a prospectus when acting as underwriters of these certificates and with respect to unsold allotments or subscriptions. In addition, all dealers selling these certificates will deliver a prospectus until the date that is ninety days from the date of this prospectus.
$571,479,000
(Approximate)
Wells Fargo
Commercial Mortgage
Securities, Inc.
Depositor
Wells Fargo
Commercial Mortgage
Trust 2018-C45
Issuing Entity
Commercial Mortgage
Pass-Through Certificates,
Series 2018-C45
| Class A-1 | $ | 14,405,000 | ||
| Class A-2 | $ | 5,559,000 | ||
| Class A-SB | $ | 37,388,000 | ||
| Class A-3 | $ | 150,000,000 | - | |
| $ | 200,000,000 | |||
| Class A-4 | $ | 203,783,000 | - | |
| $ | 253,783,000 | |||
| Class X-A | $ | 461,135,000 | ||
| Class X-B | $ | 110,344,000 | ||
| Class A-S | $ | 46,114,000 | ||
| Class B | $ | 32,115,000 | ||
| Class C | $ | 32,115,000 | ||
PROSPECTUS
Wells Fargo Securities
Co-Lead Manager and Joint Bookrunner
Barclays
Co-Lead Manager and Joint Bookrunner
Academy Securities
Co-Manager
, 2018